ValueGuide_Apr2012

8/2/2019 ValueGuide_Apr2012

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Sharekhan ValueGuide April 20121


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April 2012 Sharekhan ValueGuide2


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CONTENTS

After the smart gains

initially this year, the

equity market has hit theroadblocks of policy

inaction and political

logjam. Given the

pressure from the 2Ps,

policy (or lack of it) and

politics, the sentiments have taken a hit and the market is unable to

sustain its momentum. The domestic support was limited and the rally

was driven by foreign inflows.

REGULAR FEATURES

Report Card 4

Earnings Guide I

TECHNICALS

Sensex 29

Sharekhan Top Picks 07

Stock Idea 11

SharekhanBudget Special 12

Railway Budget Special 15

Stock Update 16

Sharekhan Special 23

From Sharekhans Desk EQUITY

06

Pressure of policy and politics FUNDAMENTALS

DERIVATIVES

View 30

TECHNICALS

Crude oil 31

Gold 32

Silver 32

FUNDAMENTALSCopper 32

Lead 32

Zinc 33

Gold 34

Silver 34

Crude Oil 34

Copper 35

Natural gas 35

Nickel 35

TECHNICALS

INR-USD 36

INR-EUR 36

FUNDAMENTALS

USD-INR 37

EUR-INR 37

GBP-INR 37

JPY-INR 37

INR-GBP 36

INR-JPY 36

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COMMODITY

CURRENCY

PMS DESK

ProPrimeTop Equity 38

ProPrimeDiversified Equity 39

ProTechDiversified 40

ProTechNifty Thrifty 41

ProTechTrailing Stops 42

ADVISORY DESK

Smart Trades 43

Derivative Trades 43

MID Trades 43

MUTUAL FUNDS DESK

Top MF Picks (equity) 44

Top SIP Fund Picks 45

Switch Idea 24

Sector Update 25

Viewpoint 26


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STOCK IDEAS STANDING (AS ON APRIL 03, 2012)

REPORT CARD

COMPANY RECO PRICE RECO CURRENT PRICE AS ON GAIN- ABSOLUTE PERFORMANCE RELATIVE TO SENSEXPRICE TARGET DATE RECO 03-APR-12 LOSS (%) 1M 3M 6M 12M 1M 3M 6M 12M

EVERGREEN

GSK Consumers 2,544.0 3,000.0 12-Dec-11 Buy 2,738.7 7.7 7.2 10.6 16.8 24.4 8.1 -2.0 9.6 36.2

HDFC 540.0 785.0 19-Nov-07 Buy 687.5 27.3 1.6 5.0 6.6 -2.2 2.4 -7.0 0.0 7.1

HDFC Bank 71.6 570.0 23-Dec-03 Hold 530.2 640.5 1.9 23.8 13.0 14.0 2.7 9.6 6.0 24.8Infosys 689.1 ** 30-Dec-03 Hold 2,858.5 314.8 0.2 1.5 13.1 -10.3 1.0 -10.1 6.1 -1.8

Larsen & Toubro 1,768.0 1,588.0 18-Feb-08 Buy 1,362.1 -23.0 2.5 32.0 -1.9 -18.4 3.4 17.0 -7.9 -10.7

Reliance Ind 283.5 890.0 5-Feb-04 Buy 752.7 165.5 -9.0 4.8 -8.4 -27.9 -8.3 -7.2 -14.0 -21.1

Tata Consultancy Services 426.3 1,294.0 6-Mar-06 Buy 1,178.0 176.4 -1.9 1.6 15.8 2.7 -1.1 -10.0 8.6 12.4

APPLEGREEN

Aditya Birla Nuvo 714.0 1,050.0 6-Dec-05 Buy 993.6 39.2 9.1 31.3 4.4 16.3 10.0 16.3 -2.1 27.3

Apollo Tyres 37.0 86.0 27-Jul-09 Buy 80.5 117.4 -0.3 36.8 43.5 15.6 0.5 21.2 34.7 26.6

Bajaj Auto 1,610.0 1,612.0 27-Dec-11 Reduce 1,647.4 -2.3 -5.4 12.2 7.8 16.7 -4.6 -0.6 1.1 27.7

Bajaj Finserv 545.0 ** 26-May-08 Buy 664.7 22.0 0.3 51.4 21.3 21.7 1.2 34.1 13.8 33.3

Bajaj Holdings 741.9 1,009.0 26-May-08 Buy 810.7 9.3 3.1 23.9 15.3 7.3 3.9 9.7 8.1 17.5

Bank of Baroda 239.0 1,065.0 22-Apr-12 Buy 804.3 236.5 -3.6 19.0 4.3 -14.3 -2.8 5.4 -2.2 -6.2

Bank of India 309.0 384.0 22-Apr-12 Hold 366.2 18.5 -0.4 37.4 16.4 -22.3 0.4 21.7 9.2 -14.9

Bharat Electronics 1,108.0 1,893.0 25-Sep-06 Buy 1,518.9 37.1 -3.6 13.4 0.0 -8.0 -2.8 0.5 -6.2 0.7

Bharat Heavy Electricals 120.4 328.0 11-Nov-05 Hold 264.1 119.4 -11.3 11.3 -19.7 -37.5 -10.6 -1.4 -24.6 -31.6

Bharti Airtel 313.0 450.0 8-Jan-07 Buy 336.8 7.6 -2.9 -1.3 -10.0 -4.0 -2.1 -12.6 -15.5 5.1

Corp Bank 218.0 636.0 19-Dec-03 Buy 431.1 97.8 -7.9 24.1 1.4 -30.0 -7.1 9.9 -4.9 -23.4

Crompton Greaves 50.4 164.0 19-Aug-05 Hold 146.0 189.6 1.6 16.9 -4.1 -46.4 2.5 3.6 -10.0 -41.3

Divi's Labs 767.0 1,015.0 31-May-11 Buy 761.2 -0.8 3.6 -2.0 4.1 11.9 4.5 -13.2 -2.3 22.5

GAIL 476.0 471.0 1-0ct-10 Buy 383.4 -19.5 1.6 -1.7 -7.4 -16.9 2.4 -12.9 -13.1 -9.1

Glenmark Pharmaceuticals 599.0 362.0 17-Jul-08 Buy 310.1 -48.2 -1.5 6.4 -5.5 3.9 -0.6 -5.8 -11.3 13.7

GCPL 145.0 547.0 7-May-09 Buy 494.8 241.2 11.2 34.7 25.5 38.0 12.1 19.3 17.7 51.0

Grasim 1,119.0 2,980.0 30-Aug-04 Buy 2,643.2 136.2 -3.6 8.3 11.9 4.5 -2.8 -4.0 4.9 14.4

HCL Technologies 103.0 523.0 30-Dec-03 Buy 505.4 390.7 4.1 28.0 24.9 9.8 4.9 13.3 17.2 20.2

Hindustan Unilever 324.0 406.0 29-Jul-11 Hold 403.8 24.6 6.0 0.8 20.2 45.7 6.8 -10.7 12.8 59.5

ICICI Bank 284.0 1,070.0 23-Dec-03 Buy 908.2 219.8 -1.4 27.8 1.7 -18.2 -0.5 13.2 -4.6 -10.4

Indian Hotel Company 76.6 84.0 17-Nov-05 Buy 65.2 -14.9 -4.8 15.3 -10.2 -23.6 -4.0 2.1 -15.7 -16.4

ITC# 34.8 250.0 12-Aug-04 Buy 227.1 553.5 10.6 14.2 14.6 27.2 11.5 1.2 7.5 39.3

Lupin 80.7 538.0 6-Jan-06 Buy 534.4 562.2 10.3 22.6 13.5 29.9 11.2 8.6 6.5 42.2

M&M 116.0 759.0 1-Apr-04 Hold 706.6 509.1 4.5 5.4 -11.7 1.6 5.4 -6.6 -17.1 11.2

Marico 7.7 186.0 22-Aug-02 Buy 171.2 2123.4 8.5 18.2 18.9 24.3 9.4 4.7 11.5 36.0

Maruti Suzuki 1,163.0 1,382.0 23-Jan-12 Hold 1,309.6 12.6 0.6 42.6 23.6 6.0 1.4 26.3 16.0 16.1

Piramal Healthcare 417.0 345.0 9-May-11 Reduce 465.1 -10.3 5.1 25.6 31.5 15.8 5.9 11.2 23.4 26.7

PTC India 79.0 75.0 22-Mar-11 Buy 67.6 -14.4 17.1 68.5 -1.3 -23.2 18.0 49.3 -7.4 -15.9

Punj Lloyd 69.0 ** 9-Feb-11 Reduce 59.1 16.8 -1.6 39.8 3.3 -17.4 -0.8 23.8 -3.1 -9.6

SBI 476.0 2,725.0 13-Feb-12 Buy 2,172.6 356.4 -5.2 30.9 11.5 -20.7 -4.4 15.9 4.6 -13.1Sintex Industries^ 143.0 105.0 26-Sep-08 Buy 88.9 -37.8 2.9 33.9 -31.4 -45.1 3.8 18.6 -35.6 -39.9

TGBL (Tata Tea)^ 78.9 129.0 12-Aug-05 Hold 119.0 50.8 -4.3 26.8 34.4 16.8 -3.5 12.3 26.1 27.8

Wipro 356.0 ** 31-Oct-11 Hold 446.5 25.4 3.3 11.6 30.7 -5.6 4.2 -1.2 22.6 3.4

EMERGING STAR

Axis (UTI) Bank 229.4 1,620.0 24-Feb-05 Buy 1,175.8 412.7 -1.0 45.3 13.3 -17.0 -0.2 28.7 6.3 -9.2

Cadila Healthcare# 198.3 768.0 21-Mar-06 Buy 739.5 272.9 5.9 6.2 -1.2 -5.3 6.8 -5.9 -7.3 3.7

Eros International Media 186.0 298.0 15-Nov-10 Buy 195.4 5.0 3.0 -10.1 -21.3 35.3 3.9 -20.4 -26.2 48.1

Gateway Distriparks 131.0 173.0 2-Feb-12 Buy 154.0 17.6 0.7 18.9 11.2 32.4 1.5 5.3 4.3 45.0

Greaves Cotton^ 83.0 89.0 25-Jan-12 Hold 86.1 3.7 5.0 10.5 -2.1 -6.9 5.9 -2.1 -8.2 1.9

ITNL 362.0 330.0 14-Sep-10 Buy 201.2 -44.4 6.7 41.1 1.7 -14.1 7.6 25.0 -4.6 -6.0

EQUITY FUNDAMENTALS

NEW

NEW


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COMPANY RECO PRICE RECO CURRENT PRICE AS ON GAIN- ABSOLUTE PERFORMANCE RELATIVE TO SENSEXPRICE TARGET DATE RECO 03-APR-12 LOSS (%) 1M 3M 6M 12M 1M 3M 6M 12M

REPORT CARD

STOCK IDEAS STANDING (AS ON APRIL 03, 2012)

EQUITY FUNDAMENTALS

**Price target under review ^ Reco price adjusted for stock split ***Price target and reco price adjusted for the demerger #Reco price adjusted for bonu

IRB Infra 234.0 200.0 29-Nov-10 Buy 193.9 -17.1 0.8 51.7 17.7 -9.9 1.6 34.4 10.4 -1.4

Kalpataru Power 112.0 151.0 15-Mar-12 Buy 107.8 -3.8 3.1 18.2 -0.5 -21.2 4.0 4.7 -6.7 -13.7

Max India 212.0 234.0 24-Nov-09 Buy 169.2 -20.2 -1.2 15.6 -11.6 1.9 -0.3 2.4 -17.1 11.5

Opto Circuits India 199.0 355.0 13-May-08 Buy 192.5 -3.3 -4.6 30.8 17.2 -5.8 -3.8 15.8 10.0 3.2

Thermax 124.2 526.0 14-Jun-05 Hold 483.6 289.4 -10.0 19.7 6.3 -24.7 -9.3 6.1 -0.3 -17.6

Yes Bank 332.0 431.0 2-Dec-10 Buy 374.3 12.7 6.4 60.9 36.9 20.6 7.3 42.5 28.4 32.0

Zydus Wellness 530.0 323.0 18-Nov-11 Reduce 393.3 34.8 8.7 5.3 -26.0 -30.7 9.6 -6.7 -30.6 -24.2

UGLY DUCKLING

Ashok Leyland # 27.0 27.0 2-Feb-12 Reduce 32.0 -15.6 8.0 36.9 18.6 11.4 8.9 21.3 11.3 21.9

Bajaj Corp 109.0 142.0 30-Aug-11 Buy 120.0 10.1 3.5 22.6 14.9 23.0 4.3 8.6 7.8 34.6

CESC 282.0 405.0 29-Jun-11 Buy 277.2 -1.7 3.4 35.8 -1.0 -12.2 4.2 20.3 -7.1 -3.9

Deepak Fert 50.6 188.0 17-Mar-05 Buy 149.5 195.4 -3.5 23.6 -8.8 -6.6 -2.7 9.5 -14.4 2.2

Federal Bank 258.0 522.0 16-Mar-10 Buy 443.5 71.9 3.9 27.9 17.1 5.1 4.7 13.3 9.9 15.0

Gayatri Projects 393.0 310.0 5-Apr-10 Buy 133.6 -66.0 -6.2 49.1 5.2 -37.0 -5.4 32.1 -1.3 -31.0

India Cements 72.0 125.0 12-Aug-11 Buy 108.7 51.0 8.9 64.4 50.7 14.0 9.8 45.6 41.4 24.7

Ipca Laboratories 132.0 389.0 5-Nov-07 Buy 338.9 156.7 -1.8 20.4 28.8 10.7 -1.0 6.7 20.9 21.2

ISMT 43.0 36.0 8-Oct-09 Buy 26.7 -37.9 -10.3 14.7 -21.4 -46.3 -9.5 1.6 -26.3 -41.2

Jaiprakash Associates 16.7 105.0 30-Dec-03 Buy 88.6 431.5 13.2 61.0 16.5 -10.7 14.2 42.6 9.3 -2.2

KKCL 427.0 800.0 7-Oct-10 Hold 650.1 52.2 3.9 -4.5 -18.0 24.6 4.8 -15.4 -23.0 36.4

NIIT Technologies 210.0 277.0 19-Jan-11 Buy 266.1 26.7 11.3 45.3 35.3 54.3 12.2 28.7 26.9 68.9

Orbit Corporation 142.0 70.0 23-Dec-09 Buy 55.0 -61.3 -4.3 103.5 71.4 -0.2 -3.5 80.2 60.8 9.2

Polaris Financial Tech 164.0 179.0 3-Nov-10 Buy 166.8 1.7 6.5 37.8 27.4 -8.9 7.4 22.1 19.6 -0.2

Pratibha Industries 65.2 65.0 18-Jan-10 Buy 48.4 -25.8 -0.3 44.1 9.4 -29.2 0.5 27.6 2.6 -22.5

Provogue India*** 43.0 35.0 6-Jul-10 Buy 15.2 -75.1 -56.0 -27.9 -51.9 -64.1 -55.7 -36.1 -54.9 -60.7

Punjab National Bank 180.0 1,340.0 19-Dec-03 Buy 931.2 417.3 -2.6 21.2 -2.5 -19.6 -1.8 7.4 -8.5 -12.0

Ratnamani Metals 54.0 132.0 8-Dec-05 Buy 107.0 98.1 -0.6 16.5 4.5 -16.1 0.2 3.2 -2.0 -8.2

Raymond 387.0 500.0 3-Nov-11 Buy 425.5 9.9 21.5 37.2 28.1 31.7 22.5 21.5 20.2 44.2

Selan Exploration 58.0 500.0 20-Mar-06 Buy 286.7 394.3 0.1 25.2 -3.1 -17.4 0.9 10.9 -9.1 -9.6

Shiv-Vani Oil & Gas 370.0 283.0 4-Oct-07 Buy 173.2 -53.2 -16.2 -5.9 -10.7 -40.3 -15.5 -16.6 -16.2 -34.6

Sun Pharma 60.4 631.0 24-Dec-03 Buy 569.1 842.1 1.2 15.8 24.0 29.7 2.0 2.6 16.3 41.9

Torrent Pharma 185.0 760.0 4-Oct-07 Buy 625.0 237.8 9.4 16.0 16.5 11.1 10.3 2.7 9.3 21.6

UltraTech Cement 384.0 1,550.0 10-Aug-05 Hold 1,512.3 293.8 4.9 29.5 31.0 35.3 5.8 14.8 22.9 48.1

Union Bank of India 46.0 259.0 25-Jan-12 Hold 237.7 416.7 1.2 36.1 -3.8 -29.8 2.0 20.6 -9.7 -23.1

United Phosphorus 163.0 167.0 27-Aug-09 Buy 136.0 -16.6 -2.7 4.1 -4.0 -10.8 -1.8 -7.8 -9.9 -2.4

V-Guard Industries 162.0 227.0 6-Sep-10 Buy 195.2 20.5 2.5 23.8 -8.0 13.1 3.4 9.6 -13.6 23.8

VULTURE'SPICK

Mahindra Lifespace 799.0 400.0 9-Jan-08 Buy 326.6 -59.1 -1.2 37.0 8.7 -16.6 -0.4 21.3 2.0 -8.7

Orient Paper and Industries 21.4 70.0 30-Aug-05 Buy 59.5 178.0 5.5 21.9 -1.5 10.2 6.3 7.9 -7.6 20.7

Tata Chemicals 411.0 400.0 31-Dec-07 Hold 345.2 -16.0 -3.3 11.3 8.8 2.2 -2.5 -1.4 2.0 11.8Unity Infraprojects 138.4 107.0 26-Feb-08 Buy 50.2 -63.7 -0.8 60.5 12.5 -25.5 0.0 42.1 5.6 -18.4

CANNONBALL

Allahabad Bank 73.0 271.0 25-Aug-06 Buy 190.9 161.4 -0.6 61.5 19.6 -14.0 0.2 43.0 12.2 -5.9

Andhra Bank 120.1 156.0 3-Feb-11 Buy 121.6 1.2 -4.6 50.3 -2.1 -16.7 -3.8 33.2 -8.2 -8.8

IDBI Bank 106.0 131.0 19-Jun-09 Hold 106.2 0.1 -6.4 36.8 4.9 -23.5 -5.7 21.1 -1.6 -16.2

Madras Cement 88.0 160.0 10-Feb-11 Hold 153.0 73.9 10.8 53.4 56.8 50.3 11.7 35.9 47.1 64.5

Shree Cement 445.0 ** 17-Nov-05 Hold 3,173.7 613.2 16.7 54.2 77.3 61.3 17.7 36.6 66.4 76.6

NEW

NEW


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Pressure of policy and politics

FROM SHAREKHANS DESK

fromshare

khan

sdeskAfter the smart gains initially this year, the equity market has hit the roadblocks of policy

inaction and political logjam. Given the pressure from the 2Ps, policy (or lack of it) andpolitics, the sentiments have taken a hit and the market is unable to sustain its momentum.

The domestic support was limited and the rally was driven by foreign inflows. However, therecent developments have spooked foreign investors and foreign fund flows have dwindled lately.

The policy makers, the Reserve Bank of India (RBI) and the finance minister (FM), didprecious little to ease out liquidity condition and/or boost private investments. The RBIdeferred policy rate cuts citing loose fiscal policy and rising crude prices as key concerns,putting the ball in the FMs court. The FM did precious little to push forward reforms orcome out with a credible roadmap/plan to curtail the fiscal deficit. On the contrary, itannounced a large government borrowing programme that unnerved the debt/bond marketand raised questions on the possibility of policy rate cuts even in April 2012 by the RBI.

In case of budget, the devil lies in the fine print of the Finance Bill. In the budget, the FMproposes to amend certain sections of the Income Tax Act with retrospective effect to makethe Vodafone-Hutchison kind of deals between foreign investors taxable in India. The pro-

posal, which seeks to overturn a Supreme Court verdict on the case, could have a far-reaching impact on foreign investments as it may deter foreign investors from coming toIndia where laws are changed arbitrarily. Like Lloyd Blankfein, chairman, Goldman Sachs,warned, It [the Vodafone case] seems so unbelievable. It will hurt Indias image as a placewhere the rule of law prevails.

Moreover, the General Anti-Avoidance Rule (GAAR) provisions suggest taxing of foreignportfolio investments through tax heavens like Mauritius. The ambiguity of GAAR provi-sions and their effect on portfolio investments through participatory note (P-notes) haveconfused foreign institutional investors and the flood of portfolio investments has reducedto a trickle post-budget, adversely affecting the equity market.

As if the policy blunders werent enough, the break-out of a fresh bout of allegations ofmisappropriation/mismanagement of natural resources and/or scam in allotment of defencecontracts dented the overall sentiments. The preliminary report of the Comptroller and Audi-tor General of India suggests huge revenue loss for the government (in trillions of rupees) onaccount of auctioning of coal blocks to private sector companies, which have made supernor-mal profits. The government had barely recovered from this blow when the army chief firedthe next salvo. He wrote to the prime minister saying he was offered a bribe of Rs14 crore toclear sub-standard equipment for the army. Whats more, he also warned that the countryssecurity was at risk, what with 97% of its air defence being obsolete. This created a furore inthe parliament but what added fuel to fire was the leaking of this letter to the media.

Globally too the environment has not been favourable of late. Though the recent Chinesemanufacturing data is better than expected but fears persist that the worlds second largesteconomy China may be heading for a hard landing. Meanwhile, the ongoing crisis in theMiddle-East and the resulting threat of supply disruptions has hardened crude oil again.

Thus, the pressure of policy and politics combined with unfavourable global cues is tellingon the equity market. Our research team had indicated in the latest Market Outlook reportat the start of the month itself that the equity market would find it difficult to sustain themomentum given the hurdles ahead.

However, the view in the medium to long term is constructive, given the reversal in theinterest rate cycle and the markets reasonable valuation (10-12% below the long-termaverage). Consequently, we retain the house view that the market would consolidate in arange around the current level over the next few months before the next leg up. In themeantime, the near-term volatility would provide attractive entry points for investors toaccumulate quality stocks.


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Sharekhan Top Picks

SHAREKHAN TOP PICKS

In the third month of 2012, volatility spiked up in the Indian marketon account of political and policy concerns. The global environment

was also not very conducive for equities during this period with

growing concerns related to the hard landing of the Chinese

economy. Consequently, the Sensex and the Nifty have declined byaround 1.3% each since the release of the previous issue of

Sharekhans Top Picks on March 3, 2012. But the Sharekhans

Top Picks basket outperformed the benchmark indices with a

marginal gain in the same period which was aided by gains of 6.1%

* CMP as on March 30, 2012

NAME CMP* PER ROE (%) PRICE UPSIDE(RS) FY11 FY12E FY13E FY11 FY12E FY13E TARGET (%)

Apollo Tyres 79 9.1 8.8 6.8 18.3 15.9 17.2 86 8

Bank of Baroda 794 7.4 6.6 5.8 23.5 21.1 20.6 1,065 34

Bharat Electronics 1,515 14.4 13.3 12.0 17.2 14.9 13.8 1,893 25

Divis Laboratories 767 23.7 21.0 16.6 23.9 23.4 25.6 1,015 32

ICICI Bank 887 19.8 16.4 14.4 9.6 10.8 11.4 1,070 21

ITNL 193 8.7 8.1 6.5 22.1 15.3 14.0 330 71

Madras Cement 153 17.2 10.3 9.4 13.0 19.0 18.0 160 4

Marico 175 41.5 32.9 24.6 32.7 30.7 31.7 186 7

Orient Paper 59 8.3 6.7 5.6 17.0 18.4 18.9 70 18

Selan Exploration 280 15.0 10.4 7.5 18.7 21.9 23.6 500 79

Sun Pharma 570 32.5 24.2 24.0 19.2 21.1 17.7 631 11

ABSOLUTE OUTPERFORMANCE (RETURNS IN %) CONSTANTLY BEATING NIFTY AND SENSEX (RETURNS IN %)

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS

and 11.1% recorded by Orient Paper and Industries, and Maricorespectively in the same period.

We are making three changes to the basket this month. We arereplacing Grasim Industries with Madras Cement and Pratibha

Industries with IL&FS Transportation Networks as part of the churn

within the sectors. In view of the impending Q4 corporate result

we are also replacing Tata Consultancy Services (TCS) with Apollo

Tyres on account of expectations of weak quarterly results of TCS

and an improvement in the performance of Apollo Tyres.

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%140.0%

YTD

CY2012

CY2011

CY2010

CY2009

Since

Jan

2009

Sharekhan (Top Picks) Sensex Nifty

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%180.0%

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

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Mar-11

May-11

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Sharekhan Sensex Nifty


8/61


DIVIS LABORATORIES 767 23.7 21.0 16.6 23.9 23.4 25.6 1,015 32

Remarks: Strong M9FY2012 performance (PAT growth 27%) has re-affirmed our confidence in the growth potential of Divis Labs.

The new DSN SEZ facility at Vishakhapatnam that started production from one of its blocks in June 2011 (the remaining blocks of this facility are likely to get operational overFY2012-13) is likely to bring better economies of scale and tax benefits.

A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit growth opportunities inniche segments like high potency drugs for oncology and steroids for contraceptives.

With the order inflow picking up and its new plant getting operational, Divis has a strong revenue growth visibility and the operating leverage in the business will boost its

margins. At the current market price the stock trades at a PE multiple of 16.6x discounting its FY2013E earnings. We maintain our Buy recommendation.

BANK OF BARODA 794 7.4 6.6 5.8 23.5 21.1 20.6 1,065 34

Remarks: Bank of Baroda stands out among the PSU banks as it continues to deliver strong earnings growth with improvement in key operational metrics. The banks business growthis expected to remain better than industrys (contributed by stronger overseas growth) with relatively stable margins which will lead to a healthy growth in the top line.

While the asset quality of most PSU banks has deteriorated significantly over the past two to three quarters, BoBs asset quality has remained healthy due to lower slippages.Although, the asset quality risks have risen due to weak macro environment and policy issues, yet BoB is expected to fare better than the other PSU banks in terms of assetquality, resulting in lower credit cost and higher growth in earnings.

The operating metrics of BoB has improved significantly led by strong focus on CASA, margins, fee income etc. The bank is expected to post RoE and RoA of around 20%and 1.1% respectively over the next two years.

We believe BoB commands a premium over the other PSU banks due to a steady growth in its core income and a healthy asset quality. Currently, the stock is trading at 1.2xFY2013 book value which is reasonable. We recommend a Buy on the stock with a price target of Rs1,065.

APOLLO TYRES 79 9.1 8.8 6.8 18.3 15.9 17.2 86 8

Remarks: We view Apollo Tyres as the best tyre play amongst the Indian listed tyre companies. The company is also the best diversification story whereby it is now the largest radialmanufacturer in the country. It is also a global tyre play after the acquisition of Vredestien in Europe and of Dunlop in South Africa and derives 23% of its sales globally.

Europe continues to be the shining spot with the company recording double-digit margins at the EBIT level helped by strong sales of Vredestiens branded replacement tyres.

Increased sales of Apollo branded tyres in Europe would provide additional fillip to its profitability.

The company is likely to benefit from an uptick in the domestic commercial vehicle (CV) replacement segment and increased sales of CV radial tyres. The rupees depreciationwill see reduced threat from Chinese imports.

Stable material prices, recovery in South African operations and increased proportion of Apollo branded tyres in the premium European market are likely to improve themargins. At the current market price the stock trades at a PE multiple of 6.8x discounting its FY2013E earnings. We maintain our Buy with a price target of Rs86.

BHARAT ELECTRONICS 1,515 14.4 13.3 12.0 17.2 14.9 13.8 1,893 25

Remarks: BEL, a public sector unit, is one of the leading defence companies in India. With the increase in the defence budget and the focus on modernisation of the defence technology,BEL is best placed to take a sizeable pie of the defence spend.

The companys order book currently stands at Rs27,000 crore, which is around 5x its FY2011 revenues. This gives us a strong revenue visibility for at least the next two tothree years.

BEL has entered into joint ventures and technology collaborations to strengthen its position in the defence services space, reap the benefits of the offset clause (which itbelieves is worth $300 million in the next five to seven years) and enter into newer areas of operations.

The March quarter is the strongest for BEL and the upcoming budget could also have something positive to offer to the defence sector and in turn to BEL. Also, in the Budget2012-13, the defence allocation has been increased by 17.6% to Rs1.93 lakh crore and the capex budget has been increased by 15% to Rs79,579 crore.

The key risk remains its execution: a delay in release of orders could lead to slower execution.

At the current market price the stock trades at 12x its FY2013E earnings. The company has huge cash reserve of Rs5,875 crore, which translates into cash per share ofRs734 and gives the stock further support. We maintain our Buy recommendation on the stock.

NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY11 FY12E FY13E FY11 FY12E FY13E TARGET (%)

SHAREKHAN TOP PICKS EQUITY FUNDAMENTALS


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ICICI BANK 887 19.8 16.4 14.4 9.6 10.8 11.4 1,070 21

Remarks: ICICI Bank is back on growth path as its advances are growing at a healthy rate (up 19.1% YoY and 5.2% QoQ in Q3FY2012). We expect the advances of the bank to growby 18% CAGR over FY2011-13. This should lead to a 15% CAGR growth in the net interest income in the same period.

ICICI Banks asset quality has shown a turnaround as its NPAs have continued to decline over the last six quarters led by contraction in slippages. This has led to a sharp

reduction in the provisions and an increase in the profitability. Going forward, we expect the NPAs to decline further which will lead to lower NPA provisions and hence aid theprofit growth.

With a pick-up in the business growth and an improvement in the margins the RoEs are likely to expand to about 12% over the next two years while the RoA would improveto 1.4%. This would be driven by a 17% CAGR in profits over FY2011-13.

Despite the run-up in the stock over the past two months it trades at 1.6x FY2013E book value. We expect the stock to re-rate, given the improvement in the profitability ledby lower NPA provisions, a healthy growth in the core income and improved operating metrics. We recommend Buy with a price target of Rs1,070.

ITNL 193 8.7 8.1 6.5 22.1 15.3 14.0 330 71

Remarks: IL&FS Transportation Networks Ltd (ITNL) is Indias largest player in the BOT road segment with 10,269 lane km in various stages of development, construction or operation.It has a pan-India presence and a diverse project portfolio consisting of 23 road and bus transportation projects as well as a metro rail project.

Recently it bagged four road BOT projects which form 50% of the existing order book, thus providing good revenue visibility over the next two to three years. Further, with8,800km of NHAIs target for FY2013, ITNL is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector due to its established trackrecord in operating BOT road projects, its execution capabilities and the strong support from IL&FS.

It has a fair mix of annuity and toll projects in its portfolio which provides revenue comfort. Further, it is present across the value chain except the civil construction services,which it outsources to the local contractors. This helps the company to handle a large number of projects at a time and diversify geographically, reducing the risk ofconcentration.

Thus, we expect the sales and earnings to grow at CAGR of 10% and 16% respectively over FY2012-14E.

At the current market price, the stock is currently trading at 6.5x its FY2013E earnings and at a P/BV of 0.8x. We maintain our Buy recommendation with a price target ofRs330.

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS

MARICO 175 41.5 32.9 24.6 32.7 30.7 31.7 186 7

Remarks: Marico is one of the strongest players in the Indian hair care and edible oil markets. Its flagship brand Parachute along with Nihar commands a 54% share in the domesticbranded coconut oil market. Its portfolio of value-added hair oil got strong traction in the domestic market helping it to clock around 20% volume growth in the domestic market.The companys good for heart edible oil brand Saffola is also witnessing mid-teen volume growth on account of improving consumer awareness.

Apart from domestic operations, Marico has strong international presence in Bangladesh, Egypt, South Africa, and the recently entered South East Asia. Though the near-term performance has been affected by political instability and high inflationary environment in some of the international markets, we believe the long-term growth potentialis intact in these markets.

Kaya is showing signs of improvement with a double-digit same-store collection growth in the past few quarters.

Any significant increase in the prices of the key raw materials (including copra) and a slowdown in the sales volume growth would act as the key risks to our earningsestimates.

We expect the top line to grow at a CAGR of about 25% over FY2011-13 and the bottom line to grow at a CAGR of 30% over the same period (on the back of an expectedimprovement in the margins due to the softening of raw material prices). At the current market price the stock trades at 32.9x its FY2012E EPS of Rs5.3 and 24.6x its FY2013EEPS of Rs7.1.

MADRAS CEMENT 153 17.2 10.3 9.4 13.0 19.0 18.0 160 4

Remarks: Madras Cement is a predominant player in the south region with an installed capacity of 12.5MMT. The company will be the biggest beneficiary of the recent partial recoveryin the cement offtake in the southern region. Further, the supply discipline has resulted in strong realisation. We expect the earnings of the company to grow by around 35%over FY2011-13.

The company has posted a volume growth of over 22% YoY for February 2012 and we believe the volume growth along with the realisation growth would support the revenuegrowth in Q4FY2012.

To overcome the issue of power shortage in Tamil Nadu and to control the power cost the company is setting up captive thermal power plants in Ariyalur and RR Nagar to meetthe energy requirements. As per the plan a 60MW thermal power plant would be set up at Ariyalur (of this 40MW has already been commissioned and the balance 20MW isexpected in the near term) and a 25MW thermal power plant will be set up at RR Nagar.

The company is likely to be the biggest beneficiary of the sharp correction in the price of imported coal as it imports 50-60% of its total coal requirement. So going forward,significant savings in the power and fuel costs can be expected.

Any failure to adhere to supply discipline could be a key risk to the cement price and hence the same could adversely affect the earnings of the company.

At the current market price of Rs153 the stock trades at PE of 9.4x its FY2013E earnings and an EV/EBIDTA of 5.8x on FY2013E.


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SELAN EXPLORATION 280 15.0 10.4 7.5 18.7 21.9 23.6 500 79

Remarks: Selan Exploration (Selan) has rights to develop five small discovered (minimal exploration risk) oil fields (Bakrol, Lohar, Indrora, Karjisan and Ognaj) in Cambay Basin(Gujarat) with proven oil & gas reserves.

Between FY2006 and FY2009, Selan ramped up its production by 4x. In the next phase (FY2009-11), with stagnate oil production it did preparatory work to ramp up drillingin the existing fields and the new field, Indrora (the most prolific one with significant reserves). Currently, the company is waiting for the final approval for drilling which could

ramp up its production significantly in the near future. Based on this, we expect the company to ramp up its production more than two times by FY2014 over that of FY2011. It would lead to an earnings growth (CAGR) of 41%

during FY2011-13.

At the current market price, the stock trades at a PE of 7.5x and EV/EBITDA of 3.6x based on our FY2013 estimates. We remain bullish on its production ramp-up plan andrecommend Buy with a price target of Rs500.

ORIENT PAPER 59 8.3 6.7 5.6 17.0 18.4 18.9 70 18

Remarks: OPIL, a part of CK Birla group, is a diversified conglomerate operating in three segments; cement, paper and fans. The cement division contributes over 53% of the totalrevenue. The company benefits due to its diversified business model.

Due to the recent increase in cement prices, the present realisation of the company is higher by over 24% over FY2011. The surge in the realisation will be able to offset the

cost inflation and the profitability of the division is likely to improve (marginally).

In the electrical division, due to the new product launches and gaining market shares, the company would deliver over 11% revenue growth in FY2012. Going forward, thedivision can witness growth on the back of lighting products (CFL) and household appliances.

The restructuring plan to demerge the cement division augurs well for the company as the uncertainty in the profitability of the paper division was one of the major overhangson the stock. Hence, the valuation could get re-rated going ahead.

However, the key concern remains the poor volume offtake in its key market, ie Andhra Pradesh (which accounts for 37% of the total dispatches).

At the current market price of Rs59, the stock trades at a PE of 5.6x and EV/EBIDTA of 4.1x, discounting its FY2013 earnings estimate.

SUN PHARMA 570 32.5 24.2 24.0 19.2 21.1 17.7 631 11

Remarks: The combination of Sun Pharma and Taro offers an excellent business model for Sun Pharma, as has been reflected in the M9FY2012 performance (its revenue grew 31%YoY in M9FY2012).

Though Taro may not show a similar performance in the next quarter, but we expect a better performance from Sun Pharma going forward mainly driven by the resumptionof sales from the US based Cranbury facility, which has been cleared by the USFDA recently. Sun Pharma seeks to acquire the remaining equity in Taro and, if successful, thatwill not only help achieve better synergy but also boost earnings from the first year itself.

We expect 24% and 16% revenue and PAT CAGR respectively over FY2011-13. With a strong cash balance, Sun Pharma is well positioned to capitalise on the growthopportunities. Its debt-free balance sheet insulates it from the negative impact of volatile currency.

Due to provisions of Union Budget 2012-13, which provided for Alternate Minimum Tax (ALT) on partnership-based units availing various tax concessions, Sun Pharmasearnings are likely to get reduced to the extent of 9% in FY2013.

At the current market price, Sun Pharma is trading at 24.2x and 24.0x FY2012 and FY2013 estimated EPS respectively. We maintain our Buy recommendation on the stockwith a price target of Rs631, which implies 26x FY2013E EPS.


SHAREKHAN TOP PICKS EQUITY FUNDAMENTALS


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Concerns priced in, growth aheadCOMPANY DETAILS

Price target: Rs151

Market cap: Rs1,720 cr

52-week high/low: Rs148/88

NSE volume (no of shares): 75,210

BSE code: 522287

NSE code: KALPATPOWR

Sharekhan code: KALPATPOWR

Free float (no of shares): 6.9 cr

PRICE CHART

SHAREHOLDING PATTERN

(%) 1m 3m 6m 12m

Absolute 1.4 18.6 1.7 3.1

Relative 1.0 4.9 -5.4 4.6

to Sensex

PRICE PERFORMANCE

EMERGING STAR BUY; CMP: RS112 MARCH 15, 2012

KEY POINTS

Better times ahead: Competition in the domestic T&D EPC space intensified in thelast few years, adversely affecting the market share, margins and valuations of theestablished players including Kalpataru Power Transmission Ltd (KPTL). Howeverthe stringent norms adopted by PGCIL recently could ease the competition to someextent in future. Meanwhile, KPTL has gained a strong foothold in some highgrowth international geographies. Also, opportunity in the T&D space is huge andgrowing impressively. The domestic opportunity is pegged at Rs150,000 crore inthe 12th Five-Year Plan and the global opportunity is around $1.5-2.0 trillionbetween FY2011 and FY2030.

Strong order book provides growth visibility: After the muted performance of thpast two years, we expect an improvement in the revenue growth of KPTL fromFY2012. This will be backed by a strong order book of Rs5,500 crore (stand-alone), ie 1.8x its FY2012E revenues. In JMC Projects (a 67% subsidiary) the strongrevenue traction is likely to continue in FY2013 and FY2014, thanks to an ordebook of over Rs5,000 crore. The consolidated revenue is estimated to grow at 17%CAGR during FY2012-14. Moreover, the renewed focus of the government on thepower sector could improve the generation-linked transmission infrastructuredemand.

Concerns on margin and cash flows priced in: On account of a competitive biddingenvironment and the extended execution time line of projects (primarily ROW issues)the EBITDA margin of KPTL (stand-alone) is likely to remain subdued in the neaterm which is already priced in the stock. Further, on account of the tightenedpayment norms adopted by PGCIL, KPTL could witness strain in its working capitarequirements and cash flows. Nevertheless, KPTLs balance sheet position is betterthan that of its peers with relatively less leverage (a consolidated debt-equity ratioof 0.6x). Further, the peaking of the interest rate in the near future could be beneficial

as for KPTL the interest cost is the highest cost component below the EBITDA line Ripe for re-rating: Given the tough business environment, the valuation multiple

of the T&D EPC companies have contracted significantly in the past few years. Thecurrent valuation multiple of 7-8x one-year forward earnings (as against the averagof 15-16x earlier) does not factor in the potential revival in the overall businessoutlook. The estimated earnings growth of 17% (CAGR; during FY2012-14) impliea PEG of 0.4x. Based on the SOTP method, we value the stock (KPTL at 9x, JMCProjects at 6x of FY2014E earnings and SPV at 1x equity invested) at Rs151, whichis 1x FY2014E book value and 5x EV/EBIDTA FY2014E. We initiate coverage onKPTL with a Buy recommendation.

KALPATARU POWER TRANSMISSION

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding

or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.

STOCK IDEAEQUITY FUNDAMENTALS

Promoters

55%

Foreign

12%

Institutions

23%

Others

10%

80

90

100

110

120

130

140

150

Mar-

11

Jun-

11

Sep-11

Dec-

11

Mar-

12

KEY FINANCIALS (CONSOLIDATED)

Particulars FY2009 FY2010 FY2011 FY2012E FY2013E FY2014E

Net sales (Rs cr) 3,246.0 4,031.9 4,354.7 5,260.5 6,242.7 7,262.0

EBITDA margin (%) 10.1 10.9 11.1 10.3 10.1 10.0

Net profit (Rs cr) 110.9 177.6 200.1 192.7 220.4 265.5

EPS (Rs) 7.2 11.6 13.0 12.6 14.4 17.3

EPS growth (%) -32.7 60.1 12.6 -3.7 14.4 20.5

PER (x) 15.1 9.4 8.4 8.7 7.6 6.3

P/BV (x) 1.9 1.6 1.0 0.9 0.8 0.7

EV/EBITDA (x) 8.1 6.0 5.0 5.3 4.7 4.2

Dividend yield (%) 1.2 1.4 1.4 1.4 1.4 1.6

RoCE (%) 17.9 19.6 17.9 16.1 16.2 17.0

RoE (%) 13.5 18.8 15.0 11.2 11.6 12.5


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Union Budget 2012-13: Right on intent, low on action

SHAREKHAN BUDGET SPECIAL MARCH 16, 2012

The Union Budget 2013 reflects another instance of thegovernments indecisiveness on critical policy issues. In his speech,the finance minister acknowledged that there is a need to achievefiscal consolidation, curtail subsidy burden and revive privateinvestments but he did little in terms of policy action to address thesame. The budget proposes steps to boost revenues by rolling backfiscal stimulus (a 2% hike in both the excise duty and the servicetax rate) and expresses intent to limit the subsidy bill to 2% of thegross domestic product (GDP; against 2.5% in FY2012). But thereis no clear roadmap of the action needed to achieve the same. Onesenses that the governments focus has been on the safe passage ofthe finance bill and that the measures to cut down subsidy burdenand to achieve the targeted fiscal consolidation will follow suit postbudget. On the whole, the finance minister in this budget has set

more realistic targets than he had in the previous year but he hasmissed out perhaps the last opportunity before the general electionto take bold policy decisions.

KEY POSITIVES

The budget sets a fiscal deficit target of 5.1% (against 5.9% inFY2012) and a total subsidy target of 2% of the GDP; but theroadmap to achieve the same is not clear, given the absence ofany proposal to pass on the higher cost to consumers.

It provides incentives for the infrastructure sector in terms ofeasing norms/limits for external commercial borrowings (ECBs)and of channelising higher retail savings into infrastructure bonds.

It lowers the personal tax burden by 12-15% for the middleincome group which will have a positive impact on consumption/discretionary spending.

The budgeted tax revenue receipts appear to be more realisticthis year. The gross tax revenue growth of 19.5% would besupported by a robust growth in the indirect taxes resulting outof an increase in the excise duty and service tax rates.

It reduces the securities transaction tax (STT) by 20% on cashdelivery transactions and proposes to introduce equity savingschemes with tax deduction of 50% on direct equity investmentsup to Rs50,000 by retail investors having annual income belowRs10 lakh. The equity savings scheme would have a lock-inperiod of three years.

It proposes steps to attract foreign inflows by allowing qualifiedfinancial institutions (QFIs) to access the Indian bond marketand by introducing two-way fungibility for Indian depository

receipt issues.

KEY NEGATIVES

The governments borrowing figure (net) of Rs479,000 crore(as against Rs437,000 crorethe revised estimate of FY2012)exceeds the consensus estimate, and would adversely affect theliquidity conditions and increase the risk of crowding out of theprivate sector.

No material reforms have been announced in the budget; therehas been no hike in the foreign direct investment (FDI) limit inaviation, insurance and retail sectors either.

The budget has not announced any timeline for theimplementation of tax reforms, the Goods and Services Tax(GST) and the Direct Tax Code (DTC).

TRENDS IN TAX REVENUES (Rs '00 crore)

FY2006A FY2007A FY2008A FY2009A FY2010A FY2011A FY2012RE FY2013BE

Gross tax revenues 3,661.5 4,735.1 5,931.5 6,053.0 6,245.3 7,930.7 9,016.6 10,776.1

Gross tax revenue % YoY 20.1 29.3 25.3 2.0 3.2 27.0 13.7 19.5

Direct tax 1,572.6 2,194.1 2,955.6 3,194.4 3,770.4 4,452.7 4,995.6 5,690.1

% change YoY 19.2 39.5 34.7 8.1 18.0 18.1 12.2 13.9

Corporation tax 1,012.8 1,443.2 1,929.1 2,134.0 2,447.3 2,986.9 3,276.8 3,732.3

% change YoY 22.5 42.5 33.7 10.6 14.7 22.1 9.7 13.9

Income tax 559.9 750.9 1,026.4 1,060.5 1,323.2 1,465.9 1,718.8 1,957.9

% change YoY 13.6 34.1 36.7 3.3 24.8 10.8 17.3 13.9 Indirect tax 2,088.9 2,541.0 2,975.9 2,858.6 2,474.9 3,478.0 4,021.1 5,086.0

Indirect tax revenue YoY 20.7 21.6 17.1 -3.9 -13.4 40.5 15.6 26.5

Indirect tax as of total 57.1 53.7 50.2 47.2 39.6 43.9 44.6 47.2

Excise 1,112.3 1,176.1 1,236.1 1,086.1 1,036.2 1,383.0 1,507.0 1,943.5

% change YoY 12.2 5.7 5.1 -12.1 -4.6 33.5 9.0 29.0

Import duty 650.7 863.3 1,041.2 998.8 833.2 1,358.1 1,530.0 1,866.9

% change YoY 12.9 32.7 20.6 -4.1 -16.6 63.0 12.7 22.0

Service tax 230.6 376.0 513.0 609.4 584.2 710.2 950.0 1,240.0

% change YoY 62.4 63.1 36.4 18.8 -4.1 21.6 33.8 30.5

Other tax revenues 95.4 125.6 185.6 164.2 21.2 26.7 34.1 35.5

% change YoY 360.1 31.6 47.8 -11.5 -87.1 25.9 27.7 4.3

BUDGET SPECIAL EQUITY FUNDAMENTALS


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It has abolished the import duty on coal but not mentionedanything about restructuring the state electricity boards (SEBs)required to boost the power generation sector.

It has increased the cess on oil upstream companies which is ill-timed, given the recent auction of ONGC offer for sale.

FISCAL DEFICIT PEGGED @5.1%...WILL RBI CUT RATES?

Potential slippages in fiscal consolidation

While the market was expecting a definite clarity on the fiscalconsolidation front, the budget inadequately addresses the same.Though the 5.1% fiscal deficit target is lower than the FY2012target of about 5.9%, the revenue target could be missed as thesame is based on an assumption of a recovery in economic growthin FY2012-13. Second, there is no clarity on the roadmap to limitthe subsidy bill within 2% of the GDP unless the government takessome out-of-the-budget steps to curtail fuel and fertiliser subsidy.For instance, on fertiliser side also the subsidy budgeted is Rs60,000crore (compared with ~Rs67,200 crore in FY2012) which seemsinsufficient. Therefore, as the crude prices and fertiliser prices remainfirm the slippage on subsidies is likely to be similar to that seen inFY2012.

Sector Comments

Oil & Gas Lower provisioning of subsidy, no hike in prices of petroleum products and increase in cess negative for Oil India, ONGC and the oil marketing

companies (OMCs).

Auto Excise duty hike of over 2% and higher excise on truck chassis negative for Tata Motors and Ashok Leyland. Though no announcement of

additional excise duty on diesel vehicles is a relief for Mahindra and Mahindra (M&M) and Maruti Suzuki.

Pharma Increase in basic excise duty (f rom 10% to 12% on bulk drugs and from 5% to 6% on formulations), imposi tion of al ternative minimum tax (AMT)

on profits from partnerships affects Sun Pharmaceuticals, Strides Arcolab and Cadila Healthcare in terms of a higher tax incidence.

Telecommunications Non-tax revenue break-up shows a budgeted estimate of Rs40,000 crore from the auction of spectrum which would be pressure on the cash flowsituation on the telecom sector. Plus, increase in service tax would make telecom services more expensive.

Hotel Increase in service tax from 10.3% to 12.36% and non-granting of infrastructure status are both negative.

Sector Comments

Infrastructure Investment in infrastructure doubled in 12th Five-Year Plan, tax-free bonds doubled, withholding tax on interest payment on ECBs reduced from20% to 5%.

Logistics 100% deduction allowed on capital expenditure (capex) on container freight stations (CFS)/inland container depot ( ICD), increased deduction from100% to 150% on capex on cold chain warehouses. Positive for Gateway Distriparks, Arshiya International and other logistic companies.

Retai l Reduction in incidence of the excise duty on branded apparels from 4.5% to 3.6% is likely to boost the demand for branded apparels, and benef itcompanies like Provogue and Raymonds.

Power Clear at tention on fuel securi ty front; customs duty cut for coal, natural gas, l iquefied natural gas (LNG) and coal mining equipment; al locat ion oftax-free bonds of Rs10,000 crore; ECB fund raising promoted with easier norms. However, no mention of restructuring of SEBs is a negative.

Media Exempt ion of f ilm content from service tax ambit, faster GST rol l-out and higher capi tal avai labi li ty through venture capital funding. Posit ive forcompanies like Eros International, PVR Cinemas, Cinemax and Reliance MediaWorks.

Education/UID Increase in allocation for education projects/skill development/unique identification (UID; Aadhaar) positive for NIIT, Everonn Education, EducompSolutions, Tera Software, CMC etc.

GAINERS OF BUDGET 2012-13

LOSERS OF BUDGET 2012-13

TREND IN FISCAL DEFICIT

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

FY1999A

FY2000A

FY2001A

FY2002A

FY2003A

FY2004A

FY2005A

FY2006A

FY2007A

FY2008A

FY2009A

FY2010A

FY2011A

FY2012RE

FY2013BE

-2 %

-1 %

0%

1%

2%

3%

4%

5%

6%

7%

Fis c a l Def ic it Rev enue Def ic it Pr imary Def ic itFD as % of GDP RD as % o f GDP PD as % o f GDP

FISCAL CONSOLIDATION TARGETS

GOVERNMENT BORROWINGS (RS 00 CRORE)

High target for market borrowings; could increase further on fiscaslippages

The gross market borrowings for FY2013 are pegged at Rs479,000crore compared with Rs436,000 crore in FY2012. During FY2012the borrowings were revised upwards due to fiscal slippages, so

0

1,000

2,000

3,000

4,000

5,000

6,000

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY10A

FY2011A

FY2012RE

FY2013BE

0%

1%

2%

3%

4%

5%

6%

7%

Fiscal Deficit FD as % of GDP

01,000

2,000

3,000

4,000

5,000

6,000

FY2002A

FY2003A

FY2004A

FY2005A

FY2006A

FY2007A

FY2008A

FY2009A

FY2010A

FY2011A

FY2012RE

FY2013BE

50%55%60%65%70%75%80%85%90%95%Gross Debt Market Borrow ings

Net Debt Market Borrow ings

net as % of gross borr

EQUITY FUNDAMENTALS BUDGET SPECIAL


14/61


050

10 015 020 0

25 030 035 0

40 045 0

FY1999A

FY2000A

FY2001A

FY2002A

FY2003A

FY2004A

FY2005A

FY2006A

FY2007A

FY2008A

FY2009A

FY2010A

FY2011A

FY2012RE

FY2013BE

Privatisation / Dives tments

higher borrowings on an expanded base will be perceived as anegative by the market. This is likely to keep the bond yields firmand may affect the private investments. However, if the fiscal deficitexpands the borrowings could inch up as had happened in FY2012.

Focus on social schemes continues

Focus on its pet schemes like Mahatma Gandhi National RuralEmployment Guarantee Act (MGNREGA), right to education (RTE)etc would continue. The expenses on administering theimplementation of food security will be fully provided in the FY2013budget. Further, the government has raised allocation to RTE by22%, to National Rural Health Mission (NRHM) by 15% and to

National Family Benefit Scheme (NFBS) by 100%, showing itsinclination for social schemes.

Conclusion: increased uncertainty on policy rate cuts in April 2012

Thus, the government has done little to inspire enough confidencein the Reserve Bank of India (RBI) to begin its policy rate reversalcycle in April this year. We believe that the RBI would prefer thecrude oil prices to cool down and the government to take someout-of-the-budget steps to rein in the subsidy bill. The hardening ofthe bond yields by 10-12 basis points also reflects the nervousnessin the debt market and indicates the growing uncertainty over thepossibility of policy rate cuts in April this year.

TREND AND COMPOSITION OF SUBSIDIES PROCEEDS FROM DISINVESTMENTS

0

50 0

1000

1500

2000

2500

FY02A

FY03A

FY04A

FY05A

FY06A

FY07A

FY08A

FY09A

FY10A

FY11A

FY12RE

FY13BE

Food Fertilis ers Petroleum Subs idy

PERSONAL INCOME TAX

In the Union Budget 2012-13, the finance minister has increasedthe basic exemption limit for individual tax payers to Rs200,000from the earlier Rs180,000 which would lead to a saving ofRs2,060 per tax payer (for female tax payers Rs1,030). Thebudget has also raised the upper limit of 20% tax slab to

Rs1,000,000 from the earlier Rs800,000 which would lead toan additional benefit of Rs20,600 per tax payer. Further, thebudget has introduced a new section, 80TTA, wherein deductionwould be allowed to the tax payer (individual and HinduUndivided Family) up to Rs10,000 in respect of any income byway of interest on deposits in savings account with banks, co-operative banks and post office. Section 80D (relating to medicalinsurance) would be amended to include the payment made on

account of preventive health check-up for an amount of up toRs5,000 (effective from April 1, 2013). Finally, the effective ageof a senior citizen being an Indian resident has been reducedfrom sixty-five years to sixty years for all purposes.

INDIVIDUAL TAX PAYERS

FY2011-12 FY2012-13

Tax slabs Tax rate Tax slabs Tax rate

(Rs) (%) (Rs) (%)

Up to 180,000 Nil Up to 200,000 Nil

180,001 500,000 10.3 200,001 500,000 10.3

500,001- 800,000 20.6 500,001 - 1,000,000 20.6

Above 800,001 30.9 above 1,000,001 30.9

Particulars FY2012BE FY2012RE Change YoY % FY2013BE Change YoY %

Agriculure and allied activities 14,744 14,855 0.8 17,692 19.1

Rural development 46,292 39,132 (15.5) 40,763 4.2

Irrigation and food control 565 489 (13.4) 1,275 160.6

Energy 155,495 147,190 (5.3) 154,842 5.2

Industry and minerals 45,214 40,581 (10.2) 57,227 41.0

Transport 116,861 109,205 (6.6) 125,357 14.8Communication 20,256 11,994 (40.8) 15,411 28.5

Science technology and environment 16,186 12,713 (21.5) 16,592 30.5

General economic surveys 15,802 19,420 22.9 24,777 27.6

Social services 153,812 157,056 2.1 188,872 20.3

General services 7,230 5,536 (23.4) 8,701 57.2

Grand total 592,457 558,172 (5.8) 651,509 16.7

MAJOR OUTLAYS BY CENTRE RS (CR)

BUDGET SPECIAL EQUITY FUNDAMENTALS

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

For detailed report, please visit the Research section of our website, sharekhan.com.


15/61


RAILWAY BUDGET

Rail Budget 2012-13: Populism avoidedRAILWAY BUDGET SPECIAL MARCH 14, 2012

Contrary to expectations, the Railway Budget 2012-13 avoidedpopulism and hiked passenger fares after a gap of ten years. The

passenger fare hike has come on the back of a substantial increasein the freight rates effected just prior to the budget. The railwayminister also detailed an extensive plan to invest a huge sum inexpansion and modernisation of the railway network over the nextfive years and sought additional budgetary support for the same.He has set an ambitious five-year target to improve the operationalratio to 74% from the 95% revised estimate for FY2011-12. Onan overall basis, the railway budget suggests that the apprehensionof a hugely populist Union Budget after the Congress Partys debaclein the Uttar Pradesh assembly election has been allayed for now.However, there is strong opposition to the passenger fare rate hikefrom the railway ministers party and leaders.

PERFORMANCE FOR 2011-12 The gross traffic receipts came in at Rs1,03,917 crore, short by

Rs2,322 crore of the FY2012 budget estimate. This was due to

a lower than expected growth in passenger and freight volumes. The ordinary working expenses exceeded the budgeted estimate

by around Rs2,000 crore at Rs75,650 crore; the pensionpayments also expanded by Rs1,000 crore in FY2012.

The operating ratio stood at 95.0% as compared to 91.1% inthe FY2012 budget estimate.

The surplus was significantly lower at Rs1,492 crore comparedwith the budgeted estimate of Rs5,258 crore. This was mainlyon account of a sharp rise in the working expenses.

BUDGET FOR 2012-13 The budget estimates for FY2012-13 foresee an increase of 5-

6% in the passenger and freight volumes. Further, with theincrease in the freight rates and passenger fare the gross receiptscould increase by about 27% in FY2013.

The working expenses are estimated to grow at 14% in FY2013to Rs84,400 crore, resulting in an operating ratio of 84.9%.

The budget estimates a surplus of Rs15,556 crore in FY2012which would be a quantum jump from the FY2012 level. The

growth in the surplus hinges on an increase in traffic receiptand containment of working expenses.

Capex on safety, expansion and modernisation

The capital expenditure (capex) for FY2013 is pegged aRs60,100 crore, an increase of 4.2% over the FY2012 capexOut of the total capex outlay for FY2013, Rs24,000 crore wouldbe sourced through budgetary support, Rs18,050 crore frominternal resources, Rs15,000 crore from market borrowingsRs2,000 crore through internal resources and Rs1,050 crorefrom external sources of financing, like public-privatepartnership (PPP).

The railways plans to invest heavily in safety, hygiene, expansionand moderatinsation for which a total outlay of Rs7.35 lakhcrore has been allocated in the 12th Five-Year Plan.

The budget has proposed a capex of Rs6,872 crore for building

725km of new lines and Rs3,393 crore for doubling of 700kmrailway line. Further, the budget targets 800km gauge conversionand 1,100km electrification in FY2013 at a cost of abouRs2,900 crore.

POSITIVES

Passenger fares have been increased after a gap of ten years; though inadequate the

move would still provide some relief to the strained financial health of the railways.

Freight rates were increased substantially recently outside of the railway budget.

The railways borrowings are expected to be around Rs15,000 crore in FY2012-13,significantly lower than that in FY2011.

A stiff target has been set to bring the operational ratio down to 84.9% in FY2012-13 (from

The demand for higher budgetary allocation will strain the already tight fiscal deficit

scenario.

The operational ratio at 95% is among the lowest in recent years and shows highinefficiencies of operations and low internal accruals. Further, the hiring of 100,000

employees in FY2013 would increase the cost pressure substantially.

The hike in the passenger fares is quite inadequate considering the deterioration inthe financial health of the railways.

INCREASE IN CAPEX (RS CRORE)

0

1 0 0 0 0

2 0 0 0 0

3 0 0 0 0

4 0 0 0 0

5 0 0 0 0

6 0 0 0 0

7 0 0 0 0

2

004-05

2

005-06

2

006-07

2

007-08

2

008-09

2

010-11

201

1-12RE

201

2-13BE

Plan Out lay

PERFORMANCE OF INDIAN RAILWAYS (RS CR)

Particulars 2008-09 2009-10 2010-11 2011-12RE 2012-13BE

Gross traffic receipts 79,862 86,964 94,536 103,917 132,552

Working expenses 71,839 82,915 89,474 98,610 112,400

Operating ratio (%) 88.0 95.3* 94.6* 94.9* 84.8*

Ordinary working expenses 54,349 65,810 68,139 75,650 84,400

Appropriations to depreciation reserve fund 7,000 2,187 5,515 6,160 9,500

Appropriation to pension fund 10,490 14,918 15820 16800 18500

Net traffic receipts 8,023 4,049 5,061 5,307 20,152

Net miscellaneous receipts 1,152 1,495 1,285 1,837 2,081

Net revenues 9,175 5,544 6,346 7,144 22,233

Net dividend payable 4,718 5,543 4,941 5,652 6,676

Surplus (+) or deficit (-) 4,457 1 1,404 1,491 15,556

* calculated as not disclosed in the budget documents; BE = budget estimate; PE: Provisional Estimates

EQUITY FUNDAMENTALS

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.



16/61


Bullishness continuesCOMPANY DETAILS

Price target: Rs1,050


52 week high/low: Rs994/710

NSE volume (No of shares): 91,995

BSE code: 500303

NSE code: ABIRLANUVO

Sharekhan code: ABIRLANUVO

Free float (No of shares): 5.6 cr

(%) 1m 3m 6m 12m

Absolute 10.9 26.8 3.3 23.3

Relative to Sensex 15.4 14.7 -4.1 27.4

PRICE PERFORMANCE

APPLE GREEN BUY; CMP: RS951 MARCH 26, 2012ADITYA BIRLA NUVO

We continue with our bullish outlook and Buy rating on Aditya Birla Nuvo, Of late there hasbeen a lot of speculation in the media over the companys businesses, and we clarify thesituation and present our understanding and analysis of the recent news flow on the company.

Aditya Birla Nuvo to sell Madura Garments for $500 million

Media reports state that as per their sources Aditya Birla Nuvo is selling its brandedapparel business, Madura Garments. Madura Garments is a 100% subsidiary of AdityaBirla Nuvo and owns marquee apparel brands like Louis Philippe, Peter England, VanHeusen, Allen Solly and Espiritin its portfolio.

The current media valuation seems to be at a 100% premium to our estimated value,thus, if it happens, would be positive.

Idea Cellular on the block

We believe Aditya Birla Nuvo is the cheapest way of gaining exposure to Idea Cellular

There has been speculation in the market and the media that Idea Cellular is on the

block. Idea Cellulars management has categorically denied the same Our analysis on Idea Cellular puts an equity value of about Rs34,000,we believe that

exposure to Idea Cellular through Aditya Birla Nuvo is still cheap and offers a decentupside.

Issue of warrants to promoters also speaks of positive sentiment

In meeting of its board of directors Aditya Birla Nuvo decided to issue 1.65 crorewarrants of face value Rs10 each to the promoter/promoter group on a preferentialallotment basis, We view this development as a positive.


Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.

Read through MTN results for BhartiCOMPANY DETAILSPrice target: Rs450



NSE volume (No of shares): 57.3 lakh

BSE code: 532454

NSE code: BHARTIARTL

Sharekhan code: BHARTIARTL


(%) 1m 3m 6m 12m

Absolute -13.0 -12.6 -17.9 1.9

Relative to Sensex -10.6 -14.2 -18.6 6.7

PRICE PERFORMANCE

APPLE GREEN BUY; CMP: RS338 MARCH 9, 2012BHARTI AIRTEL

Over the last two days, two developments pertaining to Bharti Airtel (Bharti) have taken

place- 1) MTNs results were declared which provided some understanding on the

competitive scenario in Bhartis major African regions of operation and 2) the Telecom

Regulatory Authority of India (TRAI) issuing a consultation paper on auction of spectrum.

We present below the analysis of the same and their likely implication on Bharti.

Bharti to remain under pressure: Spectrum refarming would entail high operational cost

for incumbent players like Bharti and Idea which have substantial spectrum in the efficient

900MHZ band. Further MTN results implicitly state that if Bharti Africa has to continue

gaining market share in the African region, it would have to up its ante on the capex front.

This would put some strain on Bhartis African business cash flow position. Further the

competitive and cost landscape in Africa would continue to remain as has been seen fromMTNs results and comments. We believe that Bharti is likely to remain under pressure.

We however continue to maintain our Buy rating on the stock with a price target of Rs450

(8.1x FY2013EV/EBITDA). Any clarity on the pending regulatory issues is likely to drive

stock performance in the near term.



holding or having a postition in the companies mentioned in the article.


Foreign

23%

Institutions

12%

Promoters

50%

Public &

Others

12%

Non-promoter

corporate

3%

Foreign

18%

Institutions8%

Promoters

68%

Public & Others

2%

Non-promoter

corporate

4%

STOCK UPDATE EQUITY FUNDAMENTALS


17/61


Another tariff hike to set the outlook positiveCOMPANY DETAILS

Price target: Rs405




BSE code: 500084

NSE code: CESC

Sharekhan code: CESC


(%) 1m 3m 6m 12m

Absolute -6.5 5.5 -13.7 -16.9

Relative to Sensex -3.6 3.1 -15.5 -11.8

PRICE PERFORMANCE

UGLY DUCKLING BUY; CMP: RS268 MARCH 7, 2012CESC

Event: WBERC approves CESCs 13% hike in tariffsThe West Bengal Electricity Regulatory Commission (WBERC) has allowed CESC to hikethe tariffs for FY2012 by 13% with retrospective effect from April 2011.

Second tariff hike in FY2012; effectively 24% tariff hike allowed during FY2012

CESC had been allowed to raise tariffs by 46 paise per unit in April 2011. Now, againWBERC allowed it to raise tariff to Rs5.88/unit for FY2012. Hence, effectively CESC isallowed a total hike of 24.3% in FY2012. This strengthens our expectations of CESCgetting approval for a tariff of Rs6.28 per unit for FY2013.

Impact on our estimates

As the revised tariff will be retrospectively effective from April 2011, there would beadditional revenue of around Rs450 crore. We believe the company would book all theprior period revenue in Q4FY2012 and adjust the same as receivable which would berecoverable from customers in a spread of 48 months.

Based on this, we have revised our sales estimates for FY2012 and FY2013 by 11% and12% respectively. Also, we have revised PAT estimates by 9% for FY2012 but retain ouFY2013 earnings estimates.

View: Retain Buy

Currently, the stock is trading at 0.6x its FY2012E and 0.5x its FY2013E stand-alonebook value. We continue to rate CESC as a Buy considering its cheap valuation and theimproving financial health of the retail business, which was a major drag on the overalbalance sheet of the company.




Annual report reviewCOMPANY DETAILS

Price target: Rs3,000


52 week high/low: Rs2,730/2,120

NSE volume (No of shares): 17,123

BSE code: 500676

NSE code: GSKCONS

Sharekhan code: GSKCONS

Free float: 2.4 cr

(No of shares)

(%) 1m 3m 6m 12m

Absolute -1.7 3.3 12.6 22.0

Relative to Sensex 3.3 -3.5 5.7 32.6

PRICE PERFORMANCE

EVERGREEN BUY; CMP: RS2,670 MARCH 27, 2012GLAXOSMITHKLINE CONSUMER HEALTHCARE

Key points

Cash conversion cycle improved further: The companys cash conversion cycle improvedfrom negative 89 days in CY2010 to negative 100 days in CY2011, indicating animprovement in working capital management. Hence despite an above 40% growth inloans and advances in the last couple of years, the companys ability to generate cashfrom operating activities has remained strong.

Return ratios remain strong: The return ratios continued to improve with the return onnet worth (RoNW) and return on capital employed (RoCE) up from 32.2% and 48.7%respectively in CY2010 to 33.8% and 51.7% in CY2011.

Cheery dividend player: As anticipated the company has paid a dividend of Rs35 per

share in CY2011. The dividend payout ratio stood at 41% in CY2011, which hasimproved in comparison to its average dividend payout ratio of around 33%.

Maintain positive bias on stock: We have incorporated the CY2011 balance sheenumbers in our estimates and the same has not led to any major change in our earningestimates. Considering the low penetration of the MFD category and GSKs strongpresence in it, we believe the company is well poised to achieve a top line and bottomline growth of close to 20% each over CY2011-13. At the current market price thestock trades at 26.2x its CY2012E EPS of Rs101.8 and 22.1x its CY2013E EPS ofRs121.1. We maintain our Buy recommendation on the stock with a price target oRs3,000.




Promoters

52%

Foreign

18%

Institutions

17%

Others

13%

Promoters

43%

FIIs

15%

Others

25%

Domestic

institutions

17%

STOCK UPDATEEQUITY FUNDAMENTALS


18/61


Price target revised to Rs547COMPANY DETAILS

Price target: Rs547




BSE code: 532424

NSE code: GODREJCP

Sharekhan code: GODREJCP


(%) 1m 3m 6m 12m

Absolute 1.0 14.0 4.6 19.1

Relative to Sensex 2.4 10.2 0.4 25.1

PRICE PERFORMANCE

APPLE GREEN BUY; CMP: RS447 MARCH 6, 2012GODREJ CONSUMER PRODUCTS

KEY POINTS

We expect the consolidated top line of GCPL to grow at a CAGR of close to 25% overFY2012-14. This will be driven by a strong growth in the household insecticide (HI) andhair colour segments in the domestic market and a sustained growth of above 20% inmost of the international markets. The growth would be driven by portfolio enhancement,increased penetration and adequate support of media and promotional activities.

The company is reaping the benefits of low-cost raw materials. Also there are nosignificant launches in the next two quarters. Hence the consolidated operating OPMwould sustain in the range of 19-20% in the next two quarters. Also, the increasingcontribution from the high-margin international business has largely offset the risk ofimpact of volatility in the raw material prices on the margins. The commodity risk islimited upto 25% of the consolidated revenues, and the increased contribution fromthe international business would help the consolidated OPM to remain in the range of

17.0-18.5% over FY2012-14. We expect GCPLs consolidated top line and bottom line to grow at a CAGR of 24%

and 26% respectively over FY2011-14. The sustained strong growth in the domesticHI business and the strong growth in the international markets remain key growthdrivers for the company over the long run. We have revised our price target upwards toRs547. At the current market price the stock trades at 20.6x its FY2013E EPS ofRs26.1. We maintain our Buy recommendation on the stock.




Price target revised to Rs250COMPANY DETAILSPrice target: Rs250




BSE code: 500875

NSE code: ITC

Sharekhan code: ITC


(%) 1m 3m 6m 12m

Absolute 6.0 10.4 9.2 29.2

Relative to Sensex 10.1 -2.3 5.5 33.8

PRICE PERFORMANCE

APPLE GREEN BUY; CMP: RS221 MARCH 19, 2012ITC

Key points

The Government of India has imposed a 10% ad valorem duty on 50% of the MRP ofcigarettes (exceeding the length of 65mm) in the Union Budget 2012-13. This is anadditional charge on the existing specified excise duty on different slabs of cigarettes(of above 65mm in length).

We believe ITC needs to take an additional price increase in the range of 7-9% in itscigarette portfolio to mitigate the impact of the excise duty hike.

A price increase of additional 7-9% in the cigarette portfolio will have an impact onthe sales volume of ITCs cigarette business, resulting in flattish sales for a quarter ortwo. Hence, we have reduced our cigarette business volume growth expectation for

FY2013 to 3.5% from 6% earlier.

The downward revision in the sales volume growth estimate of the cigarette businesshas resulted in a downward revision of about 2% in our earnings estimate for FY2013.

We have rolled over our price target to the FY2014 earnings estimate. Hence ourrevised price target stands at Rs250 (based on 23x its FY2014E EPS of Rs10.9). Inview of the strong balance sheet, better earnings visibility and about 15% upside fromthe current level, we maintain our penchant for ITC in the large-cap FMCG space. Atthe current market price the stock trades at 24.0x its FY2013E EPS of Rs9.2. Wemaintain our Buy recommendation on the stock.



holding or having a postition in the companies mentioned in the article.For detailed report, please visit the Research section of our website, sharekhan.com.

Promoters68%

Institutions

22%

Others

10%

Domestic

Institutions

35%

FIIs

48%

Others

17%



19/61


New orders in bag, execution a key challengeCOMPANY DETAILSPrice target: Rs105



NSE volume (No of shares): 1.8 cr

BSE code: 532532

NSE code: JPASSOCIAT

Sharekhan code: JPASSOCIAT


(%) 1m 3m 6m 12m

Absolute 16.2 50.5 10.6 -9.6

Relative to Sensex 17.3 38.1 5.6 -2.9

PRICE PERFORMANCE

UGLY DUCKLING BUY; CMP: RS77 MARCH 28, 2012JAIPRAKASH ASSOCIATES

We present below the key takeaways from our recent interaction with the management oJaiprakash Associates Ltd (JAL).

JAL has been awarded two contracts by Mangdechhu Hydroelectric Project AuthorityBhutan for the construction of two contract packages pertaining to 720MWhydroelectric projects. The cost of constructing the two projects is around Rs914 croreand the management expects a operating profit margin (OPM) of 20-21%.

The two mega projects of the EPC division, namely Karcham Wangtoo and YamunaExpressway, have been completed. Hence, both the projects will start generating revenueand support the overall earnings of the company. With the likely surge in the revenueof Jaiprakash Power Venture and Jaypee Infratech, the parent (JAL) is likely to benefiin terms of a higher dividend income.

JAL has maintained the momentum in the volume growth and posted a 40% year-onyear (Y-o-Y) growth in its dispatches for February 2012. Going ahead, with the likelyincrease in the infrastructure spending we believe the volume growth of the companywill be in double digits and ahead of the all-India industry volume growth.

In addition to the impressive volume growth, the company has also benefited in termof a healthy realisation, primarily due to supply discipline. During Q3FY2012 therealisation of the company grew by 15.8% YoY to Rs3,947 per tonne. Further, withthe price hike undertaken during February and March 2012, we believe the cemenrealisation and EBITDA per tonne of the company in Q4FY2012 would be higher YoYas well as sequentially.

We maintain our Buy recommendation on the stock with a price target of Rs105. Athe current market price, the stock is trading at a PE of 25.1x FY2012 and 18.5xFY2013 earnings estimates




Tractor production cut in March 2012COMPANY DETAILS

Price target: Rs759




BSE code: 500520

NSE code: M&M

Sharekhan code: M&M


(%) 1m 3m 6m 12m

Absolute -2.1 -10.9 -14.1 3.6

Relative to Sensex 0.6 -12.5 -14.7 8.6

PRICE PERFORMANCE

APPLE GREEN HOLD; CMP: RS676 MARCH 9, 2012MAHINDRA & MAHINDRA

KEY POINTS

Mahindra & Mahindra (M&M) has announced a cut in production of tractoramounting to two days in a week in the current month to normalise the built up ofexcess inventory in the system. The production cut will be undertaken at RudrapurNagpur and Jaipur. The management also predicted of a flat year-on-year (Y-o-Ygrowth in March 2012 and guided for an 8% growth in FY2013.

The subdued volume sales figures in February 2012 and a rather muted expectation foMarch 2012 have vindicated our bearish stance. We see two issues - an overall slowdownat the industry level and the second would be a loss of market share by M&M. Thuswe believe that the company might find it difficult to meet its 8-10% volume growth

guidance for FY2013. Consequently, we lower our estimates to 5% volume growth for FY2013 which lead

to a cut of 5.4% in our already below consensus earnings estimates for FY2013 andFY2014.

Valuation

We lower our estimates to 5% volume growth for FY2013 which leads to a cut of5.4% in our already below consensus earnings estimates for FY2013 and FY2014. Webelieve that M&M would continue to underperform in the near-term due to growthconcerns on tractors and an overhang of higher diesel tax on the automotive segmentThus, we maintain our Hold recommendation despite upside to our target price oRs759 per share.




Promoters

25%

Institutions

20%Foreign

30%

Non Corp Holdings10%

Public & Others

15%

Promoters

47%

Public &

others22%

Foreign

18%

Institutions

13%

STOCK UPDATEEQUITY FUNDAMENTALS


20/61


Timely clearances of projects hold the keyCOMPANY DETAILS

Price target: Rs70

Market cap: Rs631 cr



BSE code: 532837

NSE code: ORBITCORP

Sharekhan code: ORBITCORP


(%) 1m 3m 6m 12m

Absolute -15.2 111.2 49.2 14.7

Relative to Sensex -10.5 84.7 46.8 16.6

PRICE PERFORMANCE

UGLY DUCKLING BUY; CMP: RS55 MARCH 21, 2012ORBIT CORPORATION

KEY POINTS Sales booking in Q4FY2012 likely to be better than Q3: Orbit Corp is expecting presales

for Q4FY2012 to be better than Q3FY2012 sales booking of Rs71.1 crore (32,921 sqft). For Q4FY2012 as well, the company is looking at bulk sales (as done in the thirdquarter) in two of its properties viz Orbit Residency at Andheri, Mumbai and OrbitTerraces at Lower Parel, Mumbai which are at an advanced stage.

New launches to kick in from Q1FY2013: With the amended Development ControlRegulation (DCR) now in place, the company expects the approval process to bestreamlined and gain momentum in a months time. The company plans to launch aslum rehabilitation project (SRA) in Santa Cruz (phase 1 of ~100,000 sq ft) where it isin talks with a few Singapore firms for partnership, a new project at Napean Sea Road(60,000 sq ft) and another new project at Kemps Corner (~100,000 sq ft) by H1FY2013.

Mandwa project to take 6-9 months to get approvals and clearances: The pendingapprovals and clearances for Mandwa will take approximately six to nine months. In

response to Bombay Environmental Action Group (BEAG) allegations against OrbitCorp the environment secretary had ordered an inspection of the area and concludedthat there was no case of mangroves being destroyed.

Maintain Buy: The next couple of quarters need to be keenly watched in terms of thecut in interest rate cycle and the progress on the approvals front for the company.Further any success in roping private equity in few of its projects will help the companyimprove its balance sheet. We maintain our Buy rating on the stock with a target priceof Rs70. At the current market price, the stock trades at 7.8x its FY2013E earningsand 0.4x its FY2013E price to book value (P/BV).




Promoters

48%Public &

others

50%

Foreign

1%Institutions

1%

Price target revised to Rs35COMPANY DETAILSPrice target: Rs35

Market cap: Rs187 cr



BSE code: 532647

NSE code: PROVOGUE

Sharekhan code: PROVOGUE


(%) 1m 3m 6m 12m

Absolute 32.9 42.4 15.7 -18.2

Relative to Sensex 38.3 28.8 7.4 -15.4

PRICE PERFORMANCE

UGLY DUCKLING BUY; CMP: RS16 MARCH 26, 2012PROVOGUE INDIA

Provogue India (Provogue)s shares that had got temporarily suspended from tradingfor the demerger process got listed on the bourses at Rs17 per share.

As per the scheme of demerger every shareholder holding 1 share of Provogue hasreceived 1 share of Prozone Capital Shopping Centers Ltd (PCSCL; face value Rs2).The face value of Provogue shares has got reduced from Rs2 to Rs1.

Shares of PCSCL will get relisted after it files for the same, which may take one to threemonths. Our fair value for Prozone works out to Rs27 per share.

Post restructuring, our revised target price for Provogue is Rs35; Maintain Buy: Postrestructuring Provogue now holds only the core retail assets that include brand sales-

Provogue along with export sales, ie those which were part of standalone financials.Thus our standalone financials and estimates for Provogue remain intact. We expect adecline in FY2012 profits while we expect FY2013 to witness strong recovery with a26% growth in earnings. Valuing branded business and the export business of Provoguewith a blended price earning ratio (PER) at 10x FY2013, we arrive at a target price ofRs35 for Provogue. Thus our revised target price for Provogue now stands at Rs35 andwe maintain our Buy rating.



holding or having a postition in the companies mentioned in the article.


Promoters

47%

Public & Others

28%

Institutions

1%Non-promoter

corporate

10%

Foreign

14%



21/61


Tariff hike and policy reforms the key to future growthCOMPANY DETAILS

Price target: Rs75




BSE code: 532524

NSE code: PTC

Sharekhan code: PTC

Free float (N

ValueGuide_Apr2012

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