market outlook 24th october 2011

8/3/2019 Market Outlook 24th October 2011

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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlookIndia Research

October 24, 2011

Dealers DiaryThe Indian markets are expected to open in green tracing firmness across Asianmarkets in the early market trade and the strong gains logged by US & European

markets on Friday. The domestic indices retreated and closed in red on Friday asinvestors turned cautious ahead of Sunday's meeting of European leaders. Also,the INR fell to a 30-month low past the 50 per US$ level for the first time in morethan two years.

Global cues remain mixed on the outcome of European summit. Europeanleaders on Sunday ruled out tapping the European Central Banks balance sheetto boost the regions rescue fund and outlined plans to aid banks, inching towarda revamped strategy to contain the Greece-fueled debt crisis.

On the domestic front, crucial corporate earnings season has gathered steam. The street would also be keeping a close eye on the RBIs monetary policy reviewscheduled for Tuesday (October 25, 2011) where a 25bp hike is already factoredin by the markets, in our view.No major negative surprise so far has retained the

investor confidence in markets.

Markets TodayThe trend deciding level for the day is 16,857/5,070 levels. If NIFTY trades

above this level during the first half-an-hour of trade then we may witness a

further rally up to 16,961 17,137 / 5,101 5,152 levels. However, if NIFTY

trades below 16,857/5,070 levels for the first half-an-hour of trade then it may

correct up to 16,681 16,577 / 5,018 4,987 levels.

Indices S2 S1 R1 R2SENSEX 16,577 16,681 16,961 17,137

NIFTY 4,987 5,018 5,101 5,152

News Analysis

INEOS ABS announces open offer 2QFY2012 Result Reviews L&T, Axis Bank, Idea, Asian Paints, JSW Steel,

GCPL, United Phosphorus, Federal Bank, Syndicate Bank, JagranPrakashan, HT Media, Bank of Maharashtra, HCC, Electrosteel Steels,GIPCL, NIIT, Sarda Energy, Hitachi Home, PVR, Siyaram Silk

2QFY2012 Result Previews ITC, Sterlite, GAIL, Union Bank of India,Sadbhav Engg., Jyoti StructuresRefer detailed news analysis on the following page

Net Inflows (October 20, 2011)

` cr Purch Sales Net MTD YTDFII 1,469 1,900 (431) (796) (2,750)

MFs 303 490 (187) 76 5,574

FII Derivatives (October 21, 2011)

` cr Purch Sales Net Open InterestIndex Futures 5,422 4,936 486 15,145

Stock Futures 5,733 6,136 (403) 29,564

Gainers / Losers

Gainers LosersCompany Price (`) chg (%) Company Price (`) chg (%)Chambal Fert 90 3.2 Jain Irrigation 124 (5.1)

United Brew 420 2.8 Asian Paints 3,015 (4.4)

Gujarat NRE Coke 24 2.5 Union Bank 240 (4.1)

Manappuram Fin 58 2.2 L&T 1,336 (3.5)

Patni Computer 331 2.0 Indiabulls Fin 163 (3.4)

Domestic Indices Chg (%) (Pts) (Close)BSE Sensex (0.9) (151.3) 16,786

Nifty (0.8) (42.0) 5,050MID CAP (0.7) (41.7) 6,112

SMALL CAP (0.6) (41.2) 6,825

BSE HC (0.3) (16.1) 5,928

BSE PSU (0.6) (45.4) 7,376

BANKEX (0.7) (75.0) 11,094

AUTO (0.2) (17.3) 8,848

METAL (1.4) (152.8) 11,100

OIL & GAS (0.5) (39.9) 8,650

BSE IT (0.4) (21.9) 5,526

Global Indices Chg (%) (Pts) (Close)Dow Jones 2.3 267.0 11,809

NASDAQ 1.5 38.8 2,637

FTSE 1.9 104.0 5,489

Nikkei (0.0) (3.3) 8,679

Hang Seng 0.2 42.6 18,026

Straits Times 0.7 18.4 2,712

Shanghai Com (0.6) (14.1) 2,317

Indian ADRs Chg (%) (Pts) (Close)Infosys 2.2 1.2 $55.6

Wipro 1.8 0.2 $9.6

ICICI Bank 1.8 0.6 $35.5

HDFC Bank 1.6 0.5 $31.4

Advances / Declines BSE NSE Advances 1,112

Declines 1,682 928

Unchanged 126 71

Volumes (` cr)BSE 2,343

NSE 8,909


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MarketOutlook|IndiaResearch

October 24, 2011 2

INEOS ABS announces open offerOn October 22, 2011, INEOS ABS announced an open offer to acquire a

maximum of 29,31,920 shares, representing 16.67% of the voting capital of the

company at a price of `606.8 per share. We had recommended the stock at a

price of `559 with a target price of `702. On account of the offer the stock iscurrently under review.

Result ReviewsL&TLarsen and Toubro (L&T) posted good set of numbers for 2QFY2012, which were

above our expectations mainly on account of good top-line performance.On the order booking front, L&T has an order backlog of `1,42,185cr as of

2QFY2012. Order inflow for the quarter stood at `16,096cr (`20,464cr), led by

the infrastructure segment (31%). The company has significantly cut its guidance of

order inflow from 15-20% to 5% for FY2012, mainly to factor in general slowdown

faced by the sector; but it has maintained revenue growth guidance of 25% for the

whole year, which we believe is aggressive. We believe L&T is best placed to

benefit from the gradual recovery in the capex cycle, given its diverse exposure to

sectors, strong balance sheet and cash flow generation as compared to its peers.

Further, at current valuations, after an underperformance of ~16.5% to BSESensex over the last three months, we believe most of the negatives are factored inand, hence, we maintain our Buy view on the stock with a revised target price of`1,714 (`1,857). We have assigned lowered PE multiple of 18x (earlier 19x) toL&T parents FY2013E EPS of `76.4 and its subsidiaries to factor in macro

headwinds faced by the sector and economy.

Axis BankFor 2QFY2012, Axis Bank reported healthy 25.2% yoy growth in its net profit to

`920cr, above our estimates and in-line with consensus estimates. A sharp uptick

in NIM and healthy fee income growth more than compensated the higher

provisioning expenses.

Business growth momentum for the bank picked up during the quarter, with

advances growing by 6.2% qoq (up 26.7% yoy) and deposits rising by 5.9% qoq

(up 23.9% yoy). CASA deposits grew at a healthy pace of 26.0% yoy (10.4% qoq),

leading to a rise in CASA ratio to 42.2% from 40.5% in 1QFY2012. Reported NIM

rebounded sharply to 3.8% (up 50bp qoq) on the back of stronger build-up in

CASA deposits, stable funding rates and a pick-up in yield on advances. The uptick

in NIM coupled with healthy business growth led to healthy 24.3% yoy (16.4% qoq)

growth in NII, which came in well above our estimates. Asset quality showed initial

signs of stress with annualized slippage ratio rising to 1.4% from 0.8% in

1QFY2012 and advances restructured during the quarter rising to `312cr from

`107cr restructured in 1QFY2012. Gross and net NPA ratios were stable

sequentially; however, provision coverage ratio including technical write-offs came

off slightly to 77.7% (80.0% in 1QFY2012). The bank added 35 branches during


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October 24, 2011 3

the quarter. Tier-I CAR including profits declined to 9.3% from 9.8% in 1QFY2012

due to faster business growth.

The banks substantial branch expansion over the past 2-3 years (407 in FY2011

itself, a 41.4% yoy increase) is expected to yield meaningful results over FY2012-13, leading to more CASA market share gains. We remain positive on the bank,

owing to its attractive CASA franchise, rapid branch expansion, multiple sources of

sustainable fee income, strong growth outlook and A-list management. The stock

is currently trading at 1.8x FY2013E ABV. We maintain our Buy recommendationon the stock while keeping the target price under review.

IdeaFor 2QFY2012, Idea Cellular (Idea) reported modest growth in revenue, which

was in-line with our expectation; however, the company disappointed on thebottom-line front. Revenue came in at `4,620cr, up 2.2% qoq, on the back of

growth in ARPM by 4.1% qoq to `0.427/min and subscriber growth of 5.4% qoq

with end-of-period subscriber base standing at 100.2mn. The effect of these

positive factors was partially overshadowed by the negative impact from the

decline in minutes of usage by 6.9% qoq to 364min from 391min in 1QFY2012.

EBITDA margin decreased by 95bp qoq to 25.7% due to higher employee costs

and roaming and access charges. However, EBITDA per minute stood flat qoq at

`0.11. PAT came in at `106cr, down 40.3% qoq, due to higher interest costs of

`294cr and higher depreciation and amortization expenses of `737cr on account

of 3G-related expenses. We maintain our Neutral view on the stock.

Asian PaintsFor 2QFY2012, Asian Paints (APL) posted a good performance on the top-line

front but a weak performance on the earnings front. The companys top line grew

by 24.3% yoy to `2,251cr (`1,811cr), in-line with our estimates. Earnings declined

by 3% yoy to `209cr (`215cr), below our estimates. Operating profit dipped by

396bp yoy to `323cr (`331cr) due to high raw-material costs and other expenses

(up 55bp yoy). We maintain our Neutral view on the stock.

JSW SteelJSW Steel reported better-than-expected standalone numbers for 2QFY2012.

Although JSW Steels crude steel production increased by 10.6% yoy to 1.7mn

tonnes, production was lower by at least 0.5mn tonnes on account of shortage of

iron ore. Despite lower production, standalone net sales grew by 33.5% yoy

to `7,625cr, in-line with our estimate of `7,607cr. Net sales growth was driven by

the increase in steel sales volumes (up 18.9% yoy to 1.9mn tonnes) as well as

blended realizations (up 14.6% yoy to `42,831/tonne). However, EBITDA/tonne

grew only by 9.9% yoy to `6,887 due to higher raw-material costs. EBITDA

increased by 30.6% yoy to `1,296cr. The company reported exceptional items

related to forex loss of `513cr during the quarter. Consequently, net profit

decreased by 71.5% yoy to `127cr. However, adjusted net profit, excluding


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October 24, 2011 4

exceptional items, increased by 43.7% yoy to `640cr (higher than our estimate

of `432cr). The company has now lowered its production and sales volumes

estimates for FY2012 and FY2013 by 14.0% and 13.0% to 7.5mn tonnes and

7.8mn tonnes, respectively. We maintain our Buy rating on the stock; our targetprice is under review.

GCPLGodrej Consumer (GCPL) posted a modest set of numbers for the quarter, largely

in-line with our estimates. Consolidated top line grew by 24.5% yoy, with domestic

sales and international business posting healthy growth of 24% and 19% yoy,

respectively. Soaps, household insecticides and hair colors performed well for the

company. On the operating front, the company reported a marginal decline in its

margin (down 23bp yoy), which came in at 17.6%. Recurring PAT grew by 13.3%

yoy; whereas on a reported earnings basis, the company posted a decline of 2.5%

yoy in earnings and stood at `128cr (`131cr). The quarter witnessed robust growth

in the hair colors and household insecticides categories, growing by more than

double the category growth rates (32% yoy and 29% yoy), respectively. At the CMPof `404, the stock is trading at 18.8x FY2013E earnings of `21.5. We maintainour Accumulate rating on the stock with a revised target price of `452 (`457),based on 21x FY2013E EPS.

United PhosphorusFor 2QFY2012, United Phosphorus reported net sales and net profit of `1,776cr

and `56.9cr, respectively. Top-line growth of 41.3% yoy was driven by India (25%

growth) and rest of the world (ROW, 105% growth). Growth in ROW was driven

mainly by acquisitions. The company's operating margin came in at 15.3%,

reporting a dip of 325bp from 18.5% in 2QFY2011. Overall, net profit came in at

`56.9cr, reporting a decline of 50.4% yoy, higher than the dip in operating profit

on the back of forex losses. Going forward, management has upped its guidance

for FY2012 to 30-35%, driven by strong volume growth. On the OPM front,

management expects OPM of 19-20%. At the CMP, the stock is trading at 9.3x

FY2012E and 8.6x FY2013E earnings, respectively. We maintain our Buy rating onthe stock with a target price of `180.

Federal BankFor 2QFY2012, Federal Bank recorded strong net profit growth of 36.2% yoy (up

30.8% qoq), above our estimates, mostly due to lower provisioning expenses than

built in by us. The banks asset quality improved significantly during the quarter,

with slippages reducing by`58cr qoq and credit cost improving by 46bp qoq.

For 2QFY2012, advances and deposits registered strong growth. Advances grew

by 21.6% yoy (up 5.1% qoq) to `33,607cr and deposits grew by 30.9% yoy (up10.1% qoq) to `47,263cr. CASA deposits grew by a less impressive 14.5% yoy

compared to deposit growth, leading to CASA ratio shrinking by 367bp yoy (down

151bp qoq) to 25.7%. Including NRE deposits, total low-cost deposits constituted


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October 24, 2011 5

31.3% of total deposits (32.8% in 1QFY2012). A major portion of the banks loan

book is on a floating basis, which led to a sharp rise of 76bp qoq in yield in

advances to 12.7% in 2QFY2012. However, cost of deposits also rose by 42bp

qoq, leading to a sequential 10bp decline in reported NIM to 3.8%. During2QFY2012, non-interest income remained flat sequentially (down 18.8% yoy) at

`117cr. CEB income came in at `31cr (flat qoq), however recoveries continued to

be weak at `14cr, declining by 41.4% qoq. Asset quality of the bank witnessed a

significant improvement in 2QFY2012, with gross NPA ratio declining by 33bp

qoq to 3.6% and net NPA ratio declining by 16bp qoq to 0.6%. Slippages for

2QFY2012 reduced by`58cr sequentially to `265cr (annualised slippage ratio at

3.3%). The bank had witnessed higher retail slippages in 1QFY2012 due to one-

off employee-related issues.

At the CMP, the stock is trading at 1.0x FY2013E ABV. While lower leverage is

leading to low RoE at present, the banks core RoA is relatively high. Werecommend Buy on the stock with a target price of `444.

Syndicate BankFor 2QFY2012, Syndicate Bank reported 36.2% yoy growth in its net profit to

`323cr, well ahead of our as well as street estimates. However, earnings growth

was partly driven by a lower effective tax rate than expected. On the PBT front,

numbers were 7.5% ahead of our estimates. Healthy expansion in NIM coupled

with largely stable asset quality (in spite of completion of deadline for switchover to

system-based NPA recognition platform) were the key positive takeaways from theresults.

Healthy business growth with stable asset quality: The banks advances grew by3.3% qoq (up 18.9% yoy), while deposits accretion picked up pace to rise by 6.2%

qoq (up by 21.5% yoy). The banks reported NIM for the quarter rebounded by

28bp qoq to 3.4% on the back of a 71bp qoq expansion in loan yields as

compared to a 33bp rise in cost of deposits. Asset quality was largely maintained

despite completion of deadline for switchover to system-based NPA recognition

platform. Gross and net NPA ratios were almost flat sequentially at 2.4% and

0.9%, respectively. Provision coverage ratio including technical write-offs remained

healthy at 78.5%.

At the CMP, the stock is trading at attractive valuations of 0.7x FY2013E ABV

compared to its five-year range of 0.7-1.3x one-year forward ABV with a median

of 0.9x. Keeping in mind the banks stable asset quality, moderate growth strategy

over the past couple of years and moderate NIM, its valuation appears cheap

relative to peers. We value the stock at 0.85x FY2013E ABV and maintain a Buyrecommendation with a target price of `125.

Jagran PrakashanFor 2QFY2012, Jagran Prakashan (JPL) reported a weak performance on therevenue and earnings front. Ad revenue grew by ~9.5% yoy and muted 3.7% qoq

and circulation growth stood at ~11.6% yoy and ~5.2% qoq. Non-publishing

business revenue which comprises event, outdoor and digital businesses grew by


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October 24, 2011 6

13% yoy, though declined by 27.1% qoq. During the quarter readership for Dainik

Jagran and I-Next increased by 4.82lakh 0.37lakh respectively. Circulation during

2QFY2012 for Dainik Jagran and I-Next increased by 9.6% yoy and 30% yoy

respectively. A detailed note would be released post the conference call with themanagement today. The stock is currently under review.Concall is scheduled on Monday, October 24, 2011 at 12.00 noon IST, dial innumbers: 022 6629 0034, 022 3065 0034

HT MediaFor 2QFY2012, HT Media reported a modest performance on the revenue as well

as the profitability front. The companys top line grew by 13.4% yoy to `489cr.

Recurring earnings grew by 11.6% yoy on account of high other income and a

significant decrease in tax rate. Key highlights for the quarter include 1) overall

growth of ~15% yoy in advertising revenue, driven by ~12.5% yoy growth in

English and ~24% yoy growth in Hindi; however, sequentially, advertising revenue

growth in English was higher at 35.4%, while advertising revenue in Hindi grew by

~2.3% qoq, 2) a ~21% yoy/4.5 qoq increase in circulation revenue, 3) a ~11%

yoy jump and a ~27% qoq decline in radio revenue and 4) 125bp yoy OPM

contraction due to high other expenditure. A detailed note would be releasedpost the conference call with the management today. The stock is currentlyunder review.Concall is scheduled on Monday, October 24, 2011 at 11.00 AM IST, dial innumbers: 022 6629 0034, 022 3065 0034Bank of MaharashtraFor 2QFY2012, Bank of Maharashtra posted strong net profit growth of 52.0% yoy

to `100cr, above our estimates, due to higher-than-expected growth in net interest

income and non-interest income and significantly lower provisioning expenses than

built in by us. Sequential improvement in NIM, healthy growth in fee income and

sharp improvement in asset quality were the key positive takeaways from the

results.

Remarkable quarter in terms of earnings quality: During 2QFY2012, advancesgrew strongly by 24.0% yoy to `50,043cr, while deposits grew moderately by

12.5% yoy to `63,976cr. Consequently, the banks incremental CD ratio for

2QFY2012 stood at 227.6%, leading to overall CD ratio improving from 69.1% in

1QFY2012 to 72.1% in 2QFY2012. CASA deposits growth was comparable to

deposit growth of 12.4% yoy, with saving account deposits rising by 13.3% yoy.

On the back of reasonable growth in CASA deposits, the bank was able to

improve its CASA ratio albeit marginally to 40.7%. During 2QFY2012, yield on

advances increased by 62bp to 11.5%, while cost of deposits increased by a lower

36bp, leading to a sequential expansion in reported NIM. The bank surprised on

the asset-quality front, with slippages declining by 50.3% qoq to `93cr (average

`226cr since 1QFY2010). Slippages, which have been on a declining trend since

1QFY2011, improved sharply in 2QFY2012 to 0.8% compared to 1.6% in

1QFY2012 and 4.0% in 1QFY2011. Gross NPA ratio improved to 2.2% compared

to 2.4% in 1QFY2012, while net NPA ratio halved from 1.2% in 1QFY2012 to


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October 24, 2011 7

0.6%. Provision coverage ratio (including technical write-offs), which was as low as

54.7% in 1QFY2011, increased from 73.2% in 1QFY2012 to 86.0%.

We expect the bank to deliver healthy 38.1% earnings CAGR over FY2011-13E on

the back of largely stable NIM, pick-up in fee income and improving asset quality.

At the CMP, in our view, the stock is trading at attractive valuations of 0.6x

FY2013E ABV vs. its five-year range of 0.6-1.2x and median of 0.9x. Werecommend Buy on the stock with a target price of `57, implying an upside of19.5% from current levels.

HCCFor 2QFY2012, HCCs numbers came much lower than our and street

expectations. On the top-line front, HCCs revenue declined by 6.3% yoy to

`828.6cr (`884.6cr), against our estimate of `946.5cr, due to slowdown inexecution. EBITDAM came in at 11.3% (12.8%), a dip of 150bp yoy and lower

than our estimate of 13.2%, on account of commodity price pressures and fixed

overheads not covered by lower revenue. On the earnings front, HCC reported a

loss of `40.5cr vs. profit of `12.1cr in 2QFY2011, against our estimate of loss of

`7.4cr. Shocking performance on the bottom-line front was due to lower revenue

and EBITDA margin and higher interest cost (`107.4cr, growth of 60.2% yoy).

Owing to the uncertainties surrounding Lavasa project and other concerns such assubdued order inflow, deteriorating working capital situation and high interestcost, we continue to maintain our Neutral view on the stock.

Electrosteel SteelsElectrosteel Steels (ESL), an associate of Electrosteel Castings (34.4% stake),

reported its 2QFY2012 results. ESL did not report any sales during 2QFY2012, as

it suspended operations during the quarter to synchronize its various units.

However, on account of certain fixed costs, the company reported net loss of `23cr

in 2QFY2012. ESL had commenced operations of pig iron during FY2011.

However, it was subsequently shut down for synchronization with other facilities at

the plant. We believe ESLs financials would turn around once it receives coking

coal and iron ore from Electrosteel Castings at a substantial discount to market

prices. Meanwhile, we maintain our Buy rating on Electrosteel Castings with atarget price of `35.

GIPCLFor 2QFY2012, GIPCLs top line reported growth of 41.9% yoy to `304cr. Growth

was driven by higher capacity, even though generation rose marginally by 3% yoy

to 986MU. SLPP station II became commercial operational only in September

2010 and, hence, did not contribute to the top line in the first two months of

2QFY2011. All of the companys plants, barring SLPP station II, had healthy plant

availability factor during the quarter. Vadodara stations I and II operated at PAF of

97.7% (95.4% in 2QFY2011) and 98.9% (90.7% in 2QFY2011), respectively. SLPP

I and II stations operated at PAFs of 78.4% (68.0% in 2QFY2011) and 61.6%


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October 24, 2011 8

(53.2% in 2QFY2011). The companys OPM stood at 31.2%, down 774bp yoy due

to higher gas prices. GIPCLs 2QFY2012 bottom line rose by 77.5% yoy to `28cr

(in-line with our estimates), aided by higher PAF. We maintain our Buy rating onthe stock; the target price is under review.NIITFor 2QFY2012, NIIT reported a decent performance, which was in-line with our

expectations. The companys consolidated revenue came in at `384cr, up 19.5%

yoy. Revenue from ILS, SLS and CLS businesses increased by 11.9%, 12.4% and

9.6% yoy to `180.2cr, `40.5cr and `163.0cr, respectively. The companys blended

EBITDA margin improved by 501bp yoy to 14.6% on the back of margin

expansion in SLS as well as CLS businesses. These gains in margins by the CLS

and SLS businesses were partially overshadowed by margin decline in the ILS

business and higher operating expenses due to facility overlap and some pre-

operative expenses related to skill building solutions. PAT came in at 30.2cr. Wemaintain our Buy view on the stock with a target price of `60.Sarda EnergySarda Energy reported its 2QFY2012 results. Net sales grew by 25.5% yoy

to `251cr, driven by higher revenue from the steel segment. The steel segments

revenue grew by 58.8% yoy to `157cr, while the ferro alloys segments revenue

declined by 13.1% yoy to `89cr. The companys EBITDA increased by 118.9% yoy

to `35cr due to strong profitability performance by the steel segment. The steelsegments EBIT increased by 556.2% yoy to `24cr, which was partially offset by the

decrease in the ferro alloy segments EBIT, which declined by 25.4% yoy to `10cr.

The company reported net loss of `10cr, mainly on account of exceptional items

primarily related to forex losses. The company reported exceptional items of `33cr

during the quarter. Excluding these exceptional items, the company's adjusted PAT

stood at `23cr compared to `1cr in 2QFY2011. We maintain our Buy rating onthe stock; our target price is under review.

Hitachi Home & Life SolutionsHitachi Home & Life Solutions (HHLS) reported lower-than-expected numbers for

2QFY2012. The companys revenue declined by 2.1% yoy from `131cr in

2QFY2011 to `128cr (8.3% lower compared to our estimates of `139cr). The

companys EBITDA margin came in at 1.6%, down 705bp yoy, due to higher

employee and other expenses. The company reported a higher forex loss on ECB

during the quarter, which led to loss of `7cr as compared to profit of `5cr in

2QFY2011.

We expect the companys sales volume to increase at a CAGR of 14.7% over

FY2011-13E, which would lead profits to increase to `41cr in FY2013E from `29cr

in FY2011. At the CMP of `165, the stock is trading at attractive valuations with PEof 9.3x FY2013E earnings. We maintain our Buy rating on the stock with a targetprice of `212, based on a target PE of 12x for FY2013E.


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October 24, 2011 9

PVRPVR reported modest performance for 2QFY2012. The companys revenue grew

by 2.5% yoy. Earnings grew robust at 58.2% yoy due to lower depreciation costsand decrease in tax rate. The companys OPM feel by 434bp yoy on account of

increase in rent and staff costs. Occupancy increased to 36% in 2QFY2012 from

30% in 2QFY2011. ATP decreased by ~5% yoy during the quarter to `152.

Footfalls increased to 7.1mn in 2QFY2012 from 5.7mn in 2QFY2012.A detailed

note would be released post the conference call with the management today.

The stock is currently under review.Concall is scheduled on Monday, October 24, 2011 at 2:30 PM IST, dial innumbers: 022 6629 0349, 022 3065 0129Siyaram Silk MillsSiyaram Silk Mills (SSML) registered strong top-line growth during 2QCY2012. The

companys net sales grew by 34.9% qoq and 13.5% yoy to `244cr. SSML reported

a 68bp yoy and 136bp qoq expansion in its OPM to 13.4%, largely on the back of

a decline in staff cost and purchase of traded goods as a percentage of sales.

Operating profit increased by 19.5% yoy to `33cr (`27cr) on the back of higher

revenue and margin expansion during the quarter. Net profit increased by 16.9%

yoy to `17cr (`15cr). Net profit margin increased marginally by 21bp yoy to 6.9%

(6.7%). We continue to maintain our Buy recommendation on the stock. We will becoming with a detailed report post management interaction.

Result PreviewsITCITC is expected to announce its 2QFY2012 results. For the quarter, we expect ITC

to report 17.5% yoy growth in its top line to `5,948cr, impacted by strong growth

in its hotels, paperboards and packaging and cigarettes segments. ITCs earnings

for the quarter are expected to grow by 18.5% yoy to `1,227.4cr, driven largely by

top-line growth. We expect OPM for the quarter to improve by 60bp yoy to 36%.

We remain Neutral on the stock.

Sterlite IndustriesSterlite Industries is slated to announce its 2QFY2012 results. The companys top

line is expected to grow by 61.2% yoy to `9,726cr, mainly due to higher sales

volume and realization for its zinc business. The companys EBITDA margin is

expected to improve by 340bp yoy to 27.8%. The companys bottom line is

expected to grow by 60.5% yoy to `1,641cr. We maintain our Buy rating on thestock with a target price of `158.


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October 24, 2011 10

GAILGAIL is expected to announce its 2QFY2012 results. Transmission volumes for the

quarter are likely to stay flat qoq. We expect the company to report top-line growth

of 8.3% yoy to `8,779cr. Operating margin is expected to contract by 38bp yoy to

17.3%. On the bottom-line front, we expect GAIL to report growth of 3.3% yoy to

`954cr. We maintain our Buy recommendation on GAIL with a target price of`508.

Union Bank of IndiaUnion Bank of India is scheduled to announce its 2QFY2012 results. We expect

the bank to post muted 1.8% qoq and 5.4% yoy growth in NII to `1,619cr. Non-

interest income is expected to decline by 13.1% yoy to `443cr, primarily onaccount of lower treasury gains. Pre-provision profit of the bank is expected to

decline by 2.2% yoy on account of relatively faster rise in operating expenses. On

account of substantially lower provisioning expenses (primarily due to high base

effect) and lower effective tax rate compared to 2QFY2011, net profit is expected

to register healthy 60.9% yoy growth to `488cr. At the CMP, the stock is trading at

valuations of 0.9x FY2013E ABV. We maintain our Buy recommendation on thestock with a target price of `286.

Sadbhav Engineering We expect Sadbhav Engineering (SEL) to post robust 48.0% growth to `386.1cr

(`260.9cr) on the top-line front, owing to pick-up in the execution of captive road

BOT projects. EBITDA margin is expected to witness a fall of 70bp yoy to 11.3%

(12.0%) on account of higher sub-contracting charges for the quarter. On the

earnings front, despite lower margins, the company is expected to post decent

growth of 22.9% yoy to `16.9cr (`13.7cr).

At current levels, the stock is trading at valuations of 12.6x FY2013E earnings and

2.0x FY2013E P/BV on a standalone basis. Based on a target P/E multiple of 9x

and valuing the companys BOT arm on DCF basis, our SOTP-based target price

works out to `167. Hence, we maintain a Buy view on the stock.

Jyoti StructuresFor 2QFY2012, we expect Jyoti Structures to report decent top-line growth of

14.0% yoy to `618.3cr. EBITDA margin is expected to come in at ~11.1%. Despite

the NCD issue, interest cost is expected to remain at elevated levels, resulting in

flat bottom-line growth. PAT is expected to come in at `25.2cr. Currently, wemaintain our Buy rating with a target price of `90.


11/14


October 24, 2011 11

Quarterly Bloomberg Brokers Consensus EstimatesGail -(24/10/2011)

Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net sales 9,215 8,104 13.7 8,867 3.9

EBITDA 1,646 1,457 13.0 1,577 4.3

EBITDA margin (%) 18 18 18

Net profit 1,033 924 11.9 985 4.9

Source: Bloomberg

ITC Ltd -(24/10/2011)


EBITDA 2,127 1,875 13.5 1,976 7.7


Net profit 1,469 1,247 17.9 1,333 10.3

Source: Bloomberg

Sterlite Industries Ltd - Consolidated (24/10/2011)


EBITDA 2,662 1,529 74.1 2,758 (3.5)


Net profit 1,541 1,008 52.8 1,640 (6.0)

Source: Bloomberg

Union Bank Ltd - (24/10/2011)

Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net profit 548 303 80.8 464 18.1

Source: Bloomberg


12/14


October 24, 2011 12

Dr. Reddys Laboratories Ltd - Consolidated (25/10/2011)


Net profit 286 287 (0.3) 263 8.9Source: Bloomberg

Kotak Mahindra Bank Ltd - (25/10/2011)

Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net profit 325 195 66.7 252 28.8

Source: Bloomberg

NTPC Ltd -(25/10/2011)

Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net sales 14,120 12,989 8.7 14,171 (0.4)

EBITDA 3,332 3,872 (13.9) 3,219 3.5


Net profit 2,024 2,107 (4.0) 2,076 (2.5)

Source: Bloomberg

Sesa Goa Ltd - Consolidated (25/10/2011)

Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net sales 913 907 0.7 2,095 (56.4)

EBITDA 346 303 14.0 1,147 (69.9)


Net profit 302 385 (21.6) 841 (64.1)

Source: Bloomberg

NHPC (28/10/2011)Particulars (` cr) 2QFY12E 2QFY11 yoy (%) 1QFY12 qoq (%)Net sales 1,476 1,240 19.0 1,431 3.1

EBITDA 1,010 1,059 (4.6) 1,038 (2.7)


Net profit 732 690 6.1 791 (7.4)

Source: Bloomberg


13/14


October 24, 2011 13

Economic and Political News

Law soon to make private sector bribery a criminal offence: PM

Ministry to set aside coal from e-auction for NTPC Aviation FDI may soon take wing More trouble brewing for power distribution firms India to review tax treaty with Mauritius in DecemberCorporate News

Coal Indias revenue threatened as defaults by utilities rise 14-day strike at Maruti ends JSW steel to raise steel prices by 3-4% KPIT Cummins sells financial services biz to Infrasoft Delay in CCI as regulator for pharma deals irks MNCs Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar

24/10/2011 ITC, GAIL, Sterlite Inds, Titan Inds., Union Bank, Sadbhav Engg., Jyoti Structures

25/10/2011 NTPC, Kotak Mah. Bank, Dr Reddy's, Sesa Goa, KEC International

28/10/2011 NHPC, Tata Global, CCCL,

29/10/2011 Maruti, LIC Housing Fin., IOB, Electrosteel Castings, J K Lakshmi Cements


14/14


Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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market outlook 24th october 2011

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