Angel Broking Market Strategy-July2011

1

1QFY2012 Results P1QFY2012 Results P1QFY2012 Results P1QFY2012 Results P1QFY2012 Results Preview |review |review |review |review | July 2011

Refer to important Disclosures at the end of the report

Note: Stock prices as on June 30, 2011

Table of Contents

StrategyStrategyStrategyStrategyStrategy 2-122-122-122-122-12

Angel Research Model PAngel Research Model PAngel Research Model PAngel Research Model PAngel Research Model Portfolioortfolioortfolioortfolioortfolio 1313131313

1QFY2012 Sectoral Outlook1QFY2012 Sectoral Outlook1QFY2012 Sectoral Outlook1QFY2012 Sectoral Outlook1QFY2012 Sectoral Outlook

Automobile 15

Banking 18

Capital Goods 22

Cement 25

FMCG 28

Infrastructure 31

Metals 34

Oil & Gas 37

Pharmaceutical 40

Power 43

Real Estate 46

Software 49

Telecom 52

Stock WStock WStock WStock WStock Watchatchatchatchatch 5656565656

Refer to important Disclosures at the end of the report 2


Strategy

On the cusp of a turn

Indian markets have underperformed almost all major globalmarkets in the current calendar year ostensibly due to the twin

macro-concerns of high inflation and interest rates; and nowthe key question on the minds of investors is when the rate cyclewill reverse. While the trajectory was a little less certain even a

couple of months back, in our view, various indicators aresignaling that inflation and interest rates are close to peak levels,with respite likely from the second half.

In our view, external issues such as the Greek crisis can contributeto near-term uncertainty and volatility, but they are unlikely to

materially impact the overall upward trajectory of the Indianeconomy and markets, which are underpinned by strongstructural growth drivers, and even in the near-term are likely

to register GDP growth of 7.5-8%. Hence, we maintain ourpositive stance on Indian equities as we believe that valuationsremain fairly attractive, especially in light of the reasonable

earnings visibility over the next two years.

Why broader interest rates are close to peak in our view

Insignificant forex inflows:Insignificant forex inflows:Insignificant forex inflows:Insignificant forex inflows:Insignificant forex inflows: In this cycle, forex reserves have beenrelatively anaemic (up 12% since March 2010 vs. 60% growth

during January 2007 - October 2008), suggesting a peakingof rates at lower levels in this cycle. In cognizance, the RBI toohas not used the harsher CRR tool much, mainly sticking to

repo hikes.

Cooling domestic demand:Cooling domestic demand:Cooling domestic demand:Cooling domestic demand:Cooling domestic demand: Broader interest rates have risenby 200-225bp and signs of weakening domestic demand are

emerging in interest-sensitive sectors. 1) Real estate andinfrastructure sectors are getting adversely impacted,2) evidencing this slowing construction activity, cement volumes

are flat on a yoy basis, 3) auto sales are decelerating, withpassenger vehicles growing by just 6.2% yoy and 4) gross capitalformation has been stagnant in 4QFY2011.

Deposit mobilisations up, credit offtake down:Deposit mobilisations up, credit offtake down:Deposit mobilisations up, credit offtake down:Deposit mobilisations up, credit offtake down:Deposit mobilisations up, credit offtake down: There arebroader signs of slowdown in credit offtake, while deposit

mobilisation has picked up significantly only to be largelydeployed at a negative spread into government bonds.Accordingly, we expect deposit and lending rates to not go up

further even if the RBI hikes the repo rate.

Respite on domestic food prices:Respite on domestic food prices:Respite on domestic food prices:Respite on domestic food prices:Respite on domestic food prices: With food forming 45-60% ofIndian consumer inflation indices, rising food prices are a

practical concern for policymakers. No doubt rather than hikingrates we need to improve supply, logistics, subsidy disbursement,

etc., but nonetheless, food inflation cooling off significantly inrecent weeks should reduce policymakers' need to tighten the

policy even symbolically.

Respite also on global commodities, sustainable crude rangeRespite also on global commodities, sustainable crude rangeRespite also on global commodities, sustainable crude rangeRespite also on global commodities, sustainable crude rangeRespite also on global commodities, sustainable crude range

US$95-105:US$95-105:US$95-105:US$95-105:US$95-105: Global demand weakness is already leading to

cooling commodity prices. Also, affirming the risk to globalGDP from higher crude, the IEA has decided to release reserves(third such instance since 1974). Our analysis also indicates

that whenever the global oil bill exceeds 5% of GDP, crude pricestend to cool off as demand weakens. For CY2011, this gives arange of US$95-105 for crude.

US FUS FUS FUS FUS Fed still perceives deflationary pressures:ed still perceives deflationary pressures:ed still perceives deflationary pressures:ed still perceives deflationary pressures:ed still perceives deflationary pressures: Wholesale (PPI)inflation in the US is as high as 7.3%, largely similar to IndianWPI levels. The US Fed, on the contrary, is worried about

deflation due to weak unemployment and housing data. It isdismissive about the current inflation readings, pointing thatthey are driven by global commodity price pressures that are

expected to dissipate.

Overweight on sectors with good earnings visibility

Presently, we have a positive outlook on index BFSI stocks, aided

by moderate credit growth, better margin performance andlower provisioning burden than small banks. Moreover, coolingof inflation and interest rates from 2HFY2012 is likely to improve

credit growth and asset quality outlook for the overall bankingsector. The infrastructure sector is also likely to benefit from animminent cooling of the rate cycle and, in any case, valuations

have become very cheap, offering a margin of safety.

Large-cap metals also offer strong earnings visibility, in ourview, on account of capacity expansion, low-cost integrated

operations and healthy export potential. Incidentally, on theexport front, in the past few quarters, growth in India's exportshas been phenomenal, in our view, aided by the fact that the

rupee has depreciated against the euro and has become morecompetitive vis-à-vis the yuan as far as the US and Middle Eastare concerned. In the export sector, in case of the IT sector,

we believe valuations factor in the positives; while in case of thepharma sector, we are overweight on account of a healthygrowth outlook at reasonable valuations.

Overall, in view of the easing headwinds to growth from2HFY2012, we estimate Sensex earnings to post an 18.4%CAGR over FY2011-13E. A fair multiple of 15x FY2013E EPS

yields a Sensex target of 21,320, giving a reasonable ~14%upside from current levels. Hence, we remain positive on theIndian markets.

3



Inflation and interest rates expected to peak soon

In our view, various indicators are increasingly signaling thatinflation and interest rates are close to peak levels, with respitelikely from the second half. With the RBI hiking rates10 times since March 2010 and, more importantly, withdemand-supply factors pushing up the broader interest ratesby ~200bp, the demand momentum in the economy hasslowed, as can be observed from the recent incremental creditofftake, monthly cement and auto sales numbers and almoststagnant capital formation during 4QFY2011.

Hence, we believe the RBI has largely achieved its objective,stated in its Monetary Policy Review of May 3, 2011, of reducingdemand-side pressures to contain inflation, and this should leadto peaking out of inflation from the second half of FY2012.

Lower forex reserve accretion and RBI not hiking CRR

During the last interest rate cycle, our forex reserves hadincreased by over US$100bn between January 2007 andOctober 2008 alone (representing a 60%+ increase), keepingthe GDP growth momentum high even at higher levels of interestrates. The demand momentum had remained reasonably strongeven though the RBI had resorted to substantial CRR hikes, whichwere far more potent in pushing up domestic interest rates(at peak levels just before the Lehman crisis, interest rates werealmost 150-200bp higher than those at present).

This time around, forex reserves have been relatively anaemic(up only 12% since March 2010), suggesting a peaking ofinterest rates at lower levels in this interest rate cycle as comparedto the previous one. In cognizance of this, the RBI too has notreally used the harsher CRR tool, sticking to relatively symbolicrepo hikes. In the current scenario, with the CRR prevailing at6.5% and unlikely to be hiked due to naturally tight liquidityconditions, broader interest rates are likely to peak atcurrent levels in spite of repo hikes. This is rightly so, as inthe absence of strong forex inflows, demand too isaccordingly decelerating sooner.

Markets decline for second consecutive quarter

Indian markets continued to be under pressure for most of1QFY2012 primarily due to concerns of higher inflation andthe consequent policy rate hikes by the RBI. Despite thebounce-back at the very end of the quarter, overall the Sensexregistered losses of 3.1% qoq, continuing the declining trendwitnessed in 4QFY2011.

Source: Bloomberg, Angel Research

Exhibit 1: Sensex continued to be under pressure

(%)

(30.0)

(15.0)

-

15.0

30.0

45.0

60.0

1Q

FY0

8

2Q

FY0

8

3Q

FY0

8

4Q

FY0

8

1Q

FY0

9

2Q

FY0

9

3Q

FY0

9

4Q

FY0

9

1Q

FY1

0

2Q

FY1

0

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

Source: Bloomberg, Angel Research; Note: Dec 31, 2010=100

Exhibit 2: India has underperformed most major peers YTD

India Japan US Dow ChinaHong Kong Brazil FTSE South Korea

80

85

90

95

100

105

110

115

Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 May-11 Jun-11


Exhibit 3: FII flows turn positive(` cr)

(30,000)

(15,000)

-

15,000

30,000

45,000

60,000

75,000

1Q

FY0

8

2Q

FY0

8

3Q

FY0

8

4Q

FY0

8

1Q

FY0

9

2Q

FY0

9

3Q

FY0

9

4Q

FY0

9

1Q

FY1

0

2Q

FY1

0

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

Source: RBI, Angel Research

Exhibit 4: Forex reserves trend interest rate cycle wise

3.00

4.50

6.00

7.50

9.00

-

50

100

150

200

250

300

350

Forex reserves (US$ bn) Repo Rate (%, RHS)

Jan-0

7

May-

07

Sep

-07

Jan-0

8

May-

08

Sep

-08

Jan-0

9

May-

09

Sep

-09

Jan-1

0

May-

10

Sep

-10

Jan-1

1

May-

11

60%+in forex reserve

s

vJust 12% till nowv

Strategy



Credit offtake has fallen while deposit accretion hasgained momentum

Prior to December 2010, broader deposit mobilisation wasinevitably lower in light of high inflation and deposit rates evenbelow NSS rates. Due to the resulting drying up of liquidity,broader interest rates have already gone up by about 200-225bp.

With the sharp spike in lending rates, credit offtake has declined,as evident from the incremental CD ratio in FY2012 YTD (up toJune 17) at just 44.9% compared to 247.1% during the sameperiod in FY2011. A like-to-like comparison between March-end and mid-June of FY2011 vs. FY2012 indicates 11% lowercredit mobilisation vs. almost 5x higher deposit mobilisation.

Peak retail FD rates currently hovering at 9-9.5% for major banksare well above the 8% that NSS offers and well above the10-year G-Sec yield (8.3%) i.e., deposit mobilisation has pickedup significantly only to be largely deployed at a negative spreadinto government bonds. Accordingly, we expect deposit ratesas well as private sector lending rates to not go up further evenif the RBI hikes the repo rate a couple of more times,as demand-supply dynamics for the banking sector dictate otherwise.

In fact, we expect broader deposit and lending rates to declinefrom 2HFY2012, once WPI inflation also starts heading lower(the near-term uptick due to hike in fuel prices is in our viewalready factored in by the RBI and markets).

Even the 1-year and 10-year G-sec yield spread has recentlyturned into the negative territory i.e., bond markets are alsosignalling that interest rates are closer to peak (as witnessed inthe last interest rate cycle).

RBI's actions for containing demand-side inflationarypressures are bearing fruits

The RBI in its Annual Review of Monetary Policy for FY2012 hadindicated its intention to contain demand-side pressures oninflation through continuance of tight monetary policy and tocarry out further rate hikes if needed.

Broader interest rates have risen by 200-225bp and signs ofweakening demand are emerging in interest-sensitive sectors.1) Real estate and infrastructure sectors are getting adverselyimpacted, 2) evidencing this slowing construction activity, cementvolumes are flat on a yoy basis, 3) auto sales are decelerating,with passenger vehicles growing by just 6.2% yoy in May 2011and 4) gross capital formation has been stagnant in 4QFY2011.

The interest-sensitive mortgage demand, which has a substantialnegative correlation with interest rates, is also expected to trenddown going forward, as home loan rates have also hardenedby 150-200bp and SBI's teaser rate scheme has beendiscontinued. Although sales of 19 large listed real estatecompanies have recovered from post-Lehman lows, they arestill barely at the levels before the Lehman crisis even after apassage of three years and, in our view, higher interest ratescould dampen real estate activity further. Cement dispatchesfor April and May 2011 have been almost stagnant on a yoybasis, providing further evidence of slowing construction activity.

Passenger vehicles’ yoy growth decelerated to a more thantwo-year low of 6.2% yoy in May 2011. Another acknowledgedlead indicator of the broader economy – commercial vehiclesales, which were growing at a healthy rate of 30%+ at thestart of FY2011, have slowed down to below 20% growth rate.Hence, with the RBI's actions for containment of demand-sideinflationary pressures bearing fruits, we expect the monetarytightening stance to end sooner than expected by the markets.

Strategy


Exhibit 5: CRR hikes - very few in this interest rate cycle

(%)

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Jan

-07

May-0

7

Sep

-07

Jan

-08

May-0

8

Sep

-08

Jan

-09

May-0

9

Sep

-09

Jan

-10

May-1

0

Sep

-10

Jan

-11

May-1

1


Exhibit 7: Yield spread indicating near-peak interest rates

G-Sec 1Yr and 10Yr Spread (%) Repo Rate (%, RHS)

4.5

5.5

6.5

7.5

8.5

9.5

(1.0)

-

1.0

2.0

3.0

4.0

Jun

-05

Dec-0

5

Jun

-06

Dec-0

6

Jun

-07

Dec-0

7

Jun

-08

Dec-0

8

Jun

-09

Dec-0

9

Jun

-10

Dec-1

0

Jun

-11

Source: RBI, Angel Research; Note: #Between March 26, 2010 and June18, 2010, * Between March 25, 2011 and June 17, 2011

Exhibit 6: Deposits up while credit off-take slows

FY2011# FY2012*

70,503

28,527

62,862

139,998

-

40,000

80,000

120,000

160,000

Credit offtake (` cr) Deposit mobilisation (` cr)

5



Growth in capital formation decelerating sharply

The gross fixed capital formation (GFCF) during 4QFY2011dipped sharply to almost the same level as in 4QFY2010.Though the decline in the growth rate in 4QFY2011 has to beseen in the context of the high base during 4QFY2010, yet broadertrends suggest that capital formation is slowing down, even if notas drastically as maybe suggested by the latest quarterly numbers.

On a yoy basis, real gross capital formation in FY2011 registeredan 8.6% increase compared to 7.4% in FY2010. However,yoy growth levels are almost half of what they used to be in thepre-crisis period; and on a quarterly basis, yoy growth incapital formation has been falling sharply for the last fiveconsecutive quarters.

Strategy

Source: Company, Angel Research

Exhibit 12: CV sales momentum has slowed considerably46.8

40.2

32.2 31.7

25.9

19.5

31.2

16.313.1

17.8

10.2

19.6

-

10.0

20.0

30.0

40.0

50.0

Jun

-10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec

-10

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11

Commercial vehicles (YoY % growth)


Avg Floating Home Loan Rate (%) Housing loan yoy growth (%, RHS)

8.1

9.7

11.412.3

10.5

8.9

35.3

24.115.5

9.2 10.2

17.8

-

10.0

20.0

30.0

40.0

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011

Exhibit 8: Interest rates vs. housing loan growth

Source: C-line, Angel Research

Quarterly Revenue (` cr) YoY growth (%, RHS)

(90)

(60)

(30)

-

30

60

90

120

150

0

3,000

6,000

9,000

1Q

FY2

00

8

2Q

FY2

00

8

3Q

FY2

00

8

4Q

FY2

00

8

1Q

FY2

00

9

2Q

FY2

00

9

3Q

FY2

00

9

4Q

FY2

00

9

1Q

FY2

01

0

2Q

FY2

01

0

3Q

FY2

01

0

4Q

FY2

01

0

1Q

FY2

01

1

2Q

FY2

01

1

3Q

FY2

01

1

4Q

FY2

01

1

Exhibit 9: Slow growth in real estate revenue


Exhibit 10: Growth in cement dispatches muted

Cement dispatches (YoY % change)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

Apr-

10

May-

10

Jun-1

0

Jul-

10

Aug-1

0

Sep

-10

Oct

-10

Nov-

10

Dec-

10

Jan-1

1

Feb-1

1

Mar-

11

Apr-

11

May-

11

Passenger vehicles (YoY % growth)

21.9

29.9

23.020.9

30.0

10.7

21.4

17.8

22.0

25.0

13.0

6.2-

7.0

14.0

21.0

28.0

35.0

Jun

-10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-1

1


Exhibit 11: Passenger vehicles growth halves

Quarterly Real GFCF ( cr)` Chg YoY (%, RHS)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

-

100,000

200,000

300,000

400,000

500,000

Sep

-05

Mar-

06

Sep

-06

Mar-

07

Sep

-07

Mar-

08

Sep

-08

Mar-

09

Sep

-09

Mar-

10

Sep

-10

Mar-

11

Source: CSO, Angel Research

Exhibit 14: ...but almost stagnant on a quarterly basis

Annual Real GFCF (` cr) YoY % growth (RHS)

15.314.3

15.2

2.6

7.48.6

-

3.0

6.0

9.0

12.0

15.0

18.0

700,000

900,000

1,100,000

1,300,000

1,500,000

1,700,000

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011

Source: CSO, Angel Research

Exhibit 13: Steady growth in real GFCF on a yoy basis...



Strategy

Oil burden closer to the peak of historical averages;other commodities also expected to soften further onmoderating global demand

Global oil prices had risen sharply over the past few months(from a steady range of US$85-95/barrel at the start of CY2011.Brent crude rose to the peak of US$125/barrel in April 2011and has averaged over US$111/barrel in CY2011YTD, therebyimpacting emerging economies like India in particular. However,looking at the trend in crude oil burden (crude oil consumptionas a percentage of global GDP) over the past decade, we believecrude prices are closer to their peak levels. Since CY1999, crudeoil burden has averaged 3.1% with a peak of 5.0% in CY2008.However, with the increase in oil prices, global forecasted crudeoil bill for CY2011 has risen to 5.2%, indicating thatCY2011 YTD average oil prices are closer to their peak levelsbased on historical trends. Hence, we expect Brent crude tocontinue its recent moderating trend further before stabilisingin the US$95-105/barrel band.

Further, with the signs of recovery in advanced economies likethe US moderating, consumption is likely to be lower thanforecasted, thereby causing a decline in prices. Even the FederalReserve in its recent review has revised its estimates downwardsfor US' GDP growth for the current as well as next year,suggesting moderating economic growth.

In order to reduce the impact of disruption in Libyan oil supplies,the International Energy Agency (IEA), which consists of

28 member countries, recently decided to release 60mn barrelsof oil from its emergency stocks. IEA member countries currentlyhold 4.1bn barrels of oil, of which 1.6bn barrels are heldexclusively for emergency use (equivalent to 146 days of net oilimports as against the legal obligation of 90 days).

Significantly, this is only the third time since 1974 that the IEAhas tapped into its emergency stockpiles, indicating thewillingness to reduce the burden of oil prices on the alreadymoderating economic growth and carry out further releases ifthe situation does not improve. Though the quantum of therecent release was small at 60mn barrels (2mn barrels/day for30 days) as compared to global forecasted demand for 2011at ~88mn barrels/day, the quantum of excess reserves withIEA is large enough to continue a similar 'stimulus' for ~300days. The announcement resulted in a sharp fall in oil pricesand is expected to keep them on a downward bias at least inthe short term.

The government recently decided to hike the prices of severalregulated fuels due to the rising under recoveries of OMCs.However, the recent decline in crude prices is expected to containinflationary pressures within comfortable levels going forward.

Exhibit 15: Scenario analysis of crude oil burden

Source: IMF, OPEC, Angel Research

Brent Crude Oil P Brent Crude Oil P Brent Crude Oil P Brent Crude Oil P Brent Crude Oil Price (US$/barrel)rice (US$/barrel)rice (US$/barrel)rice (US$/barrel)rice (US$/barrel)

9090909090 100100100100100 110110110110110 120120120120120 130130130130130

Crude oil consumption 2011E (US$ bn) 2,894 3,216 3,537 3,859 4,180

- as a % of global GDP 4.2 4.7 5.2 5.6 6.1

Global GDP 2011E (US$ bn) 68,652 68,652 68,652 68,652 68,652

Source: IMF, OPEC, Angel Research; Note: 2011 data as per YTD average prices

Exhibit 16: Historical trend in crude oil burden

Oil consumption (US$ bn) As a % of global GDP (RHS)

0.0

1.1

2.2

3.3

4.4

5.5

-

1,000

2,000

3,000

4,000

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11


60

75

90

105

120

135

Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11

(US$/b

arr

el)

Exhibit 17: Brent crude oil prices have cooled off

In case of other commodities, with the recent signs of moderationin advanced economies and the re-emergence of sovereigndebt crisis in the eurozone, we expect commodities to remainunder pressure at least in the short term, which is expected towane inflationary pressures on the Indian economy.

The US Fed also expects pressures from global commodity andenergy prices to dissipate going forward, as it modulates itsaccommodative monetary policy. Also, with the second roundof Quantitative Easing (QE-II) ending on June 30, the speculativemoney which, to an extent, was fueling the commodity priceswill shrink, thereby putting downward pressure on prices.

7



US wholesale inflation (PPI) at almost same levels asWPI for India

In the Indian context, more emphasis is generally put onwholesale price inflation data. However, in the global context,

Strategy

The S&P GSCI index, which consists of 24 commodities fromall commodity sectors – energy products, industrial metals,agricultural products, livestock products and preciousmetals – has cooled off ~12% from its recent peaks (tradingnear five-month lows), indicating the downward pressure ondemand due to moderating global growth.

inflation is generally assessed in terms of consumer price inflation(CPI). The Indian CPI is highly skewed towards food items (with aweightage of ~50% in the recently launched new CPI series),which are more relevant in a populous and developing countrylike India, compared to ~15% weightage in the CPI for US.

If we compare the two countries' wholesale price indices, thedifference between inflation levels is much smaller. The US PPIis mainly driven by higher global energy and commodity prices,which is a similar situation as with the Indian WPI; in fact, theUS PPI is currently prevailing at as high a level as 7.3%. However,the US Central Bank is not worried about the same and expectspressures from these factors to dissipate as it modulates itsaccommodative monetary policy and the base effect kicks in.In fact, it is still more worried about deflation due to weakunemployment and housing data, which are key demandindicators relevant for monetary policy decision-making.We believe the Indian Central Bank should also take cognizanceof this fact and use the monetary tightening tool sparingly incase of energy and commodity prices-related inflation.

That said, with food forming a substantial 45-60% of thecommon man's consumption basket depending on the variousdomestic consumer inflation indices, rising food prices arebound to be a serious concern for policymakers (not debatingthe Indian CPI composition which, unlike the US CPI, does notproperly cover several items like housing and healthcare).

In our view, there is broad acknowledgement that increasingrates is not the way to tackle this, rather we need to improvefactors such as supply, logistics, procurement and subsidydisbursement. That said, the significant cooling of food inflationin the recent weeks will provide a respite to policymakers asregards headline inflation numbers, thus reducing the need toresort to even symbolic monetary policy tightening.


Exhibit 18: S&P GSCI index 12% off recent peaks

600

630

660

690

720

750

780

Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11


Exhibit 19: Chinese PMI cooling off

Manufacturing PMI SA New Export Orders PMI SA

47.0

50.0

53.0

56.0

59.0

Jun

-09

Sep

-09

Dec-0

9

Mar-

10

Jun

-10

Sep

-10

Dec-1

0

Mar-

11

Jun

-11


Exhibit 20: US and UK PMI drifting sharply

UK Mfg PMI US Mfg PMI

40.0

45.0

50.0

55.0

60.0

65.0

May-

09

Aug

-09

Nov-

09

Feb

-10

May-

10

Aug

-10

Nov-

10

Feb

-11

May-

11


Exhibit 21: Trend in PPI for US and Indian WPI

India WPI US PPI

(9.0)

(6.0)

(3.0)

-

3.0

6.0

9.0

12.0

15.0

Jan

-08

May-

08

Sep

-08

Jan

-09

May-

09

Sep

-09

Jan

-10

May-

10

Sep

-10

Jan

-11

May-

11



Raw-material and interest cost pressures likely todecelerate going forward

Taking into account the above-mentioned factors, viz. slowdownin demand growth, lower credit offtake, considerably lower forexinflows, almost stagnant gross fixed capital formation and thewaning inflationary pressures from global energy andcommodity prices, we believe that we are very close to the peakof the current interest rate cycle.

On the domestic prices front, we expect cost pressures to subsideover the next couple of quarters. Based on an analysis of Sensexcompanies (ex. financials) over the last 20 quarters, we haveobserved that there is a 70% positive correlation between primaryarticles inflation and raw-material costs as a percentage of sales.

Strategy

However, over the past 2-3 quarters, there has been a widedivergence between them. The quarterly average primary articlesinflation has eased considerably from the peak levels of 21.4%in the quarter ended March 2010 to 15.9% during 4QFY2011.On the other hand, raw-material costs as a percentage of saleshas gone up to 44.6% during 4QFY2011. Primary articlesinflation has softened further to 11.8% during 1QFY2012(up to June 18, 2011); hence, we expect raw-material costpressures to decelerate over the next couple of quarters andaid in improving overall EBITDA margins.

In fact, food inflation is hovering around its two-year low. Primaryarticles inflation has also come down sharply from its recentpeak of 18.4% in January 2011 to 11.3% in May 2011. Eventhe spread between the primary articles and manufacturedproducts inflation in the WPI has narrowed considerably fromthe recent peaks, indicating a greater proportion ofpass-through of raw-material cost pressures – this would easeoff cost-push inflationary pressures going forward.

Currency depreciation aiding exports

Export growth has been fairly robust since November 2009;even on a rolling one-year basis, exports have grown by healthy34.7% yoy. This healthy growth in exports has been partly aidedby favourable currency movements for Indian exporters. Overthe past one year, the INR has depreciated considerably(3-11%) against the major target export countries such aseurozone. Even though the INR has appreciated against thedollar and the dollar-pegged Middle East countries, which areamongst our major export destinations, it has, however,depreciated by 1.3% against the Chinese yuan, which to anextent has improved the competitiveness of Indian exporters'vis-à-vis their Chinese counterparts in respect of these majorexport destinations.

The trend in INR depreciation is expected to continue given theoverall current account deficit and further yuan appreciationalso cannot be ruled out, given China's trade surplus anddecreasing need to create employment through the export sector.This, in turn, is expected to maintain a healthy outlook for Indianexports in our view.

Source: MOSPI, Angel Research

Exhibit 22: Food inflation near two-year lows

-

5.0

10.0

15.0

20.0

25.0

Jun

-08

Oct

-08

Feb

-09

Jun

-09

Oct

-09

Feb

-10

Jun

-10

Oct

-10

Feb

-11

Jun

-11

(%)

Source: MOSPI, Angel Research

Exhibit 23: Even primary articles inflation has cooled off(%)

-

5.0

10.0

15.0

20.0

25.0

Nov-

07

May-

08

Nov-

08

May-

09

Nov-

09

May-

10

Nov-

10

May-

11

Source: MOSPI, C-line, Angel Research

Exhibit 24: Primary articles inflation vs. RM cost as a % of sales

0.0

5.0

10.0

15.0

20.0

25.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Jun

-06

Dec-0

6

Jun

-07

Dec-0

7

Jun

-08

Dec-0

8

Jun

-09

Dec-0

9

Jun

-10

Dec-1

0

Jun

-11

RM as % of sales Avg. Primary Articles Inflation (%, RHS)

9



In our view, external issues such as the Greek crisis can contributeto near-term uncertainty and volatility from an Indian marketperspective, but they are unlikely to materially impact the overallupward trajectory of the Indian economy and markets, whichare underpinned by strong structural growth drivers and evenin the near-term are likely to register GDP growth of 7.5-8%.

Modest US economic recovery signals continuedaccommodative monetary policy

Monetary policy in developed economies such as the US hascontinued to be accommodative with the Fed's policy rate – theFederal Funds Target Rate is at its multi-year low level of0-0.25%. Even in the recent monetary policy review meeting onJune 22, 2011, the Federal Reserve reiterated its intention tokeep the rates at exceptionally low levels for an 'extended period',thereby encouraging the continuance of 'carry trades' into theemerging market economies.

The US Federal Reserve's Chairman himself, in a recent speech,had admitted that, "the current pace of US' economic recoverywas frustratingly slow and uneven", thereby hinting at a possibilityof further stimulatory measures going ahead as well. Even postQE-II, the Fed has indicated its intention to continue the buybackof treasury securities from its maturing debt (the quantum ofwhich could be ~US$300bn).

Unemployment levels in the US continue to be well in excess ofhistorical levels. Unemployment rate in the US has neveraveraged in excess of 9.0% for three consecutive years in thelast 60 years, but during CY2009-CY2011 YTD it has averagedover 9.0%, indicating the gravity of the problem. Even the FederalReserve, which had pegged the unemployment rate forCY2011 at 8.6% in its April 2011 projections, has revised itupwards to 8.8% in its June 2011 estimates.

Euro sovereign debt concerns unlikely to impactIndian markets materially

Sovereign debt crisis concerns have re-emerged in the PIIGS (Portugal,

Italy, Ireland, Greece and Spain) eurozone. Recently, Standard & Poor's

had cut Greece's credit rating by three notches from B to CCC and

had indicated the likelihood of the country defaulting on its debts at

least once by 2013. However, on a positive note, the recent

(June 21, 2011) victory of the Greek Prime Minister in a confidence

vote has bolstered his government's chances of pushing through

austerity measures to secure further international financial aid for the

country, thereby buying more time to set the house in order.

Also, on June 29, 2011, the Greek Parliament has passed the financial

austerity bill, which was a pre-condition for further financial aid.

The euro crisis has structural underpinnings arising out of conflict

between individual national fiscal policies and common

monetary and exchange rate policies of member nations.

However, in our view, it is likely to be managed in an orderly

fashion, as worst affected countries such as Greece account for

Strategy

a minor 0.5% of global GDP for CY2011 (as per IMF estimates),

creating enough scope (and incentive) for larger countries to

bailout Greece and prevent wider global financial repercussions.

Source: Ministry of Commerce, Angel Research

Exhibit 25: Healthy traction in exports

Monthly Exports (US$ bn) 3 month rolling chg yoy (%, RHS)

41.1

30.626.9

19.321.6

25.8

37.341.2

46.042.2 42.5

44.7

-

10.0

20.0

30.0

40.0

50.0

-

10

20

30

Jun

-10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11

Exhibit 26: INR vs. Currencies of major target export markets

Source: Bloomberg, Angel Research; Note: Numbers in brackets denoteappreciation of INR

CurrencyCurrencyCurrencyCurrencyCurrency One One One One One-year chg-year chg-year chg-year chg-year chg. (%). (%). (%). (%). (%)

Euro (EUR) 11.4

Singapore Dollar (SGD) 8.7

Japanese Yen (JPY) 4.5

British Pound (GBP) 2.3

Chinese Yuan (CNY) 1.3

Saudi Riyal (SAR) (3.3)

US Dollar (USD) (3.3)

UAE Dirham (UAE) (3.3)

Hong Kong Dollar (HKD) (3.4)

Source: IMF, Angel Research

Exhibit 27: PIIGS - GDP as % of global GDP (CY2011E)

0.3

3.2

0.30.5

2.2

-

1.0

2.0

3.0

4.0

5.0

Portugal Italy Ireland Greece Spain



Strategy

The US Federal Reserve in its June 2011 policy review meeting,for the second time, revised GDP growth forecasts downwards.Real GDP growth for 2011 has now been pegged at 2.8%compared to January 2011 estimate of 3.7%; similarly for 2012,it stands at 3.5% against the estimate of 4.0% in January 2011.Also, unemployment levels have been pegged higher than April2011 forecasts, suggesting an overall moderating trend in theeconomic growth.

Sensex EPS: 18.4% CAGR in FY2011-13E

We expect Sensex EPS to grow by 17.6% to `1,193 in FY2012and by 19.2% in FY2013 to ̀ 1,421, implying an 18.4% CAGRover FY2011-13E. A fair multiple of 15x FY2013E EPS yields aSensex target of 21,320, giving a reasonable ~14% upsidefrom current levels.

The primary growth drivers of Sensex EPS over FY2011-13Eare expected to be BFSI, oil and gas and metal stocks, with theBFSI sector expected to contribute 31.6% to overall growth inSensex EPS during the period, while contribution from the oiland gas and metal sectors is estimated to be at 16.8% and

Averaging 9.5%over past 2 years

Cooled off sharply withina year of hitting peak

US Unemployment Rate - Seasonally Adjusted Average

-

2.0

4.0

6.0

8.0

10.0

12.0

Jan

-48

May-

51

Sep

-54

Jan

-58

May-

61

Sep

-64

Jan

-68

May-

71

Sep

-74

Jan

-78

May-

81

Sep

-84

Jan

-88

May-

91

Sep

-94

Jan

-98

May-

01

Sep

-04

Jan

-08

May-

11


Exhibit 28: US unemployment well above average levels

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

(%)

Feb-0

0

Oct

-00

Jun-0

1

Feb-0

2

Oct

-02

Jun-0

3

Jun-0

5

Jun-0

7

Jun-0

9

Jun-1

1

Feb-0

4

Feb-0

6

Feb-0

8

Feb-1

0

Oct

-04

Oct

-06

Oct

-08

Oct

-10


Exhibit 29: Fed Funds rate remains at record low levels

Exhibit 30: US Fed revises growth forecasts downwards again

Source: US Federal Reserve, Angel Research

Avg of central tendency (%) Avg of central tendency (%) Avg of central tendency (%) Avg of central tendency (%) Avg of central tendency (%)

20112011201120112011 20122012201220122012 20132013201320132013 LLLLLonger runonger runonger runonger runonger run

Real GDP growthReal GDP growthReal GDP growthReal GDP growthReal GDP growth

- Jun 2011 projection 2.8 3.5 3.9 2.7

- Apr 2011 projection 3.2 3.9 3.9 2.7

- Jan 2011 projection 3.7 4.0 4.2 2.7

Unemployment rateUnemployment rateUnemployment rateUnemployment rateUnemployment rate

- Jun 2011 projection 8.8 8.0 7.3 5.4

- Apr 2011 projection 8.6 7.8 7.0 5.4

- Jan 2011 projection 8.9 7.9 7.0 5.5

PPPPPersonal Cons. Exp (PCE) inflationersonal Cons. Exp (PCE) inflationersonal Cons. Exp (PCE) inflationersonal Cons. Exp (PCE) inflationersonal Cons. Exp (PCE) inflation

- Jun 2011 projection 2.4 1.8 1.8 1.9

- Apr 2011 projection 2.5 2.0 1.7 1.9

- Jan 2011 projection 1.5 1.5 1.6 1.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

(%)

Bond Yield Earnings Yield


Exhibit 33: Sensex earnings yield vs. bond yield

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

(x)

Sensex 1-yr fwd P/E Average P/E

Source: Angel Research

Exhibit 32: Sensex – One-year forward P/E

825

1,014

1,193

1,421

600

800

1,000

1,200

1,400

1,600

FY2010 FY2011 FY2012E FY2013E

(`)

22.9% growth17.6% growth

19.2% growth


Exhibit 31: Sensex EPS

11



11.9%, respectively. Strong performance by the BFSI sectorhighlights the underpenetration of financial services in India,which would drive credit growth in the years to come.IT companies are expected to contribute healthy 10.7% to SensexEPS growth over FY2011-13E, primarily backed by highervolumes. On the other hand, sectors such as telecom, powerand FMCG are expected to underperform the others. Thecombined contribution of all these sectors to Sensex EPS growthis expected to be 12.6% over FY2011-13E.

Strategy

1QFY2012 Sensex earnings outlook

We expect Sensex companies to maintain strong top-line growthmomentum, with projected growth of 21.8% yoy in sales.However, profit growth is expected to be lower at 14.0% yoy,mainly on the back of lower operating margins, which areexpected to contract by 124bp yoy during the quarter. Overall,we expect OPM to come in at 20.9% vis-à-vis 22.1% in thecorresponding period last year. Net profit margin is alsoexpected to decline to 11.0% from 11.7%, down by 75bp yoy.

We expect strong numbers to be posted by the oil and gas,BFSI and FMCG sectors in 1QFY2012. The oil and gas sectoris expected to drive growth in Sensex sales and profit, with 18.7%contribution in Sensex sales growth and 18.4% contribution inSensex profit growth, despite operating margin contraction of116bp yoy. Ex. oil and gas, growth in Sensex sales and earningsis expected to be at 22.9% and 14.1%, respectively.

IT companies are expected to report 21.2% growth in sales,driven primarily by volumes, while profit growth is expected tocome in at a relatively lower 13.2% yoy due to a 199bp yoymargin compression on account of wage hikes. BFSI companiesare expected to report an 18.9% jump in net profit on the backof similar growth in the top line. Performance of private banksis expected to remain consistent with ~30% yoy growth in profits.The regulatory provisioning burden will decline for SBI over thenext couple of quarters, thereby aiding growth in profits.Ex. BFSI, growth in Sensex profit is expected to be 12.8% yoy.

We expect FMCG companies to post decent 16.4% yoygrowth in sales on the back of higher volumes as well as pricehikes; the increase in profits is expected to be healthy 20.7%yoy due to an 87bp yoy expansion in operating margins. Powercompanies are expected to post a 15.5% increase in sales, whilePAT is expected to grow by healthy 22.8% on the back of OPMexpansion of 262bp yoy.

The auto, capital goods, metals and telecom sectors areexpected to be the major underperformers during this quarter.Auto stocks are expected to report 12.1% yoy growth in profit,despite a healthy 22.2% increase in sales, mainly because ofsub-15% growth in earnings for Hero Honda, Tata Motors andM&M due to stiff pressure on margins on account of high inputcosts. Maruti Suzuki is expected to report a 3.7% yoy decline inprofits due to lower volumes as well as margin compression.

Telecom companies are expected to report a decline in profits,despite substantial top-line growth. The telecom sector is expectedto report a healthy 29.1% yoy increase in the top line, partiallybecause of the inclusion of Zain's numbers in Bharti Airtel's accounts.However, due to increased competition and higher interest andother costs on account of the 3G network rollout, profits areexpected to decline by 2.5% yoy. RCom's earnings are expected tofall substantially by 72.2% yoy due to operating margincompression as well as higher interest costs. Ex. telecom, profitgrowth in the Sensex is estimated at 14.7% yoy.

Metal companies are expected to witness healthy growth of27.3% in the top line on the back of stronger commodity pricesas well as volume growth on account of capacity expansions.However, profits are expected to grow by relatively lower 11.2%yoy, primarily due to high input costs denting margins by 207bpyoy. Though the capital goods sector is expected to witness strongsales growth of 25.8%, margins are estimated to fall by 92bpyoy, resulting in bottom-line growth of just 5.8%.

In the construction sector, we expect JP Associates to reportmoderate performance on the top-line front with strong growthin adjusted net profit. Sales and adjusted profits are estimatedto grow by 11.6% and 88.4% yoy, respectively, withmargins increasing by 275bp. We expect Cipla to performmoderately, with 15.5% top-line growth and 9.4% growthin the bottom line.

7.2 1.36.2

31.65.2

10.7

11.9

16.8 1.13.1 0.5 4.3 100.0

-

20.0

40.0

60.0

80.0

100.0

Auto

Const

r.

Engg.

Finance

FMC

G IT

Met

als

Oil

&G

as

Pharm

a

Pow

er

Real E

state

Tele

com

Tota

l


Exhibit 34: Sectoral contribution to Sensex EPS growth in FY11-13E



Net Sales (Net Sales (Net Sales (Net Sales (Net Sales (`̀̀̀̀ cr) cr) cr) cr) cr) Net PNet PNet PNet PNet Profit (rofit (rofit (rofit (rofit (`̀̀̀̀ cr) cr) cr) cr) cr) WWWWWeightageeightageeightageeightageeightage % Contribution% Contribution% Contribution% Contribution% Contribution

CompanyCompanyCompanyCompanyCompany 1QFY2012E 1QFY2012E 1QFY2012E 1QFY2012E 1QFY2012E 1QFY2011 1QFY2011 1QFY2011 1QFY2011 1QFY2011 % chg% chg% chg% chg% chg 1QFY2012E1QFY2012E1QFY2012E1QFY2012E1QFY2012E 1QFY2011 1QFY2011 1QFY2011 1QFY2011 1QFY2011 % chg% chg% chg% chg% chg (%) (%) (%) (%) (%) to Sensex growth to Sensex growth to Sensex growth to Sensex growth to Sensex growth#####

Bajaj Auto 4,763 3,737 27.4 734 590 24.3 1.4 2.8

Bharti Airtel 17,212 12,231 40.7 1,874 1,743 7.5 3.5 1.8

BHEL 8,251 6,601 25.0 785 668 17.6 2.3 1.6

Cipla 1,649 1,427 15.5 282 257 9.3 1.1 0.6

DLF 2,334 2,029 15.0 408 411 (0.8) 0.6 (0.0)

HDFC 1,326 1,081 22.6 884 695 27.3 6.2 6.7

HDFCBK 4,180 3,341 25.1 1,073 812 32.2 6.2 8.2

Hero Honda 5,704 4,265 33.7 550 492 11.9 1.2 1.1

Hindalco 19,476 16,544 17.7 819 759 7.8 2.5 1.2

HUL 5,462 4,794 13.9 609 515 18.3 1.6 2.6

ICICIBK 4,385 3,672 19.4 1,493 1,026 45.5 8.4 18.3

Infosys 7,435 6,198 20.0 1,689 1,488 13.5 9.4 6.7

ITC 5,692 4,817 18.2 1,301 1,070 21.6 7.3 6.3

Jindal Steel & Power 3,582 2,998 19.5 864 957 (9.7) 1.8 (1.6)

JP Associates 3,588 3,214 11.6 199 106 88.4 0.6 2.0

L&T 9,938 7,885 26.0 674 666 1.2 6.6 0.3

M&M 6,536 5,124 27.5 637 562 13.3 2.3 2.3

Maruti Suzuki 8,250 8,051 2.5 448 465 (3.7) 1.1 (0.3)

NTPC 15,094 12,944 16.6 2,091 1,842 13.5 2.0 2.0

ONGC 16,191 13,823 17.1 3,904 3,661 6.6 3.1 1.9

RCOM 5,123 5,069 1.1 70 251 (72.2) 0.5 (2.5)

Reliance Infra 4,751 3,706 28.2 391 375 4.2 0.5 0.3

RIL 68,849 58,228 18.2 5,615 4,851 15.7 10.7 16.4

SBI 12,519 10,994 13.9 2,550 2,914 (12.5) 4.6 (6.4)

Sterlite 10,200 5,925 72.2 1,700 1,008 68.6 1.7 12.2

Tata Motors 33,166 26,876 23.4 2,226 1,989 11.9 2.5 6.5

Tata Power 5,543 5,152 7.6 494 318 55.5 1.4 4.8

Tata Steel 34,668 27,195 27.5 1,858 1,865 (0.4) 2.7 (0.2)

TCS 10,547 8,216 28.4 2,182 1,843 18.4 4.6 4.0

Wipro 8,335 7,236 15.2 1,363 1,318 3.4 1.7 0.4

TTTTTotalotalotalotalotal 344,749 344,749 344,749 344,749 344,749 283,372 283,372 283,372 283,372 283,372 21.7 21.7 21.7 21.7 21.7 39,766 39,766 39,766 39,766 39,766 35,518 35,518 35,518 35,518 35,518 12.0 12.0 12.0 12.0 12.0 100 100 100 100 100 100 100 100 100 100

Sensex# 21.8 14.0

Exhibit 35: Quarterly earnings trend for Sensex companies

Source: Angel Research; Note: # based on free-float weightages

Strategy

13



BSE-100 AngelSector Company CMP (`) Target Price (`) Weightage (%) Weightage (%) Stance

Auto & AncillariesAuto & AncillariesAuto & AncillariesAuto & AncillariesAuto & Ancillaries 6.36.36.36.36.3 6.06.06.06.06.0 UnderweightUnderweightUnderweightUnderweightUnderweight

JK Tyres 96 133 0.0 3.0 Overweight

MRF 6,723 8,627 0.0 3.0 Overweight

BFSIBFSIBFSIBFSIBFSI 26.226.226.226.226.2 29.029.029.029.029.0 OverweightOverweightOverweightOverweightOverweight

SBI 2,406 2,832 3.2 5.0 Overweight

Axis Bank 1,289 1,650 1.6 9.0 Overweight

ICICI Bank 1,093 1,355 5.9 12.0 Overweight

HDFC Bank 2,503 2,594 4.4 3.0 Equalweight

Capital Goods &Capital Goods &Capital Goods &Capital Goods &Capital Goods & 10.010.010.010.010.0 11.011.011.011.011.0 OverweightOverweightOverweightOverweightOverweight

InfrastructureInfrastructureInfrastructureInfrastructureInfrastructure IVRCL Infra 70 100 0.1 3.0 Overweight

L&T 1,823 2,030 4.6 5.0 Overweight

LMW 2,090 2,780 0.0 3.0 Overweight

CementCementCementCementCement 2.12.12.12.12.1 0.00.00.00.00.0 UnderweightUnderweightUnderweightUnderweightUnderweight

FMCGFMCGFMCGFMCGFMCG 8.98.98.98.98.9 3.03.03.03.03.0 UnderweightUnderweightUnderweightUnderweightUnderweight

ITC 202 203 5.1 3.0 Underweight

HotelsHotelsHotelsHotelsHotels 0.20.20.20.20.2 3.03.03.03.03.0 OverweightOverweightOverweightOverweightOverweight

Taj GVK 105 140 0.0 3.0 Overweight

MediaMediaMediaMediaMedia 0.40.40.40.40.4 3.03.03.03.03.0 OverweightOverweightOverweightOverweightOverweight

Jagran Prakashan 127 161 0.0 3.0 Overweight

MetalsMetalsMetalsMetalsMetals 9.09.09.09.09.0 12.012.012.012.012.0 OverweightOverweightOverweightOverweightOverweight

Hindalco Inds 181 242 1.2 4.0 Overweight

Tata Sponge 340 415 0.0 3.0 Overweight

Tata Steel 609 799 1.9 5.0 Overweight

Oil & GasOil & GasOil & GasOil & GasOil & Gas 12.412.412.412.412.4 12.012.012.012.012.0 UnderweightUnderweightUnderweightUnderweightUnderweight

Reliance Industries 898 1,189 7.2 12.0 Overweight

PharmaPharmaPharmaPharmaPharma 4.54.54.54.54.5 6.06.06.06.06.0 OverweightOverweightOverweightOverweightOverweight

Cipla 330 377 0.8 3.0 Overweight

Lupin 449 593 0.5 3.0 Overweight

PPPPPowerowerowerowerower 4.04.04.04.04.0 0.00.00.00.00.0 UnderweighUnderweighUnderweighUnderweighUnderweight

Real EstateReal EstateReal EstateReal EstateReal Estate 0.70.70.70.70.7 0.00.00.00.00.0 UnderweightUnderweightUnderweightUnderweightUnderweight

SoftwareSoftwareSoftwareSoftwareSoftware 11.911.911.911.911.9 9.09.09.09.09.0 UnderweightUnderweightUnderweightUnderweightUnderweight

Infosys 2,907 3,424 6.7 3.0 Underweight

HCL Tech 493 591 0.6 3.0 Overweight

TCS 1,180 1,337 3.3 3.0 Equalweight

TTTTTelecomelecomelecomelecomelecom 3.13.13.13.13.1 0.00.00.00.00.0 UnderweightUnderweightUnderweightUnderweightUnderweight

OthersOthersOthersOthersOthers 0.6 0.6 0.6 0.6 0.6 6.06.06.06.06.0 OverweightOverweightOverweightOverweightOverweight

Surya Roshni 84 137 0.0 3.0 Overweight

Greenply 192 270 0.0 3.0 Overweight

Angel Research Model Portfolio



1QFY2012 Sectoral Outlook

15



Automobile

CV sector to ride on LCV demand

In FY2011, the CV industry grew by robust 30.4% yoy, drivenby significant recovery in economic and industrial activity, healthyfreight availability and improvement in agricultural production.Despite higher vehicle prices and interest rates, the CV industryhas grown at a healthy rate of ~15% YTD in FY2012. Duringthe quarter, the LCV segment grew by robust 22.8% YTD inFY2012, while the M&HCV segment witnessed moderate growthof 5.6%. However, multiple headwinds in the form of higherinterest rates, diesel prices and moderation in near-termeconomic growth are expected to negatively affect transporterprofitability, leading to a slowdown in growth momentum.As such, we expect the CV sector to register a CAGR of 10-12%over the next two years, with the LCV segment expected to drivegrowth as it is estimated to grow at a relatively high rate of16-18% during the same period. During 1QFY2012,Tata Motors recorded 18% yoy growth on account of 25% yoygrowth in the LCV segment. Going ahead, new product launches(Magic, Iris and Ace) are expected to drive volume growth.

Strong demand growth witnessed in the Indian auto sector inFY2010 and FY2011 showed signs of slowing down during1QFY2012. Although the overall auto sector reported healthygrowth of ~18% YTD in FY2012, it was primarily driven by thetwo-wheeler and three-wheeler segments. We expect our autouniverse to report ~18% yoy growth in revenue during1QFY2012 on the back of ~17% yoy jump in volumes. However,on a sequential basis, revenue is expected to decline by ~10%,led by a qoq decline in passenger vehicle (PV) and commercialvehicle (CV) volumes. While the strong growth momentum intwo-wheelers and light commercial vehicles (LCV) continued in1QFY2012, cumulative effects of rising interest rates and a sharpincrease in fuel prices resulted in slowing PV and medium andheavy commercial vehicles (M&HCV) demand. We expect thenear-term demand environment to remain challenging for theauto sector due to increased ownership cost for consumers.The long-term demand momentum is expected to remainhealthy, aided by positive consumer sentiment, rising incomelevels, easy availability of finance and new launches.

Under pressure EBITDA margin to restrict profitability

We expect operating margin of companies in our auto universeto remain under pressure in 1QFY2012 on account of a yoyincrease in raw-material costs. On a sequential basis though,commodity prices have remained more or less stable. Key rawmaterials such as steel, aluminum, plastic and rubber witnessedaverage increases of ~6%, ~18%, ~1% and ~38% yoy,respectively, during 1QFY2012. However, we believe averageprice increases of ~2% by auto makers during the quarter andongoing cost-reduction initiatives will dilute the impact of inputcost inflation to a certain extent. As a result, we expect a marginal~50bp yoy contraction in EBITDA margin to ~12%. On the netprofit front, our auto universe is expected to report a ~9% yoyincrease in profitability, while it is expected to decline by ~13%on a qoq basis.

Interest rate, fuel price and commodity price trend

Financing plays an important role for the auto industry andinterest rates exhibit a negative correlation with auto volumegrowth. Monetary tightening by the RBI to rein inflation hasbeen pushing interest rates up, leading to increased cost ofownership for consumers. Further, the government's policy ofderegulating petrol prices to control the fiscal deficit has led toa sharp increase in petrol prices since the beginning of CY2011.Petrol and diesel prices have been hiked by `7.5/litre and`3.4/litre YTD in CY2011. This has negatively affected ownershipcost and freight operators' profitability and has moderated autovolume growth. Further, commodity prices in general havewitnessed a slight uptick during the quarter on a yoy basis, withprices of key raw materials, steel and aluminum, increasing by

6-18% yoy. Rubber and lead prices also rose by ~38% and~30% yoy, respectively, during the quarter.

Auto index underperforms the Sensex

The auto index underperformed the Sensex during 1QFY2012,registering a decline of 5.3% versus losses of 3.1% posted bythe Sensex. The underperformance can be attributed to growingconcerns regarding volume growth in the sector due toheadwinds in the form of rising interest rates and higher vehicleand fuel prices. Index heavyweights, Tata Motors and Marutiperformed poorly as compared to the auto index, down 15%and 3%, respectively. During the quarter, Tata Motors’ shareprice declined by 20% on account of lower-than-expected4QFY2011 performance. Maruti Suzuki fell by 8% on concernsthat the strike at the Manesar plant will hurt the company’svolume and profitability. On the other hand, Hero Honda, ExideIndustries and Apollo Tyres outperformed the auto index by 24%,19% and 18%, respectively.


Exhibit 1: Auto index vs. the Sensex

BSE Auto BSE_SENSEX

0

50

100

150

200

250

Jul-07 Feb-08 Oct-08 Jul-09 Mar-10 Oct-10 Jun-11



Automobile

PV segment – Sluggish demand; Competition tointensify with new launches

PVs witnessed a slowdown in volume growth during 1QFY2012,plagued by macroeconomic concerns such as rising interestrates, fuel price hikes and declining consumer confidence. As aresult, the industry registered sluggish yoy volume growth of10.6% YTD in FY2012. Going ahead, we expect the slowdownin demand to continue for the next couple of months with revivallikely in 2HFY2012, led by festival demand. However, weestimate the PV segment to register a CAGR of 10-12% overthe next two years on account of buoyant long-term expectedeconomic growth, low penetration levels and increasingdisposable income. During 1QFY2012, market leader, Marutiwitnessed sluggish volume growth in domestic markets due towhich it reported a 0.6% yoy decline in sales. The primary reasonfor sluggish growth can be attributed to the slowdown in thedominant A2 segment, which increased marginally by 0.3%yoy. In terms of market share, Maruti conceded ~200bp ofmarket share to competition in domestic markets YTD in FY2012and its share now stands at 43.7%. We expect Maruti's marketshare to remain under pressure, ahead of several new smallcar launches that are lined up in FY2012.

Two-wheeler growth relatively insulated

The two-wheeler segment maintained its growth momentumand posted strong 19.8% yoy growth YTD in FY2012. Salesvolume continues to defy the slowdown witnessed in PV and CVsales as the increase in interest rates and fuel prices is believedto have a negligible impact on overall two-wheeler volumes.Further, improving supplies across the domestic motorcyclesegment coupled with high growth in the exports market aidedthe two-wheeler segment's growth. The dominant motorcyclesegment posted robust 21% yoy growth, while the scooters andmopeds segments reported 15% and 20% yoy growth involumes, respectively. Hero Honda led the two-wheeler pack,registering impressive growth of 24% yoy, backed by the strengthof its market reach and strong performance in the rural market.Bajaj Auto reported a healthy 18% yoy increase in motorcyclevolumes on the back of strong traction in Pulsar and Discover.Led by superior sales growth, Hero Honda regained a marketshare of 282bp at the expense of Bajaj Auto and TVS in thedomestic two-wheeler segment, and its YTD FY2012 marketshare stands at 46.8% as against 19.6% and 14.2% forBajaj Auto and TVS, respectively. Going ahead,we expect the two-wheeler segment to report strong volumeperformance and register a 14-15% CAGR in volumes over thenext couple of years.

Auto ancillaries to track the auto sector

The auto ancillaries sector, which derives 70-75% of its revenuefrom OEMs, has benefitted from strong growth in domesticautomobile production in the last two years and is estimated tohave grown at a robust rate of 20-25% during the period.The sector's growth has been driven by the domestic OEMsegment, which has witnessed a CAGR of ~25% inFY2009-11. Further, exports, which account for ~17% of theauto component industry, are estimated to have grown at arate of ~15% during the period on the back of recovery in thecars and light trucks segment in the US in CY2010, after a

Ashok Leyland, on the other hand, witnessed a 9.9% yoy dip involumes, led by a 14.2% yoy fall in the M&HCV goods segment.

Source: Company; Angel Research

Exhibit 2: TML and Ashok Leyland – Quarterly volumes

SegmentSegmentSegmentSegmentSegment 1QFY121QFY121QFY121QFY121QFY12 1QFY111QFY111QFY111QFY111QFY11 % chg% chg% chg% chg% chg FY20FY20FY20FY20FY201111111111 FY2010FY2010FY2010FY2010FY2010 % chg% chg% chg% chg% chg

TTTTTata Motorsata Motorsata Motorsata Motorsata Motors 193,038193,038193,038193,038193,038 181,711181,711181,711181,711181,711 6.2 6.2 6.2 6.2 6.2 803,265803,265803,265803,265803,265 642,685642,685642,685642,685642,685 25.0 25.0 25.0 25.0 25.0

M&HCV 49,115 45,298 8.4 212,278 167,828 26.5

LCV 77,033 61,639 25.0 284,647 233,697 21.8

TTTTTotal CVotal CVotal CVotal CVotal CV 126,148126,148126,148126,148126,148 106,937106,937106,937106,937106,937 18.018.018.018.018.0 496,925496,925496,925496,925496,925 401,525401,525401,525401,525401,525 23.8 23.8 23.8 23.8 23.8

Utility Vehicles 10,627 9,795 8.5 43,076 34,124 26.2

Cars 56,263 64,979 (13.4) 263,264 207,036 27.2

TTTTTotal PVotal PVotal PVotal PVotal PV 66,89066,89066,89066,89066,890 74,77474,77474,77474,77474,774 (10.5)(10.5)(10.5)(10.5)(10.5) 306,340306,340306,340306,340306,340 241,160241,160241,160241,160241,160 27.027.027.027.027.0

Exports (Inc Above ) 14,886 12,243 21.6 58,044 34,140 70.0

Ashok LAshok LAshok LAshok LAshok Leyland CV saleseyland CV saleseyland CV saleseyland CV saleseyland CV sales 19,27719,27719,27719,27719,277 21,40021,40021,40021,40021,400 (9.9)(9.9)(9.9)(9.9)(9.9) 94,10694,10694,10694,10694,106 63,92663,92663,92663,92663,926 47.247.247.247.247.2

Exhibit 3: Maruti and M&M – Quarterly volumes


Maruti SuzukiMaruti SuzukiMaruti SuzukiMaruti SuzukiMaruti Suzuki 281,526281,526281,526281,526281,526 283,324283,324283,324283,324283,324 (0.6) (0.6) (0.6) (0.6) (0.6) 1,271,0151,271,0151,271,0151,271,0151,271,015 1,018,3651,018,3651,018,3651,018,3651,018,365 24.824.824.824.824.8

Passenger Cars 249,181 239,898 3.9 1,127,083 866,858 30.0

MUV, Gypsy, Vitara 1,502 2,989 (49.7) 5,666 3,932 44.1

DomesticDomesticDomesticDomesticDomestic 250,683250,683250,683250,683250,683 242,887242,887242,887242,887242,887 3.2 3.2 3.2 3.2 3.2 1,132,7491,132,7491,132,7491,132,7491,132,749 870,790870,790870,790870,790870,790 30.1 30.1 30.1 30.1 30.1

Exports 30,843 40,437 (23.7) 138,266 147,575 (6.3)

M&MM&MM&MM&MM&M 162,149162,149162,149162,149162,149 132,241132,241132,241132,241132,241 22.622.622.622.622.6 590,719590,719590,719590,719590,719 472,914472,914472,914472,914472,914 24.924.924.924.924.9

Automotive-Domestic 96,280 78,318 22.9 358,023 286,713 24.9

Automotive-Exports 5,717 3,775 51.4 19,042 11,567 64.6

Tractor-Domestic 57,244 47,716 20.0 201,786 165,633 21.8

Tractor-Exports 2,908 2,432 19.6 11,868 9,001 31.9


Exhibit 4: Bajaj Auto, Hero Honda, TVS – Quarterly volumes


Bajaj AutoBajaj AutoBajaj AutoBajaj AutoBajaj Auto 1,092,8151,092,8151,092,8151,092,8151,092,815 928,336928,336928,336928,336928,336 17.7 17.7 17.7 17.7 17.7 3,823,9293,823,9293,823,9293,823,9293,823,929 2,852,6322,852,6322,852,6322,852,6322,852,632 34.034.034.034.034.0

Motorcycles 963,051 828,418 16.3 3,387,045 2,511,696 34.9

Three Wheelers 129,764 99,918 29.9 436,884 340,936 28.1

Exports (Inc above ) 427,364 323,899 31.9 1,203,718 890,006 35.2

Hero HondaHero HondaHero HondaHero HondaHero Honda 1,529,5771,529,5771,529,5771,529,5771,529,577 1,234,0391,234,0391,234,0391,234,0391,234,039 23.923.923.923.923.9 5,402,4445,402,4445,402,4445,402,4445,402,444 4,600,1304,600,1304,600,1304,600,1304,600,130 17.417.417.417.417.4

TVS MotorsTVS MotorsTVS MotorsTVS MotorsTVS Motors 536,130536,130536,130536,130536,130 463,840463,840463,840463,840463,840 15.615.615.615.615.6 2,046,7312,046,7312,046,7312,046,7312,046,731 1,536,8681,536,8681,536,8681,536,8681,536,868 33.233.233.233.233.2

Motorcycles 215,051 200,358 7.3 836,821 640,965 30.6

Scooters 117,523 95,486 23.1 466,264 309,501 50.7

Mopeds 192,133 160,197 19.9 703,717 571,536 23.1

Three Wheelers 11,423 7,799 46.5 39,929 14,866 168.6

Exports (Inc above ) 77,802 54,483 42.8 234,411 165,414 41.7

Source:Company, Angel Research

17



Automobile

Analyst - YAnalyst - YAnalyst - YAnalyst - YAnalyst - Yaresh Karesh Karesh Karesh Karesh Kothariothariothariothariothari

21% yoy decline in CY2009. The US and European Union arethe major export destinations for Indian auto componentmanufacturers, contributing 60-65% to the sector's exportrevenue. Going ahead, we expect the auto component industryto register moderate growth as domestic OEM demand isexpected to ease after witnessing strong volume growth overthe last two years. However, exports are likely to grow at ahealthy rate on revival in the automobile industry across theglobe and increased penetration of domestic auto componentplayers in key export markets over the next couple of years.Further, with India emerging as a global automotivemanufacturing hub, foreign players are setting up their facilitiesin the country, and this is expected to aid sourcing of componentsfrom the country over the long term. Replacement demand inthe industry is expected to grow at a steady rate of 8-10%,although the threat of cheaper Chinese imports will remain amajor concern for domestic manufacturers. Companies in thesubsegments of the auto components sector (tyres, bearingsand batteries), with a larger share of revenue from thereplacement and domestic markets, are likely to register stronggrowth in the next couple of years.

Outlook

Considering the near-term macroeconomic challenges,we expect the auto industry to register moderate volume growthof 12-13% for FY2012. However, we believe low penetrationlevels coupled with a healthy and sustainable economicenvironment and favourable demographics supported byincreasing per capita income levels will drive long-term growthof the Indian auto industry. As such, we prefer stocks that havestrong fundamentals, ability to deliver strong top-lineperformance and are available at attractive valuations.We continue to prefer companies in the auto sector with a strongpricing power and high exposure to rural and exports markets.

WWWWWe prefer M&M among auto heavyweights. In the ancillarye prefer M&M among auto heavyweights. In the ancillarye prefer M&M among auto heavyweights. In the ancillarye prefer M&M among auto heavyweights. In the ancillarye prefer M&M among auto heavyweights. In the ancillaryspace, we maintain our positive stance on Exide Industries,space, we maintain our positive stance on Exide Industries,space, we maintain our positive stance on Exide Industries,space, we maintain our positive stance on Exide Industries,space, we maintain our positive stance on Exide Industries,Apollo TApollo TApollo TApollo TApollo Tyres and JK Tyres and JK Tyres and JK Tyres and JK Tyres and JK Tyres.yres.yres.yres.yres.

Exhibit 5: Quarterly estimates – Automobile (((((`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on June 30, 2011, @Adjusted for extraordinary items; * Consolidated numbers

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTaaaaargrgrgrgrgeeeeettttt Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E chg bpchg bpchg bpchg bpchg bp 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E ( ( ( ( ( `̀̀̀̀)))))

Ashok Leyland 49 2,505 6.7 9.5 (53) 102 (17.1) 0.8 (17.1) 4.7 4.5 5.0 10.3 10.8 9.7 60 Buy

Bajaj Auto@ 1,406 4,763 27.4 19.8 (20) 734 24.3 25.4 24.3 90.4 100.3 107.3 15.6 14.0 13.1 1,610 Accumulate

Hero Honda 1,878 5,704 33.7 15.1 112 550 11.9 27.6 11.9 100.6 103.9 116.9 18.7 18.1 16.1 - Neutral

Maruti 1,158 8,250 2.5 9.5 (13) 448 (3.7) 15.5 (3.7) 79.2 89.1 101.0 14.6 13.0 11.5 1,314 Accumulate

M&M @ 701 6,536 27.5 13.8 (127) 637 13.3 10.8 9.2 43.3 46.7 51.6 16.2 15.0 13.6 804 Buy

Tata Motors@* 994 33,166 23.4 12.5 (175) 2,226 11.9 34.9 0.1 145.3 159.4 172.6 6.8 6.2 5.8 1,100 Accumulate

TVS Motors 54 1,644 20.0 5.5 (92) 46 14.0 1.0 14.0 4.1 4.4 5.2 13.2 12.2 10.3 62 Buy

Exhibit 6: Quarterly estimates – Auto Ancillary (((((`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on June 30, 2011, * Consolidated numbers; # December year ending


(((((`̀̀̀̀))))) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E chg bpchg bpchg bpchg bpchg bp 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E (((((`̀̀̀̀)))))

Bharat Forge* 310 1,300 28.4 16.3 (194) 75 21.4 3.2 21.5 12.8 18.8 23.4 24.2 16.5 13.2 351 Accumulate

Bosch India# 6,851 1,930 16.5 18.6 (19) 249 18.7 79.3 18.7 273.4 307.9 340.6 25.1 22.3 20.1 - Neutral

Exide Industries 162 1,336 16.0 19.3 (354) 187 13.2 2.2 13.2 7.8 8.7 10.0 20.6 18.5 16.1 172 Accumulate

FAG Bearing# 1,194 322 18.9 19.5 37 42 23.9 25.2 23.9 73.1 86.7 97.3 16.3 13.8 12.3 - Neutral

Motherson Sumi* 226 2,200 18.4 11.1 137 106 78.8 2.7 78.8 10.1 11.6 13.7 22.4 19.5 16.5 247 Accumulate

Apollo Tyres* 78 2,426 33.2 10.0 (90) 91 22.4 1.8 22.4 8.7 9.8 11.6 9.0 8.0 6.7 93 Buy



BankingBanking

During 1QFY2012, banking stocks suffered on account ofuncertain domestic macro conditions, which have been plaguedby high inflation for over a year now. With margin compressionsand provisioning for pension expenses for retired employees incase of PSU banks in 4QFY2011 results already having createddoubtful sentiments, the possibility of further aggressive ratehikes by the RBI as inflation numbers continued to be muchoutside the comfort zone led to a sharp correction in the Bankexin the last week of April. An aggressive 50bp hike in key policyrates in the May 3rd monetary policy was accompanied by theincrease in savings rate and shift to relatively stricter provisioningnorms, which further slid the Bankex down. Eventually, theBankex rallied along with the Sensex in the last week of June,with increasing visibility that inflation may cool down from2HFY2012.

By the end of the quarter, the Bankex was down by 3.6%sequentially, underperforming the Sensex marginally by 0.5%.Within our coverage universe, Federal Bank gave the highestreturns of 7.9% sequentially, followed by HDFC Bank and SouthIndian Bank, with gains of 6.8% and 4.8%, respectively.

Credit demand sustains above 20%, deposit growthcrosses 18%

Prior to December 2010, broader deposit mobilisation wasinevitably lower in light of high inflation and deposit rates evenbelow NSS rates. Due to the resulting drying up of liquidity,broader interest rates have already gone up by 200-225bp.In 1QFY2012 alone, a cumulative repo rate hike of 75bp andthe more impactful 50bp hike in savings rate have led mostbanks to pass on most of the burden to borrowers.

Further, the rise in interest rates during the quarter ledto a decline in credit demand from the highs of 23-24%witnessed in 4QFY2011 to a more sustainable 20.7% (as ofJune 17, 2011). However, on the positive side, it resulted inhigher and much-required deposit mobilisation.

With the sharp spike in lending rates, credit offtake has declined,as evident from the incremental CD ratio in FY2012 YTD (up toJune 17) at just 44.9% compared to 247.1% during the sameperiod in FY2011. A like-to-like comparison betweenMarch-end and mid-June of FY2011 vs. FY2012 indicates 11%lower credit mobilisation vs. almost 5x higher deposit mobilisation.

The deposit growth rate for the first time since December 2009crossed 18% (18.2% as of June 17, 2011), as the continualincrease in deposit rates by banks over the last six months ledto higher supply of funds. Consequently, the overallcredit-to-deposit ratio marginally fell to 74.9% from 75.7% atthe start of 1QFY2012.

The peak retail FD rates, currently hovering at 9-9.5% for majorbanks, are well above the 8% rate that NSS offers and wellabove the 10-year G-Sec yield (8.3%), reflecting that depositmobilisation has picked up significantly but only to be deployedat a negative spread into government bonds. Accordingly,we expect deposit rates as well as private sector lending ratesto not go up further even if the RBI hikes the repo rate a coupleof more times, as the demand-supply dynamics for the bankingsector dictate otherwise.

Source: RBI, Angel Research; Note: #Between March 26, 2010 and June18, 2010, * Between March 25, 2011 and June 17, 2011

Exhibit 2: Deposits up while credit off-take slows

FY2011# FY2012*

70,503

28,527

62,862

139,998

-

40,000

80,000

120,000

160,000

Credit offtake (` cr) Deposit mobilisation (` cr)

Exhibit 1: 1QFY2012 stock performance(%)(%)(%)(%)(%) Returns (qoq)Returns (qoq)Returns (qoq)Returns (qoq)Returns (qoq) Returns (yoy)Returns (yoy)Returns (yoy)Returns (yoy)Returns (yoy)

Federal Bank (FEDBK) 7.9 42.1

HDFC Bank (HDFCBK) 6.8 30.7

South Indian Bank (SIB) 4.8 44.4

Indian Overseas Bank (IOB) 2.3 41.1

Yes Bank (YESBK) 0.6 15.9

ICICI Bank (ICICIBK) (1.8) 26.8

SensexSensexSensexSensexSensex (3.1) (3.1) (3.1) (3.1) (3.1) 6.5 6.5 6.5 6.5 6.5

BankexBankexBankexBankexBankex (3.6) (3.6) (3.6) (3.6) (3.6) 19.1 19.1 19.1 19.1 19.1

Syndicate Bank (SYNDBK) (3.7) 27.6

Jammu and Kashmir Bank (J&KBK) (3.9) 1.7

IDBI Bank (IDBIBK) (4.5) 14.2

Axis Bank (AXSB) (8.2) 3.7

Indian Bank (INDBK) (8.5) (5.9)

United Bank of India (UTDBK) (9.4) 18.9

Bank of Baroda (BOB) (9.5) 24.2

UCO Bank (UCO) (10.6) 23.6

Punjab National Bank (PNB) (10.7) 4.1

Andhara Bank (ANDHBK) (11.1) 3.2

Central Bank of India (CNTBK) (11.9) 3.6

Vijaya Bank (VIJBK) (12.4) 7.7

State Bank of India (SBI) (13.1) 4.5

Dena Bank (DENABK) (13.1) (2.6)

Bank of India (BOI) (13.3) 18.8

Allahabad Bank (ALBK) (14.7) 21.3

Oriental Bank of Commerce (OBC) (14.8) 1.1

Union Bank of India (UNBK) (15.7) (5.9)

Canara Bank (CANBK) (16.3) 16.8

Corporation Bank (CRPBK) (17.6) 0.3


19



Banking

On the back of pick-up in deposit growth rates in 1QFY2012,some of the banks reduced their term deposit rates. However,on the advances side, banks raised their lending rates by ~50bpon an average during the quarter. Amongst banks under ourcoverage, Axis Bank had the highest average base rate change(112bp), followed by HDFC Bank (97bp).

We expect most banks, especially the smaller banks with lowCASA ratios, to face NIM pressures during the quarter, as1) further deposits reprice upwards, 2) CASA ratios decline asrising interest rates are likely to have resulted in a shift fromsavings to term deposits and 3) in most cases, CD ratiosdeteriorate in line with sectoral trends. Overall, we expect largeprivate banks to post 25% yoy growth in net interest income,while PSU banks are expected to register 20.6% yoy growth.

Liquidity relatively comfortable during 1QFY2012

Increasing deposit mobilisation and slowing credit offtake, apartfrom seasonal factors, reflected in lower average LAF borrowingsfor 1QFY2012 at ~`46,000cr, comfortably within the RBI'scomfort zone of +-1% of total NDTL.

The easing of liquidity pressures in 1QFY2012 post two quartersof heavy liquidity crunch in the system (average LAF borrowingsfor 3QFY2011 and 4QFY2011 at `92,300 and `83,800cr,respectively) further suggests that banks may not increase depositrates any further even if there are further rate hikes by the RBI.

Provisioning for employee benefits

PSU banks had to provide fully for pension liabilities related toretired employees in 4QFY2011, which led to a fewdisappointments in 4QFY2011 results, particularly in case of

Exhibit 3: 4QFY2011 and 1QFY2012 – Lending and deposit rates


AvgAvgAvgAvgAvg. Base rates. Base rates. Base rates. Base rates. Base rates BPLR ratesBPLR ratesBPLR ratesBPLR ratesBPLR rates FD ratesFD ratesFD ratesFD ratesFD rates

BankBankBankBankBank 4QFY114QFY114QFY114QFY114QFY11 1QFY121QFY121QFY121QFY121QFY12 BP changeBP changeBP changeBP changeBP change 4QFY114QFY114QFY114QFY114QFY11 1QFY121QFY121QFY121QFY121QFY12 BP changeBP changeBP changeBP changeBP change 4QFY114QFY114QFY114QFY114QFY11 1QFY121QFY121QFY121QFY121QFY12 BP changeBP changeBP changeBP changeBP change

AXSB 8.52 9.64 112 16.50 17.25 75 9.25 9.25 -

HDFCBK 8.03 9.00 97 17.25 17.75 50 9.25 9.25 -

SBI 8.12 8.85 73 13.00 14.00 100 9.25 9.25 -

ICICIBK 8.44 9.05 61 17.50 18.00 50 9.25 9.25 -

IDBI 9.29 9.81 52 14.00 14.50 50 9.25 9.50 25

CRPBK 9.14 9.65 51 13.25 13.85 60 9.25 9.30 5

CANBK 9.31 9.81 50 13.75 14.25 50 9.10 9.25 15

BOB 9.31 9.81 50 13.75 14.25 50 9.35 9.00 (35)

J&KBK 9.01 9.50 49 13.25 14.00 75 9.50 9.00 (50)

UNBK 9.31 9.80 49 13.75 14.25 50 8.75 9.25 50

BOI 9.32 9.81 49 13.75 14.25 50 9.25 9.25 -

SYNBK 9.32 9.81 49 13.75 14.25 50 9.25 9.35 10

OBC 9.32 9.81 49 13.75 14.25 50 9.25 9.25 -

ANDHBK 9.31 9.79 49 13.75 14.25 50 9.25 9.25 -

CENTBK 9.31 9.79 49 13.75 14.25 50 9.60 9.25 (35)

DENABK 9.27 9.76 49 14.50 15.00 50 9.00 9.25 25

IOB 9.32 9.81 49 13.75 14.25 50 9.25 9.25 -

INDBK 9.33 9.81 49 13.75 14.25 50 9.50 9.25 (25)

PNB 9.33 9.81 49 13.00 13.50 50 9.15 9.15 -

UCOBK 9.33 9.81 49 13.75 14.25 50 9.00 9.00 -

SIB 8.92 9.40 48 17.50 18.50 100 9.75 9.75 -

ALLBK 9.33 9.81 48 13.75 14.25 50 8.75 9.00 25

UTDBK 9.45 9.79 34 13.50 14.25 75 8.75 8.75 -

VIJAYA 9.50 9.81 31 13.75 14.25 50 9.35 9.35 -


Exhibit 4: Lower average LAF borrowings in 1QFY2012

(2,000)

(1,600)

(1,200)

(800)

(400)

0

400

800

1,200

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11

Jun

-11

(` bn)



Banking

Central Bank of India, Vijaya Bank, Bank of India and DenaBank. However, with one-time costs related to pension expensesfor retired employees having been provided in 4QFY2011,we expect most PSU banks under our coverage to report adecline or negligible increase in staff costs in FY2012.

Barring a few banks, asset quality remains strong

Although a few banks surprised negatively on the asset-qualityfront by reporting high slippages for 4QFY2011, the asset qualityof the sector on a whole especially for private banks continuedto improve in 4QFY2011, which is evident from the fact thatnet NPA ratio for the entire sector has been on a decliningtrend since 3QFY2010.

We expect moderation in asset-quality pressures for public sectorbanks from the high base in the last few quarters; however,further switchover to CBS-based recognition of NPAs duringthis quarter as well as in 2QFY2012 is expected to lead to anupsurge in gross NPAs for some PSU banks, especially includingthose with larger proportion of rural branches. We expect assetquality to remain healthy for private banks going forward,although it is unlikely to improve materially from the alreadylow levels witnessed in the past couple of quarters. Overall,incremental asset-quality pressures that could arise due to therecent increase in interest rates pose risks to our asset qualityestimates for the sector.

Rate hikes by the RBI push up bond yields

The 10-year G-sec bond yields remained above 8% for most ofApril as inflationary expectations continued to dominatesentiments in the bond markets. The markets were expecting a25bp hike in key policy rates in the annual monetary policymeet on May 3, 2011; however, the RBI surprised mostlyeveryone by announcing an aggressive 50bp hike. The RBI alsoincreased the savings deposit rate by 50bp to 4% and tightenedthe provisioning norms for banks, which further dampenedsentiments in the bond markets, leading to a single-day increasein bond yields by nearly 10bp to 8.24%.

Evidence of a slowdown in the economy coupled with highreported inflation figures further hardened yields to as high as8.41% during the quarter. The hardening of bond yields despitehigher deposit mobilisation (leading to higher SLR investments)witnessed during the quarter (18.2% as of June 17, 2011) alsoindicates higher demand of funds from the government's side.With yields having hardened by ~22bp on an average in1QFY2012 over the last quarter, we expect banks carrying ahigh modified duration investment book to report some MTMlosses in 1QFY2012 results.


Exhibit 5: Expected qoq reduction in staff costs

52.548.3

43.3 42.039.2

34.229.8

26.5

19.3

13.511.2 10.3

7.2 5.8

-

10.0

20.0

30.0

40.0

50.0

60.0

CEN

TBK

BO

I

VIJ

AYA

UN

BK

ALL

BK

BO

B

CRPBK

J&K

BK

DEN

ABK

CA

NBK

SYN

BK

OBC

PN

B

AN

DH

BK

(%)


Exhibit 7: Corp. & G-Sec bond yields rise in 1QFY2012

31-Mar-11 30-Jun-11

9.5

5

9.4

5

9.3

5

9.2

3

9.2

0

9.1

5

7.5

5 7.9

9

9.6

3

9.6

2

9.5

9

9.5

7

9.5

9

9.6

2

8.3

0

8.3

3

7.00

7.50

8.00

8.50

9.00

9.50

10.00

1Yr AAA 2Yr AAA 3Yr AAA 5Yr AAA 7Yr AAA 10Yr AAA 1Yr Gsec 10Yr Gsec

(%)

Exhibit 8: AFS modified duration as of FY2011


Bank Bank Bank Bank Bank AFS AFS AFS AFS AFS AFS AFS AFS AFS AFS AFS Mod. AFS Mod. AFS Mod. AFS Mod. AFS Mod.

(((((`̀̀̀̀cr)cr)cr)cr)cr) (%)(%)(%)(%)(%) Dur Dur Dur Dur Dur. . . . . (yrs)(yrs)(yrs)(yrs)(yrs)

OBC 11,642 27.7 4.4

ANDHBK 3,423 14.1 3.9

SBI 71,900 24.9 3.6

VIJBK 6,676 25.2 3.2

AXSB 24,988 34.7 3.1

BOB 18,496 26.0 2.8

PNB 21,067 22.1 2.7

UTDBK 7,406 28.0 2.7

IOB 17,168 36.0 2.6

CANBK 21,830 26.1 2.2

BOI 30,153 36.6 2.0

UNBK 14,110 24.2 1.8

CPRBK 14,057 32.4 1.5

J&KBK 7,468 37.9 1.5

SIB 1,759 21.1 0.4


Exhibit 6: Net NPA ratio on a declining trend

0.97

1.02

1.05 1.06

1.15

1.081.07

1.06

0.990.97

0.90

1.00

1.10

1.20

3Q

FY09

4Q

FY09

1Q

FY10

2Q

FY10

3Q

FY10

4Q

FY10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

21



Banking

Analyst - VAnalyst - VAnalyst - VAnalyst - VAnalyst - Vaibhav Agrawaaibhav Agrawaaibhav Agrawaaibhav Agrawaaibhav Agrawal/l/l/l/l/Shrinivas BhutdShrinivas BhutdShrinivas BhutdShrinivas BhutdShrinivas Bhutdaaaaa/////VVVVVarun Varun Varun Varun Varun Varmarmarmarmarmaaaaa

Hike in savings deposit rate; Provisioning normsbecome stricter

The RBI hiked the savings bank rate by 50bp to 4.0% on May 3,2011, the first hike in the past 19 years, to reduce the spreadbetween saving deposit and term deposit rates, which hadwidened significantly in the recent period; this move by the RBIis possibly a precursor to the deregulation.

The impact of the hike is expected to be more on banks with ahigher proportion of saving account deposits to total liabilities.Assuming no interest burden had been passed on, the overallnegative impact would have been 0.4-9.3% on the net profitlevel (FY2012E) and 1-8bp on the return on assets (FY2012E)level. However, as expected, most banks have passed on theincreased burden of cost of deposits through lending rate hikes.

The RBI relaxed the 70% provisioning coverage norm for banks;however, it increased the provisioning requirements across theNPL bucket by 5-10%. Even in case of restructured advances,provisioning requirements were hiked to 2.0% from the existing0.25-1.0% (depending on the category of advances), which is expectedto add to the provisioning burden mainly for PSU banks in 1QFY2012.

Outlook and valuation

The trade-off between growth and inflation once again was thekey predicament faced by the RBI during the quarter.

With inflation not budging, the RBI was forced into further ratehikes, which we feel was justified considering the generalisationof inflationary pressures and the underlying strength in creditdemand remaining firm. Meanwhile, growth has suffered, aspointed out by few of the growth indicators; however, with thepolicy action in shape, we expect inflation to moderate in thesecond half of FY2012.

Also, we expect deposit rates as well as private sector lendingrates to not go up further even if the RBI hikes the repo rate acouple of more times, as the demand-supply dynamics for thebanking sector dictate otherwise.

In fact, we expect broader deposit and lending rates to declinefrom 2HFY2012, once WPI inflation starts treading downwards(the near-term uptick due to fuel prices is in our view alreadyfactored in by the RBI and markets).

Accordingly, while we continue to like large banks with strongdeposit franchises, ICICI Bank and Axis Bank are our top picksin this space as in our view they will also be bigger beneficiariesof the eventual turn in the interest rate cycle. In the mid-capspace, we prefer banks that have either already seen bulk ofthe asset-quality pressures or have been relatively conservativein the past couple of years. In this space, we like CorporationBank, Indian Bank, United Bank and Syndicate Bank.

Exhibit 9: Quarterly estimates ( ( ( ( ( `̀̀̀̀ cr) cr) cr) cr) cr)CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Operating Income Net P Operating Income Net P Operating Income Net P Operating Income Net P Operating Income Net Profit EPS (rofit EPS (rofit EPS (rofit EPS (rofit EPS (`̀̀̀̀) Adj B) Adj B) Adj B) Adj B) Adj BVPS (VPS (VPS (VPS (VPS (`̀̀̀̀))))) P/E (x) P/AB P/E (x) P/AB P/E (x) P/AB P/E (x) P/AB P/E (x) P/ABV (x)V (x)V (x)V (x)V (x) TTTTTargetargetargetargetarget Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E (((((`̀̀̀̀)))))

AXSB 1,289 3,092 23.0 943 27.1 82.5 98.2 120.8 462.5 529.8 622.7 15.6 13.1 10.7 2.8 2.4 2.1 1,650 Buy

FEDBK 452 596 13.8 174 32.3 34.3 43.1 49.6 298.3 332.7 371.8 13.2 10.5 9.1 1.5 1.4 1.2 483 Accum.

HDFCBK 2,503 4,180 25.1 1,073 32.2 84.4 110.3 143.5 545.5 630.3 741.2 29.7 22.7 17.4 4.6 4.0 3.4 - Neutral

ICICIBK 1,093 4,385 19.4 1,493 45.5 44.7 57.1 69.3 478.3 510.0 549.0 24.4 19.2 15.8 2.3 2.1 2.0 1,355 Buy

SIB 24 275 31.4 86 46.4 2.6 3.1 3.2 14.8 17.2 19.2 9.3 7.7 7.4 1.6 1.4 1.3 26 Accum.

YESBK 312 553 36.3 212 35.8 20.9 26.0 29.8 109.3 131.8 156.9 14.9 12.0 10.5 2.9 2.4 2.0 337 Accum.

ALLBK 197 1,484 29.2 358 3.0 29.9 33.4 35.6 152.7 185.3 211.1 6.6 5.9 5.5 1.3 1.1 0.9 222 Accum.

ANDHBK 134 1,110 17.5 329 2.5 22.6 23.9 24.0 116.0 134.1 152.4 5.9 5.6 5.6 1.2 1.0 0.9 145 Accum.

BOB 872 3,088 24.8 1,001 16.5 108.0 117.1 131.9 534.4 624.8 726.5 8.1 7.4 6.6 1.6 1.4 1.2 1,017 Buy

BOI 414 2,811 20.8 773 6.7 45.5 56.9 67.2 266.6 331.5 383.3 9.1 7.3 6.2 1.6 1.2 1.1 498 Buy

CANBK 524 2,756 10.1 1,018 0.5 90.9 91.6 92.6 381.8 469.8 534.9 5.8 5.7 5.7 1.4 1.1 1.0 - Neutral

CENTBK 124 1,632 19.5 235 (30.3) 27.7 17.6 22.0 126.6 131.7 149.7 4.5 7.0 5.6 1.0 0.9 0.8 112 Reduce

CRPBK 526 1,105 14.7 337 0.8 95.4 100.2 107.5 466.4 554.8 640.1 5.5 5.2 4.9 1.1 0.9 0.8 640 Buy

DENABK 91 621 32.8 141 1.8 18.3 19.5 20.3 102.9 119.7 137.1 4.9 4.7 4.5 0.9 0.8 0.7 106 Buy

IDBI 136 1,635 24.1 336 33.9 16.7 18.5 21.9 128.0 142.7 159.5 8.1 7.4 6.2 1.1 1.0 0.9 - Neutral

INDBK 213 1,385 8.0 417 13.2 38.8 43.3 47.4 179.5 217.9 254.8 5.5 4.9 4.5 1.2 1.0 0.8 255 Buy

IOB 147 1,605 43.2 294 46.6 18.7 22.5 26.4 128.7 145.1 165.9 7.9 6.5 5.6 1.1 1.0 0.9 166 Accum.

J&KBK 840 505 9.8 162 11.3 126.9 141.2 150.2 717.4 825.5 940.2 6.6 5.9 5.6 1.2 1.0 0.9 893 Accum.

OBC 330 1,301 2.3 348 (4.1) 51.5 57.4 66.6 334.3 395.2 447.9 6.4 5.7 4.9 1.0 0.8 0.7 392 Buy

PNB 1,090 4,009 14.9 1,100 3.0 139.9 151.9 174.6 602.7 743.3 882.0 7.8 7.2 6.2 1.8 1.5 1.2 1,235 Accum.

SBI 2,406 12,519 13.9 2,550 (12.5) 130.1 202.5 270.6 928.7 1,141.0 1,337.7 18.5 11.9 8.9 2.6 2.1 1.8 2,832 Buy

SYNBK 117 1,417 20.2 344 29.6 18.3 21.1 24.0 108.3 131.9 150.1 6.4 5.6 4.9 1.1 0.9 0.8 139 Buy

UCOBK 96 1,149 2.0 198 (23.9) 12.6 14.8 17.8 65.5 82.2 92.4 7.6 6.5 5.4 1.5 1.2 1.0 - Neutral

UNBK 293 2,161 21.2 631 5.0 32.7 43.8 47.8 162.0 237.8 274.4 9.0 6.7 6.1 1.8 1.2 1.1 357 Buy

UTDBK 96 723 14.9 127 17.6 13.2 14.8 17.1 101.6 111.3 122.3 7.3 6.5 5.6 0.9 0.9 0.8 110 Accum.

VIJAYA 70 606 (1.5) 109 (37.4) 8.7 9.1 10.3 65.0 71.5 78.7 8.0 7.7 6.8 1.1 1.0 0.9 - Neutral

Source: Company, Angel Research; Note: Price as on June 30, 2011



Capital Goods

Capital Goods (CG) Index – Still in doldrums

During 1QFY2012, the CG index outperformed the broaderindices and ended with a gain of 5.1% in absolute terms,outperforming the Sensex by 8.2%. After reporting negativereturns in the first two months of the quarter, the CG indexbounced back in June with ~6% returns in absolute terms.This was largely aided by the recent rally in the broader markets.In addition, the spike in CG production reported through IIPnumbers released in June had a positive impact on the CGindex. However, we believe the surge in CG stocks is a temporaryevent, given the deteriorating macro enviroment – lower-than-expected industrial capex and higher working capital requirements.


Abs. ReturnsAbs. ReturnsAbs. ReturnsAbs. ReturnsAbs. Returns Relative to SensexRelative to SensexRelative to SensexRelative to SensexRelative to Sensex

(%)(%)(%)(%)(%) (%)(%)(%)(%)(%)

BSE Sensex (3.1) -

BSE CG 5.1 8.2

ABB 9.9 13.0

Areva T&D 3.8 6.9

BHEL (0.7) 2.4

BGR Energy (5.9) (2.8)

Crompton Greaves (5.0) (2.0)

Jyoti Structures 4.8 7.8

KEC International (3.9) (0.8)

Thermax (1.4) 1.7

Exhibit 1: 1QFY2012 – Sensex vs. CG stocks


Exhibit 2: CG index – Relative returns to the Sensex

23.5

1.3

17.2

(6.2)

(14.1)

9.4

(9.7) (7.1)

48.6

(10.7)

0.6

(0.6)

3.5

(4.6) (5.8)(9.0)

8.2

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

(%)

Concerns over the sector loom large

Interest rate heads northward:Interest rate heads northward:Interest rate heads northward:Interest rate heads northward:Interest rate heads northward: Elevated interest rates remain acause of concern, given the cascading impact on industrial capex(lower capacity additions) and, thereby, demand for capitalgoods. Muted demand in terms of lower inflows will have adirect impact on companies in our coverage universe.Additionally, high commodity prices are likely to continueimpacting the profitability of CG companies. However, in ourview, both inflation and interest rates are close to peak levelsand are likely to see some respite from 2HFY2012.

Source: RBI, CSO, Angel Research

Exhibit 3: Higher interest rates impacting GFCF

2.0

4.0

6.0

8.0

(5.0)

5.0

15.0

25.0

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

% change in GFCF (YoY) Repo Rate (%, RHS)

Companies in our CG universe reported a mixed performanceduring the quarter. ABB and Jyoti Structures emerged as themajor gainers, up 9.9% and 4.8%, in absolute terms andoutperformed the Sensex by 13% and 7.8%, respectively.BGR Energy tumbled the most, declining by 5.9%, in absoluteterms and underperformed the Sensex by 2.8%; slackening orderinflows and poor earnings visibility remain as an overhang onthe stock. BHEL faced downward pressure partially due to theproposed FPO, before recovering in the recent market rally.

We believe the challenges outlined in the power sector such ascoal linkages, delays in land acquisition and environmentalclearances will remain a near-term drag for companies in ourCG universe.

Coal deficit – A key concern: Coal deficit – A key concern: Coal deficit – A key concern: Coal deficit – A key concern: Coal deficit – A key concern: With the Indian coal sectorstruggling to meet the demands of the power sector, theperceived shortage in coal supply casts a grim outlook on thepower sector. Further, the coal sector is facing problems overcoals blocks (No-Go regions declared by the EnvironmentMinistry), thereby pressuring coal supply. However, theenvironment ministry has agreed to relax the 'No-Go region'norms in certain cases in order to cope with the massive capacityexpansion planned in the country.

PPPPPower sector hurdled with delays in capacity addition: ower sector hurdled with delays in capacity addition: ower sector hurdled with delays in capacity addition: ower sector hurdled with delays in capacity addition: ower sector hurdled with delays in capacity addition: Most ofthe companies in our CG universe have their fortunes directlylinked to the pace of the power sector's growth in the country.India has a poor track record in this regard, with only 50-60%of the total planned capacity added during several of theprevious five-year plans. For the Eleventh Plan, the capacityaddition target was revised to 62,374MW (78,000MW), ofwhich only 57% has been achived till May 2011. As per theplanning commission, around 17,600MW of capacity additionis planned in FY2012, which also seems challenging. As perour analysis, we estimate a total capacity addition of 42,000MWat the end of the Eleventh Plan.

23



Capital Goods

Key developments during the quarter

ABB (CMP/TPABB (CMP/TPABB (CMP/TPABB (CMP/TPABB (CMP/TP:::::`876/876/876/876/876/`637) (Rating: Sell)637) (Rating: Sell)637) (Rating: Sell)637) (Rating: Sell)637) (Rating: Sell) ABB plans to invest~US$24mn in India to manufacture a new range of miniaturecircuit breakers (MCB), residual current circuit breakers (RCCB)and surge protection devices (SPD). The new manufacturingfacility will be set up in Nelamangala campus in Bangalore.The plant will manufacture a new range of protection devicesused in residential and commercial buildings, industrial andrenewable energy applications, data centres andtelecommunications industries to protect installations againstover-current, short circuits and leakage current.

Areva T&D (CMP/TPAreva T&D (CMP/TPAreva T&D (CMP/TPAreva T&D (CMP/TPAreva T&D (CMP/TP: : : : : `257/–) (Rating: Neutral):257/–) (Rating: Neutral):257/–) (Rating: Neutral):257/–) (Rating: Neutral):257/–) (Rating: Neutral): Areva T&Dbagged orders of Electric BoP from Essar Projects and L&T Power.The combined value of the orders is ̀ 410cr. The scope of workincludes supply and installation of electrical BoP solutions forwhich Areva T&D India will manufacture and installgas-insulated substations, air-insulated substations, distributionand power transformers, and low-voltage switchboards.

BHEL (CMP/TPBHEL (CMP/TPBHEL (CMP/TPBHEL (CMP/TPBHEL (CMP/TP:::::`2,047/–) (Rating: Neutral): 2,047/–) (Rating: Neutral): 2,047/–) (Rating: Neutral): 2,047/–) (Rating: Neutral): 2,047/–) (Rating: Neutral): BHEL secured anorder for steam turbine generators for a new rating of 700MWenuclear sets from Nuclear Power Corporation of India for its2x700MWe Kakrapar Nuclear Power Station (Units 3 and 4) inGujarat. The order is in consortium with Alstom. BHEL's sharein the contract is worth `880cr.

Crompton Greaves (CMP/TPCrompton Greaves (CMP/TPCrompton Greaves (CMP/TPCrompton Greaves (CMP/TPCrompton Greaves (CMP/TP:::::`259/259/259/259/259/`300) (Rating: Buy)300) (Rating: Buy)300) (Rating: Buy)300) (Rating: Buy)300) (Rating: Buy)Continuing with its strategy of pursuing inorganic growth,Crompton Greaves concluded two overseas acquisitions,viz. Sweden-based Emotron Group and US-based QEI, Inc.We believe the acquisition will enable the company to becomea stronger and more comprehensive player in the industrialand power systems business and build capabilities by leveragingits existing product portfolio. Further, the overseas buyouts willhelp the company offset the sluggishness in the localtransmission and distribution markets.

KEC International (CMP/TPKEC International (CMP/TPKEC International (CMP/TPKEC International (CMP/TPKEC International (CMP/TP:::::`79/79/79/79/79/`115) (Rating: Buy):115) (Rating: Buy):115) (Rating: Buy):115) (Rating: Buy):115) (Rating: Buy): KECInternational witnessed impressive order inflow during thequarter. In the domestic T&D segment, the company securedorders worth `600cr. KEC International also fared well in theMiddle East and African markets by securing orders totaling`548cr. SAE Towers contributed ̀ 273cr to the order book. Newsegments of water and railway also booked orders worth ̀ 92cr.

Jyoti Structures (CMP/TPJyoti Structures (CMP/TPJyoti Structures (CMP/TPJyoti Structures (CMP/TPJyoti Structures (CMP/TP:::::`85/85/85/85/85/`104) (Rating: Buy):104) (Rating: Buy):104) (Rating: Buy):104) (Rating: Buy):104) (Rating: Buy): JyotiStructures secured orders totaling `524cr for substation andtransmission projects in India and Bhutan. The company'ssubsidiary, Jyoti Structures Africa Pty. Ltd., won another contractfrom ESKOM (South African Power Utility) worth `225cr for theexecution of 765kV and 400kV lines.


Exhibit 7: Intermediate goods component growth

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

Apr-

08

Jul-

08

Oct

-08

Jan

-09

Apr-

09

Jul-

09

Oct

-09

Jan

-10

Apr-

10

Jul-

10

Oct

-10

Jan

-11

Apr-

11

(%)


Exhibit 6: Basic goods component growth

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Apr-

08

Jul-

08

Oct

-08

Jan

-09

Apr-

09

Jul-

09

Oct

-09

Jan

-10

Apr-

10

Jul-

10

Oct

-10

Jan

-11

Apr-

11

(%)


Exhibit 5: CG component growth

(25.0)

(10.0)

5.0

20.0

35.0

50.0

65.0

Apr-

08

Jul-

08

Oct

-08

Jan

-09

Apr-

09

Jul-

09

Oct

-09

Jan

-10

Apr-

10

Jul-

10

Oct

-10

Jan

-11

Apr-

11

(%)


Exhibit 4: IIP growth

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

Apr-

08

Jul-

08

Oct

-08

Jan

-09

Apr-

09

Jul-

09

Oct

-09

Jan

-10

Apr-

10

Jul-

10

Oct

-10

Jan

-11

Apr-

11

(%)



Capital Goods

Analyst - Hemang ThakerAnalyst - Hemang ThakerAnalyst - Hemang ThakerAnalyst - Hemang ThakerAnalyst - Hemang Thaker


TTTTTransmission and distribution (T&D):ransmission and distribution (T&D):ransmission and distribution (T&D):ransmission and distribution (T&D):ransmission and distribution (T&D): The T&D equipment spaceis circled with diverse set of challenges. First, generation delaysare likely to adversely affect growth prospects of T&D equipmentsuppliers as the sector has a high degree of correlation withpower capacity addition. Second, the T&D equipment space isturning competitive on the recent new PGCIL mandate ofseparate tendering of sub-stations and circuit breakers.We believe this would lead to lower order inflows for companieslike ABB, Areva and Siemens, who enjoy a dominant marketshare in the high-voltage T&D space.

In the transmission EPC space, KEC International is well placedin terms of growth prospects. In the last couple of quarters,KEC International has gained increased traction from Africaand Americas (SAE Towers), which outlines a huge potential forthe company in these regions. With geographical diversity,we believe KEC International is insulated against domesticcompetition. Jyoti Structures also provides improved revenuevisibility on the back of better-than-expected order inflows duringthe previous quarter as well as optimistic management guidanceon future order intakes.

PPPPPower equipment:ower equipment:ower equipment:ower equipment:ower equipment: BHEL continues to ride high on the strongorder book (3.2x FY2012E revenue); however, its long-termconcerns over competitive pressures in the BTG space and theproposed FPO are putting pressure on the stock. NTPC bulktendering will be a key for BHEL, Thermax and BGR. In June2011, five companies including Thermax and BGR placed bidsfor the bulk tender.

VVVVValuations:aluations:aluations:aluations:aluations: On the valuation front, we believe most companiesin our CG universe are presently trading at premium valuations,offering a meager upside from current levels. In such ascenario, we prefer a stock-specific approach. CromptonGreaves, KEC International and Jyoti Structures are among ourpreferred picks.

Thermax (CMP/TPThermax (CMP/TPThermax (CMP/TPThermax (CMP/TPThermax (CMP/TP:::::`594/–) (Rating: Neutral):594/–) (Rating: Neutral):594/–) (Rating: Neutral):594/–) (Rating: Neutral):594/–) (Rating: Neutral): Thermax baggedan order worth `366cr for a 120MW captive power plant forsupplying two blast furnace gas-fired boilers and one steamturbine generator. The company also received an order valuedat ̀ 403cr to supply circulating fluidised bed combustion (CFBC)boilers for a co-generation plant. Management is scoutingoverseas to buy a company with a technological edge in waterwaste management to strengthen its presence in the watertreatment segment. The size of such an acquisition is expectedto be around US$100mn.

1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations: We expect companies in ourCG universe to post cumulative top-line growth of 17% yoy.This would primarily be driven by BHEL and Jyoti Structures,which are expected to post strong revenue growth of 25% and24% yoy, respectively. KEC International and Thermax are alsolikely to maintain steady top-line growth of 18% and 14.1%yoy, respectively. BGR’s top line is expected to drop by 15% yoyon a high base. In the T&D equipment segment, we expect ABBand Areva to report top-line growth of 15% and 14% yoy,respectively, while Crompton Greaves is likely to post mutedgrowth of 8% yoy.

On the operating front, we expect our universe companies toreport flat margins at ~12.3%. ABB is likely post a marginimprovement of 345bp yoy due to fewer expected costprovisions. KEC International is likely to post a slightimprovement of 52bp yoy because of increased contributionfrom SAE Towers. On the other hand, we expect Thermax toreport a 115bp yoy dip in OPM to 11%. Similarly, BGR andCrompton Greaves are expected to report a margin dip of 44bpand 42bp yoy, respectively.

The expected top-line growth of 17% yoy along with flat marginswould result in ~13% yoy PAT growth for companies in our CGuniverse. ABB is likely to report robust profitability growth on alow base. KEC International is also expected to report strongPAT growth because of normalised tax rates compared to hightax incidence in 1QFY2011. BHEL and Jyoti Structures are likelyto maintain steady growth.

Exhibit 8: Quarterly estimates ((((( `̀̀̀̀ cr) cr) cr) cr) cr)

Source: Company; Angel Research; Note: Price as on June 30, 2011; * December year ending

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E chg bpchg bpchg bpchg bpchg bp 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E ( ( ( ( ( `̀̀̀̀)))))

ABB* 876 1,683 15.0 8.0 345 80 109.6 3.8 109.6 3.0 20.3 23.6 293.6 43.2 37.2 637 Sell

Areva* 257 1,009 14.0 9.0 (20) 33 2.6 1.4 2.6 7.8 8.9 11.9 32.9 28.8 21.6 - Neutral

BHEL 2,047 8,251 25.0 14.5 (12) 785 17.6 16.0 17.6 114.6 133.6 156.5 17.9 15.3 13.1 - Neutral

BGR Energy 449 771 (15.0) 11.0 (44) 40 (33.4) 5.6 (33.4) 44.8 44.5 48.1 10.0 10.1 9.3 520 Buy

Crompt. Greav. 259 2,486 8.0 12.5 (42) 183 (4.3) 2.8 (4.3) 13.9 15.3 18.7 18.7 17.0 13.9 300 Buy

KEC Intl. 79 998 18.0 10.5 52 38 43.5 1.5 43.5 8.3 9.5 12.8 9.5 8.3 6.2 115 Buy

Jyoti Stryctures 85 700 24.0 11.2 (13) 32 21.6 3.9 21.6 10.8 12.6 15.3 7.8 6.7 5.6 104 Buy

Thermax 594 901 14.1 11.0 (115) 67 1.6 5.6 1.6 32.0 37.5 43.4 18.5 15.9 13.7 - Neutral

25



Cement

Demand slowdown continues in 1QFY2012

After registering low dispatch growth of 4.9% in FY2011(vs. FY2004-10 CAGR of ~9.3%), cement demand continuedto remain muted in the first two months of FY2012. DuringApril-May 2011, all-India cement dispatches remained flat at35.86mt (35.92mt in April-May 2010). There was no pick-upin demand in the southern region post the elections inTamil Nadu and Kerala. The political situation continued toremain uncertain in Andhra Pradesh, resulting in lowgovernment expenditure on housing and infra projects. Someparts of the southern region were also affected due tonon-availability of sand. Demand was muted in the northernregion as well on account of moderate demand from the realestate segment. Major reasons for low demand in this regionwere labour shortage due to the harvest season and extremelyhot weather conditions. In the eastern region, demand failed topick-up post the elections in West Bengal. Demand pick-up wasslow in the western and central regions as well because of lowofftake from the real estate segment and labour shortage.

Performance of companies

During April-May 2011, among large players, ACC was thetop performer with 14.1% yoy dispatch growth, aided bycapacity additions at Bargarh and Chanda. JP Associates alsoreported 7.7% yoy growth in dispatches. However, dispatchesof UltraTech Cement and Ambuja Cements declined by 3.9%yoy and 3.7% yoy, respectively.

All-India capacity utilisation down to 70%

Poor demand scenario coupled with excess supply pulled downcapacity utilisation for the quarter to 70%. Capacity utilisationhas been the lowest in the southern region at ~60%, as theregion has been facing double whammy of poor demand aswell as huge capacity addition. Amongst all the regions, theeastern region is operating at the highest capacity utilisation(~92%) level. The central region is also operating at a healthycapacity utilisation level in excess of 85%. Capacity utilisationin the western region is at 80%, while the northern region hascapacity utilisation of 75%.

Price situation

All-India cement prices rose substantially since mid-Februarydue to the production discipline adopted by cementmanufacturers across the country, reaching their all-time highsin March 2011. However, cement prices across the country havebegun to correct from the peaks of March 2011. Price correctionshave been in the range of `10-30/ bag.

Southern region:Southern region:Southern region:Southern region:Southern region: Price correction has been the lowest in thesouthern region at ̀ 5-10/ bag from March 2011 levels. Cementmanufacturers have adopted a strong production disciplinedespite low capacity utilisation, thereby capping the price fallto a large extent. Currently, cement prices are at`280/bag. On an average, cement prices have remained flatwhen compared on a sequential basis.

Northern region:Northern region:Northern region:Northern region:Northern region: In the northern region, prices are currentlyhovering at ~`275/bag, down by `15/bag from March 2011levels. However, for 1QFY2012, on a sequential basis, priceswere higher by `10/bag.

WWWWWestern region: estern region: estern region: estern region: estern region: The western region managed to hold on to thepeak-level prices till May-end. However, prices have correctedsince then. On an average, prices have corrected by `10-25from March 2011 peak levels. The correction has been severein Gujarat, which has seen a price decline of ~`100/bag.Currently, prices are at `255/bag in the western region.For 1QFY2012, on a sequential basis, prices in the region werehigher by `5/bag.

Eastern region: Eastern region: Eastern region: Eastern region: Eastern region: In the eastern region, prices are at `235/bag,down by `25/bag from March 2011 levels. For 1QFY2012 asa whole as well, prices were down on a sequential basis.

Central region: Central region: Central region: Central region: Central region: Prices have declined the highest in the centralregion since March 2011. Prices in this region fell by~`30/bag from March 2011 levels and are currently at`245/bag. On an average, prices during the quarter declinedon a sequential basis.

CompanyCompanyCompanyCompanyCompany AprAprAprAprApr-May-May-May-May-May AprAprAprAprApr-May-May-May-May-May yoyyoyyoyyoyyoy

20112011201120112011 20102010201020102010 chgchgchgchgchg(%)(%)(%)(%)(%)

ACC 4.0 3.5 14.1

Ambuja 3.6 3.8 (3.7)

UltraTech 6.4 6.7 (3.9)

JP Associates 2.8 2.6 7.7

Exhibit 2: April-May 2011 Cement dispatches (mt)

Source: Company, Industry

Source: Industry, Angel Research

Exhibit 1: Monthly dispatch trend

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

(%)

Apr-

10

May-

10

Jun

-10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11



Cement

Higher coal prices to exert margin pressures

Indian cement manufacturers are highly dependent on importedcoal due to the relatively low coal linkages within India.The cement industry gets ~45% of its requirement from domesticlinkage coal, while the remaining is procured from globalmarkets and domestic open markets/e-auction routes. Globalspot coal prices were substantially higher on a yoy basis duringthe quarter. Average prices of the New Castle Mckloksey 6,700kccoal stood at ~US$120/tonne in 1QFY2012, as againstUS$100/tonne in 4QFY2011. However, on a sequential basis,prices declined by US$8/tonne.

In February 2011, Coal India (CIL) selectively raised coal pricesby significant 30% for sectors whose products commandmarket-driven prices. The price hike included the cement sector,as cement prices are market driven. The impact of price hikesby CIL is expected to be felt by cement companies from thisquarter. ACC has a substantial exposure to domestic coallinkages as it sources 60% of its requirement under this route.Ambuja Cements also has a high exposure of 40% to domesticcoal linkages.

Cement stocks – Performance on the bourses

During 1QFY2012, the large-cap cement stocks in our coverageuniverse underperformed the Sensex, which lost 3.1% duringthe quarter. India Cements was the biggest loser and fell by25.7% during the quarter. Madras Cements also fell steeply by20.2%. UltraTech too corrected substantially by 17.7%.

Abs. ReturnsAbs. ReturnsAbs. ReturnsAbs. ReturnsAbs. Returns Relative to SensexRelative to SensexRelative to SensexRelative to SensexRelative to Sensex(%)(%)(%)(%)(%) (%)(%)(%)(%)(%)

ACC (11.7) (8.6)

Ambuja (8.9) (5.8)

India Cements (25.7) (22.7)

JK Lakshmi (13.8) (10.7)

Madras Cements (20.2) (17.1)

UltraTech (17.7) (14.6)

Exhibit 5: Sensex vs. cement stocks (1QFY2012)

Source: BSE, Angel Research


Exhibit 3: All-India capacity addition (mt)

146

154

158

167

198

216

276

304

322

7

8

4

9

31

18

60

28

18

0 50 100 150 200 250 300 350 400

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012E

Year-end Capacity Additions during the year

0

50

100

150

200

250

Feb

-00

Jul-

00

Dec-0

0

May-0

1

Oct

-01

Mar-

02

Aug

-02

Jan

-03

Jun

-03

Nov-

03

Apr-

04

Sep

-04

Feb

-05

Jul-

05

Dec-0

5

May-0

6

Oct

-06

Mar-

07

Aug

-07

Jan

-08

Jun

-08

Nov-

08

Apr-

09

Sep

-09

Feb

-10

Jul-

10

Dec-1

0

May-1

1

(US$

/tonne)


Exhibit 4: New Mckloksey coal pricesAll-India capacity to increase by 18mt in FY2012

In FY2011, all-India cement capacity stood at ~304mtpa.In FY2012, the country's cement capacity is expected to increaseby ~18mt. Capacity addition for FY2012 could go up to24mtpa, if JP Associates fully meets its capacity addition targetsfor the year. Capacity addition could be higher by another3.3mtpa if ABG Group commissions its proposed plant duringthe year.

Key developments

Industry:Industry:Industry:Industry:Industry: During the quarter, the Government of India orderedthe Security Frauds Investigation Office (SFIO), Department ofCorporate Affairs, to investigate the allegations of cartelisationamongst some of the cement manufacturers leading tounsubstantiated rise in prices. The investigation would coverthe operations of the cement companies over the last 10 years.The allegations if proved would result in the imposition of severepenalties on cement manufacturers.The CompetitionCommission of India (CCI), formerly known as Monopolies andRestrictive Trade Practices Commission (MRTPC), which is yetanother government agency, is also investigating the allegationsof cartelisation. Cement manufacturers had come under theradar of government agencies even in the past. The MRTPChad carried similar investigations in 2007 as well into theactivities of cement companies. Although there have beeninstances of cement manufacturers being penalised abroad,there are no such precedences in India.

27



CementCementCementCementCement

Analyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V Srinivasan

Operating margins to decline

Operating margins of cement players are expected to declineon a yoy basis due to increased power and fuel costs. However,India Cements is expected to record a 579bp increase in marginsdue to substantially higher realisations.

Exhibit 8: Margins to decline in 1QFY2012Company (%)Company (%)Company (%)Company (%)Company (%) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E 1QFY111QFY111QFY111QFY111QFY11 chg bpchg bpchg bpchg bpchg bp 4QFY114QFY114QFY114QFY114QFY11 chg bpchg bpchg bpchg bpchg bp

(yoy)(yoy)(yoy)(yoy)(yoy) (qoq)(qoq)(qoq)(qoq)(qoq)

ACC* 21.4 29.5 (804) 24.2 (276)

Ambuja* 23.9 31.5 (761) 28.4 (455)

India Cements 16.1 10.3 579 18.4 (227)

JK Lakshmi 18.0 17.4 59 18.8 (78)

Madras Cements 23.2 28.1 (489) 27.1 (396)

UltraTech^ 22.5 27.4 (490) 24.2 (171)

Source: Company, Angel Research; Note: *Year ending December;^Performance is computed on a like-to-like basis


Going ahead, we expect cement demand to decelerate in2QFY2012 due to the onset of monsoons. Also, we expectcement prices to witness further correction of `20-30/bag inJuly due to further drop in utilisation levels. However, we expectdispatches to pick up in a healthy way post the monsoons dueto acceleration in construction activities with FY2012 being thelast year of the Eleventh Plan period. We are Neutral on thesector as a whole as we believe the stocks are fairly priced.We maintain Buy on JK Lakshmi Cement due to its attractivevaluations.

Exhibit 9: Quarterly estimates (((((`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on June 30, 2011; ^December year ending; # Estimates for merged entity

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS ( EPS ( EPS ( EPS ( EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


ACC^ 949 2,276 12.7 21.4 (804) 282 (21.5) 15.0 (21.5) 59.6 54.9 62.2 15.9 17.3 15.3 - Neutral

Ambuja^ 134 2,036 (0.6) 23.9 (761) 293 (25.1) 1.9 (25.4) 8.2 7.6 8.4 16.3 17.6 16.0 122 Reduce

India Cem. 71 1,026 16.5 16.1 579 42 68.6 1.4 68.6 2.2 4.8 8.8 32.0 14.8 8.1 - Neutral

J K Lakshmi 44 323 (0.2) 18.0 59 17 2.7 1.4 2.7 4.8 6.1 7.2 9.1 7.2 6.1 57 Buy

Madras Cem. 81 711 2.0 23.2 (489) 48 (34.7) 2.0 (34.7) 8.9 7.9 10.5 9.2 10.3 7.7 - Neutral

UltraTech# 934 4,079 127.9 22.5 (128) 464 91.2 16.9 (13.1) 51.2 69.7 80.4 18.2 13.4 11.6 - Neutral

Source: Angel Research; Note: UltraTech’s perforamance is computed on alike-to-like basis

Exhibit 7: 1QFY2012E top-line performance

1QFY2012 expectations

Top line to increase by 5.2%

We expect our cement universe to report 5.2% yoy growth in itstop line, primarily on account of better realisations. However,dispatches are expected to decline by 3.3%. We expectIndia Cements to post the highest top-line growth of 16.5%.


Exhibit 6: Realisation per tonne

3,564

3,856

2,400

2,800

3,200

3,600

4,000

1QFY11 1QFY12E

(`/t

on)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

ACC Ambuja Cem. India Cements JK LakshmiCem.

MadrasCement

Ultra Tech

(%)



For 1QFY2012, we expect our FMCG universe's revenue growthto be at ~19% due to 1) price hikes in most product categoriesby all companies, 2) higher consumer spending on non-fooditems and 3) no hike in central excise duty in Union Budget 2011-2012. We expect top-line growth to be a mix of value and volume,driven by better distribution reach, new product launches andsignificant uptick in advertising activities. However, we highlightthat increasing competitive pressure in most categories(particularly home and personal care, noodles, energy drinksand juices) and high levels of food inflation are likely to keepoperating margin under pressure. Prices of key raw materialsare currently witnessing a downturn, and we expect the full effectof falling input prices to start to play by 2HFY2012.

FMCG

Monsoons to play a decisive role towards growth…

The Indian Meteorological Department (IMD) has forecast justbelow-normal monsoons for this year (last year India witnessed102% of LPA against the forecasted 98%). Data for June 2011for the country as a whole shows 11% plus departure from thenormal. Apart from the normal monsoon forecast, rise inminimum support prices (MSPs) for kharif crops of 2011-12season (6-20%) across the board will bring cheer to the FMCGsector as a whole, as it will help cool down food inflation(currently <8%), moderate input costs and increase rural income.

Good monsoons will positively affect agri-dependent input costcompanies such as Marico (copra is the major raw material),Nestle (milk and wheat) and GSK Consumer (milk), as monsoonswill lead to a decline in raw-material costs. Companies such asHUL, Colgate, GCPL and ITC will benefit from increaseddemand, as good monsoons are likely to cool food inflation,thereby boosting buying power, especially amonglow/middle income groups, which spend ~60% of their earningson groceries.

Exhibit 3: Key input prices in 1QFY2012CMP (CMP (CMP (CMP (CMP (`̀̀̀̀))))) yoy (%)yoy (%)yoy (%)yoy (%)yoy (%) qoq (%)qoq (%)qoq (%)qoq (%)qoq (%)

Wheat (`/quintal) 1,177 (3) (2)

Barley (`/quintal) 1,300 19 21

Sugar (`/ quintal) 2,736 5 (4)

Tea (`/kg) 205 46 (1)

Coffee (`/100kg) 4,625 70 (6)

Cocoa (US$/MT) 3,364 (4) (10)

Milk Liquid (`/ltr) 31 24 15

Palm Oil (MYR/tonne) 3,100 26 (7)

Copra (`/quintal) 6,400 80 (1)

Safflower (`/ quintal) 2,700 23 14

Soyabean Oil (`/10kg) 622 46 5

Groundnut Oil (`/MT) 93,500 22 23

Coconut Oil (`/quintal) 10,192 85 5

Rice Bran Oil (`/MT) 5,100 (20) 2

Caustic Soda (`/kg) 1,242 44 0

Soda Ash (`/kg) 988 15 2

Source: Bloomberg, Angel Research; Note: Prices as on June 28, 2011

Input cost pressure still hovers…

While crude is considerably high for CY2011 (YTD), during thequarter it witnessed a steep fall of ~11%. Also, crude-basedderivatives are witnessing a dip in prices qoq, though they arestill high on a yoy basis. Agri commodities have reflected amixed trend during the quarter – prices of sugar and wheatcorrected by 2-4% qoq, while barley prices increased by ~21%.Milk liquid prices witnessed a sharp surge, up ~15% qoq, whilecoffee prices declined considerably; tea prices have also takena u-turn during the quarter, though they are still very high on ayoy basis. Except palm, copra and rice bran, all other edibleoils witnessed a surge in prices qoq as well as yoy.

However, agri commodities are expected to show a benign trendin case of normal monsoons. Prices of crude-based inputs tendto follow the decrease in crude oil prices with a lag. Hence,despite the currently prevailing benign input cost scenario, pricesof crude-linked inputs are expected to decrease going ahead.

Source: IMD; Angel Research

Exhibit 2: Monsoon trend for June

Excess Rainfall Normal Rainfall Defecient/ Scanty Deviation from Normal rainfall (RHS)

6 8

17

49

17

11

23

10

4

11

9

17

38

11

11

9

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

30

40

-

5

10

15

20

25

30

35

40

21-Jun-06 20-Jun-07 25-Jun-08 24-Jun-09 23-Jun-10 22-Jun-11

(No

ofSubdiv

isio

ns)

(%)

Source: Company, Angel Research; Note: Nestle, GSKCHL figures - 2QCY2011

Exhibit 1: 1QFY2012E revenue growth (yoy, %)

33.7

23.7

18.2 17.6 16.5 16.2 15.1 13.9 13.9

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

GC

PL

GSKC

HL

ITC

Nest

le

Dabur

Asi

an

Pain

ts

Mari

co

Colg

ate

HU

L

29



FMCG

Acquisitions continue in this quarter too…

During 1QFY2012, Godrej Consumer (GCPL) continued itsglobal shopping spree and entered into an agreement for theright to acquire 51% stake in Darling Group Holdings (DGH),a company that operates in 14 countries in the sub-SaharanAfrican region. Darling Group is one of the largest players inthe hair care category in Africa with brands such as Darlingand Amigos, both market leaders in countries in which they arepresent. Darling Group manufactures and distributes full rangeof hair extension products in Africa. The acquisition will takeplace in three phases.

In Phase I, GCPL will acquire operations of countries thatcontribute ~45% to Darling Group's revenue. The phase willbe concluded in the next two months. In Phase II, which will beconcluded in nearly 12 months from then, GCPL will beacquiring ~70% of the group's business. In Phase III, which willbe after another 12 months, GCPL will have the rights to own100% of the business through a combination of call and putoptions.

Going forward, GCPL may acquire the remaining 49% equitystake in DGH in a period of 3-5 years, through a combinationof put and call options.

All the acquisitions are in line with the company's core strategyof 3x3 (focus on the three markets of Asia, Africa and LatinAmerica on companies having a presence in the three categoriesof personal wash, hair care and home care). Similar to most ofits past acquisitions, the current acquisition is also likely to addvalue to GCPL's shareholders.

Dabur India acquired 30 Plus, an OTC energizer brand fromAjanta Pharma during the quarter. The acquisition of 30-Plus ispart of the company's aggressive strategy to build capability inthe OTC healthcare business. The quarter also witnessed a dealin which Jyothy Laboratories snapped a majority stake in HenkelIndia. The deal includes Henkel's entire portfolio, includingHenko and Chek detergents, Pril dish cleaners and Fa deodorant,and rights to the multinational's future launches. Amongst theabove-mentioned deals, rumours regarding P&G, Unilever andColgate also surfaced.

Lacklustre quarter in terms of new product launches…

During the quarter, companies under our coverage reportedfewer product launches as compared to the previous quarters.Colgate launched Colgate Sensitive Pro-Relief Toothpaste in

India; and Britannia launched Tiger Krunch Chocochips.Dabur India launched Hajmola Mint Masti and a hand sanitizer.Marico's Saffola Arise launched premium basmati rice underthe brand Basmati Gold. According to the company, the rice is100% natural and its pure goodness would nurture the healthof consumers. Kurkure launched three new products under theIngredients of India range. The variants include MumbaiChatpata Usal, Bengali Jhaal and South Spice Mix. ITC's FiamaDi Wills forayed into the men's grooming segment.Cadbury-Kraft Foods introduced refreshing Tang for children.Perfetti Van Melle India, market leader in the Indian confectioneryindustry with brands such as Alpenliebe, Center Fresh, Mentosand Happydent, announced its entry into the salty snacksbusiness with the launch of STOP NOT range of snacks.Del Monte launched Four Seasons Fusion drink. Mother Dairyintroduced Paan and Rose flavoured kulfis. GRB DairyFoods launched ice cream, ready-to-cook food, spice blendsand sweets mix.

Outperformance across the sector…

1QFY2012 witnessed a strong rally by all FMCG companies(all stocks in our universe outperformed the Sensex) with theBSE FMCG index outperforming the Sensex by 15.6% duringthe quarter. The quarter under review witnessed lot of instabilityand volatility both at the global and national level. The sectorbeing defensive in nature usually does well in conditions likethese. Apart from not so favouring macroeconomic scenario,which led to the rally in FMCG stocks, rumours regarding dealsbetween global and local FMCG giants further fuelled the rallyin some stocks. Amongst heavyweights, HUL delivered strongreturns on the brink of strong earnings growth and cooling offin palm oil prices, leading to better margins. In mid caps, whileColgate registered significant outperformance, Britannia gainedon the back of impressive set of results and margin expansion.

25.928.9

20.418.7

17.9

9.6

20.4

11.6

12.3

11.6

12.5

(3.1)

(5.0

)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Asian Paints

Britannia

Colgate

Dabur

GCPL

GSKCH

HUL

ITC

Marico

Nestle

BSE FMCG

Sensex


Exhibit 4: Relative outperformance to the Sensex (%)



FMCG

Analyst: Sreekanth PAnalyst: Sreekanth PAnalyst: Sreekanth PAnalyst: Sreekanth PAnalyst: Sreekanth P.V.V.V.V.V.S.S.S.S.S

Valuations at peak, Recommend Neutral

Most FMCG companies have witnessed a sharp rally during1QFY2012 and are currently trading at peak valuations.Moreover, we highlight that FMCG companies have significantlyoutperformed the Sensex, widening the premium valuation gap.

While the long-term consumption story for the FMCG industryremains intact due to rising consumer base and expanding ruralconsumption, any further re-rating from current valuationsseems less likely given the near-term concerns over 1) strongcompetitive intensity and 2) any spike in key raw-material prices.Hence, we maintain our Neutral stance on the FMCG sectorHence, we maintain our Neutral stance on the FMCG sectorHence, we maintain our Neutral stance on the FMCG sectorHence, we maintain our Neutral stance on the FMCG sectorHence, we maintain our Neutral stance on the FMCG sector,,,,,as we believe earnings upgrades and P/E reas we believe earnings upgrades and P/E reas we believe earnings upgrades and P/E reas we believe earnings upgrades and P/E reas we believe earnings upgrades and P/E re-ratings are likely-ratings are likely-ratings are likely-ratings are likely-ratings are likelyto take a breather from current levels.to take a breather from current levels.to take a breather from current levels.to take a breather from current levels.to take a breather from current levels.

Amongst heavyweights, post the significant rally in ITAmongst heavyweights, post the significant rally in ITAmongst heavyweights, post the significant rally in ITAmongst heavyweights, post the significant rally in ITAmongst heavyweights, post the significant rally in ITC andC andC andC andC andHULHULHULHULHUL, we maintain our Neutral view on the stocks and wait for, we maintain our Neutral view on the stocks and wait for, we maintain our Neutral view on the stocks and wait for, we maintain our Neutral view on the stocks and wait for, we maintain our Neutral view on the stocks and wait forbetter entry opportunities. In mid caps, we recommend Reducebetter entry opportunities. In mid caps, we recommend Reducebetter entry opportunities. In mid caps, we recommend Reducebetter entry opportunities. In mid caps, we recommend Reducebetter entry opportunities. In mid caps, we recommend Reduceon GSK Consumeron GSK Consumeron GSK Consumeron GSK Consumeron GSK Consumer, Marico, Colgate and Nestle (reported a, Marico, Colgate and Nestle (reported a, Marico, Colgate and Nestle (reported a, Marico, Colgate and Nestle (reported a, Marico, Colgate and Nestle (reported asignificant rally during the quarter and are trading at asignificant rally during the quarter and are trading at asignificant rally during the quarter and are trading at asignificant rally during the quarter and are trading at asignificant rally during the quarter and are trading at a14-43% premium to historical valuations) and recommend14-43% premium to historical valuations) and recommend14-43% premium to historical valuations) and recommend14-43% premium to historical valuations) and recommend14-43% premium to historical valuations) and recommendNeutral on GCPLNeutral on GCPLNeutral on GCPLNeutral on GCPLNeutral on GCPL, Britannia and Asian P, Britannia and Asian P, Britannia and Asian P, Britannia and Asian P, Britannia and Asian Paints and wait foraints and wait foraints and wait foraints and wait foraints and wait forbetter entry opportunities.better entry opportunities.better entry opportunities.better entry opportunities.better entry opportunities.

Growth across the board…

For 1QFY2012, we expect our FMCG universe's revenue growthto be at ~19% (mix of value and volume) and earnings growthat ~18%. We expect margin expansion for HUL, ITC, Britannia,Nestle, Dabur and GCPL; whereas for Asian Paints, Colgate,GSK Consumer and Marico, we expect margin contraction.Sector leader, HUL is expected to report 14% top-line growth,despite high competitive intensity in the S&D segment. Earningsare expected to grow by robust 18% yoy, primarily due tooperating margin expansion. ITC is expected to witness strongvolume growth, as there was no hike in excise duty on cigarettesduring Union Budget 2011-12. We expect ITC to register robust18.2% yoy top-line growth and 22% yoy earnings growth, aidedby recent price hikes in cigarettes, strong performance ofnon-cigarette FMCG and rebound in its hotels business.Britannia, Colgate, Dabur, GCPL, GSK Consumer, Marico andNestle are expected to post impressive top-line growth.

OPM to be a mixed bag…

In 4QFY2011, FMCG companies saw robust top-line growthdespite the inflationary environment, but gross margins took ahit due to very high raw-material costs. On the operating front,companies clipped the slide in OPM by reduction in ad spendsand other expenditure. In 1QFY2012, though we witnessed adowntrend in key raw-material prices, we expect mixedperformance on the operating front. We expect Asian Paints,Colgate, GSK Consumer and Marico to witness operatingmargin contraction. While Britannia, Dabur, GCPL, HUL, ITCand Nestle are expected to post operating margin expansion.

Exhibit 5: Quarterly estimates (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on June 30, 2011; * December year ending; ^Consolidated

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS ( EPS ( EPS ( EPS ( EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


Asian Paints^ 3,181 2,127 16.2 18.3 (67) 252.6 13.7 26.3 13.7 87.9 102.5 126.3 36.2 31.0 25.2 - Neutral

Britannia 478 1,092 19.6 5.3 89 45.2 37.7 3.8 37.7 12.2 15.4 22.5 39.3 31.0 21.2 - Neutral

Colgate 981 603 13.9 24.8 (152) 128.0 4.9 9.4 4.9 29.6 33.7 38.8 33.1 29.1 25.3 874 Reduce

Dabur India^ 114 1,185 16.5 16.8 154 109.7 26.3 1.3 26.3 3.3 4.2 5.0 34.9 26.9 22.9 - Neutral

GCPL^ 431 860 33.7 20.6 203 127.9 9.9 4.0 9.9 14.6 17.8 20.3 29.4 24.2 21.2 - Neutral

GSKCH* 2,452 664 23.7 16.5 (14) 85.3 18.8 20.3 18.8 71.2 82.7 98.3 34.4 29.7 24.9 2,163 Reduce

HUL 343 5,462 13.9 13.0 49 609.0 18.3 2.8 18.3 9.7 11.7 13.3 35.3 29.4 25.7 - Neutral

ITC 202 5,692 18.2 34.2 82 1,301.1 21.6 3.4 21.6 6.4 7.5 8.9 31.4 27.0 22.8 - Neutral

Marico^ 156 909 15.1 13.2 (15) 78.4 6.4 1.3 6.4 3.9 4.9 6.1 39.6 31.5 25.5 147 Reduce

Nestle* 4,095 1,725 17.6 21.0 91 242.7 22.9 25.2 22.9 84.9 101.0 120.1 48.2 40.6 34.1 3,483 Reduce

31



Infrastructure – Eyeing a sea of red

For 1QFY2012, we expect our coverage universe to posttop-line growth on account of a gradual pick-up in execution.


CCCL (CMP/TP: `31/–) (Rating: Neutral)

Consolidated Construction Consortium (CCCL) is expected topost poor numbers for 1QFY2012. We expect mere 10.0% yoytop-line growth, given the slow-moving infra and commercialorders (41% of the order book). On the EBITDA front, we expectthe company to register a dip of 237bp to 5.9% (8.3%), owingto low-margin orders (`1,150cr) in the final stages of completionand fixed price contracts in which rise in material prices is abovethe company’s estimates, leading to margin pressure. AgainstAgainstAgainstAgainstAgainstthis backdrop, the bottom line for the quarter is expected tothis backdrop, the bottom line for the quarter is expected tothis backdrop, the bottom line for the quarter is expected tothis backdrop, the bottom line for the quarter is expected tothis backdrop, the bottom line for the quarter is expected todecline by 57.1% yoy to decline by 57.1% yoy to decline by 57.1% yoy to decline by 57.1% yoy to decline by 57.1% yoy to `̀̀̀̀7.7cr (7.7cr (7.7cr (7.7cr (7.7cr (`̀̀̀̀17.9cr)17.9cr)17.9cr)17.9cr)17.9cr).

HCC (CMP/TP: `32/–) (Rating: Neutral)

For Hindustan Construction Company (HCC), we project modest11.5% yoy growth in revenue for 1QFY2012 to `1,110cr(`995.4cr), which would be led by execution of road projects.We project flat EBITDA margin at 12.7%. HoweverHoweverHoweverHoweverHowever, on the, on the, on the, on the, on thebottom-line front, we expect a steep decline of 73.8% to merebottom-line front, we expect a steep decline of 73.8% to merebottom-line front, we expect a steep decline of 73.8% to merebottom-line front, we expect a steep decline of 73.8% to merebottom-line front, we expect a steep decline of 73.8% to mere

However, on the earnings front, we expect a decline for mostcompanies under our coverage universe, primarily on accountof higher interest costs. For 1QFY2012, outperformers fromthe earnings point of view are JAL and SEL.

`̀̀̀̀7.4cr (7.4cr (7.4cr (7.4cr (7.4cr (`̀̀̀̀28.3cr) due to its escalating interest cost and subdued28.3cr) due to its escalating interest cost and subdued28.3cr) due to its escalating interest cost and subdued28.3cr) due to its escalating interest cost and subdued28.3cr) due to its escalating interest cost and subduedtoptoptoptoptop-line growth.-line growth.-line growth.-line growth.-line growth.

IRB Infra (CMP/TP: `173/`191) (Rating: Accumulate)

IRB is expected to continue its robust performance on a quarterlybasis. We expect 61.6% and 14.5% yoy growth in C&EPC(`533.5cr) and BOT (`233.1cr) revenue, respectively, leadingto an overall top-line (`766.5cr) growth of 49.7% for the quarter.The C&EPC segment is expected to get a boost fromSurat-Dahisar and Kolhapur road projects, which are nearingcompletion. On the BOT front, Mumbai-Pune expressway haswitnessed a toll hike of 18% effective from April 2011, whichwill drive growth for the quarter. We expect EBITDA margin at42.3%, registering a yoy decline of 250bp, mainly on accountof change in revenue mix and contraction of C&EPC marginsas compared to last year's blockbuster C&EPC margin of 28.8%.WWWWWe project net profit before tax and after tax (and minoritye project net profit before tax and after tax (and minoritye project net profit before tax and after tax (and minoritye project net profit before tax and after tax (and minoritye project net profit before tax and after tax (and minorityinterest) at interest) at interest) at interest) at interest) at `̀̀̀̀168.1cr and 168.1cr and 168.1cr and 168.1cr and 168.1cr and `̀̀̀̀117.8cr117.8cr117.8cr117.8cr117.8cr, respectively, respectively, respectively, respectively, respectively, factoring a, factoring a, factoring a, factoring a, factoring atax rate of 27.9% for the quartertax rate of 27.9% for the quartertax rate of 27.9% for the quartertax rate of 27.9% for the quartertax rate of 27.9% for the quarter.....

IVRCL (CMP/TP: `70/`100) (Rating: Buy)

We expect IVRCL to post moderate revenue growth of 10.0%yoy for 1QFY2012 to `1,217cr. On the EBITDA margin front,we expect a marginal dip of 20bp at 8.9% (9.1%). On theOn theOn theOn theOn theearnings front, we expect a decline of whopping 43.3% for theearnings front, we expect a decline of whopping 43.3% for theearnings front, we expect a decline of whopping 43.3% for theearnings front, we expect a decline of whopping 43.3% for theearnings front, we expect a decline of whopping 43.3% for thequarter to quarter to quarter to quarter to quarter to ̀̀̀̀̀ 15.9cr15.9cr15.9cr15.9cr15.9cr, primarily on account of higher interest cost,, primarily on account of higher interest cost,, primarily on account of higher interest cost,, primarily on account of higher interest cost,, primarily on account of higher interest cost,which is expected to rise by ~50% yoy for the quarterwhich is expected to rise by ~50% yoy for the quarterwhich is expected to rise by ~50% yoy for the quarterwhich is expected to rise by ~50% yoy for the quarterwhich is expected to rise by ~50% yoy for the quarter.....

JAL (CMP/TP: `81/`108) (Rating: Buy)

We expect Jaiprakash Associates (JAL) to post modest top-linegrowth of 11.6% yoy to `3,588cr (`3,215cr) for the quarter.We expect marginal growth of 2.0% in C&EPC revenue to`1,466cr. For the cement segment, we expect JAL to postrevenue of `1,487cr – volume of 4.2mt with realisations of`3,622/tonne for the quarter. The real estate sector is expectedto continue its robust performance and post healthy top-linegrowth of 60% yoy to `585.8cr. Overall, we expect JAL to postEBITDA margin of 24.0%, a jump of 274bp yoy, owing toincreased contribution from the high-margin real estatesegment. The bottom line is expected to come in at The bottom line is expected to come in at The bottom line is expected to come in at The bottom line is expected to come in at The bottom line is expected to come in at `̀̀̀̀199.3cr199.3cr199.3cr199.3cr199.3cr,,,,,registering a yoy jump of 88.4% (adjusting for extraordinaryregistering a yoy jump of 88.4% (adjusting for extraordinaryregistering a yoy jump of 88.4% (adjusting for extraordinaryregistering a yoy jump of 88.4% (adjusting for extraordinaryregistering a yoy jump of 88.4% (adjusting for extraordinarypost tax gain of post tax gain of post tax gain of post tax gain of post tax gain of `̀̀̀̀410cr in 1QFY2011) for the quarter410cr in 1QFY2011) for the quarter410cr in 1QFY2011) for the quarter410cr in 1QFY2011) for the quarter410cr in 1QFY2011) for the quarter.....

L&T (CMP/TP: `1,823/`2,030) (Rating: Accumulate)

We expect Larsen and Toubro (L&T) to record revenue of`9,938cr, a robust jump of 26.0% yoy, for 1QFY2012.This growth is on account of its large order book (~`1.4trillion)and low base. On the EBITDA front, we expect margin to belower at 11.6% as against 12.8% in 1QFY2011, in line withmanagement's commentary, to factor in higher commodity prices


Exhibit 1: Revenue trend (1QFY2012E)

Top -line (` cr, LHS) yoy change (%, RHS)

10.0 11.5

49.7

10.0 11.6

26.0

18.0

7.6

54.0

6.3

-

10.0

20.0

30.0

40.0

50.0

60.0

-

2,000

4,000

6,000

8,000

10,000

12,000

CC

CL

HC

C

IRB

Infr

a

IVRC

L

JAL

L&T

MPL

NC

C

SEL

Sim

ple

xIn

.


Exhibit 2: Earnings trend (1QFY2012E)

Earning (` cr, LHS) yoy change (%, RHS)

(57.1)(73.8)

0.2

(43.3)

88.4

1.2(12.7)

(38.9)

18.7

(10.1)

(100.0)

(80.0)

(60.0)

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

100.0

0

200

400

600

800

CC

CL

HC

C

IRB

Infr

a

IVRC

L

JAL

L&T

MPL

NC

C

SEL

Sim

ple

xIn

.



Infrastructure

during the quarter. WWWWWe project net profit at e project net profit at e project net profit at e project net profit at e project net profit at ̀̀̀̀̀ 674cr674cr674cr674cr674cr, an increase, an increase, an increase, an increase, an increaseof mere 1.2% yoyof mere 1.2% yoyof mere 1.2% yoyof mere 1.2% yoyof mere 1.2% yoy, mainly on account of the expected margin, mainly on account of the expected margin, mainly on account of the expected margin, mainly on account of the expected margin, mainly on account of the expected margincompression.compression.compression.compression.compression. We believe the company would end the quarterwith a total order inflow of ̀ 16,000cr (`15,626cr) for the quarter,which is good, even though it is lower than its yearly guidanceof 15-20%, considering the overall gloomy macro environmenton the order inflow front for the sector.

MPL (CMP/TP: `88/`117) (Rating: Buy)

Madhucon projects (MPL) is expected to post decent yoytop-line growth of 18.0% to `480.7cr for 1QFY2012, whichwould be on the back of its strong order book. We expect EBITDAmargin to be under slight pressure and register a yoy dip of55bp to 10.1%. Earnings are expected to be under pressureEarnings are expected to be under pressureEarnings are expected to be under pressureEarnings are expected to be under pressureEarnings are expected to be under pressureon account of higher interest cost for the quarter and areon account of higher interest cost for the quarter and areon account of higher interest cost for the quarter and areon account of higher interest cost for the quarter and areon account of higher interest cost for the quarter and areexpected to post a decline of 12.7% yoy to expected to post a decline of 12.7% yoy to expected to post a decline of 12.7% yoy to expected to post a decline of 12.7% yoy to expected to post a decline of 12.7% yoy to `̀̀̀̀11.7cr11.7cr11.7cr11.7cr11.7cr.....

NCC (CMP/TP: `81/`109) (Rating: Buy)

We expect Nagarjuna Construction (NCC) to post poor numbersfor 1QFY2012. On the top-line front, NCC is expected to postmodest growth of 7.6% yoy to `1,169.5cr. EBITDA margin isexpected to be flat at ~9.7%. HoweverHoweverHoweverHoweverHowever, a shocker should come, a shocker should come, a shocker should come, a shocker should come, a shocker should comeon the earnings front, as we expect the company to post aon the earnings front, as we expect the company to post aon the earnings front, as we expect the company to post aon the earnings front, as we expect the company to post aon the earnings front, as we expect the company to post adecline of 38.9% yoy/29.0% qoq to decline of 38.9% yoy/29.0% qoq to decline of 38.9% yoy/29.0% qoq to decline of 38.9% yoy/29.0% qoq to decline of 38.9% yoy/29.0% qoq to `̀̀̀̀25.3cr for the quarter25.3cr for the quarter25.3cr for the quarter25.3cr for the quarter25.3cr for the quarter.....This would be primarily on account of burgeoning interest cost(jump of ~96.3% yoy), led by elongated working capital cycle.The financial closure status for the 1,320MW power plant, whichwas guided by the company to be achieved in March, would beanother important development for the quarter.

SEL (CMP/TP: `134/`161) (Rating: Buy)

We expect Sadbhav Engineering (SEL) to post robust 54.0% yoygrowth on the top-line front, owing to pick-up in the executionof captive road BOT projects. EBITDA margin is expected towitness a fall of 220bp yoy to 9.7% (11.9%) on account ofhigher sub-contracting charges for the quarter. On the earningsOn the earningsOn the earningsOn the earningsOn the earningsfront, despite lower margins, the company is expected to postfront, despite lower margins, the company is expected to postfront, despite lower margins, the company is expected to postfront, despite lower margins, the company is expected to postfront, despite lower margins, the company is expected to postdecent growth of 18.7% yoy to decent growth of 18.7% yoy to decent growth of 18.7% yoy to decent growth of 18.7% yoy to decent growth of 18.7% yoy to `̀̀̀̀30.3cr (30.3cr (30.3cr (30.3cr (30.3cr (`̀̀̀̀25.5cr).25.5cr).25.5cr).25.5cr).25.5cr).

Simplex (CMP/TP: `268/`404) (Rating: Buy)

For Simplex, we project flat top-line growth of 6.3% yoy to`1,251cr for 1QFY2012. This subdued performance would bemainly on account of slowdown faced by the company on theinternational front. It should be noted that during the last quarterorder awarding activity had picked up on the international front,but we believe it would take time for the same to get convertedinto revenue. We expect EBITDA margin to remain stable at10.2%, in line with management's guidance. HoweverHoweverHoweverHoweverHowever, the, the, the, the, thebottom line is expected to be under pressure due to increasedbottom line is expected to be under pressure due to increasedbottom line is expected to be under pressure due to increasedbottom line is expected to be under pressure due to increasedbottom line is expected to be under pressure due to increasedinterest cost (yoy expected jump of ~41%), resulting in a yoyinterest cost (yoy expected jump of ~41%), resulting in a yoyinterest cost (yoy expected jump of ~41%), resulting in a yoyinterest cost (yoy expected jump of ~41%), resulting in a yoyinterest cost (yoy expected jump of ~41%), resulting in a yoydecline of around 10.1% to decline of around 10.1% to decline of around 10.1% to decline of around 10.1% to decline of around 10.1% to `̀̀̀̀32.5cr for the quarter32.5cr for the quarter32.5cr for the quarter32.5cr for the quarter32.5cr for the quarter.

Key developments on the road front

Awarding activity picks up and is expected to continue:Awarding activity picks up and is expected to continue:Awarding activity picks up and is expected to continue:Awarding activity picks up and is expected to continue:Awarding activity picks up and is expected to continue: NHAIhas begun FY2012 on an aggressive note by awarding projectsof ~481kms (~10% of the total orders awarded in FY2011) inApril 2011. This is in line with the aggressive targets set for theyear – 1) BOBOBOBOBOT toll basisT toll basisT toll basisT toll basisT toll basis: Projects worth ~7,994kms; and2) Annuity/EPC basis:Annuity/EPC basis:Annuity/EPC basis:Annuity/EPC basis:Annuity/EPC basis: Projects worth ~1,000kms.

Further, there has been an increase in the targets for NHAI withthe intervention of PMO. Against this background, NHAI hasfurther added 20 NH projects connecting 2,071kms. Theseadditional projects will require investments worth `16,000cr.We believe these targets are aggressive considering NHAI's pastperformance and its capacity constraints.

PPPPPolicy changes come to the fore:olicy changes come to the fore:olicy changes come to the fore:olicy changes come to the fore:olicy changes come to the fore: NHAI has recently introducedan important change by which there would be annualpre-qualification for bidders, as against each project basis,which we believe is not only logical and economical but wouldalso lead to shortening of the time cycle (by 2-3 months) inawarding projects. Further, it plans to introduce e-tenderingand e-toll collection in the near future. We believe these changesare taking the sector forward in the right direction and wouldlead to enhanced participation and transparency.

Outlook remains bleak

Era of scorching debt levels…: Era of scorching debt levels…: Era of scorching debt levels…: Era of scorching debt levels…: Era of scorching debt levels…: There has been an increase indebt levels of most companies (except L&T and SEL) over thelast three years. This increase in debt levels – above comfortablelimits – is mainly on account of increased working capitalrequirement and equity infusion in subsidiaries to supportrevenue growth for the parent construction arm. The standoutperformers among these companies are L&T and SEL, with netD/E levels at comfortable levels in spite of building an impressiveasset portfolio.

Source: Company, Angel Research; Note: Consolidated numbers for CCCL,IRB and Simplex Infra

Exhibit 3: Debt levels have surged over the last 3 years

FY08 FY09 FY10 FY11

-

0.5

1.0

1.5

2.0

2.5

CC

CL

HC

C

IRB

Infr

a

IVRC

L

JAL

L&T

MPL

NC

C

Sadbhav

Sim

ple

xIn

.

NetD

ebt/

Equity

(x)

33



Infrastructure

…With high interest rates: …With high interest rates: …With high interest rates: …With high interest rates: …With high interest rates: The RBI, on June 16, 2011, hadincreased the repo rate by 25bp (as expected) from 7.25% to7.50%, with a similar increase in the reverse repo rate from6.25% to 6.50%. The RBI has raised policy rates for the tenthtime in the last 15 months. This move, aiming to kill inflation,would come at the cost of growth and is very well acknowledgedby the RBI. We believe this was not the last round of hikes,given that inflation is expected to remain high (with high globalcommodity prices and food prices). However, we believe thatinterest rates are nearing peak levels and 2HFY2012 is expectedto better off on the interest and inflation fronts.


Exhibit 4: HCC, MPL, Simplex and JAL most vulnerableto increased interest rates

CompanyCompanyCompanyCompanyCompany ChgChgChgChgChg. in earnings for FY12 (%). in earnings for FY12 (%). in earnings for FY12 (%). in earnings for FY12 (%). in earnings for FY12 (%)if intif intif intif intif int. rate . rate . rate . rate . rate incincincincinc..... by by by by by furtherfurtherfurtherfurtherfurther100bp100bp100bp100bp100bp

CCCL (8.0)

HCC (76.8)

IRB Infra (10.5)

IVRCL (7.9)

JAL (13.7)

L&T (2.1)

MPL (21.1)

NCC (13.6)

SEL (3.2)

Simplex Infra (14.1)

Analyst: Shailesh KAnalyst: Shailesh KAnalyst: Shailesh KAnalyst: Shailesh KAnalyst: Shailesh Kanani / Nitin Aroraanani / Nitin Aroraanani / Nitin Aroraanani / Nitin Aroraanani / Nitin Arora

Order awarding takes a backseat:Order awarding takes a backseat:Order awarding takes a backseat:Order awarding takes a backseat:Order awarding takes a backseat: There has been aconsiderable slowdown in order awarding activity across sectorson account of various factors (such as environment clearance,lack of stable leadership in various PSUs, state elections andland issues). The only silver lining has been pick-up of awardingactivity in the last couple of months from NHAI's end, althoughit is leading to intense competition and creating doubts overthe profitability of these projects.

Earnings to remain under pressure: Earnings to remain under pressure: Earnings to remain under pressure: Earnings to remain under pressure: Earnings to remain under pressure: For FY2012, we expect amoderate show on the top-line front, while margins will continueto remain under pressure due to high commodity prices andinflationary pressures. Against this background, spiraling interestcost will lead to flat/lower performance on the earnings frontfor FY2012 despite the benefit of low base effect of FY2011.

Valuations attractive post deep correction

On account of cheaper valuations post the correction inconstruction stocks and taking into account FY2013E earningsgrowth outlook, we remain positive on companies having1) less dependence on capital markets for raising equity forfunding projects (L&T and SEL); 2) strong order book position(IVRCL and SEL); 3) superior return rations (L&T and SEL);4) comfortable leverage position (L&T, NCC and SEL); and5) inexpensive valuations (IVRCL and NCC). WWWWWe maintain L&Te maintain L&Te maintain L&Te maintain L&Te maintain L&T,,,,,IVRCL and SIVRCL and SIVRCL and SIVRCL and SIVRCL and SELELELELEL as our top picks in the sector as our top picks in the sector as our top picks in the sector as our top picks in the sector as our top picks in the sector.....

We have valued construction companies on an SOTP basis.For the core construction business, we have assigned earningsmultiple in the range of 8-11x (excluding L&T), based on certainquantitative and qualitative factors. The listed/unlistedsubsidiaries of construction companies are valued at 20%discount to their CMP/1-1.5x book value.

Exhibit 5: Quarterly estimates ( `̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on June 30, 2011, Target prices are based on SOTP methodology; ^Consolidated numbers; #1QFY2011 numbers for JAL havebeen adjusted for the etraordinary gain of `410cr (net of tax) *(1) For CCCL, there are no major investments in subsidiary;(2) For HCC, value of Lavasa and Road BOT totals to`29.9/share; (3) For IRB, investments in BOT and real estate total to `81.1/share; (4) For IVRCL, value of IVRCL Assets and BOT projects totals to`26.7/share; (5) For JAL, noinvestments have been adjusted;(6) For L&T, investments in subsidiaries amount to `464/share. (7) For Madhucon Projects, Road BOT and other investments total to `47.0/share;(8) For Nagarjuna, value of land bank, BOT projects and investments totals to ̀ 33.1/share;(9) For SEL, its investments in BOT projects total to `73.5/share; (10) For Simplex Infra,there are no major investments in subsidiaries

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) *Adj. P/E (x) *Adj. P/E (x) *Adj. P/E (x) *Adj. P/E (x) *Adj. P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


CCCL 31 559 10.0 5.9 (237) 7.7 (57.1) 0.4 (57.1) 2.5 2.6 4.2 12.2 12.1 7.3 - Neutral

HCC 32 1,110 11.5 12.7 7 7.4 (73.8) 0.1 (73.8) 1.2 0.8 1.3 1.8 2.5 1.5 - Neutral

IRB Infra^ 173 767 49.7 42.3 (250) 117.8 0.2 3.5 0.2 13.6 11.0 14.5 6.7 8.3 6.3 191 Accum.

IVRCL 70 1,217 10.0 8.9 (20) 15.9 (43.3) 0.6 (43.3) 5.9 6.2 8.2 7.3 6.9 5.3 100 Buy

JAL# 81 3,588 11.6 24.0 274 199.3 88.4 0.9 88.4 3.1 5.1 6.8 26.3 15.8 11.9 108 Buy

L&T 1,823 9,938 26.0 11.6 (117) 674.0 1.2 11.0 1.0 58.2 68.3 82.5 23.3 19.8 16.4 2,030 Accum.

MPL 88 481 18.0 10.1 (55) 11.7 (12.7) 1.6 (12.7) 6.9 7.5 8.7 5.9 5.5 4.7 117 Buy

NCC 81 1,170 7.6 9.7 (5) 25.3 (38.9) 1.0 (38.9) 6.2 5.8 7.6 7.7 8.3 6.3 109 Buy

SEL 134 655.0 54.0 9.7 (221) 30.3 18.7 2.0 18.7 8.0 8.4 9.7 7.6 7.2 6.3 161 Buy

Simplex In. 268 1,251 6.3 10.2 5 32.5 (10.1) 6.6 (10.2) 25.1 24.1 36.7 10.7 11.1 7.3 404 Buy



Metals

In our view, the steel space will continue to face challengesamid near-term negatives like seasonal fall in demand andhigh raw-material costs. Globally, steel prices are expected toremain under pressure. For 2QFY2012, coking coal and ironore contracts are expected to settle close to their peak levels of1QFY2012 levels. Base metal prices are also likely to remainunder pressure in the near term on demand concerns due toslowdown in growth, led by monetary tightening in China andescalating debt crisis in Europe.

In 1QFY2012, the BSE Metal index underperformed the Sensexby 3.7% and fell by 6.8% in absolute terms. SAIL underperformedby 15.9% on reports of the FPO being delayed, while JSW Steelremained flat relative to the Sensex. However, Tata Steeloutperformed by 1.2%. Relative to the Sensex, Nalco fell by10.4%, led by concerns on coal supplies. Hindalcounderperformed by 10.2% due to delay in expansion projects.However, Sterlite remained flat, while HZL outperformed by2.1%. Coal India continued to outperform, gaining 16.1%,while Sesa Goa was flat. However, NMDC and MOILunderperformed by 7.0% and 12.2%, respectively.

Key events

TTTTTata Steel closes Scunthrope plant in Europe: ata Steel closes Scunthrope plant in Europe: ata Steel closes Scunthrope plant in Europe: ata Steel closes Scunthrope plant in Europe: ata Steel closes Scunthrope plant in Europe: During the quarter,Tata Steel announced to close its Scunthrope plant (long productsbusiness) in Europe as the unit has been incurring losses for thelast two years due to weak demand from the constructionsegment. As per Tata Steel, demand for structural steel in UK isonly two-third of 2007 level and is not expected to fully recoverwithin the next few years. The proposal is expected to cut 1,200jobs at Scunthrope and 300 jobs at Teesside sites. We believethe closure will help the company in reducing its operating costs.

MMMMMetal Majorsetal Majorsetal Majorsetal Majorsetal Majors Abs.Abs.Abs.Abs.Abs. Relative toRelative toRelative toRelative toRelative to

Returns (%)Returns (%)Returns (%)Returns (%)Returns (%) Sensex (%) Sensex (%) Sensex (%) Sensex (%) Sensex (%)

Sensex (3.1)

BSE Metal (6.8) (3.7)

SAIL (19.0) (15.9)

Tata Steel (1.9) 1.2

JSW Steel (3.7) (0.6)

Hindalco (13.3) (10.2)

Nalco (13.4) (10.4)

Sterlite Ind (3.1) (0.0)

Hindustan Zinc (0.9) 2.1

NMDC (10.1) (7.0)

Sesa Goa (2.8) 0.2

Coal India 13.1 16.1

MOIL (15.3) (12.2)

Exhibit 1: Sensex vs. metal stocks


TTTTTata Steel sells its stake in Riversdale Mining: ata Steel sells its stake in Riversdale Mining: ata Steel sells its stake in Riversdale Mining: ata Steel sells its stake in Riversdale Mining: ata Steel sells its stake in Riversdale Mining: During the quarter,Tata Steel sold its 26.3% stake in Riversdale Mining to Rio Tintofor A$1,060mn. However, the company will retain its currentholding of 35.0% in Mozambique coking coal project, whichwill partially integrate its European operations. We believe thesale should aid in part-funding the company's ongoingexpansion plans.

MoEF clears allegation on VMoEF clears allegation on VMoEF clears allegation on VMoEF clears allegation on VMoEF clears allegation on Vedanta Aluminium:edanta Aluminium:edanta Aluminium:edanta Aluminium:edanta Aluminium: After putting aban on expansion plans at Vedanta Aluminium at Lanjigarh,Orissa, in 2010, the Ministry of Environment and Forests (MoEF)has cleared anti-pollution measures taken by the companyfollowing allegations of a crack in red mud pond, which resultedin leakage of red mud.

PPPPPosco starts land acquisition process:osco starts land acquisition process:osco starts land acquisition process:osco starts land acquisition process:osco starts land acquisition process: After a long delay of fiveyears, MoEF finally gave environment and forest clearance toPosco in May 2011 to build the US$12bn steel plant in Orissawith a series of conditions. Posco has started the land acquisitionprocess but is facing stiff resistance from villagers.

PPPPPower cuts in China: ower cuts in China: ower cuts in China: ower cuts in China: ower cuts in China: China is facing severe power crisis since2004 due to low hydropower production, poor coaltransportation and inadequate power transmission systems.While the government has raised power tariffs in a bid toimprove the situation, we believe the situation could worsen ifcoal prices continue to rise. In the near term, the increase inpower cost has supported aluminium prices at higher levels.

Ferrous sector

During the quarter, steel prices in India remained flat sequentiallywith a negative bias due to moderating growth, led by interestrate hikes. In 1QFY2012, average HRC prices in India wereflat qoq at ~`39,000/tonne, though up by 6.1% yoy. Worldaverage HRC prices increased by 1.9% qoq to US$809/tonne(up 11.7% yoy), while average Chinese export prices were flatqoq at US$714/tonne, though up by 11.5% yoy.

JSW Steel and Essar Steel hiked flat product prices by`600-1000/tonne in June (first time in FY2012), citing higherraw-material prices, whereas SAIL kept its prices unchanged atMay levels.


Exhibit 2: Chinese HRC prices flat qoq

World HRC prices China export HRC prices (FOB)

0

200

400

600

800

1,000

1,200

1QFY09 3QFY09 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12

(US

$/t

onne)

35



Metals

RawRawRawRawRaw-material prices trading near peak levels:-material prices trading near peak levels:-material prices trading near peak levels:-material prices trading near peak levels:-material prices trading near peak levels: Following thefloods in Australia in January 2011, which led to significantsupply shortages resulting in substantially higher coking coalprices, 2QFY2012 benchmark coking coal contracts are alsosettled at higher levels of US$315/tonne (US$330/tonne for1QFY2012). Additionally, if the workers' strike at BHP Billitoncontinues, significant supply pressures in the near term may bewitnessed. However, coking coal prices are expected to moderatein 2HFY2012, but the pace would depend on how operationsin Australia normalise and normalcy in supply is restored.

In case of iron ore negotiations, media reports suggest that2QFY2012 contracts are likely to settle at 1QFY2012 levels.During the quarter, average spot iron ore prices for 63% Fegrade (CFR, China) were flat qoq at US$181/tonne (up 9.2% yoy).

Outlook

RawRawRawRawRaw-material cost pressure to persist: -material cost pressure to persist: -material cost pressure to persist: -material cost pressure to persist: -material cost pressure to persist: We expect raw-materialprices to remain volatile as a result of floods in Australia andlow supplies of iron ore from India. However, softer demandfrom China is expected to keep further increases in iron oreprice muted. Moreover, coking coal prices may decline as theflood situation in Australia normalises and normalcy in supplyis restored.

According to World Steel, global crude steel production for Apriland May was higher by 5.0% and 4.2% yoy to 127mn tonnesand 130mn tonnes, respectively. Global capacity utilisation levelsare estimated to have remained flat at 81% in 1QFY2012. Giventhat steel production and raw-material prices are at elevatedlevels, we expect steel prices to remain under pressure, therebyleading to margin pressure in the near term.

1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations:1QFY2012 expectations: For 1QFY2012, on a yoy basis,we expect sales volume to increase, aided by higher realisations.Thus, we expect the top line of all the companies under ourcoverage to grow by 4-35% yoy. However, due to relativelyhigher raw-material costs, margins of steel companies are likelyto contract by 300-370bp yoy. For Sesa Goa, iron ore salesvolume is likely to be negatively affected and, thus, we expectflat top-line growth on a yoy basis. WWWWWe remain positive one remain positive one remain positive one remain positive one remain positive onTTTTTata Steel and JSW Steel.ata Steel and JSW Steel.ata Steel and JSW Steel.ata Steel and JSW Steel.ata Steel and JSW Steel.

Non-ferrous sector

During the quarter, base metal prices witnessed a mixed trendsequentially as concerns over the slowdown in economic growthand Greek default intensified. The sector also suffered due tohike in interest rates and bank reserve requirements by China.

On a sequential basis, average aluminium and alumina priceson LME increased by 4-5%, while copper, zinc and lead pricesdeclined by 2-6%. On a yoy basis, copper, aluminium, alumina,zinc and lead increased by 11-31% with copper and leadgaining 30.5% and 31.0%, respectively.

Source: Crisil Research, Angel Research

Exhibit 3: Domestic HRC prices flat qoq

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

(`/t

onne)


Exhibit 4: Iron ore prices and inventory in China

Iron ore inventory (RHS) Indian Iron ore 63% Fe, CFR China (LHS)

0

15

30

45

60

75

90

105

0

30

60

90

120

150

180

210

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

(mn

tonnes)

(US

$/t

onne)

Iron ore exports from KIron ore exports from KIron ore exports from KIron ore exports from KIron ore exports from Karnataka yet to resume: arnataka yet to resume: arnataka yet to resume: arnataka yet to resume: arnataka yet to resume: Following anorder of the Supreme Court on April 5, 2011, to lift the exportban on iron ore, the Karnataka government is likely to resumeiron ore exports by July 2011, as the government is working ona mechanism (infrastructure such as checkpoints and satellitetracking systems) to check illegal mining.

As per Federation of Indian Mineral Industries, iron ore exportsfrom India have declined by ~18% to 85.4mn tonnes duringApril 2010-February 2011 on account of export ban inKarnataka and increased export duty. In May 2011, Indian ironore exports to China fell by 35% yoy to 6.8mn tonnes. Totaliron ore exports to China for April-May 2011 fell by 32.4% yoyto 15.8mn tonnes.


Exhibit 5: Indian iron ore exports to China down

0

2

4

6

8

10

12

14

16

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11

(mn

tonnes)



Metals

Analyst : Bhavesh Chauhan/PAnalyst : Bhavesh Chauhan/PAnalyst : Bhavesh Chauhan/PAnalyst : Bhavesh Chauhan/PAnalyst : Bhavesh Chauhan/Pooja Jainooja Jainooja Jainooja Jainooja Jain

Exhibit 8: Quarterly estimates ((((( `̀̀̀̀ c c c c crrrrr)))))

Source: Company, Angel Research; Note: Price as on June 30, 2011; EPS calculation based on fully diluted equity; * Denotes consolidated numbers



Coal India 392 15,078 26.3 34.3 887 3,943 56.1 6.2 56.1 17.2 21.5 22.4 22.8 18.3 17.5 - Neutral

Hindalco* 181 19,476 17.7 9.9 (136) 819 7.8 4.3 7.8 12.8 16.0 25.5 14.1 11.3 7.1 242 Buy

Hind. Zinc 136 2,941 50.8 58.4 599 1,532 71.9 3.6 71.9 11.6 14.2 15.3 11.7 9.6 8.9 158 Buy

JSW Steel* 882 6,448 34.9 20.6 (315) 489 47.3 24.2 47.3 78.6 92.1 115.6 11.2 9.6 7.6 1,024 Buy

MOIL 334 227 (35.4) 57.7 (1,333) 104 (43.0) 6.2 (43.0) 35.0 32.8 34.9 9.5 10.2 9.6 358 Accumulate

Nalco 83 1,698 31.5 25.6 (488) 268 (5.6) 1.0 (5.6) 4.1 5.1 5.8 20.0 16.3 14.4 77 Reduce

NMDC 255 3,397 34.9 63.3 (1,820) 1,717 14.2 4.3 14.2 16.4 18.5 21.3 15.6 13.8 12.0 241 Reduce

SAIL 138 9,405 4.2 17.1 (333) 1,029 (12.5) 2.5 (12.5) 11.8 12.9 16.5 11.6 10.7 8.3 191 Buy

Sesa Goa* 282 2,378 (1.5) 58.0 (249) 1,075 (17.4) 12.1 (17.4) 47.5 43.4 47.4 5.9 6.5 5.9 385 Buy

Sterlite Inds* 168 10,200 72.2 28.0 350 1,700 68.6 5.1 68.6 14.3 17.3 21.7 11.7 9.7 7.7 216 Buy

Tata Steel* 609 34,668 27.5 12.6 (367) 1,858 (0.4) 19.4 (0.4) 92.9 73.2 91.5 6.6 8.3 6.7 799 Buy

Outlook

Though base metal prices are likely to remain under pressurein the near term due to concerns on growth, long-termdemand-supply fundamentals remain intact for some metals.The copper market is struggling with supply constraints, whilethe downside for aluminium prices is capped due to high energycost. However, zinc and lead prices are unlikely to see any majorupside as the market remains in surplus.

For 1QFY2012, we expect non-ferrous companies to registerpositive top-line growth of 18-72%, owing to a surge in LMEprices. HZL and Sterlite are expected to report yoy marginexpansion of 599bp and 350bp, respectively. However, Nalcoand Hindalco are expected to witness a yoy margin contractionof 488bp and 136bp, respectively, on account of higheroperating cost. WWWWWe remain positive on Sterlite and Hindalco.e remain positive on Sterlite and Hindalco.e remain positive on Sterlite and Hindalco.e remain positive on Sterlite and Hindalco.e remain positive on Sterlite and Hindalco.

On a yoy basis, inventory levels at LME warehouse for copperand aluminium increased by 3.1% and 1.6%, respectively.Inventory levels for zinc and lead were higher by 40.7% and69.8%, respectively. However, on YTD basis, copper, aluminium,zinc and lead inventory increased by 23.2%, 5.2%, 23.1% and53.8%, respectively.

Exhibit 6: Average base metal prices (US$/tonne)


1QFY121QFY121QFY121QFY121QFY12 1QFY111QFY111QFY111QFY111QFY11 yoy %yoy %yoy %yoy %yoy % 4QFY114QFY114QFY114QFY114QFY11 qoq %qoq %qoq %qoq %qoq %

Copper 9,147 7,011 30.5 9,633 (5.0)

Aluminium 2,600 2,092 24.3 2,506 3.8

Alumina 408 335 21.8 388 5.1

Zinc 2,251 2,020 11.4 2,394 (6.0)

Lead 2,548 1,945 31.0 2,602 (2.1)


Exhibit 7: Inventory chart

Copper Aluminium Zinc Lead

0

50

100

150

200

250

300

Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

37



Oil & Gas

We expect robust performance from companies in the oil andgas sector in 1QFY2012. In April 2011, crude oil price increasedsharply on the back of political unrest in MENA region; however,it came off in May-June 2011, as concerns over weak Europeaneconomies and anticipated slowing growth in the US muted thesentiment. On the domestic front, the government raised fuelprices and (surprisingly) cut duties to reduce the gross underrecoveries for oil marketing companies (OMCs).

Crude rises in April but cools in May-June 2011

Crude oil price increased to US$127/bbl in April 2011 on theback of political unrest in MENA region. Further, temporarydisruptions in crude oil production coupled with depreciationin dollar index aided the crude oil price rise in April 2011.However, crude oil price declined in May 2011 primarily onaccount of weak macro-economic data. Crude oil continued toslide in June 2011, as there were worries that European effortto resolve Greek debt crisis will not succeed. Further, IEA’sdecision to release 60mn barrels of oil from its emergency stocksto reduce the impact of disruption in Libyan oil supplies led tothe crude price cooling off.

OPEC oil supply started improving in April-May 2011 after a

gradual fall in February-March 2011 as supply concerns in

MENA countries eased.

IEA raises its forecast for oil demand

During June 2011, the International Energy Agency (IEA) raisedits forecast for global oil demand growth to 1.3% annually overthe coming five years on the back of anticipated economicexpansion in China. However, it cautioned that increased crudeoil prices threaten the recovery in developed nations. As perIEA, consumption is expected to rise to 95.3mnbpd in 2016compared to 88.0mnbpd in 2010 (China accounting for about41% of the increase in demand).

IEA expects oil production capacity to increase by 1.1mnbpd to100.6mnbpd by 2016 (compared to 93.8mnbpd in 2010).OPEC capacity is expected to expand to 37.9mnbpd in 2016(compared to 35.7mnbpd in 2010), driven by increased outputfrom Iraq, Angola and the UAE.

Production in Libya is expected to recover gradually in CY2012;current production is hovering around 200,000bpd frompre-conflict levels of about 1.6mnbpd. However, as per IEA,Libya will not reach its full production capacity until 2015. Iraqwill increase its oil output capacity by 1.5mnbpd to 4.1mnbpdby 2016. Non-OPEC supply is expected to grow on the back ofsustained investment with increased output anticipated fromCanadian oil sands, Brazil deepwater and Colombia.

OPEC meeting inconclusive

In OPEC's recent meeting to review output targets, onlySaudi Arabia, UAE, Qatar and Kuwait were willing to raiseoutput. Saudi Arabia is expected to increase the output to cooldown crude oil prices as most economies are reeling underinflationary pressure. We believe easing of MENA crisis wouldlead to a gradual decline in crude oil price.

Gas prices rise due to higher demand from Japan

Natural gas prices increased in 1QFY2012 to averageUS$4.37/mmbtu compared to US$4.18/mmbtu in 4QFY2011.The qoq price increase was mainly due to increased demandfrom Japan. US Henry Hub prices increased by 7.1% mom inApril 2011 due to increased demand from North America.


Exhibit 3: Natural gas – Henry Hub prices

Henry Hub Natural Gas Spot Price

2

3

4

5

6

Jun

-10

Jul-

10

Jul-

10

Aug

-10

Aug

-10

Sep

-10

Sep

-10

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-10

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Dec-1

0

Dec-1

0

Dec-1

0

Jan

-11

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-11

Feb

-11

Feb

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Mar-

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Mar-

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Apr-

11

Apr-

11

May-

11

May-

11

Jun

-11

Jun

-11

Jun

-11

(US

$/m

mbtu

)


Exhibit 2: OPEC oil supply improved in April-May2011

OPEC crude oil supply - Monthly

27

28

28

29

29

30

30

31

31

Jun

-10

Jul-

10

Aug

-10

Sep

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Oct

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Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

(mn

barr

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/day)


Exhibit 1: Crude oil price slids after rising in April 2011

European Brent crude oil spot price

50

60

70

80

90

100

110

120

130

140

Jun

-10

Jul-

10

Jul-

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Dec-1

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Dec-1

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Mar-

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11

Apr-

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Apr-

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May-

11

Jun

-11

Jun

-11

(US

$/b

arr

el)



Oil & Gas

Refining margins improve further

For 1QFY2012, gross refining margins are expected to improvedue to increased middle distillate cracks in Asia. After theearthquake in Japan, diesel and SKO cracks spiked, thusimproving refining margins. The Singapore refining margin forthe quarter is expected to be at ~US$8.7/bbl.

Key developments

Goverment hikes fuel prices, cuts duties to tamemounting under recoveries

In a meeting held on June 24, 2011, the Empowered Group ofMinisters (EGoM) took bold steps on the country's retail fuelpricing after a long wait of one year. As expected,the government not only hiked prices but also re-jigged theduty structure. Hence, it was an all-round effort to help thecash-starved bleeding OMCs. On the price hike front, thegovernment hiked diesel price by `3/litre; whereas the price ofcooking fuels, LPG and kerosene, was increased by ̀ 50/cylinderand `2/litre, respectively. The resultant price hikes will helpreduce under recoveries of OMCs by around ̀ 21,000cr. Further,to reduce the burden of under recoveries on OMCs,the government lowered the customs duty on crude oil to nil

from 5%; whereas on the petrol and diesel front, the revisedcustoms duty will stand at 2.5% from 7.5% earlier. This willresult in a loss of `26,000cr to the exchequer. Excise duty ondiesel has also been reduced by `2.6/litre to `2/litre, resultingin a loss of `23,000cr to the exchequer. Thus, the duty cuts willcost the exchequer a whopping ̀ 49,000cr. We believe the stepstaken by the government are per se in the right direction asthey provide more clarity on the way ballooning under recoverieswill be financed.

RIL hits a 52-week low on CAG report

RIL stock price declined in June 2011 due to a broad decline inthe overall stock market and an adverse report from theComptroller and Auditor General (CAG) of India. The CAGaccused the Oil Ministry for favouring RIL by allowing it to doublethe development cost of its KG-D6 gas field. A draft report ofthe CAG has reportedly questioned the decision of the oil ministryand its technical arm, the Director General of Hydrocarbons(DGH), to allow RIL to raise the development cost of its KG-D6field. Meanwhile, the Home Ministry has reportedly given anunconditional nod for UK's British Petroleum to buy a 30% stakein RIL's oil and gas blocks for US$7.2bn.

Cairn India gets a conditional clearance for sale of staketo Vedanta

The Cabinet Committee on Economic Affairs has endorsed thegroup of ministers' recommendation and granted conditionalnod to the sale of stake in Cairn India to Vedanta Resources.The two main conditions are that Cairn will have to allow costrecovery of royalty on Barmer crude from the revenue it earnsfrom the field, and it will have to withdraw the arbitration caseagainst the government. The total royalty burden over the projectlife is estimated to be `18,000cr. In addition, the cess of`2,650/tonne on crude oil will have to be borne by Cairn.However, this deal is subject to acceptance by the board ofCairn. In case Cairn accepts the conditions, it will have a negativeimpact on Cairn's valuations, as it will lead to higher outflow ofroyalty. Nevertheless, this development will be positive forONGC as it will save on royalty costs (approximately ̀ 13,600cr).

Oil stocks decline, while gas stocks inch up

The oil and gas index, similar to the previous quarter,underperformed the Sensex by 7% during 1QFY2012 due tohuge underperformance by index heavyweight RIL (falling by14.3% vs. the Sensex fall of 3.1%). RIL stock declined in June2011 due to a broad decline in the overall stock market and an


Exhibit 4: Crude inventory increased in 1QFY2012

300,000

325,000

350,000

375,000

400,000

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11

Jun

-11

(00

0s

bare

ls)


Exhibit 5: Motor gasoline inventory down in 1QFY2012

175,000

200,000

225,000

250,000

Jul-

10

Aug

-10

Sep

-10

Oct-1

0

Nov-

10

Dec-1

0

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-1

1

Jun

-11

(00

0s

barr

els

)

39



adverse report from CAG claiming that RIL had benefitted atthe cost of the government by hiking the cost of development ofits prolific KG-D6 field. In fact, losses in RIL stock would havebeen higher had some smart recovery not taken place towardsthe end of the quarter, after the stock hit a52-week low of ̀ 829 towards mid-June. OMCs were the majorbeneficiaries of the government's decision to hike fuel price andreduction in customs duty and excise duty, with HPCL, BPCLand IOC registering gains of 11.4%, 6.2% and 1%, respectively.However, ONGC lost 5.6% as it fell during the middle of thequarter following the government's decision for the upstreamsector to share higher subsidy burden of 38.7% in FY2011.Nevertheless, gas stocks performed well during the quarter, withIGL and Petronet LNG gaining whopping 27.7% and 11.8%,respectively.

Oil & Gas

Analyst: Amit VAnalyst: Amit VAnalyst: Amit VAnalyst: Amit VAnalyst: Amit Voraoraoraoraora


Source: Company, Angel Research; Note: Price as on June 30, 2011; ^Standalone numbers for the quarter and consolidated numbers for full year



Cairn India 311 4,393 422.4 91.5 1,452 2,670 850.0 13.6 850.0 32.4 48.7 54.7 9.6 6.4 5.7 - Neutral

GAIL 441 8,500 19.8 17.9 (233) 940 6.0 7.4 6.0 28.1 29.6 31.3 15.7 14.9 14.1 539 Buy

ONGC^ 274 16,191 17.1 53.4 (585) 3,904 6.6 4.6 6.6 26.2 32.6 39.1 10.4 8.4 7.0 336 Buy

RIL^ 898 68,849 18.2 15.3 (73) 5,615 15.7 17.2 15.7 58.0 71.9 77.2 15.5 12.5 11.6 1,189 Buy


ONGC ONGC ONGC ONGC ONGC is expected to report higher net realisations for thequarter on account of increased crude price and thegovernment's decision to cap the upstream companies' subsidyburden for 1QFY2012 at 33% of under recoveries comparedto 38.7% in FY2011. Consequently, we expect a sequentialincrease of 40% in ONGC's bottom line during the quarter.On a yoy basis as well, we expect an increase of 6.6% in ONGC'sbottom line.

RILRILRILRILRIL is expected to report higher GRM qoq at aroundUS$11/bbl (US$9.2/bbl in 4QFY2011). Higher demand fordiesel and SKO consequent to the earthquake in Japan resultedin a spurt in petro cracks in Asian benchmark indices. It couldalso be attributed to a wider heavy-light crude oil spread.Consequent to the same, we expect RIL's profitability for thequarter to increase by 4.4% sequentially, despite lower gasproduction. On a yoy basis as well, we expect RIL's profit toincrease by 15.7%.

CairnCairnCairnCairnCairn, being highly leveraged to crude oil, is expected to benefitthe most from the ~13% spurt in crude price sequentially.Production from MBA fields is expected to be higher qoq asthere was production shutdown in the previous quarter.

GAILGAILGAILGAILGAIL is expected to report flat transmission volumes qoq. Highertransmission tariff and lower subsidy burden on a sequentialbasis is expected to result in GAIL registering a robust 20% qoqincrease in profit during the quarter. On a yoy basis, GAIL isexpected to report modest growth of 6% yoy.


Exhibit 6: 1QFY2012 stock performance

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

IGL

PLN

G

GG

AS

GA

IL

ON

GC

BSE

O&

Gin

dex

GU

JS

Cair

n

RIL

(%)



Pharmaceutical

The upward rally during the quarter was mainly driven by largecaps. Ranbaxy rose by 22%, led by positive news flow on Lipitor.With regards to other major players, Cadila, Sun Pharma andLupin were the big gainers, rising by 16%, 12% and 8%,respectively. In mid caps, Ipca was up by 13%. In the MNCpack, Glaxo was up by 12%. Amongst losers, Dr. Reddy'sLaboratories (DRL) and Aurobindo Pharma (APL) dropped by6% and 12%, respectively, which declined because of USFDA‘simport alert. Despite good quarterly numbers in 4QFY2011,Dishman was hammered, down 12%. Among small caps,Indoco Remedies lost 4% during 1QFY2012.

Key developments

Indian companies remain on USFDA's warning list

After Ranbaxy, Lupin and Sun Pharma, DRL and APL have nowreceived the USFDA's warning letters.

DRL's Mexican arm has received a warning letter from the UShealth regulator for violation of the current good manufacturingpractice regulations. The company's Mexico facility producesintermediates and active pharmaceutical ingredients.The USFDA had inspected DRL's Mexico facility in November2010 and later sought certain explanations from the company.

Pharma sector bounces back strongly

The BSE healthcare (HC) index outperformed the BSE Sensexduring 1QFY2012, after having underperformed in 4QFY2011.The HC index rose by 6.2% as against the drop in Sensex in thesame period. The performance of the pharmaceutical sectorwas impacted by lacklustre performance of the broaderindices, which reeled under the slowdown in economic growthand hardening of interest rates. In such a scenario,the pharmaceutical sector, which is never affected by theeconomic slowdown, emerged as a resilient sector andoutperformed the broader indices.

However, the regulator issued the warning letter dated June 3,2011, citing 'lack of corrective actions' by the firm. With 4%contribution to the consolidated sales of FY2011 and ANDAfiled with reference to DMF from the plant, we believe thewarning letter would have a minor impact on the company'sfinancial performance. WWWWWe maintain our Buy recommendatione maintain our Buy recommendatione maintain our Buy recommendatione maintain our Buy recommendatione maintain our Buy recommendationon DRL with a target price of on DRL with a target price of on DRL with a target price of on DRL with a target price of on DRL with a target price of `̀̀̀̀1,920.1,920.1,920.1,920.1,920.

APL has indicated that it has received the warning letter fromthe USFDA, detailing its observations for its Unit VI, for whichthe company has already received the warning letter. Also, basedon a field alert report for packaging and labeling compliancefor Unit III, the USFDA has asked APL to submit a detailed actionplan for improvement in this letter, which is required to besubmitted within 15 working days, and has given the opportunityto APL for a regulatory meeting. Unit III contributes approximatelyUS$140mn to APL's total sales. We believe, even in theworst-case scenario, the stock would be fairly valued at theselevels. APL is requesting the USFDA for the meeting date and isin the process of submitting a detailed action plan. Althoughthis is a move towards the much-awaited clarity needed on theUSFDA's ban, there is still nothing concrete that can be inferredfrom the same. In terms of the developments for Unit III,we believe there are packaging compliance issues, which havea high probability of getting resolved. Hence, we currently Hence, we currently Hence, we currently Hence, we currently Hence, we currentlymaintain our estimates and recommend Buy on APL with amaintain our estimates and recommend Buy on APL with amaintain our estimates and recommend Buy on APL with amaintain our estimates and recommend Buy on APL with amaintain our estimates and recommend Buy on APL with atarget price of target price of target price of target price of target price of `̀̀̀̀278.278.278.278.278.

Developments in the Lipitor case positive for Ranbaxy

In a recent update on Ranbaxy's Lipitor case, the FDA respondedto Mylan's suit, asking the court to deny Mylan's request for apreliminary injunction and stating that no immediate decisionwill be made on Ranbaxy's ANDA for Lipitor. It stated that nodrug manufacturer can state USFDA's priorities and that theadministration has not made any unreasonable delay in takingthe decision. It further emphasised that there is no genericcompany that has received any approval so far and there is nocertainty of an approval until the technical or scientific issuesare resolved. The FDA and Ranbaxy are engaged in discussionsto resolve the issues, and the clarity on the positioning of theANDA is unlikely to come soon.

Moreover, the US court has dismissed Mylan's petitionchallenging Ranbaxy's exclusive marketing rights over thegeneric version of Pfizer's Lipitor. Mylan had sued the USFDAfor providing the exclusive right to Ranbaxy, alleging that thepermission was given on the basis of 'falsified data'. In responseto Mylan's plea, the FDA said that the company's complaint

Exhibit 1: BSE HC index vs. the Sensex

Source: C-line, Angel ResearchBSE HC Sensex

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

1QFY2011 2QFY2011 3QFY2011 4QFY2011 1QFY2012

(%)

41



Among large caps, DRL and Cadila to outperform

Among the large caps in our coverage universe, for 1QFY2012,Sun Pharma is likely to report 35.3% yoy growth in sales mainlyon the back of integration of Taro, which will drive export

Pharmaceutical

was premature and the agency's enforcement discretion wasnot reviewable by a court. It also indicated that drug makerscannot sue over pending applications filed by their competitors.

The news is positive for Ranbaxy, and since the company isawaiting clarity on the ongoing litigation, we retain our numbers.The stock is currently trading at 18.7x and 12.0x its CY2011EThe stock is currently trading at 18.7x and 12.0x its CY2011EThe stock is currently trading at 18.7x and 12.0x its CY2011EThe stock is currently trading at 18.7x and 12.0x its CY2011EThe stock is currently trading at 18.7x and 12.0x its CY2011Eand CY2012E earnings, respectivelyand CY2012E earnings, respectivelyand CY2012E earnings, respectivelyand CY2012E earnings, respectivelyand CY2012E earnings, respectively. W. W. W. W. We recommende recommende recommende recommende recommendAccumulate with a target price of Accumulate with a target price of Accumulate with a target price of Accumulate with a target price of Accumulate with a target price of `588.588.588.588.588.

Sun and MSD enter strategic partnership to co-marketMSD's diabetes drugs

During the quarter, Sun Pharma and MSD in India announcedthe formation of a strategic partnership agreement for the Indianmarket. Under the agreement, Sun Pharma would have theright to market, promote and distribute MSD's diabetes products,sitagliptin and sitagliptin plus metformin, under different brandnames in India. MSD would provide the scientific excellenceand market success of the product to the partnership, whileSun Pharma would bring in its proven success and expertise inthe marketing of drugs in the relevant therapeutic areas acrossIndia. The stock is currently trading at 27.7x and 21.1x itsFY2012E and FY2013E earnings, respectively. After the recentrun-up we are Neutral on the stock.

APL redeems FCCBs

In May 2006, APL had issued FCCBs in two tranches:Tranche-A of US$150mn and Tranche-B of US$50mn.After the repurchase and cancellation of FCCBs from time totime, the outstanding nominal value of FCCBs has been paidin full at the respective redemption prices of the principal amounton the maturity date i.e., May 17, 2011, as per the terms andconditions of the offering circular dated May 12, 2006. Thecompany has paid an aggregate amount of US$203.86mn forboth the aforesaid tranches. For the repayment, US$70mn wasthrough internal accruals and the remaining was through debt.Pursuant to this, there are no outstanding bonds as on date.We maintain our Buy rating on the stock with a target price of`278.

ANDA approvals in 1QFY2012

During the quarter, DRL and APL received five approvals each.Amongst others, Sun Pharma received higher ANDA approvals,with four approvals in place. Among the other companies inour coverage, Cipla, Cadila and Ranbaxy received two, twoand one approval, respectively.

1QFY2012 result expectations

The Indian pharmaceutical sector is expected to report mutednumbers for 1QFY2012. We expect our coverage universe(excluding Orchid, where the corresponding consolidatednumbers are unavailable) to register 19% yoy top-line growth.However, on the operating front, margins are expected to declineby 110bp, which along with increased tax outgo would lead toflat growth in net profit.

Amongst large caps, Sun Pharma is expected to post 35.3%yoy sales growth mainly on the back of integration of Taro.Cipla is expected to post net sales growth of 15.5% yoy.DRL, Lupin and Cadila are expected to report 10.0%, 17.0%and 20.5% yoy growth in net sales, respectively. Amongst smallcaps, Indoco Remedies is expected to post 21.1% yoy growth.In the MNC pack, Aventis is likely to post 25.1% yoy growth innet profit, led by 10.3% yoy sales growth.


Exhibit 3: Sales growth and OPM for 1QFY2012

CompanyCompanyCompanyCompanyCompany Generic productsGeneric productsGeneric productsGeneric productsGeneric products Approvals Approvals Approvals Approvals Approvals

APL Divalproex Sodium, Venlafaxine

Hydrocholride, Piperacilin Sodium;Tazobactum

Sodium,Alprazolam, Ramipril,Levofloxacin 5

Cipla Risperidone,Donepezil Hydrochloride 2

Cadila Venlafaxine Hydrocholride, Donepezil

Hydrochloride, 2

DRL Desloratadine Psedoephedrine Sulfate,

Venlafaxine Hydrocholride,

Donepezil Hydrochloride, Letrozole,Levofloxacin 5

Ranbaxy Naproxen Sodium 1

Sun Pharma Docetaxel, Donepezil Hydrochloride,

Letrozole,Sumatriptan Succinate 4Source: USFDA, Angel Research

Exhibit 2: ANDA approvals for select companies

Sales growth OPM

35.3

17.015.5

2.1

10.0

30.7

18.120.8

17.415.2

0.0

10.0

20.0

30.0

40.0

Sun Pharma Lupin Cipla Ranbaxy DRL



Pharmaceutical

Analyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit Kour Nangraour Nangraour Nangraour Nangraour Nangra

Exhibit 4: Quarterly estimates (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Our numbers do not include MTM on foreign debt. #2QCY2011 ,* Non-availability of 1QFY2011 consolidated numbers

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


APL 173 967 9.5 17.6 253 117.9 26.3 4.1 22.5 20.2 20.2 21.9 8.6 8.6 7.9 278 Buy

Aventis # 2,052 299 10.3 16.0 (0) 53.0 25.1 23.1 25.1 67.3 85.5 89.7 30.5 24.0 22.9 - Neutral

Cadila 919 1,280 20.5 20.7 128 179.0 35.6 8.8 35.6 33.8 38.6 52.6 27.2 23.8 17.5 1,053 Buy

Cipla 330 1,649 15.5 20.8 (13) 281.5 9.3 3.5 9.3 12.0 15.2 18.9 27.4 21.6 17.5 377 Buy

Dishman 90 227 12.5 17.5 (452) 14.7 (46.0) 1.8 (46.0) 9.9 9.3 11.1 9.1 9.7 8.1 133 Buy

Dr. Reddys 1,533 1,851 10.0 15.2 71 245.0 16.9 14.6 16.9 63.8 87.9 96.0 24.0 17.4 16.0 1,920 Buy

Glaxo# 2,354 563 13.0 34.7 (180) 154.4 10.6 18.2 10.6 66.2 72.0 86.9 35.6 32.7 27.1 - Neutral

Indoco 430 135 21.1 16.4 60 16.1 8.8 13.2 8.8 41.5 53.3 66.5 10.4 8.1 6.5 665 Buy

Ipca Labs 342 603 17.2 20.8 (137) 82.8 27.1 6.6 27.1 20.9 20.0 27.5 16.4 17.1 12.4 - Neutral

Lupin 449 1,543 17.0 18.1 (188) 203.8 3.8 4.6 3.8 19.3 22.4 29.7 23.3 20.1 15.1 593 Buy

Orchid * 271 500 - 22.1 - 50.3 - 7.2 22.2 28.4 37.3 12.2 9.6 7.3 373 Buy

Ranbaxy Lab# 541 2,143 2.1 17.4 0 258.9 (24.2) 6.2 (24.2) 35.5 29.1 44.8 15.2 18.6 12.1 588 Accum.

Sun Pharma 497 1,894 35.3 30.7 (1,336) 431.2 (23.6) 4.2 (23.6) 17.5 18.0 23.5 28.3 27.7 21.1 - Neutral

on the domestic formulation and exports fronts. The company'sOPM is expected to expand by 128bp yoy to 20.7% due to afavourable product mix. Net profit of the company is expectedto increase by 35.6% yoy to ̀ 179.0cr, driven by top-line growthand OPM expansion.

Among mid caps, Ipca Labs to take the lead

We estimate Ipca Labs' top line to grow by 17.2% to ̀ 603cr for1QFY2012. OPM is expected to decline by 137bp yoy to 20.8%,led by higher other expenses. Overall, adjusted net profit isexpected to increase by 27.1% yoy.

APL is expected to post net sales growth of 9.5% yoy, led byformulation exports. With improved gross margin for the period,strong growth of 253bp is expected in the company's OPM at17.6% for the quarter. Overall, net profit is expected to rise by26.2% yoy on the back of improvement in operating profit.

Indoco Remedies is expected to report top-line growth of 21.1%yoy to ̀ 135cr. OPM is expected to expand by 60bp yoy to 16.4%,driven by growth in domestic formulation sales. Net profit isexpected to increase by 8.8% yoy to ̀ 16.1cr because of higherdepreciation cost and tax outgo.


With the expected earnings CAGR of 21% over FY2011-13Efor our coverage universe, we remain overweight on the sectorand maintain our positive outlook. In the generic segment,we prefer Cipla, Lupin, Cadila Healthcare, APL and IndocoRemedies. In CRAMS, though the segment is currently witnessingsome pressure, there have been indications of gradual recoveryand ramp-up from most CRAMS players. Thus, with valuationsrendering attractive, we recommend Dishman Pharma in thissegment.

formulation sales during the period. On the domestic front,Indian formulation sales are expected to report a mutedperformance. Despite strong top-line growth on account of theintegration, the company's operating profit margin would declineby 13.4% yoy, with margin likely to be around 30.7%. Net profitis expected to drop by 23.6% yoy for the quarter.

Lupin, on the other hand, is expected to register sales growthof 17.0% yoy. The company's OPM is expected to contractby 188bp during the period. Net profit is expected to increaseby 3.8% yoy.

DRL is expected to post strong results with top-line growth of10.0% to `1,851cr, majorly driven by the US market.The company is expected to witness strong traction in its Indianand Russian formulation businesses as well. In the PSAI segment,lacklustre performance is expected for 1QFY2012. The companyis expected to post OPM of 15.2%, up 71bp yoy. On the netprofit front, we expect the company to post net profit of ̀ 245cr,registering growth of 16.9% yoy.

Cipla is expected to post net sales growth of 15.5% yoy to`1,649cr, driven by domestic as well as exports performance.OPM (excluding technical know-how fees) is expected to comein flat at 20.8% due to lower other expenses. Further, net profitis expected to increase by 9.3% yoy to `281.5cr.

Ranbaxy's net sales are expected to remain flat at `2,143crduring 2QCY2011. The company's gross profit margin isexpected to remain flat, leading to margin of 17.4%.

Cadila is expected to post yet another strong quarter with 20.5%yoy growth in net sales to ̀ 1,280cr on the back of robust growth

43



Power

Power deficit highest in the western region

The western region continues to record the highest power deficitin the country. During 2MFY2012, the region's power deficitstood at 11.1%. Maharashtra, the highest power consumingstate in the country, had overall power deficit of 16.1% andpeak deficit of 18.6%. The eastern region had the lowest powerdeficit of 4.5%, while the peak deficit was 6.3%.

For 1QFY2012, we expect power-generating companies in ouruniverse to report top-line growth of 16.4% yoy, driven bycapacity additions and higher tariffs. The operating profit ofcompanies in our universe is expected to increase by 15.2%yoy. Net profit is expected to increase by 12.7% yoy.

Capacity addition: Status check

Generation

As of May 2011, only 57% of the revised Eleventh Plan capacityaddition target of 62,374MW has been completed. DuringFY2011, 12,160MW of capacity was added as against thetargeted 21,441MW. Capacity addition is expected to pick upin FY2012, being the last year of the plan period. Capacityaddition has generally been delayed due to execution issuesrelating to acquisition of land and obtaining environment andother statutory clearances.

In all, we expect capacity addition of 42,000MW during theplan period, which will be ~20,000MW short of the targetedaddition. Despite this shortfall in capacity addition, the quantumof the actual addition will be well ahead of 27,283MW addedin the Tenth Plan.

Transmission lines

During 2MFY2012, 706 circuit kilometers (ckm) were added tothe 400kV transmission lines, as against the targeted 813ckm.Total addition to the 220kV transmission line categories stoodat 309ckm, as against the targeted 197ckm.

Transmission sub-stations

During 2MFY2012, total addition to the 220kV sub-stationcategory stood at 980MW, as against the targeted 640MW.

Power-deficit situation

The country continues to face power deficit due to the delay incommissioning of new capacities, fuel shortage and deficienciesin the T&D system. India's overall and peak power-deficit levelsduring 2MFY2012 stood at 7.2% and 9.3%, respectively, lowerthan 13.0% and 13.8% reported in 2MFY2011.

Operational highlights

During 2MFY2012, power generation in India rose by 8.5%yoy to 146BU (135BU). Overall, the country's thermal powergeneration rose by 6.5% yoy to 120.5BU. The plant load factor(PLF) of thermal plants for 2MFY2012 stood at 78.4%, higherby 646bp than the targeted 71.94%. Hydro power generationincreased by 12.7% yoy to 20.2BU, while nuclear powergenerated grew substantially by 54.7% yoy to 5.4BU duringthe mentioned period.

Source: CEA, Angel Research

Target (T) LHS Achievement (A) LHS A as a % of T (RHS)

0

20

40

60

80

0

5,000

10,000

15,000

20,000

25,000

FY07 FY08 FY09 FY10 FY11 2MFY12

(MW

)

Exhibit 1: Generation capacity addition

MayMayMayMayMay-11-11-11-11-11 MayMayMayMayMay-10-10-10-10-10 chg (%)chg (%)chg (%)chg (%)chg (%) 2MFY122MFY122MFY122MFY122MFY12 2MFY112MFY112MFY112MFY112MFY11 chg (%)chg (%)chg (%)chg (%)chg (%)

Thermal 60.7 56.5 7.4 120.5 113.2 6.5

Hydro 11.4 9.5 20.2 20.2 18.0 12.7

Nuclear 2.7 1.7 58.5 5.4 3.5 54.7

TTTTTotalotalotalotalotal 74.874.874.874.874.8 67.767.767.767.767.7 10.5%10.5%10.5%10.5%10.5% 146146146146146 135135135135135 8.5%8.5%8.5%8.5%8.5%

Exhibit 2: Power generation (BU)



Exhibit 3: India – Power-deficit scenario

Overall Peak

8.8

7.1 7.38.4

9.6 9.911.0

10.1

8.57.2

12.211.2 11.7

12.3

13.8

16.6

12.012.7

9.8 9.3

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

FY0

3

FY0

4

FY0

5

FY0

6

FY0

7

FY0

8

FY0

9

FY1

0

FY1

1

2M

FY1

2

(%)



Power

Coal scenario

Availability

As of May 31, 2011, 24 critical thermal power stations out ofthe 82 monitored by the CEA had critical coal stocks for lessthan seven days. Currently, coal shortage has been due tomultiple reasons such as lower production by Coal India,logistical issues and lower imports.

Global coal prices on the rise

Spot global coal prices were substantially higher on a yoy basisduring the quarter. Average prices of the New Castle Mckloksey6,700kc coal stood at ~US$120/tonne in 1QFY2012 vs.US$100/tonne in 1QFY2011. However, on a qoq basis, coalprices were down by 6%.

Indonesian coal regulation

Currently, India's power sector imports a major portion of itscoal requirements from Indonesia. Further, various Indiancompanies such as Tata Power and Adani Power intend tooperate their plants with Indonesian coal. Tata Power hasacquired a stake in Bumi Resources and has entered into anagreement with Bumi for procuring ~12mtpa for its Mundraplant. Similarly, Adani Power has entered into an agreementwith Adani Enterprises, its promoter group company, to procureIndonesian coal for its plants in Mundra complex.

Recently, the Indonesian government has set a September 2011deadline, by which coal export contracts should be re-negotiatedif contract prices are below the market price. If this rule comesinto effect, then the cost of imported coal would be based on areference price, which would be published by the Indonesiangovernment every month. The reference price would be the basisfor computation of royalty and taxes. This rule, when it takeseffect, will substantially increase the cost of imported coal andwould significantly affect the profitability of power players ifthey could not modify their PPAs to pass on the price hikes usingthe force majeure clause. The Association of Power Producers,a body of private power generators, has already moved theMinistry of Power for a change in the PPA clause.

Key developments

NTPC

NTPC commissioned the 660MW Unit 1 of Sipat Super ThermalPower Project on June 28, 2011. With this, the total capacity ofNTPC Group now stands at 34,854MW. This is the firstsupercritical 660MW unit of NTPC. With the commissioning ofthis unit, the total installed capacity of Sipat Super Thermal PowerProject has become 1,660MW.

During the quarter, the Ministry of Coal de-allocated five coalblocks, which were previously allotted due to lack of the progressin development work. All these coal blocks were allocated onJune 25, 2006. Coal blocks that have been de-allocated areChhati-bariatu, Kerandari, Chhati-bariatu (south), Brahmini andChichro Pastimal.

CESC

CESC has entered into a deal with Australia's ResourceGeneration (R-Gen) to buy a 4.8% stake in the latter forA$10mn. The acquisition has been done through CESC'ssubsidiary, Bantal Singapore Pte. Ltd., which has agreed to buy12,195,122 shares of R-Gen at A$0.82 per share. Post thisacquisition, RPG Group's (promoter of CESC) stake in R-Genhas increased to 11.2%. This deal also entails Integrated CoalMining (another affiliate of RPG) to get 139mn tonnes of coalover 38 years from R-Gen's Boikarabelo mines in South Africafrom late CY2013 when mining starts in these mines. CESC isexploring a possibility to set up a 2x660MW coal-fired plantadjacent to Boikarabelo mines to utilise a portion of the coal.CESC proposes to supply this power to the South African grid.

Exhibit 4: Region-wise power deficit (2MFY2012)Exhibit 4: Region-wise power deficit (2MFY2012)Exhibit 4: Region-wise power deficit (2MFY2012)Exhibit 4: Region-wise power deficit (2MFY2012)Exhibit 4: Region-wise power deficit (2MFY2012)


Region (%)Region (%)Region (%)Region (%)Region (%) OverallOverallOverallOverallOverall PPPPPeakeakeakeakeak

Northern (4.9) (7.9)

Western (11.1) (14.8)

Southern (5.8) (7.2)

Eastern (4.5) (6.3)

Northeastern (10.4) (10.3)

All IndiaAll IndiaAll IndiaAll IndiaAll India (7.2)(7.2)(7.2)(7.2)(7.2) (9.3)(9.3)(9.3)(9.3)(9.3)


Exhibit 5: New Castle Mckloskey coal prices

0

50

100

150

200

250

Feb

-00

Jul-

00

Dec-0

0

May-0

1

Oct

-01

Mar-

02

Aug

-02

Jan

-03

Jun

-03

Nov-

03

Apr-

04

Sep

-04

Feb

-05

Jul-

05

Dec-0

5

May-0

6

Oct

-06

Mar-

07

Aug

-07

Jan

-08

Jun

-08

Nov-

08

Apr-

09

Sep

-09

Feb

-10

Jul-

10

Dec-1

0

May-1

1

(US$/t

onne)

45



Power

Analyst - VAnalyst - VAnalyst - VAnalyst - VAnalyst - V. Srinivasan. Srinivasan. Srinivasan. Srinivasan. Srinivasan

CESC is expected to register 8.6% yoy growth in its standalonetop line to `1,191cr, aided by higher sales volume and betterrealisation. OPM is expected to decline by 36bp yoy to 23.0%,while net profit would increase by 14.1% yoy to `125cr during1QFY2012.

We expect GIPCL to register a 41.3% yoy increase in revenue in1QFY2012, primarily on the back of higher volumes.Commissioning of Unit 3 and 4 in Surat is expected to aidvolume growth. OPM is set to expand by 194bp to 27.3%.However, the bottom line is expected to decline by 29.4% yoyto `29.6cr in 1QFY2012 on account of higher depreciationand interest costs.

We expect PTC to record a 2.9% yoy jump in its standalone topline to `2,839cr, aided by higher volumes. We expect thecompany's operating margin to expand by 16bp yoy to 1.2%on account of better trading margins. Net profit for the quarteris expected to increase by 17.2% yoy to `32.6cr.

Outlook

We expect capacity addition to gather pace by the end of theEleventh Plan in FY2012. However, the country's power-deficitscenario is likely to persist, as supply is unlikely to keep pacewith demand. The poor financial position of State ElectricityBoards (SEB) remains a major cause of concern for the industry.Although there have been no reported instances ofnon-repayment of dues by state utilities to generatingcompanies, there have been instances of delayed payments.Poor financials have also resulted in increasing cases of backingdown by state utilities. State utilities are averse to buyingmerchant power, which has resulted in merchant power tariffsplummeting by ~50% from FY2009 levels. In this scenario,players with fuel security and assured power offtake throughPPAs are safer bets as compared to merchant power players.

WWWWWe maintain our Accumulate recommendation on NTPC ande maintain our Accumulate recommendation on NTPC ande maintain our Accumulate recommendation on NTPC ande maintain our Accumulate recommendation on NTPC ande maintain our Accumulate recommendation on NTPC andBuy view on CESC and GIPCL .Buy view on CESC and GIPCL .Buy view on CESC and GIPCL .Buy view on CESC and GIPCL .Buy view on CESC and GIPCL .

Adani Power

During the quarter, Adani Power became the largest privatesector thermal power generator in the country. The companysynchronised the second supercritical unit of 660MW at Mundra,taking its overall capacity to 2,640MW. The company expectsto have 6,000MW operational by the end of FY2012, out ofthe 16,500MW under development.

JSW Energy

JSW Energy has terminated its plans to acquire CIC EnergyIndonesia, as the required due diligence cannot be completedbefore the deadline of May 31.

Performance on the bourses

Most of the power stocks under our coverage underperformedthe Sensex, which lost 3.1% during the quarter. GIPCL was thebiggest loser as the stock fell by 17.8% during the quarter.NTPC and CESC also fell by 3.2% and 4.1%, respectively.


For 1QFY2012, we expect NTPC to record a 16.6% yoy increasein its top line to ̀ 15,094cr, aided by volume growth due to thecommencement of new capacities. Operating profit is expectedto increase by 15.1% yoy to `3,849cr. Net profit is expected toincrease by 13.5% yoy to `2,091cr.

Source: BSE, Angel Research

Exhibit 6: Performance on the bourses (%)

(4.7)

(3.2)

(17.8)

(4.1)

(3.7)

(3.1)

(20.0) (18.0) (16.0) (14.0) (12.0) (10.0) (8.0) (6.0) (4.0) (2.0) 0.0

PTC

NTPC

GIPCL

CESC

BSE Power

Sensex

Exhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimates ( `̀̀̀̀ cr)


CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net P Net P Net P Net P Net Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


CESC 298 1,191 8.6 23.0 (36) 125 14.1 10.0 14.1 38.8 42.9 44.5 7.7 7.0 6.7 380 Buy

GIPCL 76 357 41.3 27.3 194 30 (29.4) 2.0 (29.4) 10.8 9.2 11.1 7.1 8.2 6.8 94 Buy

NTPC 187 15,094 16.6 25.5 (34) 2,091 13.5 2.5 13.5 11.3 12.3 13.4 16.5 15.2 13.9 202 Accumulate

PTC 79 2,839 2.9 1.2 16 33 17.2 1.1 17.6 4.7 6.2 6.9 16.8 12.8 11.6 - Neutral



Real Estate

For 1QFY2012, we expect residential volumes to report flat tomoderate growth on a sequential basis on account of weakdemand due to high interest rates and elevated property prices.Revenue of real estate companies is expected to be largely drivenby execution of existing projects and new launches, thoughexecution delays remain a cause of concern. Companies suchas DLF and Unitech (through UCP) are expected to continue tosee sustainability in office-leasing volumes on a sequential basis.Accordingly, we believe commercial rentals have bottomed out,and we do not foresee any material uptick until inventory levelscome down.

In our universe of stocks, we expect HDIL to report flat growthin Transfer of Development Rights (TDR) volumes and prices,given low inventory of TDRs left on account of earlier stoppageof the MIAL project, which has re-started and, thus, we expectTDR sales volume to increase in the coming quarters. HDIL isalso expected to continue to book partial revenue from the2mn sq. ft. (msf) FSI sale (worth ~`1,400cr) in 1QFY2012.DLF's revenue is expected to be largely driven by the sale ofplotted properties in Gurgaon. For ARIL, we expect revenue tobe driven by the residential segment and rental income.

Escalating input cost and interest rates causing concern

Cost overruns continue to be a big cause of concern for realestate developers. Around 70% of the construction cost iscontributed by material and labour costs. The major componentsof these costs are steel, cement and labour. Currently, on atwo-year basis, cement price has increased by ~27% from`202/bag to `275/bag, steel price has increased by ~13%from `30,750/tonne to `38600/tonne and labour cost hasincreased by ~50% from ̀ 250/day to ̀ 325/day. DLF reporteda one-time expense of ̀ 475cr in the previous quarter on accountof higher costs, which resulted in a sharp margin decline. Apartfrom increased costs, rise in interest rates has also resulted in aslump in demand. In May 2011, on a yoy basis, Mumbaiwitnessed a decline in residential registration by 1%. Higher

RBI tightens liquidity further to curb speculative demand

In its bid to curb excess liquidity and speculative demand in thereal estate sector, the RBI had initiated measures in 4QFY2011,including: 1) capping the LTV ratio to 80% (previously 85%),2) increasing risk weight on residential housing loan of above`75lakh and 3) raising standard asset provisioning for teaserloans from 0.4% to 2.0%. We believe these measures willmarginally affect demand and may lead to postponement ofbuying in the short term. Also, the debt refinancing requirementis expected to come under pressure during 1QFY2012, whichcould lead to prices cooling off in regions such as CentralMumbai and Gurgaon, where prices have overheated sincethe last six months.

HDIL – MIAL gets the green signal

HDIL, which had stopped work on the MIAL project, recentlygot the green signal from the government to start the MIALproject. The MMRDA has also started shifting eligible slumdwellers to the Kurla Premier Compound. This is a positive signfor the company, as it can quickly ramp up its Phase-I projectand start work on Phase-II of the project. The company, whichhad already generated 11mn sq. ft. from the MIAL project sofar, despite a delay of over a year in shifting the families inPhase 1, will benefit with the continuation of work and increasedTDR generation. In the current quarter, we expect flat growth inthe sale of TDR; however, going ahead, we expect TDR sales toimprove to 1-1.2msf vs. our earlier expectation of 0.7-0.8msf.The Maharashtra government is expected to hike FSI from 1.0xto 1.33x in the suburbs, which will have a negative impact onTDR prices. Thus, we have factored in lower TDR price of

interest rates may compel buyers to postpone their purchasesor investments in new houses. With increasing input cost anddemand failing to pick up, we expect execution delays for manynew as well as old properties. We also believe that cost escalationwill impact margins over the coming quarters; however, marginswill improve once revenue from new projects increases.


Exhibit 1: 1QFY2012E – Revenue and PAT yoy growth

48.3

6.3

15.0

(0.8)

33.9

10.8

(10)

0

10

20

30

40

50

60

Revenue PAT

(%)

ARIL DLF HDIL

Source: CRISIL, Angel Research

Exhibit 2: Rising input cost – A cause of concern

Cement prices Per 50kg bag (LHS) Steel prices Per Tonne (RHS)

15,000

20,000

25,000

30,000

35,000

40,000

45,000

140

160

180

200

220

240

260

280

FY0

2

FY0

3

FY0

4

FY0

5

FY0

6

FY0

7

FY0

8

FY0

9

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

( )` ( )`

47



Real Estate

Retail segment – Still some pain left

Vacant space in shopping centres had increased during2008-09, primarily on account of high real estate costs andlower consumption, owing to which many retailers shifted gearsfrom the rapid expansion mode to the consolidation mode.Therefore, in the short term, vacant spaces are likely to increase,given the considerable rationalisation in the supply pipeline.On the other hand, we believe demand is yet to pick up,especially in tier-II and III cities, which is not the case with metros,where catchment areas are witnessing high demand. We expectprices to remain under pressure, as the segment has fragmentedsupply dynamics. Initial recovery volumes are likely to becornered by experienced players such as Phoenix Mills, andnot necessarily large ones.

`2,400/sq. ft. (i.e. 20% discount to current levels of ̀ 3,000/sq.ft.) for arriving at our target price and do not expect any negativeimpact incrementally. We have assumed 4.5msf of TDR sale forFY2012 to factor in the hike in FSI. It should be noted that a10% decline in TDR prices would impact our NAV by mere 3%and target price by 2.3%. Given the delay in shifting of families,we have excluded 10msf (potential 65 acres), which HDIL isexpected to get at the airport vicinity as it rehabilitates 85,000families. Overall, we expect the share of TDR sales in HDIL'srevenue mix to fall from 60% in FY2011 to 30% in FY2012.

DLF – Working towards reducing debt

In FY2011, DLF's net debt increased by ~`2,314cr yoy to~`23,990cr from ~`21,677cr. Thus, DLF's net debt-to-equitynow stands increased from 0.88x to 0.98x yoy, which continuesto remain a key overhang on the stock price as debt repaymentof ~`2,910cr is required to be made over the next 15 months.Further, clarity on whether DLF will buy out the promoter's stakein DAL remains another key concern since it could potentiallyfurther dilute the equity of minority shareholders. However, thecompany has increased its overall target on divestments to about`10,000cr mainly to reduce debt, which would be about`4,500cr if the wind segment is excluded. Further, the companyhas added `6,000cr-7,000cr to its disinvestment target overthe next two to three years.

Sluggish residential volumes adding to margin pressure

In Mumbai and Delhi, residential prices are currently ruling15-30% above the peak levels of 2008, whereas prices in mostother markets are still 10-15% lower than their last peak levels.This has resulted in tapering of volumes in regions likeMumbai and NCR. India's top two real estate players – DLFand Unitech – have recently stated that slower sales are leadingto a build-up of inventory and, thus, they may see some pricecorrection, leading to margin pressures. On the back of sluggishdemand, HDFC and SBI have also seen a drop in their mortgageloan transactions. For instance, HDFC has seen a drop of15-20% in its mortgage loans in Mumbai (althoughdisbursements have been good otherwise), while SBI expects adownward revision in its growth target. We believe CY2011 willsee consolidation with residential prices remaining soft inMumbai and Gurgaon (could see a correction of 15-20% in someoverheated micro markets), with a modest to flat 5% increaseexpected in other markets.

Commercial demand to pick up over the next 12 months

After registering a sharp decline in the past few quarters, capitalvalues have started to strengthen, registering a marginal

appreciation across most micro markets. Industry participantshave indicated that the surge in leasing enquiries has come onthe back of renewed interest shown by corporates.In 1QFY2012, commercial area in Mumbai witnessed a12-month high with 1.84msf of area leased out. Of this,the financial sector was the major contributor with a share of40%. We expect demand for office space to start picking upfrom 2HCY2011 as we expect 20% net employee addition inthe IT/ITES sector over FY2011-13. Cushman and Wakefieldestimates cumulative pan-India demand for office space duringCY2009-13 to be 196msf.

Source: Cushman & Wakefield, Angel Research

Exhibit 3: Pan-India commercial demand

0

10

20

30

40

50

60

2009 2010 2011 2012E 2013E

(mn

sq.ft.)

Source: Cushman & Wakefield, Angel Research

Exhibit 4: Pan-India retail demand

0

2

4

6

8

10

12

14

2009 2010 2011 2012E 2013E

(mn

sq.ft.)



Real Estate

Analyst - Sharan LillaneyAnalyst - Sharan LillaneyAnalyst - Sharan LillaneyAnalyst - Sharan LillaneyAnalyst - Sharan Lillaney

Sensex vs. realty stocks

During 1QFY2012, the BSE realty index widely underperformedthe Sensex by 1,049bp on the back of 1) corporate governance,2) restricted credit flow to the sector and 3) the expected increasein cost of funding for future projects. Moreover, the RBI'smeasures to tighten liquidity and curb speculative demand byincreasing LTV and risk weight on teaser loans have furtherdampened stocks’ performance. However, we believe the recentcorrection gives a good entry opportunity on account of1) companies trading at a significant discount to our one-yearforward NAV, 2) stability in volumes and 3) comfortable balancesheet position unlike that in 2008. We believe HDIL, OberoiRealty and ARIL are best placed in the sector.


India's realty index is currently ruling near its life-time low seenin 2008. However, things are much better than 2008 with respectto project visibility, cash flow, net debt-equity and growingdisposable income. Further, refinancing of loans from thebanking sector will give some respite to developers in the fallingvolume scenario. Having said that, we believe absorption andnot price appreciation will drive residential growth over the nextsix quarters. Amidst this scenario, new launches have been morerewarding for developers who have launched projects at a10-15% discount to the prevailing market rates. Further, highinventory is still hampering commercial recovery, though therehas been an uptick in absorption levels. We expect rentals toremain firm at current levels with an uptick likely over the next12 months. We believe that stock performances are related tomacro factors interspersed with company-specific issues suchas the DLF-DAL merger translating into higher debt and2G-related scam for Unitech. We are positive on the long-termoutlook of the realty sector, taking into account growingdisposable income, shortage of 25mn houses in India andreasonable affordability. Given the current scenario, we expectstability in residential prices with the exception of certain micromarkets, where prices have overheated, and expect an uptickin the commercial segment over the next 12 months.

We prefer companies with visibility in cash flow, low leverageand strong project pipeline with attractive valuations. Our topOur topOur topOur topOur toppicks are HDIL and ARILpicks are HDIL and ARILpicks are HDIL and ARILpicks are HDIL and ARILpicks are HDIL and ARIL, which are trading at ~38% and, which are trading at ~38% and, which are trading at ~38% and, which are trading at ~38% and, which are trading at ~38% and~56% discount to their NA~56% discount to their NA~56% discount to their NA~56% discount to their NA~56% discount to their NAVs, respectivelyVs, respectivelyVs, respectivelyVs, respectivelyVs, respectively. W. W. W. W. We maintain oure maintain oure maintain oure maintain oure maintain ourNeutral view on DLFNeutral view on DLFNeutral view on DLFNeutral view on DLFNeutral view on DLF, owing to concerns of weak operating, owing to concerns of weak operating, owing to concerns of weak operating, owing to concerns of weak operating, owing to concerns of weak operatingcash flowcash flowcash flowcash flowcash flow, increasing gearing and just ~12% discount to our, increasing gearing and just ~12% discount to our, increasing gearing and just ~12% discount to our, increasing gearing and just ~12% discount to our, increasing gearing and just ~12% discount to ouroneoneoneoneone-year forward NA-year forward NA-year forward NA-year forward NA-year forward NAVVVVV.....

Exhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimatesExhibit 7: Quarterly estimates ( `̀̀̀̀ cr)



(((((`̀̀̀̀))))) 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E chg bpchg bpchg bpchg bpchg bp 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg 1QFY12E1QFY12E1QFY12E1QFY12E1QFY12E % chg% chg% chg% chg% chg FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY11FY11FY11FY11FY11 FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E (((((`)))))

DLF 210 2,334 15.0 42.3 (600) 407.8 (0.8) 2.4 (0.8) 9.7 11.6 13.7 21.7 18.0 15.3 - Neutral

Anant Raj Ind. 64 153 48.3 60.1 508 48.8 6.3 0.2 6.3 5.7 7.5 11.5 11.2 8.5 5.5 105 Buy

HDIL 160 604 33.9 54.3 (502) 259.6 10.8 0.7 10.8 21.0 26.0 30.0 7.6 6.1 5.3 200 Buy


Exhibit 5: 1QFY2012 – Coverage vs. Sensex performance

(3.0)

(12.3)

(22.6)

(25.8)(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

BSE Sensex HDIL DLF ARIL

(%)


Exhibit 6: BSE Realty index vs. Sensex

(80)

(60)

(40)

(20)

0

20

40

60

80

Jan

-08

Nov-

08

Mar-

09

Aug

-09

Dec-0

9

May-1

0

Sep

-10

Jan

-11

May-1

1

BSEREAL Index SENSEX Index

(%)

49



Software


Exhibit 2: BFSI – Revenue growth trend

Infosys TCS Wipro HCL Tech

(10)

(5)

0

5

10

15

4Q

FY0

9

1Q

FY1

0

2Q

FY1

0

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

(%qoq)

Demand landscape remains unscathed

The demand environment cited by most tier-I IT companies interms of 1) positive client budgets for CY2011 across industries(expect telecom, which is expected to be flat) and with a highercomponent of offshoring; 2) like-to-like pricing increase in someof the deals as well as clients willing to compensate for cost ofliving adjustment (COLA); 3) upbeat gross hiring guidance forFY2012 by Infosys and TCS of 45,000 and 60,000, respectively;4) robust revenue growth guidance by Infosys (18-20% yoy)and Cognizant (at least 29% yoy); 5) global major Accenture(August year ending) raising revenue growth guidance from8-11% yoy in 1QFY2011 to 11-14% yoy in 2QFY2011 andthen to 14-15% yoy in 3QFY2011; and 6) uptick in new licensesales by Oracle envisage a strong demand environment forIT spending.

Budgets persist but looming macro concerns cause delay

The aggregate US macro data for May 2011 highlights loomingconcerns about the macro picture, with data points like1) manufacturing index declining to 53.5 vs. 60.4 for April 2011,2) retail sales growth dropping to -0.2% vs. 0.3% for April 2011,3) consumer confidence decreasing to 60.8 from 66.0 for April2011 and 4) US GDP at 1.8% for 1QCY2012 as against 3.1%for 4QFY2011. For Europe, the PMI index declined to 54.6 forMay 2011 from 58.0 for April 2011.

Client budgets are positive on a yoy basis. However, due tounstable macros, the pent-up in budget flush is not happeningas planned because clients are turning marginally cautioustowards economic recovery. However, there are no indicationsof any budget cuts from clients and IT companies continue tosee robust demand for discretionary services going ahead.In fact, Gartner has recently increased its estimate of IT spendingfor CY2011 to 7.1% yoy from 5.6% yoy earlier.

IT index has underperformed over the past three months,as 4QFY2011 panned out to be a soft quarter because of clientsfreezing their budgeting cycles. However, the demand outlookfor IT spending remains positive as clients look forward to spendon discretionary services such as enterprise solutions andengineering services to drive cost efficiency, prepare for growthand capture market share.

For the retail and CPG segment, IT spend continues to grow onmulti-channel integration to encash on the digital consumerbehaviour. Also, retail clients are spending on digital marketingand mobile and social technology to provide multi-channelexperience, retail commerce and mobile marketing to increasedigital consumer engagements.

The manufacturing segment is also back with higher spend onIT, especially with industries such as hi-tech and semiconductorlooking at immediate go-to-market strategies and, thus,spending on product engineering, supply-chain managementand consulting to drive cost efficiencies. In the manufacturingsegment, automotive and aerospace have also started spendingon dealer management network, CRM applications, rationalisinginternal processes, setting up shared services, global launchand product engineering.

Spending continues to be broad-based (ex. telecom)

For 1QFY2012, we expect demand drivers for growth tocontinue to span across various dimensions – industry wise(except telecom, which will continue to be sluggish), service wiseand geography wise. As per NASSCOM's strategic review inFebruary 2011, worldwide IT spend is expected to grow by ~4%in CY2011.

IndustryIndustryIndustryIndustryIndustry-wise trends:-wise trends:-wise trends:-wise trends:-wise trends: The BFSI segment (the major contributorwith a 45-50% share in exports) will continue to lead in termsof volume due to persistent work related to 1) regulatorycompliance, 2) data analytics, 3) operational efficiency and4) risk and fraud prevention.


Exhibit 3: Manufacturing – Revenue growth trend

(15)

(10)

(5)

0

5

10

15

4Q

FY09

1Q

FY10

2Q

FY10

3Q

FY10

4Q

FY10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

(%qoq)

Infosys TCS Wipro HCL Tech


Exhibit 1: IT index vs. the Sensex

BSE IT Sensex (RHS)

15000

16500

18000

19500

21000

4800

5200

5600

6000

6400

6800

1-A

pr-

11

16-

Apr-

11

1-M

ay-

11

16-

May-

11

31-

May-

11

15-

Jun

-11

30-

Jun

-11



Software

The energy and utilities vertical is gaining strong traction,especially for businesses relating to oil and gas, smart grid andsafety, among others, mostly for cost-cutting measures.

The telecom vertical is still a very soft spender and client budgetsremain weak. This vertical was heavily impacted for Infosys andTCS due to one of their top clients, British Telecom, cutting backheavily on capex and downsizing operations. Managements ofboth the companies maintain that the client-specific issue isbehind, and they foresee a slow recovery in the sector. We believeTSPs of matured markets will start spending to migrate tonext-generation networks such as 4G to support the heavy voiceand burgeoning data traffic.

ServiceServiceServiceServiceService-wise trends:-wise trends:-wise trends:-wise trends:-wise trends: Changed business needs of variousindustries have led to a surge in demand for discretionaryservices such as enterprise application services (EAS) andengineering and R&D (ERD) services. Investments in EAS mostlyfocus on simplifying internal processes and harmonisingbusiness processes across the enterprise to make organisationssmarter and leaner – primarily focusing on increasing efficienciesand reducing throughput. Even ERD services are witnessing aspurt in demand, with product companies getting aggressiveand trying to launch a series of new products by shortening thego-to-market cycle. In addition, demand for ERD services isdriven by increasing use of electronics, fuel efficiency norms,convergence of local markets and localised products.

Hiring spree to continue

IT players got into the hiring mode from 2HFY2010, with highlateral hiring to tap the sudden increase in demand. With astrengthening demand landscape, Infosys and TCS haveindicated robust gross hiring targets yet again for FY2012 of45,000 and 60,000, even on the total employee base of1,30,820 and 1, 99,365, respectively. These initial hiringnumbers are much higher than the initial hiring numbers of30,000 each indicated a year ago by Infosys and TCS. Also,due to the unanticipated pent-up demand as well as higherattrition rates of 20-25% annualised, gross hiring numbers forFY2011 stood much higher at 43,120 and 69,685 for Infosysand TCS, respectively.

Companies are now looking at planned hiring to address thestrengthening demand pipeline as well as to flatten theiremployee pyramids. Infosys and TCS have planned to givecampus offers to 27,500 and 37,000 people (most of whichhave already been given), respectively, indicating that majorityof the hiring in FY2012 will be of freshers. Also, with coolingattrition rates, we do not expect attrition to be a spoilsportanymore as companies resort back to planned hiring. We expectthe hiring trend to remain upbeat, with Infosys expected to havehired ~6,921 employees and TCS hiring ~8,901 employeesin 1QFY2012.

Utilisation to be a mixed bag

In 1QFY2012, we expect the utilisation level (including trainees)of Infosys to marginally increase by 50bp qoq to 68.9%.In case of TCS, we expect the company to hold up (qoq) itsutilisation level (including trainees) at 75.1%. Wipro andHCL Tech, on the other hand, are expected to see a marginaldip of 30bp and 40bp qoq to 75.8% and 76.9% in theirutilisation level, respectively, on the back of freshers joining in.

Cross-currency movement to favour dollar revenue growth

The cross-currency movement, which had proved to be a baneover 4QFY2010-1QFY2011 impacting USD revenue by0.8-1.5% (qoq), has turned into a boon since 2QFY2011.The USD has depreciated by 5.2%, 1.8% and 5.7% qoq againstthe Euro, GBP and AUD, respectively, in 1QFY2012. This willaid USD revenue for Infosys, TCS, Wipro and HCL Tech by 1.3%,0.8%, 1.1% and 1.4%, respectively. In the entire IT pack,Tech Mahindra is expected to be the highest beneficiary offavourable cross-currency movement of 2% qoq. However,INR has appreciated by 1.2% qoq against USD in 1QFY2012,which will result in lower rupee revenue growth vs. dollar revenuegrowth and impact operating margins by 35-40bp.

Modest volume growth

Traditionally, 1Q is a strong quarter for IT companies as clientbudgets on the kind of discretionary, operational and capitalspending freeze by 4Q and budget flush start happening in thenext quarter. However, we expect 1QFY2012 to be modest interms of volume growth due to unstable macros because ofwhich clients are delaying the incremental budget flush fromtheir end. For 1QFY2012, we expect volume growth to remainmodest at 0-4.8% qoq for tier-I IT companies.

Revenue continues to surge

For 1QFY2012, we expect USD revenue to surge by 1.1-6.2%qoq for tier-I IT companies on the back of modest volume growth,stable pricing and favourable cross-currency movement. In INRterms, revenue growth is expected to be lower at 0.4-4.7% qoqdue to appreciation of INR against USD on a qoq basis.


Exhibit 4: Cross-currency impact on USD revenue

Infosys TCS HCL Tech Wipro

1.3

0.8

1.4

1.1

(1.5)

(1.0)

(0.5)

-

0.5

1.0

1.5

2.0

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12E

(%)

51



Software

Analyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita Somani

Earnings to slip (ex. HCL Tech)

On the back of wage hikes undertaken in 1QFY2012,profitability of tier-I companies like TCS and Infosys is expectedto slip by 7% and 9% qoq, respectively. For Wipro, the impactwill be limited to a 1% qoq decline due to partial impact of thewage hike. However, for HCL Tech profitability is expected toscorch up on the back of margin expansion and nil forex loss.Amongst mid-tier IT companies, profitability is expected to slidesteeply on the back of wage hike as well as shooting up of taxrates because of the expiry of STPI w.e.f. April 1, 2011. However,this was already priced in our estimates.


The global macro data is pointing towards a bleak outlook forglobal corporate profits, though currently S&P 500 quarterlyprofits are about to tick in a lifetime high. Clients have allocated2-3% higher budgets related to IT spending in CY2011,but some delay in spending is surfacing as they are turning abit cautious on the back of tepid macro indicators. Therefore,1QFY2012 is expected to be modest at 1.1-6.2% qoq growthin USD revenue for tier-I IT companies, aided by moderatedemand driving volumes, favourable cross-currency movementand stable pricing environment. However, due to looming macroconcerns, coutiousness prevails for CY2012 client budgets.We remain cautiously optimistic on the IT sector with TCS, Infosysand HCL Tech as our preferred picks.

Exhibit 8: Quarterly estimates ((((( `̀̀̀̀ c c c c crrrrr)))))

Source: Company, Angel Research; Note: Price as on June 30, 2011; *June ending so 4QFY2011 estimates; ^October ending so 3QFY2011 estimates; Change is on a qoq basis



Infosys 2,907 7,435 2.6 26.3 (270) 1,689 (7.1) 29.6 (7.1) 119.5 139.3 163.0 24.3 20.9 17.8 3,424 Buy

TCS 1,180 10,547 3.8 25.7 (228) 2,182 (9.1) 11.1 (9.1) 44.4 50.8 60.8 26.6 23.2 19.4 1,337 Accumulate

Wipro 418 8,335 0.4 17.8 1 1,363 (0.9) 5.6 (0.9) 21.7 23.9 28.4 19.3 17.5 14.7 483 Buy

HCL Tech* 493 4,340 4.9 15.6 120 516 10.3 7.4 10.3 24.7 33.4 42.2 20.0 14.8 11.7 591 Buy

Tech Mahindra 721 1,288 2.1 19.6 213 209 1.2 16.0 1.2 57.0 55.3 56.4 12.7 13.0 12.8 790 Accumulate

Mphasis^ 435 1,303 3.7 12.5 (392) 156 (28.2) 7.4 (28.2) 37.2 39.0 44.4 11.7 11.2 9.8 499 Accumulate

Infotech 144 337 3.5 8.2 (241) 11 (69.3) 1.0 (69.3) 12.6 12.7 16.1 11.4 11.3 8.9 - Neutal

KPIT Cummins 173 307 (0.4) 6.9 (194) 17 (37.2) 2.1 (37.2) 11.4 12.4 16.9 15.2 13.9 10.2 208 Buy

3i Infotech 46 638 (2.1) 15.5 (43) 48 (24.4) 2.4 (24.4) 12.8 10.5 11.8 3.6 4.4 3.9 - Neutral

Margins to decline due to annual wage hikes

We expect EBIT margin for Infosys, TCS and Wipro to declineon the back of wage hikes given in 1QFY2012. Also,appreciating rupee remains a challenge. Infosys and TCS areexpected to record a margin decline of 270bp and 228bp qoqto 26.3% and 25.7%, respectively. Impact on the EBIT marginof Wipro's IT services segment due to wage hike will be less at49bp to 21.6% as the increment is effective from June 1, 2011,so the major impact will flow in 2QFY2012. On a consolidatedlevel, Wipro's EBIT margin is expected to be flat qoq at 17.8%.For HCL Tech, we expect the company's EBIT margin to improveby 120bp qoq to 15.6% due to operating leverage on the backof higher volume growth. In case of TechMahindra, we expectthe margin to expand by 213bp qoq due to SGA efficiency,growth in non-BT and absence of wage hikes.


Exhibit 5: Trend in volume growth (qoq)

7.6 7.2

3.1

(1.4)

2.7

8.1

11.2

5.7

2.9

4.4

10.5

7.46.8

4.9 4.84.7

6.6

1.51.9

-

(2)

0

2

4

6

8

10

12


(%)



Exhibit 6: Trend in USD revenue growth (qoq)

4.3

10.2

5.9

1.1

3.9

6.4

11.7

7.0

4.75.2

7.6

9.0

7.5

5.86.2

3.2

5.8 5.6

4.2

1.1

0

2

4

6

8

10

12

14


(%)


Source: Company, Angel Research; *Note: For IT services segment

Exhibit 7: Change in EBIT margins (qoq)

Infosys TCS Wipro* HCL Tech

(178)

189

(0)

(121)

(270)

(35)

86

7

(7)

(228)

37

(237)

3

(14) (49)

(85)

(242)

23

127 120

(300)

(200)

(100)

-

100

200


BP(q

oq)



Telecom

During 1QFY2012, all telecom stocks (ex. RCom) gained, withBharti Airtel (Bharti) and Idea pacing up by 10.0% and 21.0%,respectively. This was primarily due to strong subscriber netadditions, positive MNP outcome and fading knee-jerk reactiontowards the possible outcomes of National Telecom Policy 2011due to recommendation regarding the re-pricing and re-framingof the spectrum and its charges.

However, RCom underperformed significantly during the quarter,slipping by 12.9% because of the arrest of few of its seniorofficers along with the promoters of DB-Etisalat on account oftheir possible links in the 2G scam.

MNP recording a secular trend

Since the launch of MNP in January 2011, a secular trend isemerging in which incumbents such as Vodafone, Idea andBharti are proving to be net gainers in the mentioned peckingorder; whereas, the highest net looser has been RCom, bothfor its GSM and CDMA subscriber base. BSNL has also beenlosing out subscribers to other incumbents. Till date, the Indianmobile market has seen ~11mn users opting for MNP, whichalthough is insignificant at ~1.3% of subscriber base, but thetrend emerging from the applications clearly suggests that theabove-mentioned players are proving to be the front-runnersin gaining market share.

RMS vs. SMS

As per the revenue market share (RMS) data for 4QFY2011,Bharti leads at 31% with subscriber market share (SMS) of 20%,whereas Idea’s RMS and SMS stand at 13.9% and 11.1%,respectively. RMS for Bharti and Idea is higher than SMS, whichindicates that the quality of subscribers added by thesecompanies is good. On the contrary, in case of RCom, SMS isat 17%, which is much ahead of RMS that is only at 8.2%.This is evident from the ARPU profile of these companies.

VLR data points favourable for tier-I companies

As per the recent VLR data released for April 2011, out of thetotal 826.93mn subscribers, 583.22mn subscribers (70.5%)were active subscribers on the date of Peak VLR. Service providerwise, Idea leads the tally with a share of 92.92%, followed byBharti with 89.51%, Vodafone with 80.78% and RCom with63.64%, whereas Etisalat is at the bottom with 31.47%.

Source: TRAI, Angel Research

Exhibit 5: Active subscribers (April 2011)ActiveActiveActiveActiveActive Active subscribers'Active subscribers'Active subscribers'Active subscribers'Active subscribers' Active subscribers'Active subscribers'Active subscribers'Active subscribers'Active subscribers' Reported subscribers'Reported subscribers'Reported subscribers'Reported subscribers'Reported subscribers'

subscribers (mn)subscribers (mn)subscribers (mn)subscribers (mn)subscribers (mn) market share (%) market share (%) market share (%) market share (%) market share (%) market share (%)market share (%)market share (%)market share (%)market share (%) market share (%)market share (%)market share (%)market share (%)market share (%) -March 2011 -March 2011 -March 2011 -March 2011 -March 2011

Bharti 147.3 25.38 25.78 20.00

Vodafone 110.7 19.06 18.73 16.64

Idea 85.4 14.72 14.59 11.17

RCom 89.0 15.34 15.39 17.00

BSNL 47.6 8.20 8.07 10.59

Aircel 30.3 5.21 5.34 6.80

MTNL 1.8 0.32 0.32 0.63

Source: Bloomberg, Angel Research; Note: data till May 2011

591,600

590,343

563,460

135,592

70,553(1,086,669)

(477,164)

(318,125)

(1,200,000) (800,000) (400,000) - 400,000 800,000

Vodafone

Idea

Bharti

Tata Docomo

Aircel

Rcom

BSNL

Tata Indicom

Exhibit 2: Net subscriber gainers/losers due to MNP

3.8

6.4

8.5

10.0

0.49

0.80

1.04

1.20

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0

2

4

6

8

10

12

Feb-11 Mar-11 Apr-11 May-11

(%)

(mn)

Total subscribers opting for MNP (mn) Share in total subscriber base (%)

Source: Bloomberg, Angel Research; Note: data till May 2011

Exhibit 3: Net subscriber gainers/losers due to MNP


Exhibit 4: VLR data of incumbents

92.6

77.7

90.3

66.3

53.8

59.9

89.5

80.8

92.9

63.6

54.6 54.1

50

60

70

80

90

100

Bharti Vodafone Idea Rcom BSNL Aircel

(%)

Jan-11 Feb-11 Mar-11 Apr-11


Exhibit 1: Stock return analysis of leading Indian TSPs

Chg. (3 months) Chg. (1 year)

10.0

(12.9)

21.0

49.0

(51.7)

34.7

(60)

(40)

(20)

0

20

40

60

Bharti Rcom Idea

(%)

53



Telecom

Thus, though the pace of subscriber addition sported by eachof the companies remains at 2mn-2.5mn per month, additionsmade by Bharti and Idea are value additions, whereas for RComit is more of a volume addition. Amongst unlisted companies,Vodafone is also part of the Bharti-Idea clan with higher RMSat 21.2% and SMS at 16.7%, whereas incumbents such as BSNLand Aircel are part of RCom's clan with SMS higher than RMS.

Incumbents continue to post strong subscriber addition

Over March-May 2011, the Indian subscriber base grew at anaverage rate of 1.7% mom, led by incumbents such as Bharti,Vodafone and Idea. However, net subscriber addition numberswere the lowest in the last one year. Amongst incumbents,subscriber growth was led by Idea at 2.3% mom, followed byAircel, Vodafone, Bharti, RCom and BSNL, which grew at anaverage rate of 2.0%, 1.8%, 1.5%, 1.5% and 0.7% mom,respectively.

Company (mn)Company (mn)Company (mn)Company (mn)Company (mn) Dec-10Dec-10Dec-10Dec-10Dec-10 Jan-11Jan-11Jan-11Jan-11Jan-11 FFFFFebebebebeb-11-11-11-11-11 MarMarMarMarMar-11-11-11-11-11 AprAprAprAprApr-11-11-11-11-11 MayMayMayMayMay-11-11-11-11-11

Bharti 152.5 155.8 159.0 162.2 164.6 167.1

RCom 125.7 130.1 133.4 137.0 139.9 141.2

Vodafone 124.3 127.4 130.9 134.6 137.0 139.4

BSNL 81.4 83.6 85.1 86.5 87.1 87.6

Idea 81.8 84.3 86.8 89.5 92.0 93.8

TTSL 83.7 86.1 87.7 89.1 90.4 90.8

Aircel 50.2 51.8 53.5 54.8 56.0 57.1

MTNL 5.1 5.2 5.2 5.2 5.2 5.2

Loop Mobile 3.0 3.1 3.1 3.1 3.1 3.1

HFCL 1.6 1.3 1.4 1.5 1.5 1.4

Shyam Telelink 8.4 9.1 9.6 10.1 10.6 11.2

S Tel 2.3 2.5 2.7 2.8 3.0 3.2

Uninor 18.5 20.3 21.6 22.8 24.2 25.4

Videocon 7.3 6.0 6.6 7.1 7.2 7.1

DB Etisalat 0.3 0.5 0.7 1.0 1.2 1.3

TTTTTotalotalotalotalotal 746.1746.1746.1746.1746.1 766.9766.9766.9766.9766.9 787.1787.1787.1787.1787.1 807.2807.2807.2807.2807.2 823.0823.0823.0823.0823.0 834.8834.8834.8834.8834.8Source: COAI, AUSPI, Angel Research

Exhibit 7: Total subscriber base VAS share to grow

We expect VAS share in the mobility revenue of Bharti and Ideato increase in 1QFY2012, which would arrest the downside inaverage revenue per minute (ARPM) due to lower voice ARPMresulting in from higher growth in B and C circles. We expectVAS share as a percentage of mobility revenue to grow by 50bpand 10bp qoq to 15.5% and 12.2% for Bharti (excluding Africa)and Idea, respectively.

Source: TRAI, Angel Research

Exhibit 6: RMS vs. SMS of incumbents (as of 4QFY2011)31.1

21.2

13.9

8.2 8.3

4.8

20.1

16.7

11.1

17.0

10.7

6.8

0

5

10

15

20

25

30

35

Bharti Vodafone Idea Rcom BSNL Aircel

(%)

RMS SMS


Exhibit 8: Trend in MOU per month per subscriber

446468 480

454 449 449 449

389 398415

394 401 397 397

330 318295

276251

241 241

200

300

400

500

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2E

(min

)

Bharti (ex-Africa) Idea Rcom


Exhibit 9: Trend in VAS share as a % to mobility revenue

11.011.8 11.6

12.7

13.8

15.015.5

11.2

12.4 12.612.9

13.0

12.1 12.2

9

11

13

15

17

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2E

(%ofm

obili

tyre

venue)

Bharti (ex-Africa) Idea

New entrants, including Etisalat, Uninor, S Tel and Loop Mobile,grew at average rates of 15.9%, 5.5%, 5.9% and 0.6%,respectively, while Videocon declined at an average rate of 0.4%mom. Although subscriber base of all telecom players reportedgrowth, net addition run rate slided steeply for every player inApril-May 2011. Thus, a trend was spotted with most incumbents(Bharti, Vodafone, Idea and Aircel) maintaining their subscribermarket share over March-May 2011, whereas RCom and BSNLlost their market shares slightly to 16.9% and 10.5% inMay 2011 from 17.0% and 10.7% in March 2011, respectively.

MOUs to remain flat

In 4QFY2011, Idea and RCom experienced a decline in minutesof usage (MOU), while Bharti (excluding Africa) reported flatMOU on the back of robust subscriber growth. For 1QFY2012,we expect MOU of Bharti (excluding Africa), Idea and RCom toremain flat at 449min, 397min and 241min, respectively.



Telecom

Analyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita SomaniAnalyst - Srishti Anand/Ankita Somani

ARPM to remain flat

ARPM has been following a declining trend over the past ninequarters due to entry of new players and the price war. However,the price war logged by these new entrants has turned into acurse for their own sustainability. The confidence in no furtherpossibility of a price war was instilled by the rational pricingmove made by various telecom players for 3G, i.e. no case ofundercutting. Therefore, for 1QFY2012, we expect ARPM forBharti (excluding Africa) to increase by 4.6% qoq to`0.45/min; however, for Idea and RCom, ARPM is expected tobe stable on a qoq basis.

EPMs to inch up (ex. RCom)

For 1QFY2012, we expect EBITDA per minute (EPM) to remainalmost flat for Idea, while a slight uptick is expected for Bhartiand RCom on account of stable MOU and APRM and increasedshare of VAS in mobility revenue.


Exhibit 10: Trend in ARPM

0.40

0.45

0.50

0.55

3Q

FY10

4Q

FY10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12E

(/m

in)

`



Exhibit 11: Trend in ARPU per month230 220 215

202 198 194 192

200185 182

167 168 168 164

149139

130122

111 107 106

50

100

150

200

250

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2E

(/m

onth

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ARPUs to decline marginally

For 1QFY2012, we expect the combination of flat MOU, flatARPM and soft subscriber addition to pull down the averagerevenue per user (ARPU) of Bharti (excluding Africa), Ideaand RCom by 0.8%, 1.9% and 1.0% qoq to `192/month,`164/month and `106/month, respectively.


Exhibit 12: EPM trend

0.20

0.17

0.17 0.16 0.16

0.150.16

0.13 0.13

0.11

0.10 0.10 0.11 0.10

0.20

0.16

0.170.17 0.17

0.13

0.14

0.09

0.12

0.15

0.18

0.21

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

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1

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2E

(`/m

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0.13 0.13

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0.13

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0

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0

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1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

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2E

(/m

in)

`Bharti (ex-Africa) Idea Rcom


For 1QFY2012, we expect revenue growth to be driven by decentgrowth in subscriber base, flat voice ARPM and higher share ofVAS in mobility revenue. Amongst the top three operators,we expect Bharti to post revenue growth of 5.8% qoq. Idea andRCom are expected to post revenue growth of 4.8% and 3.9%qoq, respectively. On the EBITDA margin front, we expectmargins of Bharti, Idea and RCom to expand by 172bp, 63bpand 407bp (higher growth due to low base effect) qoq to 35.2%,26.0% and 28.2%, respectively. Players in the sector (especiallyRCom and Etisalat) continue to be haunted by issues related tothe 2G scam. We believe industry dynamics point toward apossible consolidation in the long run and expect only selectfew operators, including Bharti, Vodafone, RCom, Idea, BSNL,Aircel and Uninor, to be the survivors out of the current 15operators. Amongst the listed players, Bharti is a better bet dueto its low-cost integrated model (owned tower infrastructure),potential opportunity to scale up in Africa, established leadershipin revenue and subscriber market share, and relatively betterKPIs. However, overall we remain Neutral on the telecom sector.


Source: Company, Angel Research; Note: Price as on June 30, 2011; Change is on a qoq basis



Bharti 395 17,212 5.8 35.2 172 1,874 33.8 4.9 33.8 15.9 21.1 26.2 24.8 18.8 15.1 - Neutral

Rcom 96 5,123 3.9 28.2 407 70 (58.7) 0.3 (58.7) 6.5 3.1 7.1 14.8 31.2 13.6 - Neutral

Idea 80 4,438 4.8 26.0 63 195 (29.0) 0.6 (29.0) 2.7 2.6 3.4 29.3 30.7 23.5 - Neutral

55



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1,24

21,

413

18.0

17.8

86.7

97.3

13.8

12.3

2.8

2.3

22.5

20.7

1.3

1.1

Her

o H

onda

Neu

tral

1,87

8 -

37,4

9921

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24,3

6814

.114

.110

3.9

116.

918

.116

.110

.29.

062

.459

.51.

41.

2

JK T

yre

Buy

96 1

3339

46,

636

7,30

05.

05.

819

.029

.55.

13.

30.

40.

48.

311

.90.

30.

3

Mah

indr

a &

Mah

indr

aBu

y70

1 8

0441

,183

27,0

2530

,583

12.7

12.6

46.7

51.6

15.0

13.6

3.6

3.0

25.1

23.9

1.2

1.0

Mar

uti

Acc

umul

ate

1,15

8 1

,314

33,4

7941

,706

47,2

428.

58.

789

.110

1.0

13.0

11.5

2.0

1.7

16.7

16.0

0.6

0.5

Mot

hers

on S

umi

Acc

umul

ate

226

247

8,75

19,

651

11,1

2611

.011

.111

.613

.719

.516

.55.

54.

430

.029

.81.

00.

8

Subr

osA

ccum

ulat

e31

35

186

1,22

51,

336

7.6

7.6

3.9

4.4

8.0

7.0

0.7

0.7

9.5

10.3

0.3

0.3

Tata

Mot

ors

Acc

umul

ate

994

1,1

0063

,356

145,

042

161,

960

12.7

12.5

159.

417

2.6

6.2

5.8

2.2

1.6

41.9

32.1

0.5

0.4

TVS

Mot

orBu

y54

62

2,54

87,

360

8,25

35.

85.

84.

45.

212

.210

.32.

42.

020

.721

.00.

40.

3

Bank

ing

Bank

ing

Bank

ing

Bank

ing

Bank

ing

Alla

haba

d Ba

nkA

ccum

ulat

e 1

97 2

22 9

,372

6,0

46 6

,598

2.9

2.7

33.

4 3

5.6

5.9

5.5

1.1

0.9

19.

2 1

7.8

--

And

hra

Bank

Acc

umul

ate

134

145

7,5

07 4

,456

4,8

02 3

.0 2

.7 2

3.9

24.

0 5

.6 5

.6 1

.0 0

.9 1

9.1

16.

8-

-

Axi

s Ba

nkBu

y 1

,289

1,6

50 5

3,06

8 1

3,51

7 1

6,63

2 3

.0 2

.9 9

8.2

120

.8 1

3.1

10.

7 2

.4 2

.1 2

0.1

21.

0-

-

Bank

of B

arod

aBu

y 8

72 1

,017

34,

139

12,

803

14,

605

2.6

2.5

117

.1 1

31.9

7.4

6.6

1.4

1.2

20.

2 1

9.5

--

Bank

of I

ndia

Buy

414

498

22,

641

11,

470

12,

871

2.4

2.2

56.

9 6

7.2

7.3

6.2

1.2

1.1

18.

1 1

8.5

--

Can

ara

Bank

Neu

tral

524

- 2

3,22

6 1

1,52

2 1

2,98

1 2

.4 2

.2 9

1.6

92.

6 5

.7 5

.7 1

.1 1

.0 2

0.8

18.

1-

-

Cen

tral

Ban

kRe

duce

124

112

8,0

24 6

,742

7,5

86 2

.6 2

.5 1

7.6

22.

0 7

.0 5

.6 0

.9 0

.8 1

6.2

15.

1-

-

Cor

pora

tion

Bank

Buy

526

640

7,7

85 4

,631

5,1

99 2

.2 2

.1 1

00.2

107

.5 5

.2 4

.9 0

.9 0

.8 1

9.3

17.

9-

-

Den

a Ba

nkBu

y 9

1 1

06 3

,021

2,5

61 2

,750

2.6

2.4

19.

5 2

0.3

4.7

4.5

0.8

0.7

17.

5 1

5.8

--

Fede

ral B

ank

Acc

umul

ate

452

483

7,7

24 2

,498

2,8

05 3

.5 3

.2 4

3.1

49.

6 1

0.5

9.1

1.4

1.2

13.

7 1

4.1

--

HD

FC B

ank

Neu

tral

2,5

03 -

116

,718

18,

444

22,

893

4.4

4.3

110

.3 1

43.5

22.

7 1

7.4

4.0

3.4

18.

8 2

0.9

--

ICIC

I Ban

kBu

y 1

,093

1,3

55 1

25,9

37 1

9,16

1 2

3,36

1 2

.7 2

.7 5

7.1

69.

3 1

9.2

15.

8 2

.1 2

.0 1

4.0

15.

6-

-

IDBI

Ban

kN

eutr

al 1

36 -

13,

396

7,2

44 8

,474

1.9

2.0

18.

5 2

1.9

7.4

6.2

1.0

0.9

13.

6 1

4.5

--

Indi

an B

ank

Buy

213

255

9,1

39 5

,678

6,1

96 3

.5 3

.3 4

3.3

47.

4 4

.9 4

.5 1

.0 0

.8 2

2.0

20.

4-

-

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

atch

|at

ch |

atch

|at

ch |

atch

| J

uly

2011 57

Plea

se r

efer

to im

port

ant d

iscl

osur

es a

t the

end

of t

his

repo

rt.

Com

pan

y N

am

eRe

coC

MP

Targ

etM

kt C

ap

Sale

s (`

cr)

OPM

(%

)

EPS

(`)

PER (

x)P/

BV (

x)Ro

E (%

) EV

/Sale

s (x

) (`

)Pr

ice

(`)

(` c

r)FY

12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

IOB

Acc

umul

ate

147

166

9,0

86 6

,496

7,0

31 2

.7 2

.4 2

2.5

26.

4 6

.5 5

.6 1

.0 0

.9 1

6.0

16.

6-

-J

& K

Ban

kA

ccum

ulat

e 8

40 8

93 4

,073

2,0

40 2

,169

3.2

3.0

141

.2 1

50.2

5.9

5.6

1.0

0.9

18.

3 1

7.0

--

Orie

ntal

Ban

kBu

y 3

30 3

92 9

,614

5,3

46 5

,859

2.6

2.5

57.

4 6

6.6

5.7

4.9

0.8

0.7

15.

4 1

5.8

--

Punj

ab N

atl.B

ank

Acc

umul

ate

1,0

90 1

,235

34,

520

17,

044

19,

313

3.3

3.1

151

.9 1

74.6

7.2

6.2

1.5

1.2

21.

9 2

1.3

--

Sout

h In

d.Ba

nkA

ccum

ulat

e 2

4 2

6 2

,706

1,0

99 1

,203

2.6

2.5

3.1

3.2

7.7

7.4

1.4

1.3

19.

2 1

7.3

--

St B

k of

Indi

aBu

y 2

,406

2,8

32 1

52,7

78 5

4,71

9 6

3,50

5 2

.9 2

.9 2

02.5

270

.6 1

1.9

8.9

2.1

1.8

19.

7 2

2.6

--

Synd

icat

e Ba

nkBu

y 1

17 1

39 6

,733

5,6

32 5

,939

2.8

2.4

21.

1 2

4.0

5.6

4.9

0.9

0.8

17.

0 1

7.0

--

UC

O B

ank

Neu

tral

96

- 6

,005

4,8

49 5

,596

2.2

2.2

14.

8 1

7.8

6.5

5.4

1.2

1.0

16.

8 1

7.6

--

Uni

on B

ank

Buy

293

357

15,

352

8,9

62 9

,848

2.8

2.6

43.

8 4

7.8

6.7

6.1

1.2

1.1

19.

2 1

8.1

--

Uni

ted

Bank

Acc

umul

ate

96

110

3,3

17 2

,968

3,2

99 2

.6 2

.5 1

4.8

17.

1 6

.5 5

.6 0

.9 0

.8 1

3.5

14.

0-

-Vi

jaya

Ban

kN

eutr

al 7

0 -

3,2

85 2

,541

2,7

98 2

.3 2

.2 9

.1 1

0.3

7.7

6.8

1.0

0.9

12.

4 1

2.8

--

Yes

Bank

Acc

umul

ate

312

337

10,

859

2,4

12 2

,956

2.4

2.4

26.

0 2

9.8

12.

0 1

0.5

2.4

2.0

21.

6 2

0.6

--

Cap

ital G

oods

Cap

ital G

oods

Cap

ital G

oods

Cap

ital G

oods

Cap

ital G

oods

ABB

*Se

ll 8

76 6

37 1

8,56

5 7

,443

8,6

75 9

.4 9

.5 2

0.3

23.

6 4

3.2

37.

2 6

.7 5

.8 1

6.6

16.

8 2

.4 2

.1A

reva

*N

eutr

al 2

57 -

6,1

41 4

,564

5,3

20 1

0.2

10.

7 8

.9 1

1.9

28.

8 2

1.6

5.3

4.4

19.

7 2

2.1

1.5

1.3

BGR

Ener

gyBu

y 4

49 5

20 3

,240

5,2

52 5

,719

11.

0 1

1.0

44.

5 4

8.1

10.

1 9

.3 2

.7 2

.3 3

0.0

26.

8 0

.7 0

.6BH

ELN

eutr

al 2

,047

- 1

00,1

83 5

0,64

7 5

9,38

9 1

9.8

19.

8 1

33.6

156

.5 1

5.3

13.

1 4

.1 3

.4 2

8.9

27.

2 1

.6 1

.4C

rom

pton

Gre

aves

Buy

259

300

16,

628

11,

029

12,

867

13.

4 1

3.9

15.

3 1

8.7

17.

0 1

3.9

4.1

3.3

26.

8 2

6.3

1.4

1.2

Gra

phite

Indi

aBu

y 9

1 1

23 1

,772

1,7

21 2

,053

22.

9 2

5.6

11.

9 1

5.4

7.6

5.9

1.1

0.9

14.

6 1

7.2

1.3

0.9

Jyot

i Str

uctu

res

Buy

85

104

697

2,8

30 3

,259

11.

0 1

1.0

12.

6 1

5.3

6.7

5.6

0.9

0.8

16.

8 1

5.3

0.4

0.3

KEC

Inte

rnat

iona

lBu

y 7

9 1

15 2

,075

5,3

98 6

,418

11.

0 1

1.3

9.5

12.

8 8

.3 6

.2 1

.8 1

.4 2

4.2

26.

0 0

.6 0

.5LM

WBu

y 2

,090

2,7

80 2

,356

2,3

50 2

,883

14.

2 1

4.3

179

.3 2

31.7

11.

7 9

.0 2

.4 2

.0 2

2.9

24.

7 0

.6 0

.4Th

erm

axN

eutr

al 5

94 -

7,0

76 6

,197

7,1

73 1

0.7

10.

7 3

7.5

43.

4 1

5.9

13.

7 4

.2 3

.4 2

9.6

27.

3 0

.9 0

.8C

emen

tC

emen

tC

emen

tC

emen

tC

emen

tA

CC

Neu

tral

949

- 1

7,84

1 8

,913

10,

160

20.

6 2

1.0

54.

9 6

2.2

17.

3 1

5.3

2.5

2.3

15.

2 1

5.5

1.7

1.4

Am

buja

Cem

ents

Redu

ce 1

34 1

22 2

0,59

0 8

,463

9,6

17 2

3.2

23.

3 7

.6 8

.4 1

7.6

16.

0 2

.5 2

.3 1

5.2

15.

2 2

.1 1

.8In

dia

Cem

ents

Neu

tral

71

- 2

,181

3,8

96 4

,394

13.

4 1

6.5

4.8

8.8

14.

8 8

.1 0

.6 0

.6 4

.3 7

.8 1

.0 0

.8J

K La

kshm

i Cem

ents

Buy

44

57

538

1,5

29 1

,717

15.

9 1

5.8

6.1

7.2

7.2

6.1

0.5

0.5

7.0

7.7

0.5

0.4

Mad

ras

Cem

ents

Neu

tral

81

- 1

,932

3,0

33 3

,467

21.

8 2

1.4

7.9

10.

5 1

0.3

7.7

1.0

0.9

10.

3 1

2.4

1.6

1.3

Ultr

aTec

h C

emen

tN

eutr

al 9

34 -

25,

582

18,

351

20,

704

20.

9 2

1.1

69.

7 8

0.4

13.

4 1

1.6

2.1

1.8

16.

7 1

6.7

1.5

1.2

Con

stru

ctio

nC

onst

ruct

ion

Con

stru

ctio

nC

onst

ruct

ion

Con

stru

ctio

nC

onso

lidat

ed C

oN

eutr

al 3

1 -

573

2,4

33 2

,946

6.4

7.3

2.6

4.2

12.

2 7

.4 0

.9 0

.8 7

.3 1

1.2

0.4

0.4

Hin

d. C

onst

.N

eutr

al 3

2 -

1,9

38 4

,722

5,4

85 1

2.6

12.

6 0

.8 1

.3 3

9.7

24.

1 1

.3 1

.3 3

.2 5

.3 1

.3 1

.2IR

B In

fra

Acc

umul

ate

173

191

5,7

40 2

,901

3,9

95 4

2.9

38.

3 1

1.0

14.

5 1

5.7

11.

9 2

.1 1

.8 1

4.2

16.

5 3

.6 3

.0IT

NL

Buy

208

308

4,0

46 5

,103

7,1

00 2

4.5

21.

6 2

4.0

29.

7 8

.7 7

.0 1

.6 1

.4 2

0.6

21.

2 2

.2 2

.1IV

RCL

Infr

aBu

y 7

0 1

00 1

,864

6,2

75 7

,494

9.2

9.4

6.2

8.2

11.

2 8

.5 0

.9 0

.8 8

.1 9

.8 0

.6 0

.6Ja

ipra

kash

Ass

o.Bu

y 8

1 1

08 1

7,19

2 1

5,86

0 1

8,70

8 2

4.5

24.

4 5

.1 6

.8 1

5.8

11.

9 1

.7 1

.5 1

1.0

13.

1 2

.3 1

.9La

rsen

& T

oubr

oA

ccum

ulat

e 1

,823

2,0

30 1

12,0

69 5

3,70

5 6

6,16

1 1

2.0

12.

0 6

8.3

82.

5 2

6.7

22.

1 4

.3 3

.7 1

7.5

18.

1 2

.2 1

.8M

adhu

con

Proj

Buy

88

117

651

2,0

69 2

,632

10.

2 9

.9 7

.5 8

.7 1

1.7

10.

1 1

.0 0

.9 8

.5 9

.2 0

.8 0

.8N

agar

juna

Con

st.

Buy

81

109

2,0

86 5

,856

6,9

39 9

.3 9

.7 5

.8 7

.6 1

4.0

10.

6 0

.8 0

.8 6

.1 7

.60.

80.

8Pa

tel E

ngg.

Neu

tral

148

- 1

,036

3,2

72 3

,587

12.

7 1

3.1

15.

5 2

3.0

9.5

6.4

0.7

0.6

7.2

9.9

1.0

0.9

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

atch

|at

ch |

atch

|at

ch |

atch

| J

uly

2011 58

Plea

se r

efer

to im

port

ant d

iscl

osur

es a

t the

end

of t

his

repo

rt.

Com

pan

y N

am

eRe

coC

MP

Targ

etM

kt C

ap

Sale

s (`

cr)

OPM

(%

)

EPS

(`)

PER (

x)P/

BV (

x)Ro

E (%

) EV

/Sale

s (x

) (`

)Pr

ice

(`)

(` c

r)FY

12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

Punj

Llo

ydN

eutr

al 7

6 -

2,5

19 9

,585

10,

992

8.3

8.4

3.7

5.9

20.

6 1

2.8

0.8

0.8

4.1

6.4

0.7

0.6

Sadb

hav

Engg

.Bu

y 1

34 1

61 2

,011

2,6

02 2

,865

9.8

10.

4 8

.4 9

.7 1

5.9

13.

8 2

.7 2

.3 1

8.4

17.

9 1

.0 0

.9

Sim

plex

Infr

aBu

y 2

68 4

04 1

,331

5,3

73 6

,721

9.7

9.8

24.

1 3

6.7

11.

1 7

.3 1

.1 1

.0 1

0.5

14.

3 0

.5 0

.5

FMC

GFM

CG

FMC

GFM

CG

FMC

G

Asi

an P

aint

sN

eutr

al 3

,181

- 3

0,50

8 9

,092

10,

608

17.

0 1

7.6

102

.5 1

26.3

31.

0 2

5.2

11.

0 8

.6 3

9.6

38.

3 3

.2 2

.7

Brita

nnia

Neu

tral

478

- 5

,710

5,0

14 5

,858

5.8

7.1

15.

4 2

2.5

31.

0 2

1.2

10.

9 8

.9 3

7.8

46.

1 1

.1 1

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Col

gate

Redu

ce 9

81 8

74 1

3,34

6 2

,564

2,9

66 2

0.1

20.

8 3

3.7

38.

8 2

9.1

25.

3 3

1.7

22.

8 1

13.9

105

.0 5

.0 4

.2

Dab

ur In

dia

Neu

tral

114

- 1

9,84

9 5

,268

6,0

33 1

9.1

19.

5 4

.2 5

.0 2

6.9

22.

9 1

1.2

8.9

46.

7 4

3.3

3.8

3.3

Gla

xoSm

ith C

on*

Redu

ce 2

,452

2,1

63 1

0,31

2 2

,723

3,1

74 1

6.4

16.

9 8

2.7

98.

3 2

9.7

24.

9 8

.8 7

.2 3

2.6

31.

8 3

.4 2

.9

God

rej C

onsu

mer

Neu

tral

431

- 1

3,94

4 4

,196

4,6

81 1

9.5

19.

9 1

7.8

20.

3 2

4.2

21.

2 6

.0 5

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26.

3 3

.4 3

.0

HU

LN

eutr

al 3

43 -

74,

017

21,

840

24,

574

13.

4 1

3.9

11.

7 1

3.3

29.

4 2

5.7

23.

7 2

0.5

74.

8 7

4.6

3.2

2.8

ITC

Neu

tral

202

- 1

56,6

58 2

4,70

6 2

9,29

4 3

4.0

34.

2 7

.5 8

.9 2

7.0

22.

8 8

.0 6

.5 3

2.7

31.

5 6

.0 5

.0

Mar

ico

Redu

ce 1

56 1

47 9

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3,4

31 3

,926

13.

7 1

4.1

4.9

6.1

31.

5 2

5.5

8.3

6.6

30.

8 2

9.0

2.7

2.3

Nes

tle*

Redu

ce 4

,095

3,4

83 3

9,48

4 7

,277

8,4

35 2

0.1

20.

7 1

01.0

120

.1 4

0.6

34.

1 3

0.8

20.

9 9

1.1

72.

9 5

.3 4

.5

Hot

elH

otel

Hot

elH

otel

Hot

el

Taj G

VKBu

y 1

05 1

40 6

58 3

10 3

60 4

0.4

40.

6 9

.5 1

1.7

11.

0 9

.0 1

.8 1

.5 1

7.3

18.

3 2

.5 2

.0

ITITITIT IT 3i In

fote

chN

eutr

al 4

6 -

886

2,2

01 2

,260

20.

6 2

1.5

10.

5 1

1.8

4.4

3.9

0.7

0.6

15.

3 1

5.1

1.1

1.0

Educ

omp

Buy

392

522

3,7

22 1

,612

1,8

02 4

3.1

46.

7 4

2.1

51.

8 9

.3 7

.6 1

.8 1

.3 1

5.1

17.

0 2

.5 2

.3

Ever

onn

Acc

umul

ate

526

602

1,0

00 4

80 6

50 3

3.6

33.

5 3

0.5

42.

3 1

7.2

12.

4 2

.8 2

.5 1

7.4

16.

7 1

.8 1

.4

HC

L Te

chBu

y 4

93 5

91 3

4,29

5 1

9,45

1 2

3,39

1 1

8.1

18.

5 3

3.4

42.

2 1

4.8

11.

7 3

.8 3

.1 2

5.8

26.

9 1

.7 1

.3

Info

sys

Buy

2,9

07 3

,424

166

,303

32,

999

40,

203

31.

1 3

0.1

139

.3 1

63.0

20.

9 1

7.8

5.0

4.1

23.

9 2

2.9

4.4

3.4

Info

tech

Ent

erpr

ises

Neu

tral

144

- 1

,595

1,4

32 1

,652

15.

0 1

6.3

12.

7 1

6.1

11.

3 8

.9 1

.4 1

.2 1

2.0

13.

2 0

.7 0

.6

KPIT

Cum

min

sBu

y 1

73 2

08 1

,411

1,3

24 1

,637

14.

7 1

6.2

12.

4 1

6.9

13.

9 1

0.2

2.0

1.7

15.

7 1

7.7

1.0

0.7

Mph

asis

Acc

umul

ate

435

499

9,1

16 5

,771

6,5

60 1

7.4

17.

2 3

9.0

44.

4 1

1.2

9.8

1.9

1.6

17.

3 1

6.8

1.1

0.9

NIIT

Buy

55

68

909

1,4

01 1

,545

13.

2 1

3.8

5.5

6.9

10.

0 8

.0 1

.5 1

.3 1

4.9

16.

7 0

.7 0

.5

TCS

Acc

umul

ate

1,1

80 1

,337

231

,018

45,

584

54,

509

29.

0 2

8.7

50.

8 6

0.8

23.

2 1

9.4

7.5

6.1

32.

5 3

1.4

4.8

3.8

Tech

Mah

indr

aA

ccum

ulat

e 7

21 7

90 9

,408

5,1

78 5

,715

19.

2 1

8.3

55.

3 5

6.4

13.

0 1

2.8

2.3

2.0

17.

9 1

5.6

1.9

1.6

Wip

roBu

y 4

18 4

83 1

02,4

79 3

5,50

4 4

1,14

5 2

0.0

20.

9 2

3.9

28.

4 1

7.5

14.

7 3

.7 3

.2 2

1.1

21.

5 2

.5 2

.1

LLLL L ogi

stic

s an

d Sh

ippi

ngog

istic

s an

d Sh

ippi

ngog

istic

s an

d Sh

ippi

ngog

istic

s an

d Sh

ippi

ngog

istic

s an

d Sh

ippi

ng

ABG

Shi

pyar

dN

eutr

al 3

53 -

1,7

96 2

,555

3,6

89 2

3.0

22.

3 4

7.7

76.

0 7

.4 4

.6 1

.6 1

.2 2

3.9

29.

6 1

.6 1

.1

Con

cor

Neu

tral

1,0

39 -

13,

506

4,2

46 4

,812

27.

5 2

7.0

71.

4 7

9.5

14.

6 1

3.1

2.5

2.3

18.

0 1

7.7

2.7

2.3

GE

Ship

ping

Buy

287

360

4,3

77 3

,055

3,3

25 4

0.2

41.

5 4

2.2

49.

3 6

.8 5

.8 0

.7 0

.6 1

0.3

11.

2 2

.7 2

.5

Med

iaM

edia

Med

iaM

edia

Med

ia

D B

Cor

pBu

y 2

33 3

35 4

,270

1,4

15 1

,588

29.

6 3

0.8

14.

1 1

6.8

16.

5 1

3.9

4.2

3.4

27.

9 2

7.3

3.0

2.5

HT

Med

iaN

eutr

al 1

70 -

3,9

95 2

,000

2,2

41 1

8.1

18.

2 8

.8 9

.7 1

9.4

17.

5 3

.0 2

.6 1

6.6

15.

8 2

.0 1

.8

Jagr

an P

raka

shan

Buy

127

161

4,0

10 1

,339

1,4

53 2

9.4

29.

5 7

.2 8

.1 1

7.5

15.

7 5

.6 5

.2 3

3.2

34.

4 3

.1 2

.9

PVR

Buy

102

127

276

540

627

19.

9 2

1.5

5.0

8.4

20.

4 1

2.0

0.9

0.8

4.2

6.9

0.5

0.3

Sun

TV N

etw

ork

Buy

348

454

13,

704

2,1

32 2

,384

78.

4 7

8.8

21.

2 2

3.9

16.

4 1

4.5

4.5

3.7

30.

7 2

8.2

6.3

5.6

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

atch

|at

ch |

atch

|at

ch |

atch

| J

uly

2011 59

Plea

se r

efer

to im

port

ant d

iscl

osur

es a

t the

end

of t

his

repo

rt.

Met

alM

etal

Met

alM

etal

Met

alBh

usha

n St

eel

Neu

tral

439

- 9

,311

7,9

23 8

,359

33.

2 3

4.7

49.

8 5

4.9

8.8

8.0

1.5

1.3

19.

2 1

7.7

3.1

2.8

Coa

l Ind

iaN

eutr

al 3

92 -

247

,854

60,

311

64,

355

26.

8 2

6.8

21.

5 2

2.4

18.

3 1

7.5

5.7

4.6

35.

0 2

8.8

3.2

2.8

Elec

tros

teel

Cas

tings

Buy

29

37

921

1,7

56 1

,818

17.

9 1

7.7

5.0

5.3

5.9

5.6

0.5

0.5

9.4

9.4

1.1

1.0

God

awar

i Pow

erBu

y 1

55 2

25 4

92 1

,425

1,6

07 2

0.0

21.

7 4

1.3

54.

8 3

.8 2

.8 0

.6 0

.5 1

7.6

19.

4 0

.8 0

.6H

ind.

Zin

cBu

y 1

36 1

58 5

7,56

9 1

1,74

8 1

2,56

0 5

6.4

56.

8 1

4.2

15.

3 9

.6 8

.9 2

.0 1

.7 2

3.6

20.

6 3

.1 2

.4H

inda

lco

Buy

181

242

34,

724

75,

211

80,

961

11.

6 1

4.7

16.

0 2

5.5

11.

3 7

.1 1

.3 1

.1 1

2.2

16.

9 0

.8 0

.8JS

W S

teel

Buy

882

1,0

24 1

9,68

8 3

5,72

2 4

2,80

0 1

7.5

18.

0 9

2.1

115

.6 9

.6 7

.6 1

.0 0

.9 1

0.8

12.

2 1

.0 0

.8M

OIL

Acc

umul

ate

334

358

5,6

12 1

,177

1,2

08 5

7.7

58.

6 3

2.8

34.

9 1

0.2

9.6

2.2

1.9

23.

7 2

1.4

3.0

2.6

Mon

net I

spat

Acc

umul

ate

499

533

3,2

10 1

,860

2,6

73 2

7.8

30.

8 4

1.5

56.

5 1

2.0

8.8

1.3

1.2

11.

8 1

5.3

3.3

2.6

Nal

coRe

duce

83

77

21,

339

7,0

67 7

,115

27.

1 2

8.6

5.1

5.8

16

.3 1

4.4

2.2

2.2

12.

7 1

3.6

2.9

2.9

NM

DC

Redu

ce 2

55 2

41 1

01,1

00 1

3,07

5 1

5,03

6 7

3.0

72.

9 1

8.5

21.

3 1

3.8

12.

0 4

.1 3

.2 3

3.3

30.

0 6

.3 5

.1Pr

akas

h In

d.Bu

y 6

6 9

6 8

84 2

,205

2,1

93 2

1.9

25.

6 2

2.8

28.

0 2

.9 2

.4 0

.4 0

.3 1

6.9

17.

4 0

.7 0

.7SA

ILBu

y 1

38 1

91 5

6,79

3 4

7,90

3 5

6,01

6 1

9.2

22.

1 1

2.9

16.

5 1

0.7

8.3

1.4

1.2

13.

5 1

5.2

1.4

1.3

Sard

a En

ergy

Buy

213

253

764

953

1,0

13 2

1.5

24.

1 2

7.1

33.

0 7

.9 6

.5 1

.0 0

.9 1

3.8

14.

8 1

.4 1

.2Se

sa G

oaBu

y 2

82 3

85 2

4,52

1 1

1,14

7 1

2,45

3 4

6.9

46.

7 4

3.4

47.

4 6

.5 5

.9 1

.5 1

.2 2

5.2

22.

3 1

.1 0

.8St

erlit

e In

dsBu

y 1

68 2

16 5

6,47

6 3

4,72

2 4

1,33

1 2

4.4

28.

9 1

7.3

21.

7 9

.7 7

.7 1

.2 1

.0 1

3.2

14.

3 1

.8 1

.3Ta

ta S

teel

Buy

609

799

58,

387

120

,167

125

,290

13.

7 1

5.4

73.

2 9

1.5

8.3

6.7

1.4

1.2

18.

5 1

9.6

0.5

0.5

Oil

& G

asO

il &

Gas

Oil

& G

asO

il &

Gas

Oil

& G

asC

airn

Neu

tral

311

- 5

9,11

1 1

5,69

0 1

7,90

0 8

1.9

80.

2 4

8.7

54.

7 6

.4 5

.7 1

.2 1

.0 2

1.2

19.

4 3

.3 2

.4G

AIL

Buy

441

539

55,

972

34,

001

37,

724

17.

9 1

7.6

29.

6 3

1.3

14.

9 1

4.1

2.5

2.2

18.

2 1

6.9

1.6

1.5

GSP

LBu

y 8

9 1

05 5

,004

1,0

81 1

,110

92.

2 9

2.5

9.2

9.4

9.7

9.5

2.1

1.8

23.

3 2

0.0

5.8

5.6

Guj

arat

Gas

Acc

umul

ate

391

418

5,0

08 2

,122

2,4

38 2

0.8

19.

9 2

0.9

23.

2 1

8.7

16.

8 5

.2 4

.5 2

9.7

28.

8 2

.1 1

.8IG

LRe

duce

381

352

5,3

38 2

,186

2,6

50 2

6.1

24.

0 2

0.9

22.

7 1

8.3

16.

8 4

.4 3

.7 2

6.3

23.

8 2

.6 2

.1O

NG

CBu

y 2

74 3

36 2

34,3

77 1

29,5

26 1

51,3

23 4

4.5

44.

6 3

2.6

39.

1 8

.4 7

.0 1

.7 1

.5 2

1.9

22.

4 1

.6 1

.2Pe

tron

et L

NG

Neu

tral

136

- 1

0,17

4 1

5,93

6 1

7,40

2 9

.5 1

0.3

9.8

11.

6 1

3.9

11.

7 3

.1 2

.6 2

4.7

24.

3 0

.8 0

.8RI

LBu

y 8

98 1

,189

293

,857

275

,171

275

,661

15.

4 1

6.5

71.

9 7

7.2

12.

5 1

1.6

1.5

1.3

14.

0 1

3.3

1.1

1.0

Phar

mac

eutic

als

Phar

mac

eutic

als

Phar

mac

eutic

als

Phar

mac

eutic

als

Phar

mac

eutic

als

Aur

obin

do P

harm

a#Bu

y17

3 2

7851

0145

1952

4317

.818

.315

.519

.111

.29.

01.

71.

420

.719

.01.

51.

3A

vent

is*

Neu

tral

2052

-48

491,

224

1,40

114

.915

.385

.589

.724

.022

.93.

93.

518

.317

.13.

12.

6C

adila

Hea

lthca

reBu

y91

9 1

,053

1842

453

3664

7819

.820

.238

.652

.623

.817

.56.

34.

931

.733

.43.

42.

7C

ipla

Buy

330

377

2664

871

3883

2220

.021

.215

.218

.921

.617

.53.

63.

117

.218

.53.

83.

3D

ishm

an P

harm

aBu

y90

133

739

1115

1282

17.5

17.9

9.3

11.1

9.7

8.1

0.8

0.7

8.1

8.8

1.5

1.4

Dr

Redd

y'sBu

y15

33 1

,920

2627

187

2195

8425

.225

.187

.996

.017

.416

.04.

73.

828

.625

.23.

32.

9G

SK P

harm

a*N

eutr

al23

54 -

1998

724

4727

8835

.535

.572

.086

.932

.727

.18.

97.

821

.130

.77.

36.

3In

doco

Rem

edie

sBu

y43

0 6

6552

459

174

016

.117

.253

.366

.58.

16.

51.

31.

118

.119

.51.

00.

8Ip

ca la

bsN

eutr

al34

2 -

4314

2,20

72,

548

20.5

21.5

20.0

27.5

17.1

12.4

3.3

2.7

21.8

24.9

2.1

1.8

Lupi

nBu

y44

9 5

9319

887

6817

8272

18.3

19.7

22.4

29.7

20.1

15.1

5.2

4.1

28.2

30.8

3.0

2.5

Orc

hid

Che

mic

als

Buy

271

373

1882

2143

2508

21.8

21.8

28.4

37.3

9.6

7.3

2.0

1.6

19.3

23.4

1.8

1.5

Ranb

axy*

Acc

umul

ate

541

588

2302

910

196

1202

319

.023

.029

.144

.818

.612

.13.

52.

920

.125

.92.

31.

7

Com

pan

y N

am

eRe

coC

MP

Targ

etM

kt C

ap

Sale

s (`

cr)

OPM

(%

)

EPS

(`)

PER (

x)P/

BV (

x)Ro

E (%

) EV

/Sale

s (x

) (`

)Pr

ice

(`)

(` c

r)FY

12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

FY12E

FY13E

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

Stoc

k W

atch

|at

ch |

atch

|at

ch |

atch

| J

uly

2011 60

Plea

se r

efer

to im

port

ant d

iscl

osur

es a

t the

end

of t

his

repo

rt.

Sun

Phar

mac

eutic

als

Neu

tral

497

-51

469

7576

9516

30.1

31.1

18.0

23.5

27.7

21.1

4.8

4.1

18.4

20.9

6.7

5.3

PPPP P ow

erow

erow

erow

erow

er

CES

CBu

y 2

98 3

80 3

,747

4,4

57 4

,821

25.

9 2

6.2

42.

9 4

4.5

7.0

6.7

0.8

0.7

12.

0 1

1.2

1.6

1.5

GIP

CL

Buy

76

94

1,1

50 1

,526

1,6

19 2

6.7

26.

2 9

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61



Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Ratings (Returns) :

Disclaimer

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Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investmentdecisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document arethose of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and tradingvolume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

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Note: Please refer to the important Note: Please refer to the important Note: Please refer to the important Note: Please refer to the important Note: Please refer to the important ‘‘‘‘‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may havelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may havelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may havelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may havelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment positions in the stocks recommended in this report.investment positions in the stocks recommended in this report.investment positions in the stocks recommended in this report.investment positions in the stocks recommended in this report.investment positions in the stocks recommended in this report.



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Research Team

Fundamental:

Sarabjit Kour Nangra VP-Research, Pharmaceutical [email protected]

Vaibhav Agrawal VP-Research, Banking [email protected]

Shailesh Kanani Infrastructure [email protected]

Srishti Anand IT, Telecom [email protected]

Bhavesh Chauhan Metals, Mining [email protected]

Sharan Lillaney Mid-cap [email protected]

Amit Vora Research Associate (Oil & Gas) [email protected]

V Srinivasan Research Associate (Cement, Power) [email protected]

Pooja Jain Research Associate (Metals & Mining) [email protected]

Yaresh Kothari Research Associate (Automobile) [email protected]

Shrinivas Bhutda Research Associate (Banking) [email protected]

Sreekanth P.V.S Research Associate (FMCG, Media) [email protected]

Hemang Thaker Research Associate (Capital Goods) [email protected]

Nitin Arora Research Associate (Infra, Real Estate) [email protected]

Ankita Somani Research Associate (IT) [email protected]

Varun Varma Research Associate (Banking) [email protected]

Technicals:

Shardul Kulkarni Sr. Technical Analyst [email protected]

Mileen Vasudeo Technical Analyst [email protected]

Derivatives:

Siddarth Bhamre Head - Derivatives [email protected]

Jaya Agarwal Derivative Analyst [email protected]

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales [email protected]

Abhimanyu Sofat AVP - Institutional Sales [email protected]

Jay Harsora Manager [email protected]

Meenakshi Chavan Dealer [email protected]

Gaurang Tisani Dealer [email protected]

Production Team:

Simran Kaur Research Editor [email protected]

Dilip Patel Production [email protected]

Angel Broking Market Strategy-July2011

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