Bro King+ +Q4FY11+Earnings+Preview

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INDIA RESEARCH

RESULTS PREV I EW

8 April 2011

4QFY11 Results PreviewStraining for growth


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STRICTLY CONFIDENTIAL

8 APRIL 2011

ANTIQUE STOCK BROKING LIMITED

4QFY11 RESULTS PREVIEW

Results Overview

Sectors

Automobiles

Cement

Financials

FMCG & Retail

Industrials

Information Technology

Media

Metals

Oil & Gas

Pharmaceuticals

Real Estate

Shipping & Logistics

Sugar

Utilities & Industrials

Miscellaneous

Results Preview Summary

Valuation Guide


3/42

TIQUE STOCK BROKING LIMITED 8 APRIL 20FROM THE RESEARCH DESK

Results overview

Straining for growth

The financial year has drawn to an end and the numbers roll out begins and being the year end results, the earnings season is

expected to be a bit longer than usual. The first three months of the calendar year have been akin to a roller coaster rise for the

stock markets and the impending earnings are thus expected to have a huge bearing on its ensuing course. Expectations from the

companies under our coverage (ex-financials) convey a YoY growth of 24% and a QoQ growth of 16%. The traction is one of the

highest in recent times. If one excludes the metals sector, the growth is a bit better at 25% YoY and 17% QoQ, respectively, leading

us to believe that the metals sector still ails from a degree of uncertainty and unpredictability. However, if instead of metals, one

excludes the Oil & Gas sector, then these figures are 20% YoY and 14% on a QoQ basis, leading us to believe that oil and gas

sector despite all the associated problems, is relatively better off than what it was a year ago.

(INRm) 3QFY11 3QFY10 Chg YoY (%)

Indices Net Sales PBIDT Net Profit Net Sales PBIDT Net Profit Net Sales PBIDT Net Profi

Sensex 2,575,903 808,730 380,913 2,206,929 674,097 303,047 16.7 20.0 25.7

Nifty 3,435,022 994,533 459,403 2,928,713 843,040 381,363 17.3 18.0 20.5BSE 100 5,590,574 1,394,778 594,313 4,686,644 1,145,338 481,343 19.3 21.8 23.5

BSE 200 6,781,605 1,834,588 728,971 5,718,659 1,517,681 602,275 18.6 20.9 21.0

BSE 500 8,213,861 2,130,854 832,048 6,921,438 1,766,744 695,603 18.7 20.6 19.6

BSE Midcap 1,960,385 512,053 144,795 1,656,347 421,227 122,460 18.4 21.6 18.2

BSE Smallcap 995,806 139,828 53,899 831,248 126,867 52,452 19.8 10.2 2.8

Source: Antique, AceEquity

(INRm) 3QFY11 3QFY10 Chg YoY (%)

Sectoral Indices Net Sales PBIDT Net Profit Net Sales PBIDT Net Profit Net Sales PBIDT Net Profi

BSE Auto 428,091 53,839 33,077 333,928 53,386 30,707 28.2 0.8 7.7

BSE Capital Goods 378,104 52,939 33,212 303,920 45,385 27,195 24.4 16.6 22.1

BSE Consumer Durables136,442 11,406 5,144 113,787 9,060 3,910 19.9 25.9 31.5

BSE FMCG 176,040 38,409 27,530 147,989 34,240 24,150 19.0 12.2 14.0

BSE Healthcare 117,125 27,565 23,822 105,406 31,249 23,810 11.1 (11.8) 0.0

BSE IT 258,676 73,894 62,173 216,079 65,477 53,992 19.7 12.9 15.2

BSE Metal 494,086 130,659 86,599 421,473 116,318 74,103 17.2 12.3 16.9

BSE Oil 2,387,604 308,499 162,319 2,072,680 217,786 97,929 15.2 41.7 65.8

Power 440,155 113,722 61,633 373,730 107,333 62,566 17.8 6.0 (1.5

BSE Realty 29,344 15,132 9,917 32,164 13,584 10,055 (8.8) 11.4 (1.4


3QFY11 3QFY10 Chg YoY (%)

Net Interest Provisions & Net Profit Net Interest Provisions & Net Profit Net Interest Provisions & Net Profi

Income Contingencies Income Contingencies Income Contingencies

BSE Bankex 299,977 62,868 118,714 218,562 45,599 96,444 37.3 37.9 23.1



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Results overview

The EBIDTA of companies under our coverage (ex financials) is expected to post a YoY and a QoQ growth of 12% and 15%,

respectively. This clearly conveys that cost pressures in pivotal sectors are now beginning to nibble away at the operational metrics

of India Inc. Excluding Oil & Gas, the growth is estimated to be markedly better at 17% (YoY)and 19% (QoQ) and underscores

the fact that the oil and gas sector continues to drag the performance of corporate sector. The EBIDTA exhibits a much stronge

improvement of 23% YoY and 15% QoQ, if one were to exclude two sectors i.e Metals and Oil & Gas. Thus buoyant commodityprices are now beginning to weight heavy on many sectors. On the net profits front, results of companies under our coverage (ex

financials) are expected to be flat on a YoY basis and register a 13% growth QoQ. Once again, if one were to exclude the Oil

& Gas and Metals sector, the growth is 21% and 15% on a YoY and QoQ basis respectively. The lower degree of growth in ne

profits vis a vis EBIDTA can also be attributed to increase in capital costs.

(INRm) 3QFY11 2QFY11 Chg QoQ (%)

Indices Net Sales PBIDT Net Profit Net Sales PBIDT Net Profit Net Sales PBIDT Net Profi

Sensex 2,575,903 808,730 380,913 2,439,370 744,190 350,533 5.6 8.7 8.7

Nifty 3,435,022 994,533 459,403 3,254,310 933,056 439,415 5.6 6.6 4.5

BSE 100 5,590,574 1,394,778 594,313 5,243,372 1,366,498 622,888 6.6 2.1 (4.6

BSE 200 6,781,605 1,834,588 728,971 6,358,765 1,776,158 874,951 6.6 3.3 (16.7BSE 500 8,213,861 2,130,854 832,048 7,735,098 2,052,581 979,744 6.2 3.8 (15.1

BSE Midcap 1,960,385 512,053 144,795 1,852,032 462,620 137,640 5.9 10.7 5.2

BSE Smallcap 995,806 139,828 53,899 978,278 131,025 54,886 1.8 6.7 (1.8


(INRm) 3QFY11 2QFY11 Chg QoQ (%)

Sectoral Indices Net Sales PBIDT Net Profit Net Sales PBIDT Net Profit Net Sales PBIDT Net Profi

BSE Auto 428,091 53,839 33,077 415,834 56,344 36,850 2.9 (4.4) (10.2

BSE Capital Goods 378,104 52,939 33,212 335,740 43,257 27,341 12.6 22.4 21.5BSE Consumer Durables136,442 11,406 5,144 128,956 10,976 5,245 5.8 3.9 (1.9

BSE FMCG 176,040 38,409 27,530 159,463 36,009 25,210 10.4 6.7 9.2

BSE Healthcare 117,125 27,565 23,822 115,214 27,762 148,790 1.7 (0.7) (84.0

BSE IT 258,676 73,894 62,173 253,831 70,138 57,054 1.9 5.4 9.0

BSE Metal 494,086 130,659 86,599 451,740 113,941 82,292 9.4 14.7 5.2

BSE Oil 2,387,604 308,499 162,319 2,246,700 356,806 217,322 6.3 (13.5) (25.3

Power 440,155 113,722 61,633 430,550 112,615 63,738 2.2 1.0 (3.3

BSE Realty 29,344 15,132 9,917 24,962 13,126 9,661 17.6 15.3 2.6


3QFY11 2QFY11 Chg QoQ (%)

Net Interest Provisions & Net Profit Net Interest Provisions & Net Profit Net Interest Provisions & Net Profi

Income Contingencies Income Contingencies Income Contingencies

BSE Bankex 299,977 62,868 118,714 275837.9 68129.6 104804.3 8.8 (7.7) 13.3



5/42


Expectations for 4QFY11 performance

Sales - change YoY (%) Sales - change QoQ (%)

Source: Antique

EBITDA - change YoY (%) EBITDA - change QoQ (%)

Source: Antique

Net profits - change YoY (%) Net profits - change QoQ (%)

Source: Antique

Note: In case of financials net interest income, pre-provision profits and net income are considered instead of net sales, EBIDTA and net profit.

(10) - 10 20 30 40 50

Media

Cement

Financials

Oil & Gas


Automobiles

FMCG & Retail

Pharma

Utilities

Metals

Industrials & InfrastructureReal Estate

Shipping and Logistics

Sugar

(40) (20) - 20 40 60

Industrials & Infrastructure

Utilities

Oil & Gas

Cement

Automobiles

Metals



Financials

FMCG & Retail

MediaReal Estate

Pharma

Sugar

(10) - 10 20 30 40



Real Estate

Media

Automobiles

Pharma

Utilities

FMCG & Retail

Financials

Cement

Oil & Gas

Metals

Sugar


(20) - 20 40 60 80 100 120


Cement

Metals

Sugar

Automobiles


Oil & Gas

Utilities


Pharma

Real Estate

Financials

FMCG & Retail

Media

(60) (40) (20) - 20 40 60


Automobiles

Financials

Real Estate

FMCG & Retail

Media


Pharma

Utilities

Cement

Metals

Oil & Gas


Sugar

(50) - 50 100 150


Metals

Sugar

Cement

Pharma

Automobiles


Financials

Utilities


Oil & Gas

Real Estate

FMCG & Retail

Media


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Sector EBITDA Margin (%) Net Profit Margin (%)

Quarter Ending Mar-11 Mar-10 Dec-10 Mar-11 Mar-10 Dec-10

Automobiles 13.1 13.2 13.2 8.6 7.4 8.5

Cement 21.8 28.3 18.1 10.4 14.7 10.0

FMCG & Retail 16.5 17.4 17.9 11.1 11.5 12.3

Industrials & Infrastructure 16.9 14.6 12.7 11.3 8.8 7.4

IT 29.4 28.5 28.0 21.9 23.3 22.1

Media 28.5 32.8 32.3 11.2 13.6 14.8Metals 22.6 25.3 19.4 12.7 17.4 10.6

Oil & Gas 10.1 12.4 11.2 4.9 7.6 6.0

Pharma 23.6 23.1 21.1 17.5 18.5 13.6

Real Estate 44.4 39.2 43.0 23.4 20.8 23.2

Shipping and Logistics 36.6 39.6 36.6 12.1 19.7 11.5

Sugar 19.0 17.1 13.1 5.5 9.3 3.4

Utilities 25.6 25.8 28.6 13.1 14.4 15.0

Total 17.9 19.7 18.5 10.1 11.8 8.9

Total Ex Metals & O&G 19.7 19.5 19.4 12.0 11.9 11.9

Total Ex O&G 20.4 21.0 19.4 12.2 13.3 11.6

Source: Antique

On the performance front, the EBIDTA margin of the companies under our coverage (ex-financials) is expected to be around

17.9%, exhibiting a dip of 180bps and 70 bps on a YoY and QoQ basis respectively. However, if one excludes metals and Oi

and Gas, the EBIDTA margins are conveying resilience as at 19.5 for the quarter, it is flat on both a YoY and QoQ basis. However

if one were to exclude only the Oil and Gas sector, then at 20.3%, there an increase of 90 bps on a QoQ basis, but a dip of 60

bps on a YoY basis. This leads us to believe that the most of the sectors other than metal and Oil and gas have been able to tackle

the vagaries of raw material and other costing quite effectively and we could in for a stable round of performance from here on

It is pertinent to note that the EBIDTA margin has been maintained on back on a 22% increase in net sales of the companies unde

our coverage (ex-financial, ex-Oil and gas and ex-metals) on a YoY basis and 14% on a QoQ basis. It thus could be heralding

the benefits of economies of scale as well as maturity of business models going forward.

Financials under our coverage are expected to post a revenue growth of 29% on a YoY basis and 3% on a QoQ basis. However

on the net profit front, growth is expected to be much sharper at 33% on a YoY basis and 8% on a QoQ basis. The ruggedness

of this sector can be construed as a barometer of the economic health and it is not surprising that the sector accounts for a large

part of the market capitalisation at present.

The largest increases in revenues on a QoQ basis is expected to be reported by Media, Cement and Financials. On a YoY basis

the league table gets altered with Industrial& Infra, Oil & Gas and Utilities topping the list. The laggards would be Sugar

Shipping & Logistics and Real Estate on the YoY basis and Sugar, Pharma and real estate on a QoQ basis.

On the EBIDTA front, the leaders would be Industrial& Infra, IT and Real Estate on a YoY basis while on a QoQ basis the list wouldconsist of Industrials & Infra, Cement and Metals. Thus the Industrial & Infra sectors seems to be slowly getting its groove back

The laggards on this front on a YoY basis are Shipping and logistics, Sugar and metal while on a QoQ basis it is Media, FMCG

& retail and Financials.

Summing up, we can say that save for sectors like Metals, Sugar and Real estate, the revenues and EBIDTA growth trend is largely

intact. The traction is expected to slow down a bit marginally in the coming quarters. However, Oil & gas sector continues to bog

the overall metrics on account of its humongous scale and size and there is no respite in sight. Metals, another laggard could be

set for a turn around in the coming quarters and that along with the across the board buoyancy should inject a dose of optimism

in the markets, but in a slow and steady manner. Till then, we are of the opinion that the environment of staidness and tempered

optimism will prevail in the market.


7/42


Automobiles

Same old story - Strong volumes Pressure on margins

Company Sales Chg (%) EBITDA Chg (%) Net Profit Chg (%)

Quarter Ending Mar-11 Mar-10 Dec-10 YoY QoQ Mar-11 Mar-10 Dec-10 YoY QoQ Mar-11 Mar-10 Dec-10 YoY QoQ

Ashok Leyland 36,570 29,390 22,272 24 64 4,241 3,784 1,660 12 155 2,456 2,227 434 10 466

Bajaj Auto 42,247 33,995 41,771 24 1 8,345 7,771 8,493 7 (2) 6,561 5,287 6,671 24 (2)

Bosch 18,785 15,804 17,556 19 7 3,351 2,896 1,810 16 85 2,418 2,026 2,105 19 15

Concor 10,488 9,505 9,711 10 8 2,848 2,201 2,807 29 1 2,339 1,727 2,285 35 2

Escorts 9,080 6,756 8,377 34 8 547 661 438 (17) 25 305 415 255 (27) 19

Exide Industries 11,331 10,280 10,491 10 8 1,869 2,152 1,591 (13) 17 1,415 1,345 1,244 5 14

Hero Honda 52,910 40,926 51,182 29 3 5,384 6,820 5,331 (21) 1 4,913 5,988 4,290 (18) 15

M&M 67,038 53,046 61,211 26 10 9,493 8,492 9,238 12 3 6,647 5,739 6,172 16 8

Maruti Suzuki 97,798 82,808 93,261 18 5 7,431 9,673 7,335 (23) 1 5,754 6,566 5,652 (12) 2

Tata Motors 364,956 289,778 316,852 26 15 49,798 31,354 44,886 59 11 28,093 10,786 24,571 160 14

Total 711,202 572,289 632,685 24 12 93,306 75,805 83,588 23 12 60,901 42,104 53,678 45 13

Sector overview

The automobile sector witnessed a robust 4Q despite price hikes taken by most OEMs. Breaking down the quarter one month at a

time - January dispatches were strong on account of low dealer inventory; February saw massive pre-buying before expectations o

an excise duty roll-back in the budget; March dispatches, although slow at first, picked up momentum driven by strong corporate

buying (to avail depreciation benefits), some pre-buying before the price hikes in April, dealer stocking to meet all the deliveries lined

up for Gudi Padwa and higher discounts towards the year end - a typical March trait to close the fiscal year with a bang.

On the margin front, the surge in commodity costs will be dampener. Steel, rubber, aluminum and lead prices have all been

relentless during the quarter. Most OEMs have taken price increases during the quarter (to the tune of 0.5-2%) which will help

offset these cost pressures partially. The silver lining is that retail sales have not been impacted by these price hikes.

In case of MHCVs, dispatches have been strong post the emission norm change, which is an encouraging testimony that BS3 trucks

have been well accepted in the market. The QoQ jump in volumes also bodes positively for operating leverage of CV companies

The ancillaries continue to benefit from the overall buoyancy in the industry, oblivious to the competitive intensity in most segments. We

prefer the market leaders in this space (Exide and Bosch) on account of the strong pricing power that they enjoy. There is also scope

for margin expansion for these companies as penetration into the lucrative after-markets increases. We expect Exide margins to

improve sequentially as it benefits from price increases undertaken in February along with a marginal improvement in market mix.

4QFY11 - YoY volume growth (%) 4QFY11 - QoQ volume growth (%)

Source: Company, Antique Source: Company, Antique

Ashish Nigam+91 22 4031 3443

[email protected]

30%

23%21% 21%

20%17%

15%13%

0%

5%

10%

15%

20%

25%

30%

35%

Eicher Hero

Honda

M&M Escorts Maruti

Suzuki

Bajaj

Auto

Ashok

Leyland

Tata

Motors

61%

27% 25%

8% 6%4% 2% 0%

0%

10%

20%

30%

40%

50%

60%

70%

Ashok

Leyland

Tata

Motors

Eicher M&M Escorts Maruti

Suzuki

Hero

Honda

Bajaj

Auto

Kunal Jhaveri+91 22 4031 3411

[email protected]


8/42


EUR/GBP movement - sequentially favourable USD/GBP movement - sequentially unfavourablefor Tata Motors for Tata Motors

Source: Bloomberg, Antique Source: Bloomberg, Antique

YEN/INR movement - sequentially unfavourable for Maruti Lead prices


CRC steel prices Rubber prices

Source: Bloomberg, Antique Source: NCDEX, Antique

1250

1500

1750

2000

2250

2500

2750

3000

32503500

01-Jan-10 01-Apr-10 01-Jul-10 01-Oct-10 01-Jan-11 01-Apr-11

1QFY11 2QFY11 4QFY11

Average

Price

$2387/t

4QFY10

Average

Price

$2211/t

Average

Price

$2602/t

3QFY11

400

450

500

550

600

650

700

750


4QFY10 1QFY11 3QFY11

Average

Price

EUR 523/t

Average

Price

EUR 685/t

Average

Price

EUR 597/t

4QFY112QFY11

0.54

0.57

0.60

0.63

0.66

0.69

0.72


4QFY10 1QFY11 2QFY11 3QFY11

Average

USD/GBP

0.623

Average

USD/GBP

0.633

Average

USD/GBP

0.641

4QFY11

120

140

160

180

200

220

240

260


1QFY11 2QFY11 3QFY11 4QFY114QFY10

Average

Price

INR

141/Kg

Average

Price

INR

194/Kg

Average

Price

INR

225/Kg

0.72

0.76

0.80

0.84

0.88

0.92

0.96



Average

EUR/GBP

0.862

Average

EUR/GBP

0.854

4QFY10

AverageEUR/GBP

0.887

0.40

0.44

0.48

0.52

0.56

0.60



Average

YEN/INR

0.550

Average

YEN/INR

0.544

Average

YEN/INR

0.519

4QFY11


9/42


Cement

Price recovery to boost performance



ACC 25,424 22,762 22,277 12 14 5,301 6,552 3,403 19 56 2,831 3,929 2,489 (28) 14

Ambuja Cement 22,656 19,902 17,885 14 27 5,069 6,227 3,140 (19) 61 2,890 4,421 2,510 (35) 15

Shree Cement 9,030 9,440 7,804 (4) 16 2,138 3,255 1,583 34 35 478 (165) 334 (390) 43

UltraTech Cement 40,865 19,225 37,409 113 9 8,819 4,158 7,334 (112) 20 3,965 2,285 3,190 74 24

Total 97,975 71,330 85,374 37 15 21,326 20,192 15,461 6 38 10,164 10,470 8,523 3 19

UltraTech Cement

For 4QFY11, we expect UltraTech to post revenues of INR40.9bn. These numbers are post the merger of Samruddhi with

UltraTech and hence not comparable on a YoY basis. We expect domestic blended despatches of 10.4mmt, up by 3.3% YoY

on a comparable basis.

Margins are expected to expand by 300bps QoQ to 22.7% as a result of recovery in cement prices. We expect EBIDTA/m

of INR845/mt resulting in operating profits of INR8.8bn.

We estimate net profits of INR3.97bn resulting in an EPS of INR14.5.

ACC

ACC is expected to post revenues of INR25.4bn, an increase of 12% YoY in 1QCY11. This will be largely led by 12% rise in

cement volumes to 6.2mmt and a 2% decline in realisations.

On the back of strong recovery in cement prices on a QoQ basis, EBIDTA/mt is expected to increase to INR851 as against

INR610 in 4QCY10. However, on a YoY basis, the same will be lower compared to INR1,179 in 1QCY10. Accordinglyoperating profits should stand at INR5.3bn in 1QCY11.

We expect net profits to decline by 26% YoY and increase by 16% QoQ to INR2.9bn.

Ambuja Cement

ACL's revenues in 1QCY11 are expected to increase by 14% YoY to INR22.7bn. This will be largely led by 6% rise in cement

volumes to 5.7mmt and 7.5% improvement in realisations.

Margins are expected to contract by 890bps to 22.4% as a result of higher operational costs. We expect EBIDTA/mt to fall to

INR895/mt resulting in operating profits of INR5.1bn.

Capital charges should surge by 51% to INR1.3bn on account of commissioning of clinker and grinding capacities in 1HCY10

We expect net profits to decline by 35% to INR2.9bn.

Shree Cement

SCL's revenues are expected to decline by 4% to INR9bn on account of lower cement sales and power realisations. On the

volumes front, we expect the same to be lower by 5% to 2.6m mt. We expect the company to sell ~100m units of power in

4QFY11 against 77.8m units.

We expect margins to contract by 1,080bps to 23.7% on account of lower profitability of the cement as well as power division.

We expect the company to post net profits of INR478m as against a loss of INR165m in 4QFY10 (before extra-ordinary).

Nirav Shah+91 22 4031 3473

[email protected]


10/42


Financials

Another quarter of strong core operating performance

Company Net Interest Income Chg (%) Pre Provisioning Profits Chg (%) Net Income Chg (%)


Axis Bank 17,927 14,601 17,331 23 3 17,687 13,838 16,585 28 7 9,419 7,649 8,914 23 6

Bajaj Auto Finance 2,800 1,658 2,562 69 9 1,650 1,240 1,600 33 3 791 252 764 214 3

Bank of Baroda 23,127 17,450 22,923 33 1 17,271 16,288 18,512 6 (7) 10,436 9,063 10,689 15 (2)

HDFC 11,379 11,282 10,277 1 11 12,579 12,819 12,279 (2) 2 9,513 9,264 8,909 3 7

HDFC Bank 28,048 23,514 27,767 19 1 20,599 16,944 20,727 22 (1) 10,737 8,366 10,878 28 (1)

ICICI Bank 24,714 20,349 23,117 21 7 26,599 23,989 23,426 11 14 15,709 10,056 14,370 56 9

LIC Housing Fin 3,080 2,980 3,522 3 (13) 2,924 2,857 4,891 2 (40) 2,205 2,136 2,135 3 3

Punjab National Bank 32,285 24,980 32,033 29 1 23,563 23,325 23,499 1 0 12,980 11,350 10,898 14 19

State Bank Of India 94,498 67,215 90,498 41 4 61,757 51,939 67,645 19 (9) 31,391 18,670 28,281 68 11

Shriram Transport Fin 8,952 6,483 8,367 38 7 6,547 5,442 6,338 20 3 3,430 2,644 3,000 30 14

Union Bank of India 16,199 13,961 16,158 16 0 11,799 11,475 12,611 3 (6) 6,873 5,935 5,796 16 19

Yes Bank 3,328 2,442 3,232 36 3 3,204 2,576 3,113 24 3 1,976 1,400 1,911 41 3

Total 266,339 206,912 257,785 29 3 206,180 182,730 211,225 13 (2) 115,459 86,784 106,544 33 8

Banking sector

Robust headline earnings coupled with strong bottom line

We expect banks and financials under our coverage universe to report strong earnings growth (28% YoY and 3% QoQ) driven by

strong traction in credit growth (YTD system growth at 24.3% against RBI guidance of 20% FY11e), robust margins and low base

effect in 4Q10 (especially for PSU banks.) In our coverage universe, we expect public sector banks to report a stronger earnings

growth of 40% YoY as against 38% YoY for Private Banks, supported by the lower base effect in 4QFY10 for State Bank of IndiaHowever earnings progression for PSU banks excluding SBI is likely to remain at 26% YoY.

Strong traction in credit growth with deposit growth picking up; CD ratio easing albeit at slower pace

Headline systemic credit growth continues to remain robust with YTD growth at 24.3% YoY. On the deposits front, after a lackluste

9MFY11, systemic deposit growth has finally picked up (with YTD growth at 16.7%) as the banks have aggressively hiked deposi

rates post December. As a result, deposit growth has outpaced (~7.1%) credit growth (5.9%) post December. Further CD ratio fo

the banks stands at 75% and incremental CD ratio for the banks has eased from a high of 110% to 97%.

Margins to decline on sequential basis

We believe NIMs for banks especially those with low CASA ratio and weak ALMs are likely to witness compression starting from

4Q onwards as deposit rates has spiked upwards by 150-300 across various maturities. Further, NIM moderation should be

marginal in Q4FY11 as banks continue to benefit from lending rate hikes and faster asset re-pricing.Secondly continued liquidity

tightness coupled with high volatility in wholesale borrowing costs is likely to intensify pressure on margins from 1QFY12 onwards

However, in period of high interest rate environment, trends in CASA market share remain a key monitorable on deposit front.

Other income growth to remain muted

Other income growth, excluding trading profits is likely to remain muted banks (Private at 15 % YoY and PSUs at 5% YoY) due to

lack of treasury profits as the banks had booked trading profits last year. During the quarter, G-sec yields moved across the yield

curve, more so at the shorter end (25bps) as against longer end (6bps). Since a large part of bank's investment book is in the HTM

category - it is de-risked. Hence we do not expect banks to report any significant MTM losses.

Alok Kapadia+91 22 4031 3442

[email protected]

Sunesh Khanna+91 22 4031 3437

[email protected]

Reetu Gandhi+91 22 4031 3415

[email protected]


11/42


Provisions towards pension liability for retired employees may throw some negative surprise

Public sector banks have already started amortising for second pension liability over a period of 5years starting from 3QFY11

However recent guidelines issued by RBI during the quarter, requires bank's to completely provide for amount related to separated/

retired employees. Hence banks are required to provide full provisions towards retired employees in FY11 itself, while other

liabilities (relating to second pension option and gratuity) for existing employees can be amortised over a period of five years

Therefore these upfront provisions could throw up some negative surprise in 4QFY11.

Asset quality to remain stable

Asset quality for most of the banks is likely to remain stable. We believe that, private sector banks are well placed in terms of asse

quality and are likely to report lower loan provisioning since overall NPL formation (more so in retail) has shown signs of stability

over the past few quarters, whereas PSU banks could be a little patchy. Higher slippages on account of migration to system-based

recognition of NPLs remain a key risk on asset quality.

We also believe that cash recoveries and up gradation are likely to pick up significantly from hereon, since slippages for the

banks has peaked albeit at a higher level in the previous quarters (write-offs were aggressive over FY09 and FY10).Further,

banks like Union Bank and SBI could positively surprise during the quarter with a fall in slippages, higher up gradation and

recoveries.

Non banking financial companies

We expect NBFCs to report 20-25% earnings growth primarily driven by higher business volumes.

We expect NIMs to shrink in the current scenario given the fact that wholesale rates have rallied in last quarter as the incrementa

borrowing cost at the shorter end of the yield curve has gone up by 300-400bps on back of extremely tight liquidity. There has

also been delay in passing higher interest rates to customers, although most NBFCs have raised their lending rates, but the

transmission will comes will a lag.

We believe that strong demand of securitized assets by banks in the last quarter will support margins for 2HFY11 for companies

like Shriram Transport Finance and Mahindra Finance. We expect the liquidity position to ease in April as it is generally a lean

month we expect guidance on NIMs to be cautious as the impact of higher rates is yet to be reflected in the reported margins.

Credit growth Deposit growth

Source: RBI, Antique

30,000

32,000

34,000

36,000

38,000

40,000

Apr-10 Jun-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

16

18

20

22

24

26

Total Bank Credit (INR bn) - LHS Credit growth (YOY%) - RHS

40,000

42,000

44,000

46,000

48,000

50,000

52,000

Apr-10 Jun-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

14

15

16

17

18

Total Deposit (INR bn) - LHS Deposit growth (YOY%) - RHS


12/42


FMCG & Retail

Input inflation to curb growth



Asian Paints 21,956 18,768 20,996 17 5 3,408 3,109 3,448 10 (1) 2,106 1,898 2,202 11 (4)

Britannia Industries 11,611 9,303 10,800 25 8 661 (116) 482 (671) 37 482 129 373 274 29

Colgate Palmolive 5,876 5,166 5,582 14 5 1,524 1,247 746 22 104 1,236 1,034 662 20 87

Dabur India 10,395 8,488 10,800 22 (4) 1,891 1,620 2,095 17 (10) 1,486 1,331 1,541 12 (4

Godrej Consumer 10,196 5,092 9,804 100 4 1,788 1,075 1,678 66 7 1,296 918 1,188 41 9

Hindustan Unilever 49,200 43,158 50,270 14 (2) 5,027 5,310 6,243 (5) (19) 4,601 4,225 5,870 9 (22

ITC 59,619 50,538 54,535 18 9 17,933 15,401 19,690 16 (9) 12,283 10,282 13,891 19 (12

Jyothy Laboratories 2,233 1,898 1,484 18 50 340 305 167 12 103 287 171 169 68 70

Kansai Nerolac 5,451 4,238 5,601 29 (3) 618 585 685 6 (10) 351 331 416 6 (16

Marico 7,447 6,023 8,177 24 (9) 839 861 1,093 (2) (23) 590 594 776 (1) (24

Nestle India 18,263 14,798 16,710 23 9 3,634 3,040 3,298 20 10 2,349 1,971 2,217 19 6

Pantaloon Retail 28,799 20,576 27,586 40 4 2,477 2,156 2,383 15 4 618 559 472 11 31

Titan Industries 16,624 13,112 19,546 27 (15) 1,557 1,165 1,950 34 (20) 1,091 778 1,408 40 (22

United Breweries 7,943 5,734 6,096 39 30 868 636 659 37 32 484 344 298 41 62

United Spirits 15,804 12,521 15,920 26 (1) 2,325 1,702 2,730 37 (15) 800 714 1,020 12 (22

Total 271,418 219,412 263,907 24 3 44,891 38,096 47,348 18 (5) 30,059 25,278 32,503 19 (8

Input cost inflation to take toll on profits

The steep inflation in input cost is expected to have a broad-based impact on the profitability of consumer categories like food,

home and personal care. Incremental pressure would be felt in the fabric care category with rising prices of key raw materials like

LAB and Soda Ash. Average prices of LAB and Soda ash during 4QFY11 have soared by 13% YoY and 15% YoY, respectively

Further, Palm oil prices have risen sharply by 43% during 4QFY11. The trend in these key raw material prices shows a scenario

which is similar to the one in April 2008-December 2008 period when input cost inflation impacted operating margins.

In the discretionary space, paints companies would be impacted by the sharp volatility in crude oil prices and rising prices o

titanium-dioxide (TiO2).

Trend in LAB prices (INR/kg) Trend in Soda Ash prices (INR/50kg)

Source: Industry, Antique Source: Bloomberg, Antique

Abhijeet Kundu+91 22 4031 3430

[email protected]

0

20

40

60

80

100

120

140

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

0

400

800

1200

1600

Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11


13/42


Higher prices of key raw materials had impacted HUL'sTrend in prices of palm oil (MYR/t) margins during FY09

Source: Bloomberg, Antique Source: Company, Antique

HUL expected to witness better sales growth

We expect HUL to witness acceleration in sales growth during the quarter led by better growth primarily in soaps and detergents

However, the broad-based inflation in its key raw materials like LAB, soda ash and palm oil will offset the impact of the improvemenin sales performance. We expect HUL to post a growth in sales of 14% during the quarter to INR49.2bn. However, EBITDA is

expected to drop by 5% to INR5.03bn due to increase in raw material cost.

ITC to be the outperformer

In the current inflationary scenario, we expect ITC to be the clear outperformer backed by its addictive pricing power in cigarettes

We expect the company to witness further recovery in volume growth of cigarettes and continued lower losses in its other FMCG

division.

0

900

1800

2700

3600

4500

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

46

48

50

52

54

56

1QCY07 4QCY07 3QFY09 1QFY10 4QFY10 3QFY11

Impact of rise in

prices of LAB,

Soda ash and palm

oil


14/42


Industrials

Strong earnings, inflows remain key



ABB 15,286 14,559 20,506 5 (25) 1,146 29 113 3,869 914 779 66 68 1,073 1,052

BGR Energy 17,200 16,598 12,511 4 37 1,978 1,791 1,414 10 40 1,204 1,083 876 11 37

BHEL 162,017 135,591 84,052 19 93 35,443 24,873 18,097 42 96 25,968 19,096 13,382 36 94

L & T 158,376 133,749 113,227 18 40 24,131 20,508 12,385 18 95 16,186 13,374 8,070 21 101

Siemens 27,826 22,261 25,381 25 10 3,617 2,861 3,628 26 (0) 2,416 1,811 2,418 33 (0)

Suzlon 58,181 61,220 44,330 (5) 31 7,642 5,350 2,440 43 213 3,053 (1,970) (2,540) NM NM

Tecpro Systems 10,123 7,418 4,620 36 119 2,025 1,783 516 14 293 1,162 898 187 30 520

Total 449,009 391,395 304,627 15 47 75,982 57,194 38,592 33 97 50,769 34,358 22,461 48 126

We expect our universe of Industrial companies to witness a revenue growth of 15% for the quarter which will translate into net

profit growth of 6%. Excluding Suzlon (which we expect to report a loss), profit for the pack is expected to grow by 12% YoY(~10% QoQ). Overall, we are positive on the outlook of set of numbers from BHEL, Siemens, L&T and Tecpro Systems.

BHEL

We estimate company to record sales growth of 19% for the quarter (20% growth YoY) mainly driven by the strong order booking

At the end of 4QFY11, the company had an order book of ~INR1.6tn. Our EBITDA margin estimate is 22% for the quarter, an

increase of 3.5% YoY. Net profit is estimated to be INR25.9bn - growth of 36% over 3QFY10. The order inflows for the company

have been stagnant for the last three years. BHEL has guided for 10% increase in order inflow which will be key to stock

performance.

L&T

L&T has reported a revenue growth of 21% in 9mFY11 and 40% in 3QFY11. We expect company to report a revenue growth o

20% for the quarter and 21% for the full year. The key number to be watched is order inflow in the quarter. We expect order inflow

to be muted this quarter on account of delays in awarding of orders in power and infrastructure sectors (segment constitutes 37%

and 32% of current order book). We expect company to report a net profit of INR16.2bn, a growth of 21% YoY.

BGR Energy

BGR Energy is expected to report sales and net profits of INR17.2bn and INR1.2bn, a YoY growth of ~4% and ~11% respectively

We expect revenue booking from the EPC project of Kalisindh and Mettur and BoP orders of Chandrapur and Marwa which are

in advanced stages of execution. EBITDA margin for the quarter is expected to be 11.5% as against 10.8% in 4QFY10, similato margins reported in the last three quarters. We expect order inflow to be low for the quarter as awarding of BoP and EPC orders

for SEBs and NTPC have been postponed for 1QFY12.

Siemens

The revenue is expected to grow by 25% YoY to INR27.8 bn while PAT is expected to be INR2.4bn, a growth of 33% YoY. We

expect company to report EBITDA and PAT margin of 13% and 8.7%, respectively.

Abhineet Anand+91 22 4031 3441

[email protected]

Mohit Kumar+91 22 4031 3418

[email protected]


15/42


ABB

The company has been reporting lower profitability for the last six-seven quarters on account of provisioning of ~INR1bn in the

year. The profit margin was 3.4% in CY10 compared to 7.8% in CY09. However, the worst is behind and we expect company to

start reporting healthy profit margin and growth in revenue going forward. We expect revenue to grow by 5% to INR15.2bn with

a profit margin of 5.1% in the quarter (profit margin was 0.5% in 1QCY11).

Suzlon - a turnaround story?Suzlon has been reporting losses for the last 7-8 quarters. We expect Suzlon to turn around and report a profit of INR3bn, a profi

margin of 5.2% for the quarter. While estimated EBITDA is expected to grow to INR7.6bn by 43%. The improvement is expected

on account of higher domestic booking and higher booking in subsidiary REPower. The company has raised USD150m through

issue of FCCB. The company is expected to squeeze out the minority shareholders of REPower and delist it over the next year. This

would help it to have absolute control on the company.

Quarterly sale(MW) and orderbook(MW) EBITDA and PAT(INRm)

Source: Antique

Tecpro SystemsWe expect company to report a topline growth of INR10.1bn (+36% YoY), EBITDA of 2.0bn (14% YoY) and profit of INR1.2bn

(30% YoY). We have estimated 20% EBITDA margin for the quarter.

207361 461

650

1,459 1,551

2,5782,378

-

500

1,000

1,500

2,000

2,500

3,000

1QFY11 2QFY11 3QFY11 4QFY11e

Sale - MW Order Book -MW

(8,000)

(6,000)

(4,000)

(2,000)

-

2,0004,000

6,000

8,000

1QFY11 2QFY11 3QFY11 4QFY11e

EBITDA(INRm) Depreciation Interest PAT


16/42



Positive on Infosys, TCS; Cautious on Wipro



Infosys 74,742 59,440 71,060 25.7 5.2 25,596 20,220 23,640 26.6 8.3 18,502 16,170 17,800 14.4 3.9

TCS 102,440 77,380 96,630 32.4 6.0 33,220 23,390 29,000 42.0 14.6 25,330 20,010 23,700 26.6 6.9

Wipro 81,738 70,023 78,202 16.7 4.5 17,572 15,094 16,344 16.4 7.5 13,421 12,361 13,259 8.6 1.2

CMC 3,014 2,365 2,783 27.4 8.3 999 917 879 8.9 13.7 477 443 454 7.7 5.1

KPIT 1,971 2,098 1,848 (6.1) 6.7 386 618 394 (37.5) (2.0) 208 193 214 7.8 (2.8)

Persistent 2,021 1,717 1,949 17.7 3.7 461 383 428 20.4 7.7 362 397 362 (8.8) -

Total 265,926 213,023 252,472 24.8 5.3 78,234 60,622 70,685 29.1 10.7 58,300 49,574 55,789 17.6 4.5

Sector Earnings:

IT Earnings:We believe that 4QFY11 will be a strong quarter for top IT companies due to uptick in discretionary spends.Contribution from the consultancy business will increase from the current quarter for both Infosys and TCS and will have a

positive impact on the margins of the company.

Infosys vs. TCS: TCS once again will surprise the street with a growth leadership of ~6% QoQ, beating Infosys which could

exhibit a ~5.2% QoQ rise. We foresee TCS gaining from uptick in discretionary spend and believe that margin triggers which

have enabled TCS to post robust margin expansion in past few quarter vs. a decline by its competitor Infosys will remain

intact.

Wipro:We also believe that worst is not yet over for Wipro and the company will once again be found wanting on the

margin front primarily due to higher attrition and lower utilisation levels.

Guidance vs. expectation

Infosys:Although Infosys has guided revenues of INR71.57-72.30bn and EPS of INR31.06-31.28, our calculation gives us

revenues of INR74.74bn (+5.3% QoQ) and an EPS of ~INR32.47 (+4.3% QoQ). We expect Infosys to guide a revenue

growth of 17-19% and EPS growth of ~16-17% for FY12e. There is a high possibility that Infosys would affect a dividend

payout of INR15/share and probably consider a generous bonus (1:1) on completion of its 30 years in FY11.

TCS:Although TCS' management does not provide any guidance, our calculation gives us a revenue growth of (+5.9% QoQ)

and an EPS of ~INR12.94 (+6.9% QoQ). We expect TCS to upgrade its employee addition guidance from 37,000 to 45,000

for FY12e.

Infosys Technologies

On the revenue front, we believe that Infosys will also gain from the uptick in demand environment, and will once again

outperform its muted guidance on the back of revival in demand environment driven by increase in discretionary spend. We

expect robust growth in BFSI, retail and manufacturing fronts.

Key triggers to watch for:

Attrition:We believe that Infosys will report a slightly lower attrition of ~17% vs. 17.5% previously, based on the fact that the

company has ramped up its lateral recruitment in the past two quarters.

High utilisation:We expect Infosys to post utilisation of ~74% (including trainees) based on its slightly low attrition vs. the

previous quarter.

Sandip Agarwal+91 22 4031 3427

[email protected]


17/42


Employee addition: Guiding towards an employee addition of ~25,000 for FY12e.

Cash: The company may come up with a dividend of INR15 in 4QFY11, maintaining its trend of distributing 25-30% o

earnings (it had already given a dividend of INR10 and a special dividend of INR30 during FY11).

Bonus issue: Completed its 30 years in FY11, and going by the past trends we believe the company might give a 1:1

bonus issue.

Tata Consultancy Services

On revenue front, we believe TCS to benefit from uptick in demand environment, and to post robust growth in BFSI, retail and

manufacturing verticals due to strong revenues from application development and consultancy. Improvement in consultancy and

application development work will not only enable a robust revenue growth but will also aid margins due to uptick in overal

average billing rate.

Although 4Q is generally a weak quarter and expectations are quite sluggish, we expect 4QFY11 to contrast this trend with a

strong growth as most of unused budget will get deployment in this quarter. Also, management's commentary on demand

environment, deal pipeline and pricing uptick has been very positive (Refer: Chandrasekaran interaction on CNBC on Mar 29

2011).


Lower attrition:We believe TCS will once again post lowest attrition rate of 14-14.5% YoY among the peer set.

High utilisation: The company is expected to post utilisation of ~76.5% (including trainees) based on its low attrition rates

and bench strength.

Low employee cost: TCS' employee costs to remain in the range of ~35.8% similar to the last three quarters helped by low

attrition and high utilisation.

Employee addition:We expect it to upgrade employee addition target for FY12e from 37,000 to 45,000 based on the

uptick in discretionary spend.

Wipro

Although Wipro had provided a revenue growth guidance of 3-5% on a sequential basis which is way high than what Infosys has

guided (1.25-1.75%), we believe the chances of Wipro beating it at the high end will be a challenge. We also strongly believe

that Wipro will not be able to post revenue growth higher than Infosys at least in the coming quarter.

We also have serious concerns on the restructuring of manpower front where we believe that Wipro would have incurred

significant expenses and also would have taken a shot at its utilization levels. Although we believe that the company will charge

it as a one-time expense, the possibility of recurrence of the same is high for at least next few quarters.


Our calculation based on operational metrics gives us revenues of INR81.7bn (+4% QoQ) and an EPS of ~INR5.48 (+1% QoQ)

Higher attrition:We believe Wipro will report attrition of +20% and key thing to watch for will be involuntary attrition. Also,

we believe that involuntary attrition will trigger voluntary attrition more in the coming quarters.

Low utilisation: The company is expected to post utilisation of ~71% (including trainees) based on its high attrition rates

High one-time restructuring costs:We believe that the employee cost component reported by Wipro will have high

involuntary employee costs.

Employee addition:We expect Wipro to give a fresh recruitment target for FY12e in the range of 18,000-20,000.


18/42


CMC Ltd.


We expect CMC to report revenues of INR 3.01bn implying a YoY growth of 27.4% and sequential growth of 8%. Our high

revenue estimates are based on both uptick in discretionary spend and high domestic growth primarily from governmen

projects.

We believe the company will report an EPS of INR31.51. Our high EPS estimates are primarily based on continuous shift fromlow margin consumer business to high margin IT enabled services business.

We expect very positive commentary from the company primarily in the IT enabled services segment and education vertical

All the three verticals i.e. IT enabled services, systems integration and education are posting significant growth for the last few

quarters and we expect the momentum to continue going ahead on the back of significant demand in the domestic IT services

market triggered by budget allocation by most of the state governments and e-governance roll out coupled with successfu

implementation of UID.

Persistent Systems

Key triggers to watch for: We expect Persistent to report revenues of INR2.02bn implying a sequential growth of 4%.

PAT is expected to be flat at INR362m. Diluted EPS in 4QFY11 is estimated at INR9.06.

We expect company to guide sequential revenue growth of ~3-5% and also update on new projects and client budgets.

KPIT Cummins


We expect KPIT to report revenues of INR1.97bn, implying a sequential growth of 7%.

PAT is expected to decline by ~2% QoQ to INR208m. Diluted EPS in 4QFY11 is estimated at INR2.57.

We expect company to guide on usage of huge cash balance lying on its current account.


19/42


Media

Cricket to rule the quarter



IBN18 Consolidated 2,196 1,688 2,362 30 (7) 374 24 321 1,455 16 213 (225) 198 NA 8

Den Networks 2,678 2,463 2,644 9 1 294 270 265 9 11 130 170 89 (24) 47

Dish TV 4,076 3,031 3,732 34 9 671 349 666 93 1 (775) (598) (443) NA NA

Hathway Cable 2,261 NA 2,271 NA (0) 425 NA 415 NA 2 (160) NA - NA NA

Sun TV Network 5,700 3,910 5,970 46 (5) 3,581 3,309 5,018 8 (29) 2,049 1,651 2,255 24 (9)

UTV Software Comm 2,674 1,306 2,559 105 4 684 407 534 68 28 366 305 400 20 (9)

Zee Entertainment 7,501 6,493 7,549 16 (1) 1,699 1,836 1,541 (7) 10 1,220 1,263 1,509 (3) (19)

Total 27,085 18,891 27,087 43 (0) 7,728 6,195 8,761 25 (12) 3,042 2,566 4,007 19 (24)

3QFY11 saw a buoyant growth led by festive season. In the current quarter, cricket world cup and Budget session steal the show

The GRPs of the Hindi GEC and other genres have fallen sharply in the last few weeks.The cricket is expected to constitute more than 20% of the total ad spends for CY11e with World cup generating an ad spend

revenue of more than INR20bn and IPL 4 getting the rest of the pie. While the major portion of ad revenue spend during cricke

goes to the match broadcasters, other channels also benefit due to the increase spend by companies.

4Q will see a marginal or flat growth for the sector followed by a double digit growth rate for FY12e.

DTH industry - two fold benefits from Cricket packed quarter

DTH industry with a gross subs addition of ~1m per month will continue to see similar growth in subscriber addition number in the

current and next quarter due to the cricket packed quarter. In addition to subscriber addition the industry will also see an upward

trend in ARPU due to high definition TV.

Dish TV, with an incremental market share of 30-32%, will reach a gross subscriber base of 10.4m in FY11e. We have forecasted

an ARPU of INR142 for FY11e and revenue of 4.1bn for 4QFY11.

Cable digitisation approved by cabinet

Cable operators which are facing sharp competition form DTH industry will get some relief once the digitisation bill is passed in the

parliament. Hence, even though the long-term seems positive for the cable industry, delay in policy, stiff competition from DTH

players and dithering of execution by cable companies will have negative impact in the short term.

GEC - bowled by cricket season

GEC has seen a sharp fall in GRP over the last few weeks. We expect this trend to continue in the first half of next quarters which

will be dominated by IPL 4.IBN18 which reported a sharp turnaround in the last quarter will see the growth momentum continued in the current quarter. 4Q

also being the budget season will benefit the news business of the company, which constitutes 50% of the revenue of the

restructured entity. The five state elections in Tamil Nadu, West Bengal, Kerela, Assam and Pondicherry in the next quarter wil

drive the growth in revenue and earnings.

Zee TV reported sports loss of INR1bn in 3QFY11 and the current quarter might see a similar cost structure due to the high cos

associated with India-South Africa series. The GEC business will see a marginal growth due to improved domestic subscription

revenue.

Rajesh Zawar+91 22 4031 3450

[email protected]

Varun Gupta+91 22 4031 3412

[email protected]


20/42


Metals

Sector bouncing back



Graphite India 3,360 3,386 3,375 (1) (0) 739 982 732 (25) 1 425 556 442 (24) (4)

Hindalco Industries 68,841 54,044 59,746 27 15 9,117 8,354 7,401 9 23 5,960 6,639 4,603 (10) 29

Hindustan Zinc 29,282 24,985 26,015 17 13 17,182 15,548 14,318 11 20 14,746 12,920 12,428 14 19

Monnet Ispat 3,981 4,384 3,471 (9) 15 1,185 1,284 1,109 (8) 7 684 725 702 (6) (3)

NALCO 18,565 16,260 14,432 14 29 5,753 5,411 3,896 6 48 3,935 3,915 2,560 1 54

Prakash Industries 4,493 4,643 3,823 (3) 18 820 990 717 (17) 14 500 737 551 (32) (9)

Sterlite Industries 86,543 71,108 83,325 22 4 26,070 20,685 19,787 26 32 13,263 13,809 11,011 (4) 20

JSPL 32,665 31,756 31,740 3 3 16,449 14,587 15,987 13 3 11,101 9,634 9,511 15 17

JSW Steel 64,684 54,807 60,026 18 8 14,039 13,234 10,164 6 38 5,555 6,110 2,917 (9) 90

Sesa Goa 33,000 28,156 24,987 17 32 18,307 15,030 12,306 22 49 14,505 12,129 10,653 20 36

SAIL 125,150 122,298 113,128 2 11 28,150 30,971 17,957 (9) 57 17,788 20,849 11,075 (15) 61

Tata Steel (India) 80,323 73,394 73,974 9 9 30,811 31,307 28,205 (2) 9 16,207 21,623 15,135 (25) 7

Tata Steel (Consol) 327,731 275,038 290,895 19 13 42,562 47,502 34,246 (10) 24 14,115 32,410 9,489 (56) 49

Total 798,295 690,863 714,962 16 12 180,373 174,575 138,620 3 30 102,577 120,433 75,942 (15) 35

The metals sector was severely impacted by the consumption slowdown in major markets and has seen strong rise in raw materia

and finished product prices. 4QFY11 witnessed sharp recoveries in prices of base metals with near term bottom seen in 3QFY11

Ferrous sector also participated in the rally following the raw material prices increased but end product sequentially was at similar

levels. However, towards quarter end, the metal witnessed some correction and the volatility persisted with Japanese Tsunami and

global demand headwinds.

Ferrous companies helped by higher volumes

We expect steel companies to increase their profitability sequentially in 4QFY11 with improvement in volumes however increaseof raw material prices will be offset by better product realisations during the quarter. Thus, steel companies will see expansion in

EBITDA per tonne for JSPL, JSW Steel and Tata Steel. Similarly, Sesa Goa will see improved performance by higher volumes on

account of busy quarter and higher realisations.

Non-ferrous companies benefitted by rising prices

Sequential rise in the metal prices will help the revenue growth of the non-ferrous companies. Hindalco, Nalco, Hindustan Zinc

and Sterlite Industries will gain by rising output prices but the operating costs might see an increase with rising input prices from

coal.

Commodity Average Prices

Change ChangeCommodity Unit 4QFY11 4QFY10 YoY (%) 3QFY11 QoQ (%

LME Aluminium Spot USD/t 2,506 2,167 16 2,341 7

LME Copper Spot USD/t 9,633 7,245 33 8,631 12

LME Zinc Spot USD/t 2,394 2,283 5 2,314 3

LME Lead Spot USD/t 2,602 2,211 18 2,387 9

LME Nickel Spot USD/t 26,905 20,096 34 23,565 14

LME Silver Spot USD/oz 32 17 89 27 20

LME Gold Spot USD/oz 1,388 1,110 25 1,370 1

Indian Domestic HRC USD/t 903 777 16 886 2

Iron ore fines 63.5% - CFR (China) USD/t 183 134 37 163 12

Source: Bloomberg

Rajesh Zawar+91 22 4031 3450

[email protected]

Nilesh Mahajan+91 22 4031 3414

[email protected]


21/42


Oil & Gas

Higher subsidy burden capping upstream realisations



BPCL 450,083 375,509 366,655 20 23 13,280 11,272 7,284 18 82 6,628 17,897 1,874 (63) 254

Essar Oil 147,933 104,540 122,330 42 21 7,682 3,440 7,590 123 1 2,873 1,800 2,730 60 5

GAIL 88,438 65,221 83,650 36 6 15,618 13,637 13,331 15 17 9,630 9,108 9,676 6 (0)

HPCL 414,560 313,213 339,025 32 22 10,745 13,139 6,267 (18) 71 3,971 7,575 2,110 (48) 88

IOC 989,914 772,299 803,332 28 23 44,990 72,986 27,275 (38) 65 19,128 55,568 16,348 (66) 17

OIL 24,237 18,321 23,887 32 1 11,006 6,658 12,281 65 (10) 6,849 4,310 9,080 59 (25)

ONGC 173,943 147,133 185864 18 (6) 101,656 81,290 113,138 25 (10) 45,639 37,376 57,618 22 (21)

Petronet 38,255 23,855 36,276 60 5 3,265 2,262 3,456 44 (6) 1,599 973 1,708 64 (6)

RIL 728,290 575,700 597,890 27 22 100,787 91,360 95,450 10 6 54,239 47,100 51,360 15 6Total 3,055,652 2,395,791 2,558,908 28 19 309,030 296,044 286,073 4 8 150,556 181,707 152,504 17 (1)

OMCs to post profits, with government support on under-recoveries and improved GRMs

During 4QFY11, with 21% QoQ rise in oil prices to USD105/bbl, under-recoveries on diesel and cooking fuel prices have risen

to INR313.7bn from INR149.3bn in 3QFY11. We estimate cooking fuel under-recoveries at INR137.9bn and auto fuel under-

recoveries (diesel) at INR175.8bn. We have assumed 1/3rd sharing of total under-recoveries by upstream companies, 50% to be

shared by the government and the rest 17% to be borne by OMCs. With better GRMs and inventory gains due to rising oil price

(up USD21/bbl since the beginning of the quarter), OMCs are expected to post profits despite FX losses as a result of rupee

depreciation (-INR0.5/USD). While we expect government to compensate 50% of total under-recoveries, we are awaiting fo

further clarity on under-recovery sharing mechanism.

Company & product wise under-recoveries and its sharing (INRm)4QFY11 (INRm) BPCL HPCL IOCL Tota

Diesel 43,581 36,709 95,481 175,771

Domestic LPG 19,570 20,099 35,890 75,559

PDS SKO 10,411 11,658 40,272 62,341

Total 73,562 68,466 171,643 313,670

Upstream share (1/3rd) 24,518 22,820 57,209 104,546

Sharing among upstream ONGC OIL GAIL Tota

Subsidy sharing 86,959 11,511 6,076 104,546

% sharing among upstream 83% 11% 6% 100%

Source: Antique

Net realisations of PSU upstream companies to be impacted by higher subsidy burden

ONGC is expected to post net realisations of ~USD59/bbl, up 14% YoY but down 10% QoQ and OIL is expected to post ne

realisations of ~USD60/bbl, up 1% QoQ and 27% YoY. We expect upstream companies to share 1/3rd of total under-recoveries

ONGCs 4Q net profits are expected to increase by 22% YoY but decline 21% QoQ due to higher subsidy discount because o

high oil prices. We expect DD&A to remain higher at INR45.6bn and a flattish QoQ oil & gas production. OIL is expected to pos

a net profit of INR6.8bn, higher by 59% YoY and but decline of 25% QoQ due to higher subsidy discount.

Amit Rustagi+91 22 4031 3434

[email protected]

Ruchi Dugar+91 22 4031 3422

[email protected]

Miten Vora+91 22 4031 3447

[email protected]


22/42


RIL earnings to remain strong despite fall in KG-D6 production

We expect Reliance Industries to report a 15% YoY and 6% QoQ rise in net profits aided by 28% YoY increase in refining GRMs

at USD9.6/bbl. Refining EBIT of INR28.8bn is expected to rise 18% QoQ and 45% YoY due to better GRMs. E&P earnings to ge

impacted by fall in KG-D6 gas production by 6% QoQ to 51mmcmd (including MA). Panna Mukta volumes recovered QoQ, oi

increased by 29% to 36.9Mbbl/d and gas increased by 52% to 5.8mmcmd. Petchem earnings are expected to fall by 3% QoQ

due to sharp rise in feed cost prices despite recovery in Petchem prices.

GAIL core earnings to remain strong, provision for DUPL tariff to impact growth

We expect GAIL to report flat QoQ earnings due to 20% fall in transmission EBIT impacted by INR120m provision for 6% reduction

in tariff by regulator, effective November 2008. Petchem EBIT on the other hand is expected to rise by 94% QoQ due to 51% QoQ

sales and 6% higher QoQ HDPE prices. We estimate GAIL to share 1/3rd of cooking fuel losses and share subsidy amount of

~INR6.1bn (up 45% QoQ).

For PLNG, We estimate earnings to rise by 64% YoY but down 6% QoQ. We expect a 30% YoY and a flat QoQ growth in volumes

due to higher spot cargoes. PLNG has done nearly 8 spot cargoes, out of which 4 cargoes are done as re-gasification services

Essar Oil's profitability boosted by recovery in refining margins

We expect Essar Oil to post a 60% YoY and 5% QoQ rise in net profit led by upswing in Asian refining margins. Essar Oil is

expected to report GRMs of USD6.5/bbl excluding any sales tax benefit helped by sharp recovery in diesel crack spreads, and

inventory gains due to rising oil price (up USD21/bbl since the beginning of 4QFY11).

Summary of key indicatorsParticulars (USD/bbl) 4QFY11 4QFY10 YoY (Chg %) 3QFY11 QoQ (Chg %

Bonny Light 107 78 37 88 21

Dubai 100 76 32 84 18

SGP Diesel-Dubai 18.1 8.9 103 12.9 40

SGP Gasoiine-Dubai 12.5 12.6 (0) 10.8 16

SGP Naphtha-Dubai (0.3) 2.3 (112) 3.3 (108

SGP Dubai-Arab heavy 2.6 1.3 103 3.1 (16

SGP Dubai-Maya 8.8 5.3 68 8.3 7

SGP 95 RON-Dubai 12.5 12.6 (0) 10.8 16

INR/USD 45.3 45.9 (1) 44.8 1

Reuters SGP GRMs 7.4 4.9 51 5.4 37

Source: Bloomberg, Antique

Refining margins continues to rise in 4QFY11, led by strong diesel spreads

Source: Bloomberg, Antique

2

4

6

8

10

1QFY08 4QFY08 3QFY09 2QFY10 1QFY11 4QFY11

SGP GRM (USD/bbl)

0

10

20

30

40


20

50

80

110

140

SGP Diesel-Dubai (USD/bbl) SGP Dubai crude (USD/bbl,RHS


23/42


Despite rise in oil prices, light heavy spreads remain flattish Singapore Gasoline R95-Dubai crude rise to USD3/bbl QoQ


INR appreciated by 1.3% YoY and depreciated 1%QoQSingapore Naphtha-Dubai crude fall by USD3/bbl QoQ against USD


0

4

8

12

16


20

45

70

95

120

Dubai-Maya (USD/bbl) SGP Dubai-Arab heavy(USD/bbl)

SGP Dubai crude (USD/bbl)-RHS

-7

-2

3

8

13

18

23

28

33

Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dec

05-10 range 2009 2010 2011

-30

-20

-10

0

10

20

Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

05-10 range 2009 2010 2011

39

41

43

45

47

49

51


INR/USD


24/42


Pharmaceuticals

Buoyancy to continue



Aurobindo Pharma 10,780 9,128 11,922 18 (10) 3,245 2,724 3,195 19 2 2,461 2,068 1,887 19 30

Cadila Healthcare 10,820 8,466 11,668 28 (7) 2,528 1,894 2,562 34 (1) 1,636 1,188 1,620 38 1

Indoco Remedies 1,226 1,105 1,155 11 6 151 126 145 20 4 85 82 88 4 (3)

Ipca Laboratories 4,438 3,817 4,664 16 (5) 918 814 910 13 1 573 499 527 15 9

Lupin Ltd 15,616 13,282 15,102 18 3 3,921 2,924 2,973 34 32 2,669 2,206 2,240 21 19

Sun Pharma 11,690 10,157 16,011 15 (27) 2,260 1,941 3,510 16 (36) 2,406 2,635 2,606 (9) (8)

Jubilant Lifesciences 7,984 6,048 8,690 32 (8) 1,720 1,585 1,322 8 30 1,143 920 442 24 159

Total 73,088 56,234 66,572 20 (7) 16,457 14,435 15,672 21 5 10,996 9,755 12,556 16 30

Steady state growth in domestic market

Indian pharmaceutical companies are likely to maintain strong growth in 4QFY11. The sustained growth is driven by new producintroductions and higher penetration in the domestic as well as regulated markets. Domestic formulation market is expected to grow

further by ~15% with chronic therapy areas outpacing the acute. We expect companies to register a growth of ~12-15% in the

domestic market, and adjusting for base effect, the growth could be ~7-8% in 4QFY11. Most of the domestic companies have

continued to add field force during the quarter resulting in higher overheads for certain companies. We expect companies such as

Ipca, Lupin, Sun Pharma, and Cadila Healthcare, to grow by ~15-18% in 4QFY11e.

Regulated markets to witness strong growth on the back of higher product approvals

Prescription trends for Indian companies supplying generics and branded generics have witnessed an upmove. Indian companies have

received approvals for products with exclusivity such as Pantaprazole, Omeprezole OTC, and Fexofinadine for Dr. Reddy's, Zolpidem

for Ranbaxy and Taxotere for Cadila JV - this will drive major revenue upsides in the US. Companies such as Lupin and CadilaHealthcare which have a branded formulations business in the US have continued to witness stronger prescription sales in 4QFY11.

CRAMs business on road to gradual recovery

Our interaction with Custom Research and Manufacturing Service (CRAM) companies gives us some sense that customers have

started re-stocking inventory in 4QFY11e. Big pharmacos have resumed outsourcing after the recent spate of high-value M&As

resulted in realignment of excess capacity. Companies such as Jubilant Lifesciences and Dishman Pharma continue to witness

partial restocking of inventory and have signed sub-USD50m contracts. The outsourcing industry is still void of large multi-year,

multi-million dollar deals that will result in higher growth and better confidence in the industry. We expect CRAM companies to

grow ~8-10% in 4QFY11e.

Aurobindo Pharma

We expect Aurobindo Pharma (Aurobindo) to report a 15% growth in revenues at INR10.7bn. Growth in revenue will be aided

by contribution strong sales in the export formulation business, however income from the Pfizer deal is expected to slow down in

1QFY12, we expect some impact in 4QFY11e. The quarter has witnessed two setbacks on the Pfizer deal - one on Import aler

sounded on Unit VI and product recall issue faced by Pfizer's Generic arm Greenstone. We increased contribution from Pfizer

deal. The quarter has witnessed an ARV contract being awarded to Aurobindo resultant of which we expect the segment to

witness 18% growth during the quarter. Export formulations which include geographies such as Europe and RoW markets wil

witness 16% growth on the back of new product launches and maintaining prescription share of existing products. We expect

operating profits to grow by 15% to INR3.2bn and maintain margins at 30.1% during the current quarter. We expect the net profi

to increase by 16% to INR2.5bn during the quarter.

Nishant Patel+91 22 4031 3426

[email protected]


25/42


Cadila Healthcare

We expect Cadila Healthcare (Cadila) to report a revenue growth of 29% to INR10.8bn during 4QFY11e. We expect the Zydus

Hospira JV to witness higher contribution on account of FDA approval received to market generic Taxotere. This will help improve

capacity utilization levels and income for the JV during the quarter. We expect the domestic formulations business to grow above

market growth rates of 15% on account of higher contribution from chronic therapy areas. Better product mix and cost rationalization

efforts is likely to result in 34% rise in operating profits to INR2.5bn with operating margin growth of 100bps at 23.4% during the

quarter. We expect Cadila to report a net profit growth of 38% to INR1.6bn

Indoco Remedies

We expect Indoco Remedies (Indoco) to report a revenue growth of 11% to INR1.2bn driven by strong domestic and export sales.

We expect operating margins to expand by 100bps to 12.3% during the quarter. Net profit is expected to grow 4% to INR85m

during the quarter.

Ipca Laboratories Limited

We expect Ipca to report a revenue growth of 16% to INR4.4bn during 4QFY11e. This growth will be achieved by combination

of higher sales in the domestic market and good regulated market sales. The quarter witnessed Ipca's manufacturing facility

receiving UKMHRA approval to its Indore SEZ which will result in higher off-take from the UK and European markets. We expec

utilization levels at the facility to be slow during the quarter actual pick up in volumes from the Indore SEZ for UK is expected only

by 1QFY12e onwards. We expect overheads of maintaining the site to be high even in the current quarter impacting operating

margins. We expect operating margins to decline by 100bps to 20% during the quarter. Net profits are likely grow by 14% to

INR572m.

Lupin Limited

We expect Lupin to report a revenue growth of 15% to INR15.6bn driven by strong domestic formulation sales and highe

international contribution. We expect Lupin's domestic formulations business to grow at 15% in 4QFY11e. Branded generics

segment in the US is expected to witness a lag despite increased sales in Antara prescription in the last two months. Generics

business on the other hand will grow at 15% in the regulated markets. Japan will witness strong traction on a lower base resulting

in higher revenue from that geography. Better product mix and cost rationalization efforts will result in EBIDTA growing by 25%

during the quarter to INR3.9bn and PAT to grow by 18% to INR2.7bn.

Sun Pharmaceutical Industries Limited

We expect Sun Pharmaceutical Industries (Sun Pharma) to report a growth of 15% (excluding Taro sales). On the domestic

formulation business, we expect the segment to outpace the industry growth at 20% during the quarter. However, despite stronge

topline growth, we expect the operating profits to increase by only 16% on account of integration of Taro and costs associated with

it to INR2.2bn and Net profits to grow 10% to INR2.8bn.

Jubilant LifesciencesOur interaction with the CRAMs companies suggests that big pharmacos have resumed re-stocking inventory in 4QFY11e. Big

pharmacos have realigned their manufacturing sites after series of high-value M&A in 2009. Pharma companies have resumed

outsourcing research and manufacturing to Indian companies. Indian companies such as Jubilant Lifesciences, Dishman Pharma

and Divis Laboratories have signed sub-USD50m contracts with big players. Though they are currently void of any large multi

year, multi-million dollar deals, we expect this segment to gain traction only from 1QFY12 onwards. We expect Jubilant Lifesciences

to grow at 32% to INR7.8bn. We expect revenue to witness an uptick on account of partial restocking of inventory by the big

pharmacos. We expect EBIDTA to grow by 8% to INR1.7bn and PAT to grow 24% to INR1.1m during 4QFY11e.


26/42


Real Estate & Road Infrastructure

Phoenix Mills and Indiabulls Real Estate to see strong YoY earnings growth



Real Estate

DLF 25,240 19,944 24,799 27 2 11,942 10,000 11,780 19 1 4,950 4,264 4,657 16 6

Unitech 7,707 11,074 6,598 (30) 17 2,769 2,475 2,088 12 33 1,557 1,634 1,114 (5) 40

HDIL 4,160 4,341 4,554 (4) (9) 2,413 2,271 2,665 6 (9) 2,166 1,778 2,519 22 (14

IBREL 1,566 607 3,997 158 (61) 477 (120) 1,229 497 (61) 398 9 766 4,556 (48

Phoenix Mills 464 345 451 35 3 338 198 327 71 3 245 157 238 56 3

Sobha Developers 3,621 4,008 3,629 (10) (0) 1,072 965 820 11 31 493 557 490 (11) 1

DB Realty 2,323 NA 2,733 NA (15) 999 NA 1,191 NA (16) 754 NA 1,087 NA (31

Total 42,757 40,319 44,027 6 (3) 19,011 15,789 18,909 20 1 9,810 8,399 9,783 17 0

(ex-DB Realty)

Road Infrastructure

IL&FS Transportation 8,804 NA 7,337 NA 20 2,377 NA 2,207 NA 8 725 NA 616 NA 18

Total 8,804 NA 7,337 NA 20 2,377 NA 2,207 NA 8 725 NA 616 NA 18

Real Estate

In the past year, real estate prices have rebounded in most markets across the country. In some markets such as Mumbai prices

have crossed peak levels and affordability has once again become a concern resulting in declining residential sales volumes in

the city. While prices have increased in NCR, demand seems to have stabilised. The past year saw high absorption levels in

Noida region given the launch of several mid-income housing projects. With property prices still below peak levels, improving

infrastructure and strong outlook for employment generation and salary hikes, Bangalore emerges as one of the most attractive

real estate markets in the country. Going forward, we expect real estate prices to moderate/stabilise, and given rising interest

rates, we expect affordability to once again become a key issue in influencing demand.

Demand for office space too has recovered in the past year in most markets. We expect office space absorption to continue to

improve in FY12e driven by healthy growth in the economy. However, upside on rentals will be limited given sufficient supply in

pipeline.

Road Infrastructure

The pace of project awards by NHAI has improved in FY11 but is still below the level required to achieve the target of completion

of 20km of road per day. In FY11, NHAI awarded ~5,100km of road, an increase of 52% over FY10 but well below the targe

of 9,000km. That said we expect the pace of project awards to increase in FY12e since it is the last year of the 11th plan. In an

effort to expedite the process of project awards, NHAI has invited applications from road developers for pre-qualification o

projects that are expected to be floated within a year. The pre-qualification will be valid from 1st Jan to 31st Dec every year and

the companies seeking pre-qualification must indicate the estimated project cost for which it wishes to get pre-qualified. In FY12e

NHAI is looking to award 7,300km of roads, of which 700-800km will be awarded in April itself and ~2,000km in 1QFY12e.

DLF

In 4QFY11, similar to the trend seen in previous quarters of FY11, new launches were lower than anticipated. In its 3QFY11

results, DLF had stated plans to launch ~8m sq ft of new projects in Gurgaon, Chandigarh, Delhi and Kochi. However, in

4QFY11, the company launched only ~3.3m sq ft - ~2m sq ft of plots in Mullanpur (Chandigarh), 1m sq ft of commercia

space (Horizon Centre) in Gurgaon and 0.3m sq ft of luxury housing in Delhi (Greater Kailash II).

We expect the company to end the year with ~9-10m sq ft of sales (6.5m sq ft sold in 9mFY11) vs. its target of ~12m sq ft and

20-28% lower volumes than the 12.5m sq ft sold in FY10.

Karishma Solanki+91 22 4031 3446

[email protected]


27/42


Plotted development will be an important feature of FY12 launches. The company plans to launch plots in Indore, New

Gurgaon and Panchkula. Additional launches planned in FY12 include group housing in New Gurgaon, Gurgaon Phase V

and Bangalore Phase II.

We estimate ~16% YoY growth in net profit in 4QFY11 but on a QoQ basis we expect the increase in net profit to be relatively

muted at 6% on account of few new launches.

HDIL We estimate 4QFY11 TDR volumes to be ~12% lower QoQ at ~1.1m sq ft (vs. 1.25m sq ft in 3QFY11) given decline in

residential sale volumes in Mumbai which is expected to translate into lower demand for TDR. However, we expect TDR prices

to be stable QoQ.

HDIL will likely continue to monetise its land in the Vasai-Virar belt in the coming quarters. We are estimating a 15% QoQ

increase in revenue recognised from FSI sale in Vasai-Virar in 4QFY11.

In Oct 2010, the company had signed an MoU for sale of FSI worth ~INR6.5bn at its Goregaon Siddharth Nagar project. I

this transaction is recognised in the books, earnings could be higher than estimated.

For 4QFY11, we expect HDIL's net profit to grow 22% YoY primarily due to higher TDR prices. However, on a QoQ basis, weexpect net profit to be down 14% on account of lower TDR sale volumes.

Indiabulls Real Estate (IBREL)

IBREL's 4QFY11 revenue and net profit is expected to see a substantial YoY jump since residential projects began contributing

to revenue recognition only from 1QFY11.

On a QoQ basis, we expect revenues to be lower since the revenue recognition threshold for some large projects was crossed

in the previous quarters, as a result of which a substantial percentage of revenue was recognized in the last quarter.

Area of office spaced leased in Jupiter and Elphinstone Mills is expected to have increased given that ~2.45m sq ft of office

space has been completed in both these projects together.

Sobha Developers

We expect Sobha Developers' 4QFY11e revenues and net profit to be relatively flat QoQ. On a YoY basis however, we

expect net profit to be down 11% due to lower revenue recognition from sale of land.

Sales volumes for 4QFY11 are expected to be 0.5-0.6m sq ft vs. 0.7m sq ft in 3QFY11 largely because no new projects were

launched during the quarter.

Lower sales volumes in 4QFY11 will be offset by better realisations. Average realisation is expected to improve from INR3,946/

sq ft in 3QFY11 to ~INR4,100/sq ft in 4QFY11.

Several projects are scheduled to be launched in 1QFY12 including large projects in NCR and North Bangalore.

Phoenix Mills

4QFY11 net profit is expected to register a 56% YoY increase on account of higher income contribution from Palladium. On a

QoQ basis, we expect net profit growth to increase marginally by 3%.

Fit outs by retailers is in advanced stages at Pune Market City and the mall is scheduled to open in the second half of Ap

2011. This will be the company's first mall to become operational after High Street Phoenix.

Opening of market city projects in Pune, Bangalore and Kurla and renewal of lease agreements with anchor tenants (Big

Bazaar, Lifestyle and Pantaloon) occupying ~0.15m sq ft at High Street Phoenix are key events to track in FY12.


28/42


Unitech

As at end of 3QFY11 Unitech had sold 7.19m sq ft and may end the year with ~9.5-9.7m sq ft of sales, just a little short of its

target of 10m sq ft.

We estimate 4QFY11 net profit to decline 5% YoY but on a QoQ basis net profit is expected to show a healthy growth of 40%

given that 3QFY11 profits were negatively impacted by non-operating loss of INR376m on account of disposal of a capital

asset.

DB Realty

We expect TDR from Mahul Nagar project to continue contributing the largest share of revenues in 4QFY11. Orchid Woods

in Goregaon East is expected to be the other major factor contributing to revenues given the advanced stage of completion

IL&FS Transportation

We expect a healthy QoQ growth in revenues and net profit since the company has achieved good construction progress on

4-5 projects in 4QFY11 and the 10% threshold limit for revenue recognition is expected to have been crossed for some

projects.

Towards the end of the quarter, the company tied-up debt for Phase II of the Rajasthan Mega Highways project. ~75% of the

total project cost of INR8.14bn is financed through senior debt facility with a rate of interest of 11% pa.


29/42


Shipping & Logistics

Overcapacity impacted the recovery in seasonally strong quarter



GE Shipping 5,206 7,667 5,560 (32.1) (6.4) 1,949 3,157 2,023 (38.3) (3.7) 601 2,113 622 (71.6) (3.5

Essar Shipping 8,991 8,516 8,190 5.6 9.8 3,009 2,676 2,986 12.4 0.8 190 745 265 (74.5) (28.3

Mercator Lines 7,561 4,820 7,777 56.9 (2.8) 1,100 1,347 1,380 (18.3) (20.3) (279) 2 38 NA NA

Great Offshore 2,667 2,739 1,978 (2.7) 34.8 1,296 1,357 763 (4.5) 69.9 466 731 18 (36.2) NA

Mundra Port and SEZ 5,318 4,205 4,508 26.5 18.0 3,525 2,521 3,098 39.8 13.8 2,609 1,922 2,285 35.7 14.2

Total 29,743 27,948 28,013 6.4 6.2 10,879 11,057 10,250 (1.6) 6.1 3,586 5,512 3,229 (35) 11

Freight rates in tanker segment reported significant decline on a YoY basis even from a low base in 4QFY11 and witnessed a

marginal recovery on a QoQ basis particularly in VLCC segment. Baltic Dirty Index for crude carriers declined by 18.5% YoY to

823, while Baltic Clean Index for product carriers declined by 14.6% YoY to 692. However, product carrier index remained

positive on a QoQ basis with marginal increase of 1.1% in Baltic Clean Index. The freight rates for very large crude carriers

(VLCC) remained weak as compared to smaller Suezmax vessels. The time charter yield for spot VLCC declined by 70.1% on a

YoY basis to USD10,419 per day (pd). The freight rates index for dry bulk commodity, Baltic Dry bulk Index (BDI), declined by

55.27% on a YoY basis (degrowth of 42.7% QoQ) to 1,355 in 4QFY11.

Shipping Index movementIndex 4QFY10 3QFY11 4QFY11 YoY (%) QoQ (%

Baltic Dry bulk 3,026 2,363 1,355 (55.2) (42.7

Baltic Dirty 1,010 848 823 (18.5) (2.9

Baltic Clean 810 684 692 (14.6) 1.1

Source: Bloomberg

Freight rates in Tanker segment (Spot rates, USD per day)Segment 4QFY10 3QFY11 4QFY11 YoY (%) QoQ (%

VLCC 34,836 6,832 10,419 (70.1) 52.5

Suezmax 22,271 12,401 11,355 (49.0) (8.4

Aframax 13,818 10,656 6,747 (51.2) (36.7

Product 4,126 2,370 1,946 (52.8) (17.9

Source: Company

GE Shipping

Revenue is expected to decline by 32.1% YoY (QoQ decline of 6.4%) from INR7.6bn in 4QFY10 to INR5.2bn in 4QFY11. The

company acquired 2 bulk carriers (1Supramax and 1 Kamsarmax) and also acquired 1 offshore platform/ROV Supporvessel in its offshore subsidiary. It purchased 350ft (IC) jack up rig from Mercator Lines which was under in-charter by offshore

subsidiary for 3 year contract with ONGC ending on March 2012.

EBIDTA is expected to decline by 38.3% YoY from INR3.1bn in 4QFY10 to INR1.9bn in 4QFY11. The margins are expected

to decline from 41.2% in 4QFY10 to 37.4% in 4QFY11 compared to 36.4% in 3QFY11. QoQ improvement in margin is

expected due to lower hire cost and repair & maintenance cost.

Net Profit is expected to decline by 71.6% on YoY basis (QoQ decline of 3.5%) from INR2.1bn in 4QFY10 to INR601m in

4QFY11. We expect EPS of INR3.9 in 4QFY11.

Vikram Suryavanshi+91 22 4031 3428

[email protected]


30/42


Essar Shipping, Port and Logistics

Revenue is expected to increase by 5.6% YoY (QoQ increase of 9.8%) from INR8.5bn in 4QFY10 to INR8.9bn in 4QFY11

mainly due to commencement of 30mtpa bulk terminal at Hazira, Gujarat. The company is insulated from volatility in

shipping freight rates due to long term contacts for its full fleet.

EBIDTA is expected to increase by 12.4% YoY from INR2.6bn in 4QFY10 to INR3.0bn in 4QFY11. EBIDTA margins are

expected to improve from 31.4% in 4QFY10 to 33.5% in 4QFY11. Net

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