D:VelsDaily Morning Brief 1NovMorning Insight 2 …...FII Stock Futures 28,498 0.5 FII Stock Options...

NOVEMBER 2, 2011

Economy News4 India's exports grew by 36.3% on an annual basis to $24.8 billion in

September, 2011, demonstrating impressive year-on-year expansiondespite a slowdown in the US and Europe.During the April-Septemberperiod, India's exports grew by 52% to $160 billion from $105.2 billion inthe same period last year.(BS)

4 The Government may revise the fiscal deficit target in the mid-yeareconomic review. This review will be tabled in the Parliament during thewinter session starting from November 22. The Finance Ministry has set afiscal deficit target of 4.6 per cent of the gross domestic product (GDP)for 2011-12. But according to latest data from the Controller General ofAccounts, it has already reached over 70 per cent in first six months ofthis fiscal.(BL)

4 Rise in output and new export orders pushed up the country's PurchasingManagers' Index (PMI) to 52 points in October, from 50.4 points inSeptember (ET)

4 State-owned oil companies are pressing for a Rs 1.82 per litre increase inpetrol prices because of rupee depreciation and hardening of crude oilprices. (BS)

Corporate News4 The country's largest car-maker Maruti Suzuki India reported a 53.25%

fall in sales in October to 55,595 units due to labour unrest at its Manesarplant, which severely affected production. (BS)

4 Reliance Industries, owned by Mukesh Ambani, is likely to use thetowers and fibre optic cables of a telecom company controlled by youngerbrother Anil to provide high-speed data services (ET)

4 State Bank of India (SBI), the country's largest lender, ruled out anyimmediate hike in savings deposit rates, even as private sector lendershave raised interest within days of the Reserve Bank of India (RBI)deregulating such rates.(BS)

4 Pratibha Industries said that it bagged two orders in the buildings andwater segment. The combined value of both the orders amounts to Rs5.71 bn.(BS)

4 Punjab National Bank has kicked off the biggest loans restructuringexercise by Indian lenders to a sector - power - by converting Rs 25 bn ofshort-term loans into long-term ones to avoid imminent defaults. (ET)

4 Hospital chain Fortis Healthcare (India) said it will buy Singapore-basedsister firm Fortis Healthcare International for $665 million(approximately Rs 32.50 bn).(BS)

4 The Rs 16 bn Surya Pharmaceutical has launched its Super specialityNeuropsychiatric division called ALVIN and is eyeing sales of Rs 150 mnfrom the division in a year's time. (ET)

4 Reliance Industries has seen natural gas output from its easternoffshore KG-D6 field drop to 42 million standard cubic meters per day.The current output is a far cry from 61.5 mmscmd achieved in March lastyear and is almost at the 2009 production levels. (ET)

4 IVRCL is close to selling two of its operational road projects toconstruction and engineering firm Larsen and Toubro for an undisclosedsum to unlock value and raise funds for projects under execution. (ET)

Equity% Chg

1 Nov 11 1 Day 1 Mth 3 Mths

Indian IndicesSENSEX Index 17,481 (1.3) 6.2 (3.5)

NIFTY Index 5,258 (1.3) 6.4 (3.6)BANKEX Index 11,278 (1.5) 3.9 (8.1)BSET Index 5,777 (0.9) 9.5 (0.4)

BSETCG INDEX 10,849 (1.1) 1.0 (16.1)BSEOIL INDEX 8,890 (1.1) 4.7 0.2CNXMcap Index 7,205 (0.8) 1.6 (8.9)

BSESMCAP INDEX 6,936 (0.5) 0.8 (15.0)

World IndicesDow Jones 11,658 (2.5) 6.8 (1.8)

Nasdaq 2,607 (2.9) 7.9 (2.3)FTSE 5,422 (2.2) 5.7 (5.2)NIKKEI 8,836 (1.7) (0.4) (12.0)

HANGSENG 19,370 (2.5) 8.5 (14.9)

Value traded (Rs cr)1 Nov 11 % Chg - Day

Cash BSE 2,200 1.9

Cash NSE 9,772 (8.8)Derivatives 93,325 27.4

Net inflows (Rs cr)31 Oct 11 % Chg MTD YTD

FII 481 (79.6) 2,469 940Mutual Fund (150) (4.5) (278) 4,596

FII open interest (Rs cr)31 Oct 11 % Chg

FII Index Futures 15,105 (5.0)FII Index Options 37,878 2.3

FII Stock Futures 28,498 0.5FII Stock Options 540 9.2

Advances / Declines (BSE)1 Nov 11 A B S Total % total

Advances 62 893 221 1,176 40Declines 140 1,217 251 1,608 55

Unchanged 1 96 32 129 4

Commodity % Chg

1 Nov 11 1 Day 1 Mth 3 Mths

Crude (NYMEX) (US$/BBL) 91.5 (0.7) 15.6 (2.4)

Gold (US$/OZ) 1,714.3 (0.6) 6.0 5.1Silver (US$/OZ) 33.2 (3.7) 10.8 (16.4)

Debt / forex market1 Nov 11 1 Day 1 Mth 3 Mths

10 yr G-Sec yield % 8.96 8.92 N/A 8.55Re/US$ 48.7 48.7 49.0 44.1

Sensex

Source: ET = Economic Times, BS = Business Standard, FE = Financial Express,BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange

15,500

17,000

18,500

20,000

21,500

Nov-10 Feb-11 May-11 Aug-11 Nov-11

Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 2

MORNING INSIGHT November 2, 2011

ORACLE FINANCIAL SERVICES LTD (OFSL)PRICE: RS.2100 RECOMMENDATION: ACCUMULATETARGET PRICE: RS.2196 FY13E P/E: 16.7X

Oracle's 2QFY12 numbers were lower than estimates largely due to lowerproduct revenues and margins. We believe this could be because of thevolatile nature of product revenues. Product revenues rose by 4% YoY and9% QoQ. The new license signings at $9mn ($13mn) was lower QoQ. Themanagement has indicated strong pipeline for the products business withUS providing much of the strength. The company is not seeing in majorsigns of budget deferrals or project cancellations. Services businesscontinued to lose employees during the quarter, though. We largelymaintain our FY12E earnings at Rs.115 per share. We introduce FY13earnings estimates where we expect the EPS to be Rs.126. We arrive at atarget price of Rs.2196 based on FY13E earnings (Rs.2110 based on FY12Eearnings, earlier). Based on the limited upsides, we recommendACCUMULATE. There can be potential gains from Oracle's offer, if any, tobuy-back shares and de-list the company. A delayed recovery in usereconomies and a sharper-than-expected rupee appreciation are key risks toour earnings estimates.

2QFY12 results

(Rs mns) 1QFY12 2QFY12 % QoQ 2QFY11 % YoY

Revenues 7121 7562 6.2 7436 1.7

Expenditure 4825 5078 4745

EBIDTA 2295 2484 8.2 2691 -7.7

Depreciation 101 99 91

EBIT 2195 2385 8.7 2600 -8.3

Interest 0 0 0

Other inc 750 1393 336

PBT 2945 3778 28.3 2936 28.7

Tax 903 826 301

PAT 2042 2952 44.6 2635 12.0

Share of Pft / (loss) 0 0 0

Adjusted PAT 2042 2952 44.6 2635 12.0

E.O items 0 -866 0

EPS (Rs) 24.3 35.2 31.4

Ratios

OPM (%) 32.2 32.8 36.2

GPM(%) 30.8 31.5 35.0

NPM(%) 28.7 39.0 35.4

Source : Company

Product revenues grow by 4% YoYn On a consolidated basis, revenues for Oracle grew by about 6% YoY.

n Product revenues rose by 4% YoY, led by higher implementation and AMC rev-enues. License revenues were down by nearly 76% YoY.

n We view the lower license revenues as a result of the volatile nature of the prod-uct revenues. These revenues vary based on completion of large product imple-mentations and can be very volatile.

n OFSS is also consolidating its operations in order to create a more customer-fo-cused organization.

Summary table

(Rs mn) FY11 FY12E FY13E

Sales 29,956 31,888 35,399Growth (%) 4.2 6.4 11.0EBITDA 11,207 11,483 12,789

EBITDA margin (%) 37.4 36.0 36.1PBT 12,467 13,769 15,119Net profit 11,097 9,667 10,584

EPS (Rs) 132.3 115.2 126.1Growth (%) 43.3 (12.9) 9.5CEPS (Rs) 137.1 120.2 131.9

BV (Rs/share) 644.3 742.7 861.5Dividend / share (Rs) 6.0 6.0 7.0ROE (%) 22.9 15.1 15.7

ROCE (%) 25.7 25.1 22.4Net cash (debt) 29,033 37,146 45,167NW Capital (Days) 100.1 87.8 92.1

P/E (x) 15.9 18.2 16.7P/BV (x) 3.3 2.8 2.4EV/Sales (x) 4.9 4.4 3.7

EV/EBITDA (x) 13.1 12.1 10.3

Source: Company, Kotak Securities - PrivateClient Research

RESULT UPDATE

Dipen [email protected]+91 22 6621 6301



n AMC revenues continued to grow and rose by 7% YoY for the quarter. AMCrevneus now form about 26% of the overall product revenues.

n The rise in AMC revenues is a positive as they are a stable source of revenuesand may reduce the volatility in the overall product revenues of the company.

n Oracle added 7 customers for its products business. 16 customers completed de-ployment during the quarter.

n Services revenues de-grew by 5% QoQ.

n The business continued to witness lackluster growth. The number of employeesin the services business fell further by about 4.5% (14% fall in 1Q).

n According to the management, this was largely due to attrition. However, webelieve that, the consistent reduction could be due to the higher focus of thecompany on its products business and lack of scale up in the services business.

Macro scenen We understand that, the macro scene is still uncertain as compared to the previ-

ous quarter.

n While developed economies are showing signs of weakness, clients continue tobe sanguine about their businesses. The sentiment has remained healthy, ac-cording to the management and decision making has not been impacted signifi-cantly.

n The company is witnessing strong demand trends from US but at the same time,it is seeing some weakness in the pipeline from Western Europe.

n According to the management, the transformation agenda of the clients, whichwas suspended, is being revived by clients. Moreover, compliance programs ofclients are driving growth for products like Reveleus.

Order bookings lowern Oracle booked new license orders worth $9mn ($13mn) during the quarter.

n Due to lower execution during the quarter, the tank size is at around $112mn,we understand.

n We need to watch the order bookings closely and any further strength in themedium term will only add to our confidence. However, we under stand that,the volatile nature of the business may result in lower bookings in any quarter.

EBIDTA marginsn On an overall basis, margins were almost flat QoQ.

n Product business margins fell steeply on a YoY basis (from 48.5% to 38.9%) onthe back of lower license revenues.

n In services business, margins rose on a YoY as well as QoQ basis, due to a reduc-tion in employee strength and other cost optimization initiatives.

n Oracle's margins in the services business have been surprisingly erratic, making itdifficult to estimates the future trend.

n We believe that, a higher proportion of license revenues will be a key determi-nant of margins going forward.



Financial projections and Recommendationn We almost maintain our FY12 earnings estimates with an EPS of Rs.115.

n We introduce FY13 estimates. We expect product revenues to grow by 14% andservices revenues to be almost flat YoY.

n EBIDTA margins are expected to be largely flat for the products business. Weexpect license revenues to form about 20% of product revenues v/s about 19%in FY12. Margins in services business are expected to fall on the back of salaryincrements and the expected rupee appreciation v/s 2HFY12 levels.

n We expect the rupee to average 46 / USD in FY13 as compared to about 48 /USD in 2HFY12.

n We have assumed tax at 30% of PBT in FY12 as well as in FY13. Consequently,PAT is expected to rise by about 9% in FY13E, leading to an EPS of Rs.126.

Recommendationn We see the Oracle relationship as a key differentiator for OFSL and believe this

could open up significant business opportunities for the company in addition tohaving endowed it with an MNC parentage.

n The valuations are not undemanding especially in the backdrop of a still uncer-tain macro scene. We, thus, recommend ACCUMULATE with a revised PT ofRs.2196 based on FY13E earnings (v/s Rs.2110 based on FY12E earnings), afteraccording a discount as compared to valuations of large peers.

n We note that, the quarterly earnings are pretty volatile and may surprise on ei-ther side.

n A revised open offer by Oracle, if any, with a view to increase its stake furtherand de-list the stock from the bourses, will be an upside trigger, though we as-sign low probability to the same, for now.

Risksn A delayed recovery in major user economies may impact our projections.

n A sharp acceleration in the rupee beyond our estimates may impact our earningsestimates for the company.

We recommend ACCUMULATEon Oracle Financial Services

with a price target of Rs.2196



ACCPRICE: RS.1184 RECOMMENDATION: REDUCETARGET PRICE: RS.1085 CY12E PE: 16.3X

q Company's revenues for Q3CY11 were in line with our estimates andwere impacted by fall in average cement realizations. Operating marginfor Q3CY11 declined sequentially led by lower average cement prices andhigher costs for the quarter.

q Net profit performance was marginally better than our estimates due tohigher other operating income as well as lower tax rate. PAT is up by67% YoY but down by 50% QoQ due to higher costs and lower cementrealizations.

q Cement volumes for the company are likely to improve going forward.However, current valuations are too steep and hence we continue tomaintain REDUCE on the stock with a target price of Rs 1085 based onCY12 estimates.

Financial highlights

(Rs mn) Q3CY11 Q3CY10 YoY (%)

Net Sales 21,500 16,372 31

Expenditure 19,296 14,672

Inc/Dec in trade -145 560

RM 3,628 2,493

As a % of net sales 16.9 15.2

Staff cost 1,383 1,174


Power and fuel 5,524 3,615


Transportation & Handling 3,329 2,255


Purchase of traded cement 357 258


Other expenditure 5,221 4,316


Operating Profit 2,204 1700 30

Operating Profit Margin (%) 10.3 10.4

Depreciation 1,199 911

EBIT 1,005 789 27

Interest 253 162

EBT(exc other income) 752 627

Other Income 1,561 809

Sales tax benefits 0 0

Extraordinary Items 0 0

EBT 2,312 1,436 61

Tax 637 435

Tax Rate (%) 27.5 30.3

PAT 1,676 1001

Net Profit 1,676 1001 67

NPM (%) 7.8 6.1

Equity Capital 1,879.5 1879.4

EPS (Rs) 8.9 5.3

Source: Company

Summary table

(Rs mn) CY10 CY11E CY12E

Sales 77,173 93,421 106,784Growth (%) -3.9 21.1 14.3

EBITDA 15,540 18,770 22,573EBITDA margin (%) 20.1 20.1 21.1PBT 14,615 16,659 19,502

Net profit 11,200 11,661 13,651EPS (Rs) 59.6 62.1 72.7Growth (%) (30.3) 4.1 17.1

CEPS (Rs) 80.5 87.3 99.8BV (Rs/share) 344.6 383.2 432.5Dividend / share (Rs) 20.5 20.5 20.5

ROE (%) 17.9 17.1 17.8ROCE (%) 22.4 24.5 25.5Net cash (debt) 5,562 5,745 14,490

NW Capital (Days) (22.1) (22.1) (22.1)EV/Sales (x) 2.6 2.1 1.7EV/EBITDA (x) 12.9 10.5 8.3

P/E (x) 19.9 19.1 16.3P/BV (x) 3.4 3.1 2.7


RESULT UPDATE

Teena [email protected]+91 22 6621 6302



Revenue growth in line with our estimatesn Company's revenues for Q3CY11 were in line with our estimates and were im-

pacted by fall in average cement realizations on a sequential basis. However,revenues for the Q3CY11 reported a growth of 31% YoY led by improvement incement dispatches as well as realizations as against same period last year.

n Dispatches of the company witnessed an improvement of 17.8% on YoY basisand stood at 5.69 MT in Q3CY11 as against 4.83 MT in Q3CY10. Dispatchgrowth for ACC has outperformed the industry due to commissioning of its newcapacities at Wadi and Chanda. Dispatches during 9MCY11 improved by 13.4%on YoY basis.

n Net realizations for Q3CY11 stood at Rs 3779 per tonne vs Rs 4052 per tonneduring Q2CY11 and Rs 3390 per tonne in Q3CY10. Cement prices had declinedduring Q3CY11 in most of the regions due to monsoons as well as lower thanexpected offtake. However, despite low demand growth, cement prices havestarted recovering post monsoons.

n During the quarter, production has stabilized from the new line at Chanda andWadi plant. We thus expect volumes to witness an improvement going forward.

n We expect volumes to grow to 23.9MT and 26MT in CY11 and CY12 and ex-pect pricing to improve by 5% next year. We thus expect revenues to grow at aCAGR of 17.6% between CY10-CY12.

Operating margins lower than our expectationsn Operating margin for Q3CY11 declined sequentially led by lower average ce-

ment prices and higher costs for the quarter. Margins stood at 10.3% forQ3CY11 vis-à-vis 22.9% for Q2CY11 and 10.4% for Q3CY10.

n EBITDA/tonne during the quarter stood at Rs 387 per tonne as against Rs 352 pertonne during Q3CY10. However, sequentially, EBITDA/tonne witnessed a sharpdecline due to decline in cement realizations and increase in raw material,power and fuel and other expenditure.

n On a sequential basis, raw material costs are up during the quarter due to in-crease in fly ash and gypsum prices. Power and fuel costs for the company con-tinue to stay high due to higher prices of coal. Out of the total coal requirement,60% comes from linkage coal, 30% comes from e-auctions and remaining 10%comes from imports. However, company feels that linkage coal may get reduceddue to higher demand from other sectors for coal. If that happens, it may in-crease power and fuel cost further going forward.

Per tonne analysis

Q3CY11 Q3CY10 Q2CY11

Dispatches(mn tonne) 5.69 4.83 5.93

Net Realisation/tonne 3779 3390 4052

YoY growth (%) 11.5

QoQ growth (%) -6.8

Costs per tonne 3391 3038 3124

Raw material 612 632 459

Staff cost 243 243 202

Power and fuel 971 748 959

Transporation &Handling 585 467 587

Purchase of traded cement 63 53 73

Other expenditure 918 894 845

EBITDA per tonne 387 352 928

Source: Company



n Though overall costs may remain at the current levels in near term, cementprices have started recovering post monsoons in most of the regions. We thusexpect EBITDA/tonne to improve in the coming quarters.

n We tweak our CY11 estimates and increase our cost assumptions marginally. Wethus expect margins to be 20.1% and 21% respectively for CY11 and CY12.

Net profit growth boosted by higher other operating income andlower taxn Net profit performance was marginally better than our estimates due to higher

other operating income as well as lower tax rate. PAT is up by 67% YoY butdown by 50% QoQ due to higher costs and lower cement realizations.

n Higher other operating income during the quarter includes Rs 617 mn pertainingto incentives and sales tax written back for previous years. This has resulted inboosting net profit growth.

n We tweak our estimates marginally and expect net profits to grow at a CAGR of10.5% between CY10-CY12

Valuation and recommendationn At current price of Rs 1184, stock is trading at 16.3x P/E and 8.3x EV/EBITDA for

CY11 and CY12.

n Stock has been trading at high valuations due to healthy balance sheet and re-turn ratios as well as MNC parentage. However, we believe that stock is cur-rently factoring in the best case scenario of higher cement realizations as well asEBITDA/tonne.

n Based on steep valuations, we continue to recommend REDUCE on the stockwith a price target of Rs 1085 based on $125 EV/tonne and 7.5x EV/EBITDA onCY12 estimates.

We recommend REDUCE onACC with a price target of

Rs.1085



PUNJAB NATIONAL BANK (PNB)PRICE: RS.1013 RECOMMENDATION: BUYTARGET PRICE: RS.1300 FY13 P/E: 5.3X, P/ABV: 1.2X

Q2FY12 results: Core performance marginally ahead of our ex-pectations; slippage also lower than the average run rate of pre-vious 4 quarters.q NII growth at 16.0%, slightly better than our expectations mainly aided

by better than expected NIM (3.95% during Q2FY12; 11 bps QoQ im-provement) along with 19.3% growth in loan book. Similarly, net profitgrowth (12.1% YoY) surprised positively on back of lower loan loss pro-visions (Rs.3.19 bn; down 43.6% QoQ).

q Core fee-based income witnessed healthy growth of 26.9% while 'Recov-ery from W/O A/Cs' and 'Dividend income from MF' continued to aidhealthy growth in overall non-interest income. NIM during Q2FY12 cameat 3.95%, higher than our expectations mainly on the back of 54bps im-provement in yield on advances, while cost of funds rose by only 10 bps.We are a bit conservative and have modeled NIM at 3.65% and 3.42%during FY12E and FY13E, respectively.

q Although reported slippage (1.64% annualized) may look slightly onhigher side, it came lower than the average run rate of previous 4 quar-ters (2.16% annualized). However, cumulative restructured book nowstands at Rs.199.7 bn (~8.0% of loan book), which is higher than the in-dustry average.

q Asset quality remained stable QoQ with gross NPA and net NPA comingat 2.05% and 0.84%, respectively. In absolute terms, gross NPA rose by5.2% QoQ as bank completely shifted to system based NPA recognitionsystem (loans >1.0 mn migrated during Q2FY12). Their coverage ratio isalso healthy at 75.1% at the end of Q2FY12.

q At CMP of Rs.1013, the stock is trading at 5.3x its FY13E earnings and1.2x its FY13E ABV. Although we like its positioning strategy of a domi-nant player in the Indo-Gangetic belt as well its strong liability franchise,we opine ~10% of stressed assets (restructured book + gross NPA) islikely to be an overhang on the stock, going forward. We have cut the TPto Rs.1300 (Rs.1400 earlier) but maintain BUY rating on the stock; at TPstock would trade at 1.5x FY13E adjusted book value.

Result Performance

(Rs mn) Q2FY12 Q2FY11 YoY (%)

Interest on advances 70,447.5 50,352.0 39.9

Interest on Investment 18,523.8 13,971.8 32.6

Interest on RBI/ banks' balances 483.5 204.5 136.4

Other interest 65.3 26.1 150.2

Total interest earned 89,520.1 64,554.4 38.7

Interest Expended 54,994.4 34,787.4 58.1

Net interest income (NII) 34,525.7 29,767.0 16.0

Other income (Non-interest income) 8,888.6 7,182.5 23.8

Net Revenue (NII + Other income) 43,414.3 36,949.5 17.5

Operating Expenses 18,136.6 15,948.5 13.7

Payments to / Provisions for employees 12,404.2 11,130.9 11.4

Other operating expenses 5,732.4 4,817.6 19.0

Operating profit 25,277.7 21,001.0 20.4

Provisions & contingencies 7,103.2 5,160.3 37.7

Provision for taxes 6,124.2 5,095.2 20.2

Net profit 12,050.3 10,745.5 12.1

EPS (Rs.)_ 38.04 34.08 11.6

Source: Company

RESULT UPDATE

Saday [email protected]+91 22 6621 6312



NII growth at 16.0%, slightly better than our expectations; PATalso came higher on back of lower loan loss provisionsPNB reported NII at Rs.34.53 bn (16.0% growth YoY). This is slightly ahead of ourexpectations, mainly aided by better than expected NIM (3.95% during Q2FY12; 11bps QoQ improvement) along with 19.3% growth in loan book.

Similarly, net profit growth (12.1% YoY) surprised positively on back of lower loanloss provisions (Rs.3.19 bn; down 43.6% QoQ).

Healthy growth in core fee-based income; NIM also surprisedpositivelyCore fee-based income witnessed healthy growth of 26.9% while 'Recovery fromW/O A/Cs' and 'Dividend income from MF' continued to aid healthy growth in over-all non-interest income. Overall non-interest income grew 23.8%, which was alsoaided by 39.5% growth in treasury profit.

Trend in non-interest income

(Rs bn) 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 YoY (%)

C/E/B 4.36 4.13 4.70 5.98 4.73 8.5

Profit on Exchange transaction 0.31 1.25 1.09 1.31 1.33 NM

Miscellaneous fee income 0.76 0.88 1.7 0.65 0.83 9.2

Trading Profit 0.38 0.87 0.53 0.48 0.53 39.5

Miscellaneous Income 1.38 1.44 3.43 2.40 1.48 7.2

Total non-interest income 7.18 8.57 11.45 10.84 8.89 23.8

Source: Company

NIM during Q2FY12 came at 3.95%, higher than our expectations mainly on theback of 54bps improvement in yield on advances, while cost of funds rose by only10 bps. We are a bit conservative and have modeled NIM at 3.65% and 3.42%during FY12E and FY13E, respectively.

Business grows at healthy pace; CASA mix also remains athealthy level. We are modeling loan growth of ~17% and ~19%during FY12 & FY13, respectively.Total business of the bank rose 22.5% during Q2FY12 with advances and depositsgrowing at 19.3% and 25.0%, respectively.

n Advances grew 19.3% YoY to Rs.2490.2 bn at the end of Q2FY12 mainly drivenby large Industry (24.9% YoY) and retail segments (20.2% YoY).

n Total deposits rose 25.0% YoY to Rs.3417.8 bn at the end of Q2FY12. CASA mixalso remained healthy at 36.3% at the end of Q2FY12, despite recent rise in theinterest rates offered on saving deposits and FDs.

PNB enjoys one of the highest CASA among Indian banks which helps in better NIMas compared to its peers. During Q2FY12, saving account deposits grew at healthypace (15.1% YoY) while current account floats remained flat QoQ; term depositsgrew at 34.1% leading to some compression in CASA share (decline from 40.6% atthe end of Q2FY11).

Slippage lower than the average run rate of previous 4 quarters;however, cumulative restructured book (~8.0% of loan book) ishigher than the industry average.Although reported slippage (1.64% annualized) may look slightly on higher side, itcame lower than the average run rate of previous 4 quarters (2.16% annualized).However, cumulative restructured book now stands at Rs.199.7 bn (~8.0% of loanbook), which is higher than the industry average.



Asset quality remained stable QoQ with gross NPA and net NPA coming at 2.05%and 0.84%, respectively. In absolute terms, gross NPA rose by 5.2% QoQ as bankcompletely shifted to system based NPA recognition system (loans >1.0 mn migratedduring Q2FY12). Their coverage ratio is also healthy at 75.1% at the end of Q2FY12.

Trend in NPAs

Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12

Gross NPA (Rs. bn) 36.1 40.3 45.4 43.8 48.9 51.5

% of Net NPA 1.82 1.91 2.03 1.79 2.00 2.05

Net NPA (Rs. bn) 12.8 14.3 15.8 20.4 20.9 20.9

% of Net NPA 0.66 0.69 0.72 0.85 0.86 0.84

Source: Company

Valuation & recommendationAt CMP of Rs.1013, the stock is trading reasonable at 5.3x its FY13E earnings and1.2x its FY13E ABV. We are modeling earnings to grow 16.5% CAGR during FY11-13E, while return profile is also expected to remain healthy (FY13E - RoA: 1.3%,RoE: 21.7%) during next two years.

Although we like its positioning strategy of a dominant player in the Indo-Gangeticbelt as well its strong liability franchise, we opine ~10% of stressed assets (restruc-tured book + gross NPA) is likely to be an overhang on the stock, going forward.

We have cut the TP and maintain BUY rating on the stock with revised TP ofRs.1300 (Rs.1400 earlier) based on P/ABV of 1.5x its FY12E adjusted book value.

Key Data

(Rs bn) 2010 2011 2012E 2013E

Interest income 214.22 269.86 358.14 415.50

Interest expense 129.44 151.80 224.34 268.33

Net interest income 84.78 118.07 133.80 147.17

Growth (%) 20.6% 39.3% 13.3% 10.0%

Other income 36.10 36.13 40.93 48.77

Gross profit 73.26 90.55 103.00 118.33

Net profit 39.05 44.33 49.03 60.20

Growth (%) 20.7% 13.5% 10.6% 22.8%

Gross NPA (%) 1.7 1.8 2.0 1.9

Net NPA (%) 0.5 0.9 0.8 0.6

Net int. margin (%) 3.5 3.9 3.6 3.4

CAR (%) 14.2 12.4 12.4 11.8

RoE (%) 24.6 23.0 21.1 21.7

RoA (%) 1.4 1.3 1.2 1.3

Dividend per share (Rs) 22.0 22.0 24.0 25.0

EPS (Rs) 123.9 139.9 154.8 190.0

Adjusted BVPS (Rs) 483.6 568.1 692.6 855.3

P/E (x) 8.2 7.2 6.5 5.3

P/ABV (x) 2.1 1.8 1.5 1.2

Source: Company, Kotak Securities - Private Client Research

We maintain BUY rating onPunjab National Bank with a

revised price target of Rs.1300



INDIAN BANK

PRICE: RS.216 RECOMMENDATION: BUYTARGET PRICE: RS.290 FY13E P/E: 4.2X, P/ABV: 1.0X

Q2FY12 Results: Core performance ahead of expectations, how-ever asset quality deteriorated.q Indian bank's reported earnings came slightly ahead of our expectations.

NII growth came at 15.5% to Rs.11.35 bn in Q2FY12 on back of 23.4%growth in loan book along with flat margin (3.76%). Net profit also cameslightly higher than our expectations (Rs.4.69 bn; 12.7% growth YoY) onback of strong non-interest income and muted operating expense, de-spite higher provisions done during Q2FY12.

q Loan growth continued to grow at moderate pace for third quarter in arow (23.4% YoY in Q2FY12 as compared to 28-29% YoY growth wit-nessed only till few quarters ago); now focus has shifted to large corpo-rate (30.0% YoY), while retail and MSME continue to witness moderategrowth.

q NIM also came ahead of our expectations; it grew 33 bps QoQ to 3.76%in Q2FY12 (flat YoY). We are expecting NIM to come at 3.56% and 3.30%during FY12E and FY13E, respectively as compared to 3.75% witnessedduring FY11.

q Asset quality deteriorated sharply during Q2FY12 - gross NPA rose 15.9%YoY and 30.0% QoQ while net NPA rose 17.9% YoY and 42.1% QoQ. Wehave modeled higher slippage (1.8%) during FY12E & FY13E as comparedto 1.5% witnessed during FY11. We maintain BUY rating on the stockwith revised TP of Rs.290 (Rs.305 earlier) based on 1.3x of its FY13E ad-justed book value.

Result Performance

(Rs mn) Q2FY12 Q2FY11 YoY (%)

Interest on advances 23,561.7 17,258.7 36.5

Interest on Investment 6,752.2 5,388.3 25.3

Interest on RBI/ banks' balances 34.3 109.3 -68.7

Other interest - -

Total Interest earned 30,348.2 22,756.2 33.4

Interest expenses 18,994.5 12,924.0 47.0

Net interest income 11,353.7 9,832.2 15.5

Other income 3,423.2 2,836.6 20.7

Net Revenue (NII + Other income) 14,776.8 12,668.8 16.6

Operating Expenses 5,568.0 5,279.4 5.5

Payments to / Provisions for employees 3,666.8 3,692.2 -0.7

Other operating expenses 1,901.2 1,587.2 19.8

Operating profit 9,208.8 7,389.4 24.6

Provisions & contingencies 2,203.4 1,329.7 65.7

Provision for taxes 2,318.5 1,902.0 21.9

Net profit 4686.9 4157.7 12.7

EPS (Rs.) 10.64 9.40 13.2

Source: Company

Reported earnings came slightly ahead of our expectations; NIMremained healthy at 3.76% (improvement of 33 bps QoQ)Indian bank's reported earnings came slightly ahead of our expectations. NII growthcame at 15.5% to Rs.11.35 bn in Q2FY12 on back of 23.4% growth in loan bookalong with flat margin (3.76%).

RESULT UPDATE

Saday [email protected]+91 22 6621 6312



Net profit also came slightly higher than our expectations (Rs.4.69 bn; 12.7% growthYoY) on back of strong non-interest income and muted operating expense, despitehigher provisions done during Q2FY12.

Loan growth continued to moderate for third quarter in a row;focus has shifted to large corporate during last few quarters.Loan growth continued to grow at moderate pace for third quarter in a row (23.4%YoY in Q2FY12 as compared to 28-29% YoY growth witnessed only till few quartersago). Corporate segment has been driving overall loan growth; this segment grew30.0% YoY during Q2FY12, while retail (8.4% YoY) and MSME (8.6% YoY) con-tinue to witness moderate growth. Overseas book also witnessed strong growth(45.6% YoY; 35.0% QoQ), partly aided by depreciating rupee.

During the same period, deposit grew at 18.6% YoY (5.2% QoQ) mainly on back of22.9% growth in term deposits; CASA growth was moderate at 9.5% (CASA mixdeclined 246 bps YoY).

Trends in CASA (%)

Source: Company

NIM also came ahead of our expectations; it grew 33 bps QoQ to 3.76% in Q2FY12(flat YoY). Yield on advances improved 185 bps YoY during Q2FY12 while cost ofdeposits grew 123 bps during the same period. Apart from the rise in FD rates inrecent times, decline in CASA mix (246 bps YoY) has also led to rise in its cost ofdeposits.

We are expecting NIM to come off from the current levels over next few quarters, asits weak liability franchise will not be able to shield them from rising funding costs.We are expecting NIM to come at 3.56% and 3.30% during FY12E and FY13E, re-spectively as compared to 3.75% witnessed during FY11.

Trends in NIM (%)

Source: Company



Asset quality deteriorated sharply during Q2FY12; we are model-ing higher slippage (1.8%) during FY12 & FY13E as compared to1.5% witnessed during FY11.Asset quality deteriorated sharply during Q2FY12 - in absolute terms, gross NPA rose15.9% YoY and 30.0% QoQ while net NPA rose 17.9% YoY and 42.1% QoQ. De-spite of this spike, gross NPA and net NPA stand at comfortable levels - 1.21% and0.69%, respectively at the end of Q2FY12.

The bank has been following conservative provision policy. Apart from providing100% for unsecured book, it provides 25% for substandard as against 20% providedduring FY11. They are providing as per the RBI policy for all D1 and D2 categories.

We have modeled higher slippage (1.8%) during FY12E & FY13E as compared to1.5% witnessed during FY11.

Valuations and recommendationAt the current market price of Rs.216, the stock is trading at 4.2x its FY13E earningsand 1.0x its FY13E ABV. We are modeling earnings to grow 13.5% CAGR duringFY11-13E, while return profile is also expected to remain healthy (FY13E - RoA:1.4%, RoE: 21.4%) during next two years.

We maintain BUY rating on the stock with revised TP of Rs.290 (Rs.305 earlier)based on 1.3x of its FY13E adjusted book value.

Key data

(Rs bn) 2010 2011 2012E 2013E

Interest income 77.14 93.61 119.49 140.13

Interest expense 45.53 53.25 73.90 90.10

Net interest income 31.61 40.36 45.59 50.03

Growth (%) 21.2% 27.7% 12.9% 9.7%

Other income 13.16 11.82 12.12 14.40

Gross profit 27.47 32.92 36.27 41.09

Net profit 15.55 17.14 18.94 22.07

Growth (%) 24.9% 10.2% 10.5% 16.5%

Gross NPA (%) 0.8 1.0 1.3 1.3

Net NPA (%) 0.2 0.5 0.8 0.6

Net interest margin (%) 3.5 3.7 3.5 3.2

CAR (%) 12.2 12.8 13.0 13.0

RoE (%) 24.0 22.4 20.6 21.4

RoA (%) 1.7 1.5 1.4 1.4

Dividend per share (Rs) 6.5 7.5 7.5 7.5

EPS (Rs) 36.2 39.9 44.1 51.4

Adjusted BVPS (Rs) 151.3 175.2 209.5 223.0

P/E (x) 6.0 5.4 4.9 4.2

P/ABV (x) 1.4 1.2 1.0 1.0

Source: Company, Kotak Securities - Private Client Research

We maintain BUY on IndianBank with a price target of

Rs.290



BAJAJ ELECTRICALS LTD (BAEL)PRICE: RS.195 RECOMMENDATION: BUYTARGET PRICE: RS.272 FY13E P/E: 10X

q BAEL has reported Q2FY12 results, which ahead of our estimates mainlydriven by lighting and consumer durable business.

q Engineering & Project segment reported marginal profits in the quartervis-à-vis loss in Q1FY12. However, we believe that over FY12 margins inthis segment are likely to remain under pressure on account of delays inpick up in major infrastructure projects.

q Pick-up in demand for lighting and consumer business in tier ii citiesaugers well for company's growth. However rising interest rate and in-put price trend would remain the key variable to monitor for next fewquarters.

q We tweak our estimates downward for FY12 to factor in margin pressureon account of increase in input prices and interest rates; maintain 'BUY'rating on the company's stock with a one year DCF based revised pricetarget of Rs 272 (Rs 285 earlier).

Quarterly performance

(Rs mn) Q2FY12 Q2FY11 YoY% Q1FY12 QoQ %

Net Sales 7008 5880 19.2 5443 28.8

Other Income 7 11 (34.3) 7 6.0

Raw material cost 399 116 244.5 (374) (206.6)

Purchase of traded goods 4810 4327 11.2 4485 7.2

Employee cost 463 375 23.5 315 47.1

other expenditure 811 613 32.3 715 13.4

Total expenditure 6483 5430 19.4 3308 96.0

EBITDA 525 450 16.7 302 74.2

Depreciation 29 23 24.8 31 (4.9)

PBIT 503 437 15.0 271 85.8

Interest expense 128 76 68.7 107 20.3

PBT 375 361 3.7 171 119.3

Tax Expense 125 128 (2.3) 60 107.7

PAT 250 234 7.0 111 125.6

EPS (Rs) 2.5 2.4 7.0 1.1 125.6

EBITDA (%) 7.5 7.7 5.5 35.3

Tax (%) 33.2 35.3 35.1 (5.3)

RM/Sales (%) 74.3 75.5 75.5 (1.6)

Source: Company

Result Highlightsn In Q2FY12, consolidated revenues stood at Rs 7 bn driven by lighting and con-

sumer durable business.

n Consumer appliances division revenues stood at Rs 3.3 bn vis-à-vis Rs 2.9 bn inQ2FY11. Lighting division reported 25% YoY growth in revenues at Rs 1.8 bn inthe quarter. We believe that the Indian consumer space has been undergoing achange in terms of consumer preference toward the branded products manufac-tured by the company and peer group (Havells, Crompton Greaves etc) over theunorganized sector.

n Company has reported increase in inventory levels of Rs 39 bn mainly on accountof piling up of finished goods inventory. It has observed sluggish demand for fansand air-coolers this year due to lighter summer.

Summary table

(Rs mn) FY11 FY12E FY13E

Sales 27408 32023 37471

Growth (%) 23.0 16.8 17.0EBITDA 2580 2825 3357EBITDA margin (%) 9.4 8.8 9.0

PBT 2239 2357 2920Net profit (adjusted) 1453 1555 1927EPS (Rs) 14.7 15.7 19.5

Growth (%) 22.1 7.0 23.9CEPS 15.8 16.8 20.6BV (Rs/share) 60.0 72.8 89.2

Dividend / share (Rs) 2.4 2.5 2.5ROE (%) 26.3 23.1 23.6ROCE (%) 25.0 24.1 24.1

Net cash (debt) (544) (354) 85NW Capital (Days) 68 71 76EV/Sales (x) 0.7 0.6 0.5

EV/EBITDA (x) 7.7 7.0 5.7P/E (x) 13.3 12.4 10.0P/Cash Earnings 12.4 11.7 9.5

P/BV (x) 3.2 2.6 2.2


RESULT UPDATE

Ruchir [email protected]+91 22 6621 6448



n On Consolidated basis, operating margins for the quarter stood at 7.5% vis-à-vis7.7% in Q2FY11. Company has been able to effectively manage cost overheadsand pass on the increase in price hike to the customers.

n E&P segment has been observing the major pressure due to the sluggish growthand building up of overcapacity in the T&D space.

n In the quarter under review, E&P segment has reported operating profit of Rs 65mn vis-à-vis Rs 48 mn in Q2FY11.

n Company has been taking several measures to contain the overhead costs andincrease efficiency in the E&P business. For instance, it has been striving to re-duce the project sites from current 60 locations to 32 locations.

Segment Results

(Rs mn) Q2FY12 Q2FY11 YoY (%) Q1FY12 QoQ (%)

Consolidated revenues

Lighting 1892 1514 25 1274 48.5

Consumer Durables 3394 2980 14 3031 12.0

Engg Projects 1712 1560 10 1136 50.7

PBIT

Lighting 113 68 67 62 82.3

Consumer Durables 315 317 (1) 291 8.0

Engg Projects 65 48 35 (76)

PBIT (%)

Lighting 6.0 4.5 4.9 22.7

Consumer Durables 9.3 10.7 9.6 (3.5)

Engg Projects 3.8 3.1

Source: Company

n Company has been incurring additional cost for business promotion activities. Ithas been increasing its focus on deeper brand penetration especially in the rural/semi urban areas. We believe that this likely to have a diminishing effect on themargins in the short term.

n Interest charges have gone up significantly for the company due to significantincrease in interest rates. We believe that the increase in channel inventory hasled to increase in the working capital requirement. Company has built consider-able amount of finished goods inventory over Q3-Q4FY11.

n In Q2FY12, company has reported 39% increase in capital employed in con-sumer durable SBU due to increase in finished goods inventory, mainly in the air-cooler segment.

n Despite sluggish demand scenario in E&P business and increasing working capitalCompany has been able to maintain a healthy D/E ratio of 0.3. It has reportedcash levels of Rs 2.8 bn in the quarter vis-à-vis Rs 3.9 bn in the previous year.

Valuation & Recommendationsn At current price of Rs.195, company's stock is trading at 10x P/E and 5.7 x EV/

EBITDA on FY13E earnings.

n We opine that the company is well positioned to benefit from increasing dispos-able income among Indian households and changing consumer preference forbranded products.

n We build recovery in E&P business over FY13E on back of pickup in infrastructurespending..

n We tweak our estimates downward for FY12 to factor in margin pressure onaccount of increase in input prices and interest rates; maintain 'BUY' rating onthe company's stock with a one year DCF based revised price target of Rs 272(Rs 285 earlier).

We maintain BUY on BajajElectricals with a price target

of Rs.272



AUTO INDUSTRY VOLUME UPDATE - OCTOBER 2011Automobile sector volumes for October 2011 were weak though onexpected lines. Demand generally fizzles out post festive season. For mostauto companies, we expect volumes to decline further (on sequential basis)in November and December. Demand scenario remain weak for car andM&HCV segment, while the LCV and two wheeler segment are relativelybetter placed with respect to demand.

AUTO INDUSTRY UPDATE

Arun [email protected]+91 22 6621 6143

Summary - October 2011 volumes (Nos)

October Sep October YoY MoM YTD YTD Growth2010 2011 2011 gth (%) gth (%) FY11 FY12 (%)

Hero MotoCorp

2W 505,553 549,625 512,238 1.3 (6.8) 3,025,536 3,586,130 18.5

Maruti Suzuki

A1&A2 (M-800, Alto, Wagon-R,

Estilo, Ritz, Swift, A-Star) 80,133 57,046 35,868 (55) (37) 461,712 371,283 (20)

A3 (SX4, D'zire) 11,621 9,607 5,321 (54) (45) 71,941 60,613 (16)

A4 (Kizashi) - 14 3 - (79) - 174 -

MUV (Grand Vitara, Gypsy) 422 412 270 (36) (34) 4,229 4,116 (3)

C (OMNI, Eeco) 15,379 11,737 9,996 (35) (15) 90,496 88,361 (2)

Total Domestic 107,555 78,816 51,458 (52) (35) 628,378 524,547 (17)

Export 11,353 6,749 4,137 (64) (39) 87,508 64,881 (26)

Total Sales 118,908 85,565 55,595 (53) (35) 715,886 589,428 (18)

M&M

Passenger Vehicles (incl. Verito) 16,987 19,447 18,756 10 (4) 101,323 119,393 18

4W pick-up/Gio/Maxximo 9,277 13,419 13,101 41 (2) 56,112 83,611 49

3W 5,410 7,302 6,332 17 (13) 34,075 39,481 16

MNAL 817 968 1,163 42 20 6,743 7,362 9

Total Domestic 32,491 41,136 39,352 21 (4) 198,253 249,847 26

Export 2,004 3,001 2,154 7 (28) 10,464 15,110 44

Total Sales 34,495 44,137 41,506 20 (6) 208,717 264,957 27

Tractors 24,281 24,673 31,838 31 29 119,938 149,358 25

Tata Motors

M&HCV 13,640 18,155 16,822 23 (7) 102,539 113,058 10

LCV 20,689 28,092 21,892 6 (22) 136,032 169,116 24

Utility 3,389 5,308 4,176 23 (21) 22,490 26,436 18

Cars 21,089 21,011 20,948 (1) (0) 151,164 123,809 (18)

Total Domestic 58,807 72,566 63,838 9 (12) 412,225 432,419 5

Export 5,950 6,217 4,171 (30) (33) 32,648 35,061 7

Total Sales 64,757 78,783 68,009 5 (14) 444,873 467,480 5

Source: Companies



Hero MotoCorp - sales volume (Nos)


2W 505,553 549,625 512,238 1.3 (6.8) 3,025,536 3,586,130 18.5

Source: Company

HERO MOTOCORP

n HMC dispatched 512,238 units in October 2011 registering a 1.3% YoY growthover October 2010. Last year high base was the prime reason for such a lowgrowth rate. Company's volumes in 1HFY12 have grown by 22% YoY.

n Company also reported their highest ever monthly retail sales in October 2011.Retail sales during the month stood at ~650,000 units - surpassing the previoushigh of 600,000 units achieved in October 2008.

n Strong retail sales point towards acceptance of new brand identity.

n Company recently launched the 150cc motorcycle "Impulse" at a price point ofRs66,800 (ex-showroom Delhi) and is expected to launch a new scooter "Mae-stro" in 2HFY12.

n While volumes in absolute terms are expected to grow, we expect the growthrate to taper down in 2HFY12 given higher base. For FY12, we expect 17% vol-ume jump as against 22% achieved in 1HFY12.

HHML - 2W sales volume

Source: Company

-

150,000

300,000

450,000

600,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-

15

30

45

60Volume (Units - LHS) % YoY growth (RHS)



M&M - sales volume (Nos)


Passenger Vehicles (incl. Verito) 16,987 19,447 18,756 10.4 (3.6) 101,323 119,393 17.8

4W pick-up/Gio/Maxximo 9,277 13,419 13,101 41.2 (2.4) 56,112 83,611 49.0

3W 5,410 7,302 6,332 17.0 (13.3) 34,075 39,481 15.9

MNAL 817 968 1,163 42.4 20.1 6,743 7,362 9.2

Total Domestic 32,491 41,136 39,352 21.1 (4.3) 198,253 249,847 26.0

Export 2,004 3,001 2,154 7.5 (28.2) 10,464 15,110 44.4

Total Sales 34,495 44,137 41,506 20.3 (6.0) 208,717 264,957 26.9

Tractors 24,281 24,673 31,838 31.1 29.0 119,938 149,358 24.5

Source: Company

MAHINDRA AND MAHINDRA (M&M)

Domestic volume trend (Automotive)

Source: Company

Export volume trend (Automotive)

Source: Company

UV - domestic volume trend

Source: Company

Tractor - volume trend

Source: Company

n For M&M, October 2011 was yet another month of strong volume performancein the current financial year. Growth remained robust in both the automotive andthe tractor division.

n In the automotive segments, volume grew by a strong 20% YoY to 41,506 units.Sequentially though volumes dropped on expected lines.

(continued ....)

(6,000)

-6,000

12,00018,000

24,00030,000

36,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(30)

-

30

60

90

120

150Volume (Units - LHS)

% YoY growth (RHS)

(8,000)

-

8,000

16,000

24,000

32,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(15)

-

15

30

45


% YoY growth (RHS)

-

11,000

22,000

33,000

44,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-

20

40

60


% YoY growth (RHS)

-

700

1,400

2,100

2,800

3,500

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-

30

60

90

120


% YoY growth (RHS)



n In the passenger vehicle segment, volume grew by 10.4% which in our view washelped by launch of XUV500. Furthermore Verito sales increased from 1079 unitsin October 2010 to 1818 units. We therefore believe that Scorpio, Xylo and Bo-lero dispatches (put together) did not witness any meaningful growth.

n 4W pick-up/Gio/Maxximo sales jumped by 41% YoY to 13,101 units. This seg-ment has been the key volume driver for the company in FY12 with YTD volumegrowth of 49%.

n 3W sales remained healthy at 6,332 units, registering a 17% growth over lastOctober.

n Overall automotive domestic volumes grew by 21% whereas export increased bya modest 7.5%.

n M&M's performance in the tractor division has been very robust and the samecontinued in October 2011 where the company reported 31% YoY increase withoverall tractor volumes at 31,838 units - their highest ever.

n Ssangyong too reported a healthy 22.6% jump in sales at 9,125 vehicles. Do-mestic sales at 2,011 units were 32% lower YoY while exports at 7,114 unitswitnessed 58% YoY growth. In the current calendar year, company's YTD (Jan-Oct) sales have grown by 47% to 95,365 units.

n We expect M&M volumes for the balance part of FY12 to grow at robust pace.However due to higher 2HFY11 base, we expect the growth rate in 2HFY12 toremain lower than that witnessed during 1HFY12.



MSIL - sales volume (Nos)


A1&A2 (M-800, Alto, Wagon-R,Estilo, Ritz, Swift, A-Star) 80,133 57,046 35,868 (55.2) (37.1) 461,712 371,283 (19.6)

A3 (SX4, D'zire) 11,621 9,607 5,321 (54.2) (44.6) 71,941 60,613 (15.7)

A4 (Kizashi) - 14 3 - (78.6) - 174 -

MUV (Grand Vitara, Gypsy) 422 412 270 (36.0) (34.5) 4,229 4,116 (2.7)

C (OMNI, Eeco) 15,379 11,737 9,996 (35.0) (14.8) 90,496 88,361 (2.4)

Total Domestic 107,555 78,816 51,458 (52.2) (34.7) 628,378 524,547 (16.5)

Export 11,353 6,749 4,137 (63.6) (38.7) 87,508 64,881 (25.9)

Total Sales 118,908 85,565 55,595 (53.2) (35.0) 715,886 589,428 (17.7)

Source: Company

MARUTI SUZUKI INDIA LIMITED (MSIL)

Export volume trend

Source: Company

Business Mix (Domestic)

Source: Company

A1 & A2 segment domestic volume trend

Source: Company

Domestic sales volume trend

Source: Company

n MSIL's volmes in October 2011 were impacted by labor issues at the company'sManesar plant. Strike at the Suzuki Powertrain impacted production at theGurgaon plant to a certain extent. Due to the strike the company lost productionof 40,000 units in October 2011.

n Accordingly dispatches for the month were down by 53% YoY and 35% MoM to55,595 units.

(continued ....)

0%

25%

50%

75%

100%

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

DCMUVA3A2A1

(17,000)

-

17,000

34,000

51,000

68,000

85,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(60)-60120

180240

300360

Volume (Units - LHS)% YoY growth (RHS)

(50,000)(25,000)

-25,000

50,00075,000

100,000125,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(60)

(30)

-

30

60

90

120


(6,000)

-

6,000

12,000

18,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(70)

-

70

140

210




n Production of almost all the models were hit during the strike as dispatches weredown across segments. Accordingly comparison does not hold any relevance.

n Overall demand scenario for petrol cars remains weak on account of high inter-est rates, expensive fuel and slowing economy. Company's product portfolio isheavily tilted towards the petrol run cars. During 2QFY12, diesel run cars formed22% of the company sales. Company is taking steps to increase supply of dieseldriven cars in their portfolio.

n Going ahead we expect the company's volume to grow sequentially on accountof enhanced production of high selling Swift and Dzire. However demand forother petrol driven model is expected to remain subdued. Therefore on YoY ba-sis, volume growth is expected to remain poor.

n Competition has intensified once again for MSIL with competitors launching newmodels in the volume driven compact car segment.

n Company's YTD volumes have declined by 18%. For full year we expect thecompany's volumes to de-grow by 12%. However moving ahead in FY13, weexpect a 15% volume growth on lower FY12 base.



Tata Motors - sales volume (Nos)


M&HCV 13,640 18,155 16,822 23.3 (7.3) 102,539 113,058 10.3

LCV 20,689 28,092 21,892 5.8 (22.1) 136,032 169,116 24.3

Utility 3,389 5,308 4,176 23.2 (21.3) 22,490 26,436 17.5

Cars 21,089 21,011 20,948 (0.7) (0.3) 151,164 123,809 (18.1)

Total Domestic 58,807 72,566 63,838 8.6 (12.0) 412,225 432,419 4.9

Export 5,950 6,217 4,171 (29.9) (32.9) 32,648 35,061 7.4

Total Sales 64,757 78,783 68,009 5.0 (13.7) 444,873 467,480 5.1

Source: Company

TATA MOTORS (TAMO)

Cars - domestic volume trend

Source: Company

Business Mix ( Domestic)

Source: Company

M&HCV - domestic volume trend

Source: Company

LCV - domestic volume trend

Source: Company

n Tata Motors reported October 2011 sales volumes were marginally ahead of ourexpectation. After posting a strong volume in September 2011, the volumes re-turned to normal levels in October 2011.

n TAMO dispatched 68,009 units in October 2011, which was 5% higher than vol-umes reported in similar period last year. Sequentially though volumes droppedby 14% on back higher last month base.

(continued ....)

-

6,000

12,000

18,000

24,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-

20

40

Volume (Units - LHS)

% YoY growth (RHS)

-

7,500

15,000

22,500

30,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-

13

25

38

50


(14,000)

(7,000)

-

7,000

14,000

21,000

28,000

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

(50)

(25)

-

25

50

75

100

Volume (Units - LHS) % YoY growth (RHS)

0%

25%

50%

75%

100%

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

Cars

UV

LCV

M&HCV



n Domestic volumes were up by 8.6% YoY. M&HCV segment led the growth forthe company.

n Car volumes remained largely flat both YoY and MoM. While Nano and Indicarange reported growth, Indigo witnessed a steep YoY drop. Company dispatched3,868 Nano's (up 26% YoY), 10,812 Indica range (up 11% YoY) and 6,268Indigo's (lower by 24% YoY) during the month.

n UV sales for the month grew by 23% YoY to 4,176 units but was down 21%MoM .

n At 21,892 units, LCV sales in October 2011 were weak (lowest in the past oneyear). We believe that huge stocking done at the dealers end ahead of the fes-tive season might have led to some inventory correction. We expect sequentialimprovement in LCV sales going forward.

n M&HCV sales were ahead of expectation. Volumes tend to dip sharply post astrong September period. Company dispatched 16,822 units, growth 23% overlower last October base. Given various macro headwind, company's YTD growthrate of 10% in this segment has been relatively strong, in our view.

n For exports, October 2011 was a weak month, as export volumes dropped 30%YoY and 33% MoM.

n Going ahead (balance part of FY12) we expect the company's volumes will re-main largely similar to October 2011 dispatch figures. We expect the company'sFY12 volumes to grow at a flat rate over FY11.



Trade details of bulk deals

Date Scrip name Name of client Buy/ Quantity Avg.Sell of shares price

(Rs)

1-Nov Aia Engineering Nalanda India Equity Fund Limited B 1,200,000 310.0

1-Nov Aia Engineering Reliance Capital Trustee Co

A/C Reliance Growth Fund S 1,200,000 310.0

1-Nov Aroma Ent Volga International Limited B 36,000 90.0

1-Nov Aroma Ent Shreebhuvanakaram Tradinvest B 36,000 90.0

1-Nov Aroma Ent Shree Suprinit Tradinvest Pvt.Ltd B 36,000 90.0

1-Nov Aroma Ent Shreemallikarjun Tradinvest B 36,000 90.0

1-Nov Aroma Ent Pinac Stock Brokers Private Limited B 36,000 90.0

1-Nov Aroma Ent Priyal International Private Limited B 200,000 90.0

1-Nov Aroma Ent Kanchanbhai Baldevbhai Patel B 27,000 89.5

1-Nov Aroma Ent Sheetal P Jain S 80,000 90.0

1-Nov Aroma Ent Chunilal Mishrimal Sanghvi S 27,000 89.5

1-Nov Aroma Ent Manoj Prakash Sanghvi S 300,000 90.0

1-Nov Ashutosh Paper Kpm Infotech Private Limited B 46,800 174.4

1-Nov Choice Infra Umanath Raghunath Agarwal B 27,000 40.5

1-Nov Choice Infra Rekha Lalit Jain S 50,000 40.5

1-Nov Delta Mag Ramesh Purshottam Modi B 32,000 28.0

1-Nov Delta Mag Kiran Radiografix Pvt Tldradiografix S 32,000 28.0

1-Nov Dhvanil Chem Mayurbhai Dhirubhai Vekariya B 42,000 24.4

1-Nov Dhvanil Chem Samjuben Dhirubhai Vekariya B 41,000 24.4

1-Nov Dhvanil Chem Viral Malaybhai Bhow S 40,500 24.4

1-Nov Dhvanil Chem Rohitkumar Shantilal Bhow S 42,100 24.4

1-Nov Dhvanil Chem Neelaben Rohitkumar Bhow S 34,700 24.4

1-Nov Diamant Nishil Surendrabhai Marfatia B 200,000 15.7

1-Nov Diamant Jigar Praful Ghoghari S 375,000 15.8

1-Nov Gujarat Medi B Desai Rajubhai S 27,500 18.9

1-Nov Kanchan Intl Dharmendra Harilal Bhojak B 19,519 46.5

1-Nov Kirloskar Pneu PCA Securities Investment Trust Co. Ltd

A/C. Pca India Eq Fund B 256,335 475.0

1-Nov Kosha Cubidor Suman Gupta S 60,000 38.9

1-Nov Krishna Deep Ganga Jamuna Financial Advisor B 25,000 146.6

1-Nov Kwality Cred Rajiv Chandrakant Gandhi S 31,817 24.1

1-Nov Nikki Global Nilliampathy Tracon Pvt Ltd B 22,000 342.7

1-Nov Onelife Capital Babulal V Shah B 90,000 230.0

1-Nov Onelife Capital Prakashbhai Ishwarbhai Rana S 100,014 228.3

1-Nov Pasupati Fin Amit Krishnakant Thakker S 25,000 16.7

1-Nov Pasupati Fin Pasupati Olefin Ltd S 50,000 16.7

1-Nov Polytex India Kiran Bhiku Bhanaes B 70,000 126.0

1-Nov Rama Paper Manisha Vikas Shinde B 43,500 101.1

1-Nov Rcl Foods Varun Prem Budhrani B 24,478 98.0

1-Nov Rcl Foods Blue Peacock Securities B 22,984 100.6

1-Nov Sky Inds-$ D.C.Securities Services S 26,000 36.8

1-Nov Tera Software Niraj Rajnikant Shah B 72,321 89.4

1-Nov Vertex Sec Manish Rameshbhai Vyas B 235,000 43.0

1-Nov Vertex Sec Tripurari Properties Private Limited S 240,000 43.0

Source: BSE

Bulk deals



Forthcoming events Company/MarketDate Event

2-Nov Allahabad Bank, Andhra Bank, Hindustan Motors, Hindustan Org, ICRA,Navneet Pub, Rico Auto, Trent, Tube Investments earnings expected

3-Nov Ashok Leyland, Gujarat Gas, JSL, Jubilant Food, Kesoram Ind, Manappuram Fin,SAIL, Sun TV Network, Tata Teleservices, TVS Motor, Whirlpool earnings expected

4-Nov Apollo Hosp, Bharti Airtel, HCL Infosystems, Marico, NCC, Nestle India, ONGCTV Today, TV18 Broadcasting, UB Engg earnings expected

Source: Bloomberg

Gainers & Losers Nifty Gainers & LosersPrice (Rs) chg (%) Index points Volume (mn)

Gainers

Hindustan Unilever 388 3.3 4.2 9.2

PNB 1,013 3.7 1.6 2.4

Bharti Airtel 395 0.7 1.1 1.6

Losers

ICICI Bank 895 (3.9) (13.7) 5.5

Reliance Ind 861 (1.9) (9.4) 3.8

ITC Ltd 208 (2.3) (8.5) 10.6

Source: Bloomberg



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Fundamental Research TeamDipen ShahIT, [email protected]+91 22 6621 6301

Sanjeev ZarbadeCapital Goods, [email protected]+91 22 6621 6305

Teena VirmaniConstruction, Cement, Mid [email protected]+91 22 6621 6302

Saurabh AgrawalMetals, [email protected]+91 22 6621 6309

Saday SinhaBanking, NBFC, [email protected]+91 22 6621 6312

Arun [email protected]+91 22 6621 6143

Ruchir KhareCapital Goods, [email protected]+91 22 6621 6448

Ritwik RaiFMCG, [email protected]+91 22 6621 6310

Sumit PokharnaOil and [email protected]+91 22 6621 6313

Amit AgarwalLogistics, [email protected]+91 22 6621 6222

Jayesh [email protected]+91 22 6652 9172

K. [email protected]+91 22 6621 6311

Technical Research Team

Shrikant [email protected]+91 22 6621 6360

Amol [email protected]+91 20 6620 3350

Premshankar [email protected]+91 22 6621 6261

Derivatives Research TeamSahaj [email protected]+91 22 6621 6343

Rahul [email protected]+91 22 6621 6198

Malay [email protected]+91 22 6621 6350

Prashanth [email protected]+91 22 6621 6110

D:VelsDaily Morning Brief 1NovMorning Insight 2 …...FII Stock Futures 28,498 0.5 FII Stock Options...

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