Market Strategy

July 2010

Angel Portfolio Going overweight on heavy metal

Sector Weightage(%) Stocks Ironically, having one of the largest iron-ore reserves in the world, India is
exporting iron ore at the rate of 100mn tonnes p.a. and importing steel at the
Auto & 7.0 Maruti, Fag
rate of 12mn tonnes p.a. – clearly not an equilibrium state of affairs. This month’s
Ancillaries Bearings,
strategy, therefore, focuses on an interesting confluence of events in the Indian
JK Tyres steel sector, which has thrown up highly profitable opportunities for some of the
Banking 28.0 SBI, Axis Bank, smaller steel companies, such as Electrosteel Castings, Godawari Power & Ispat
ICICI Bank, and Bhushan Steel.
HDFC Bank
FMCG 3.0 ITC Over the next two-three years, these companies are set to benefit from strong
Hotels 3.0 Taj GVK volume growth and lucrative mine allocations. Operating margins are expected to
remain healthy due to favorable demand-supply dynamics, resulting from high
Infra & 16.0 L&T, Reliance Infra,
domestic demand growth of over 10%, even as debt-strapped balance sheets of
Cap Goods Madhucon Projects,
several larger players are acting as a deterrent to any indiscriminate expansion.
IVRCL Infra,
Jyoti Structures Integrated Indian steel players also enjoy a US $150/tonne low-cost advantage,
Media 2.0 Jagran Prakashan as compared to companies that are not iron-ore integrated, and can comfortably
Metals 9.0 Electrosteel Castings, tackle any threat of imports from countries such as China.
Hindalco, Godawari
Power, Bhushan Steel Steel demand in India is expected to grow much faster than the
Oil & Gas 10.0 Reliance Industries world’s average
Pharma 4.0 Dishman Pharma,
We expect steel consumption in India to grow at a 10% CAGR over the next five
Lupin
years, as the country’s per-capita consumption (which is currently at 44kg) catches
Real Estate 3.0 Anant Raj Industries up with the global average of 190kg. Presently, with economic activity picking up,
Software 11.0 Infosys, TCS, steel consumption in India is rising faster than production, mainly led by robust
Tech Mahindra, demand from the housing, infrastructure and automobile sectors. In FY2010,
Mphasis Indian steel consumption grew by 7.6% to 56.3mn tonnes, and steel production
Telecom 4.0 Bharti Airtel grew only by 4.2%. In April 2010, Indian steel consumption continued to grow by
9.6% yoy to 4.14mn tonnes while steel production rose by just 5.3% yoy.
Top Picks
Company (Rs) CMP TP High debt levels are putting a check on domestic capacity
expansion
Bharti Airtel 308 360
ICICI Bank 872 1,145 Despite having favorable operating costs, debt levels of domestic steel companies
are fairly high (1.8x Net Debt : Equity, excluding SAIL). In contrast to the cement
Maruti Suzuki 1,423 1,685 sector, where debt levels of companies are quite low (0.5x Net Debt : Equity), high
TCS 775 921 debt levels in the domestic steel sector are ensuring that companies do not
undertake any indiscriminate expansion. This is expected to keep demand-supply
Tech Mahindra 774 1,168 dynamics favorable for the sector over the next few years.
Anant Raj 120 178
High Net Debt: Equity putting check on indiscriminate expansion
Dishman Pharma 212 279
Electrosteel Castings 48 72 (x)
2.0
Bhushan Steel 1,484 1,979
Jagran Prakashan 125 160 1.6

Godawari Power 225 322 1.2

FAG Bearings 595 712
0.8
Taj GVK 162 240
Greenply 193 291 0.4

JK Tyres 167 237 0.0

Note: Investment period – 12 Months Steel Sector * Cement Sector
BSE Sensex (17,834) and Price as on Net Debt : Equity
July 9, 2010 Source: Company, Angel Research. Note: Steel sector Net Debt : Equity excludes SAIL, for whom
major capacity additions are in any case expected post FY2012E

Please refer to important disclosures at the end of this report.

 Market Strategy

China’s competitiveness reduced, with withdrawal of export

rebates and increased cost
During April–May 2010, India’s steel imports grew by 79% yoy to 1.79mn tonnes
(mainly from China), as Chinese export prices fell by ~US $100/tonne in May
2010. However, the Chinese government withdrew the 9% rebate on HRC and
13% rebate on CRC with effect from July 15, 2010, which led to an immediate
increase of US $30 in export prices. We believe the withdrawal of rebate would
lessen the import pressure on Indian steel companies as the competitiveness of
Chinese companies is reduced by ~US $50/tonne. Further, with iron ore and
coking coal prices increasing by 12–30% for 2QFY2011E, we believe steel prices
will find support at current levels.

Lasting low-cost advantage

With rising raw material costs, steel mills across the world are focusing on
integration. India is self-sufficient in iron ore and, in fact, exported nearly 100mn
tonnes of iron ore in FY2010. Integrated domestic steel players, including Tata
Steel and SAIL, are resilient to the volatility in iron ore cost and enjoy a cost
advantage of ~US $150/tonne as compared to companies that are not iron-ore
integrated.

Overweight on Metals

The icing on the cake is that due to the recent short-term correction in steel prices,
prices of these stocks have also come down, and they are now available at
attractive valuations. As a result, we have gone overweight on metal stocks in our
model portfolio, giving a weightage of 9.0% vis-à-vis the 7.8% weightage in the
BSE-100. We rate Electrosteel Castings, Godawari Power & Ispat and Bhushan
Steel amongst our top picks in the space, with strong upsides in the range of
35–50% over the next 12 months.

Valuation Snapshot
Company CMP Target Reco P/E (x) P/BV (x) EV/EBITDA (x) RoE (%) RoCE (%)
(Rs) Price (Rs) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
SAIL 194 - Neutral 12.5 11.6 2.1 1.9 8.0 7.3 18.2 17.0 17.2 16.9
Tata Steel 496 697 Buy 8.1 8.7 1.4 1.2 6.5 5.9 17.9 14.7 11.8 11.7
JSW Steel 1,082 1,360 Buy 10.0 8.4 1.8 1.5 6.7 5.3 22.1 21.3 15.0 16.7
Bhushan Steel 1,484 1,979 Buy 6.5 5.0 1.5 1.2 7.2 5.9 26.0 26.1 12.6 14.0
Electrosteel 48 72 Buy 7.3 7.1 0.9 0.8 5.6 4.9 14.2 13.1 11.9 12.3
Prakash Inds 181 232 Buy 8.2 5.5 1.3 1.0 5.7 4.3 19.7 23.2 16.6 18.7
Godawari Power 225 322 Buy 4.2 3.2 0.9 0.7 3.2 2.1 26.1 26.7 21.2 23.5
Monnet Ispat 498 534 Accumulate 11.1 7.7 1.5 1.3 9.6 7.8 14.8 17.6 11.7 12.7
Sarda Energy 268 290 Accumulate 7.6 6.1 1.4 1.1 5.5 4.1 19.4 20.2 15.1 16.5
Source: Company, Angel Research

July 2010 2
 Market Strategy

New Investment Ideas

Polyplex Corporation (CMP: Rs.272/ TP: Rs.418/ Upside: 54%)

„ Polyplex Corporation (PCL) is one of the leading manufacturers of biaxially

oriented polyester (PET) films globally with manufacturing facilities in India,
Thailand and Turkey.
„ PCL recently forayed into the lucrative, high-growth BOPP and CPP segments with
a BOPP capacity of 35,000tpa in India as well as a new 10,000 tpa CPP plant in
Thailand. In PET films, PCL increased capacity in India by 155% in FY2010.
Overall, on the back of the company's capacity expansion moves, we expect it to
post 20% CAGR in consolidated sales over FY2010-12E.
„ The company is also available at inexpensive valuation of 0.6x FY2010E P/BV,
while its peers Jindal Poly and Ester Industries are trading between 0.9-1.1x
FY2010E P/BV. PCL holds 70% stake in its listed Thailand subsidiary Polyplex
Thailand (PTL), which has a market cap of Rs950cr and is available at FY2010E
P/BV. However, PCL has a market cap of Rs426cr or 0.6x FY2010E P/BV, which is
at more than 55% discount to PTL's market cap and at a discount of nearly 36% to
PCL's 70% stake in PTL, which works out to around Rs665cr.
„ Over the past five years, PCL has traded in the range of 0.3-0.7x one year forward
P/BV, and is currently trading at 0.5x FY2012E P/BV. Considering the 46% CAGR
in earnings over FY10-12E, we value PCL at the upper band (0.7x) FY2012E P/BV.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,581 18.5 129 81.0 17.1 3.4 0.53 2.5 0.5
FY2012E 1,733 19.0 154 96.4 17.4 2.8 0.45 1.7 0.3

Alembic (CMP: Rs.56/ TP: Rs.74/ Upside: 32%)

„ Alembic has announced de-merger of its Pharma business (comprises its domestic
formulation, international generic and API businesses) into a separate company
named Alembic Pharma.
„ With this, Alembic plans to insulate its relatively high-margin Pharma business
from the loss-making Pen-G business (API facility at Vadodara). Alembic also plans
to develop its 70 acre land asset going forward.
„ We believe that de-merger of the company into two - Alembic and Alembic
Pharma - is a long term positive as it unlocks value for both the businesses and
paves the way to rope in future investors.
„ We recommend Buy on the stock valuing Alembic on a SOTP basis with a fair
value of Rs74 ascribing Rs47 per share to Alembic Pharma at 10x FY2012E EPS,
valuing Alembic’s 29.2% stake in Alembic Pharma at 20% discount to Rs11 per
share, Alembic’s API business at Rs5 per share and valuing Land bank at Rs11 per
share.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,315 12.4 74.5 5.6 18.8 10.0 1.7 7.0 0.9
FY2012E 1,478 12.0 87.0 6.5 19.0 8.6 1.5 6.2 0.7

Note: Alembic estimates currently includes the demerged pharma business

July 2010 3
 Market Strategy

Angel Model Portfolio

Sector Company CMP Target BSE 100 Angel Stance
(Rs) Price (Rs) Weightage (%) Weightage (%)
Auto / 6.1 7.0 Overweight
Ancillaries Maruti Suzuki 1,423 1,685 1.0 3.0 Overweight
FAG Bearings 595 712 0.0 2.0 Overweight
JK Tyres 167 237 0.0 2.0 Overweight
Banking 22.8 28.0 Overweight
SBI 2,369 2,596 3.4 7.0 Overweight
Axis Bank 1,270 1,466 1.7 8.0 Overweight
ICICI Bank 872 1,145 4.9 9.0 Overweight
HDFC Bank 2,003 2,204 3.6 4.0
Cement 1.4 0.0 Underweight
FMCG 7.1 3.0 Underweight
ITC 301 305 4.1 3.0 Underweig
Hotels 0.3 3.0 Overweight
Taj GVK 162 240 0.0 3.0 Overweight
Infra/ 11.5 16.0 Overweight
Cap Goods L&T 1,819 1,809 5.0 6.0
Reliance Infrastructure 1,173 1,253 0.9 3.0
Madhucon Projects 150 190 0.0 2.0
IVRCL Infrastructure 191 216 0.2 2.0
Jyoti Structures 155 215 0.0 3.0 Overweight
Media 0.4 2.0 Overweight
Jagran Prakashan 125 160 0.0 2.0 Overweight
Metals 7.8 9.0 Overweight
Hindalco 149 208 1.0 3.0
Electrosteel Castings 48 72 0.0 2.0
Godawari Power 225 322 0.0 2.0
Bhushan Steel 1,484 1,979 0.0 2.0
Oil & Gas 16.6 10.0 Underweight
Reliance Industries 1,056 1,260 9.7 10.0 Overweight
Pharma 4.0 4.0 Equalweight
Dishman Pharma 212 279 0.0 2.0
Lupin 1,921 2,099 0.5 2.0 Overweight
Power 2,000 2,800 5.5 0.0 Underweight
Real Estate 1.1 3.0 Overweight
Anant Raj Industries 120 178 0.0 3.0 Overweight
Software 10.8 11.0 Equalweight
Infosys 2,872 3,089 7.0 3.0
TCS 775 921 2.3 3.0
Tech Mahindra 774 1,168 0.0 3.0
Mphasis 623 872 0.0 2.0 Overweight
Telecom 2.9 4.0 Overweight
Bharti Airtel 308 360 1.9 4.0 Overweight
Others 1.7 0.0 Underweight

July 2010 4
 Market Strategy

Top Picks
Large Caps
Bharti Airtel (CMP: Rs.308/ TP: Rs.360/ Upside:30%)

„ Bharti continues to maintain its leadership status in customer and revenue market
share helped by strong subscriber addition (33.7mn in FY2010) and high ARPU of
Rs253 (Industry average of Rs164).
„ The competition (price war) is unlikely to further intensify as the cost of operation
for the new players is high and unsustainable. We believe that Bharti with high
EBIDTA/minute of Rs 0.16 is relatively placed better than peers.
„ Valuations for Zain are perceived as expensive but would still be value accretive on
account of financial leverage from the Leveraged Buy Out structuring of the deal.
„ Bharti bagged 3G spectrum in 13 circles with an estimated outlay of Rs12,295cr,
which would cover 65% of its subscriber base and 69% of its revenues; this would
stress the company’s Debt position and impact Earnings by 3%.
„ Bharti is currently trading at 12.4x FY2012E EPS, a significant discount to its
historical average of 26.0x and FY2012E Sensex P/E of 13.8x and hence we
maintain a Buy on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 42,773 35.3 8,350 22.0 18.6 14.0 2.4 7.8 2.8
FY2012E 47,328 35.6 9,449 24.9 17.9 12.4 2.1 6.9 2.4

ICICI Bank (CMP: Rs.872/ TP: Rs.1,145/ Upside: 31%)

„ The Bank is well-positioned to gain market share on the back of substantial branch
expansion (substantial 1508 branches added since 3QFY2008, including entire
branch network of BoR) as well as strong Capital Adequacy at 19.4% (Tier-I at
14.2%).
„ Net Interest Margins of the Bank are expected to sustain on the back of increase in
CASA ratio to 42% in FY2010 from 29% in FY2009.
„ On the back of an improving economic environment, NPA losses are expected to
start declining. The Bank has also done lower restructuring of loans than PSU
Banks (10% of Net Worth v/s 40%+ for most PSU Banks).
„ The stock is trading at attractive valuations of 1.7x FY2012E P/ABV. Hence, we
maintain a Buy on the stock.

Y/E Op Inc. NIM PAT EPS ABV ROA ROE P/E P/ABV
March (Rs cr) (%) (Rs cr) (Rs) (Rs) (%) (%) (x) (x)
FY2011E 17,738 2.6 4,948.2 44.4 487 1.2 11.5 19.6 1.8
FY2012E 21,711 2.6 6,713.2 60.2 518 1.4 15.1 14.5 1.7

Maruti Suzuki (CMP: Rs.1,423/ TP: Rs.1,685/ Upside: 18%)

„ Given India's low car penetration (12 per 1,000 v/s 21 per 1,000 in China) and
with PPP-based per capita estimated to approach the empirically-observed
inflection point for car demand of US $5,000 over the next 4-5 years, we expect
13% CAGR in domestic volumes over FY2010-12E.

July 2010 5
 Market Strategy

„ Maruti has a sizeable competitive advantage over foreign entrants due to its
widespread distribution network (2,767 service and 681 sales outlets).
„ Moreover, with Suzuki Japan making Maruti a manufacturing hub for small cars,
to cater to increasing global demand caused by rising fuel prices and stricter
emission standards, we estimate 18% CAGR in export volumes over FY2010-12E.
„ We believe attractive valuations of 13.5x FY2012E EPS, which provides an entry
point for investors looking to play the India consumer story.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 33,519 11.2 2,674 92.5 19.2 15.4 2.8 8.8 1.0
FY2012E 39,320 11.3 3,043 105.3 17.8 13.5 2.4 7.1 0.1

TCS (CMP: Rs.775/ TP: Rs.921/ Upside: 20%)

„ TCS continues to maintain its strong revenue growth and out performance led by
strong deal wins on the back of improving global macro-economic scenario.
„ Strong client addition, deal wins, robust hiring by IT companies, positive guidance
by peers and new services expansion highlights the improved business scenario
and revival in the overall IT spending.
„ TCS has displayed strong margin resilience with an improvement in profitability
(EBIDTA Margin improved from 25.8% in FY2009 to 28.9% in FY2010) despite
weak demand and declining pricing realisations. We have valued TCS at 22x on
FY2012E Earnings in line with our Target multiple for Infosys. Hence, we maintain
a Buy on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 33,351 28.7 7,413 37.9 31.9 20.4 6.0 15.2 4.3
FY2012E 38,821 28.2 8,200 41.9 29.8 18.5 5.1 12.9 3.6

Tech Mahindra (CMP: Rs.774/ TP: Rs.1,168/ Upside: 66%)

„ Restructuring deal with BT ensures compensatory volumes; Muted pricing terms

may enhance with an improvement in the client's financial health.
„ Sustained volume traction from non-BT clients (CQGR of 7.5% in last eight
quarters) continues to provide revenue growth momentum, margin improvement,
geographical diversification and reduced client concentration to the company.
„ Positive news flow from Satyam in the form of client retention, new deal wins and
favourable settlement with Upaid provides comfort on future business prospects.
„ The stock is trading at a substantial 65% discount (after deducting value of Satyam
stake) to Infosys on a 1-year forward P/E v/s a 5-year average discount of 20%
and 1x FY2012E EV/Sales (v/s Peer average of 3x). Hence, we maintain a Buy on
the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 4,989 24.0 763 58.3 24.9 13.3 2.8 5.4 1.3
FY2012E 5,704 23.0 876 67.0 22.0 11.6 2.2 4.3 1.0

July 2010 6
 Market Strategy

Mid Caps
Anant Raj Industries (CMP: Rs.120/ TP: Rs.178/ Upside: 48%)

„ Almost all of ARIL's land bank (872 acres) is exclusively located in the NCR within
50km of Delhi, with approximately 525 acres in Delhi. This land bank has been
acquired at an historical average cost of Rs300/sq ft.
„ We expect ARIL's residential projects to drive its near-term operational visibility and
help register Rs600cr Profit over the next three years. ARIL recently launched two
residential projects in NCR; Kapashera (0.28mn sq. ft.) and Manesar (1mn sq. ft.)
for Rs5,000/sq. ft. and Rs2,500/sq. ft., respectively. Management has indicated
that it has entirely sold kapashera project and ~20% of Manesar project. Further,
ARIL has 70% pre-lease commitments at its Manesar IT Park, coupled with five
hotels getting operational by FY2011E, which will improve rental visibility.
„ ARIL is trading at a 43% discount to its NAV. The stock is trading at 9.2x FY2012E
EPS and 0.9x FY2012E P/BV and hence we recommend a Buy on stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 342 93.5 276 8.8 7.3 13.7 1.0 8.9 8.4
FY2012E 610 90.4 411 13.1 9.9 9.2 0.9 6.2 5.6

Bhushan Steel (CMP: Rs.1484/ TP: Rs.1979/ Upside: 33%)

„ Bhushan Steel has extended its presence in the steel value chain with the
commissioning of its 1.9mn tonnes HR steel capacity at Orissa.
„ We expect BSL to register 26.2% CAGR in volumes over FY2010- 15E, on
completion of Phase-III expansion by October 2012, much higher than its peers,
who are expected to register volume growth of 10-14% CAGR.
„ Further EBITDA/tonne is expected to be at the higher end of the industry range (US
$325+) on account of adoption of BF-EAF technology and lower conversion costs
„ We recommend a BUY on the stock with a target price of Rs1,979, valuing the
stock at 6.5x FY2012E EV/EBITDA

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 6,290 37.5 968 228.0 26.0 6.5 1.5 7.2 2.7
FY2012E 7,131 41.1 1,259 296.4 26.1 5.0 1.2 5.9 2.4

Dishman Pharma (CMP: Rs.212/ TP: Rs.279/ Upside: 32%)

„ Dishman has incurred organic capex of Rs300cr in the last three years towards
expansion of existing facilities at its Bavla unit and building the China and HPAPI
facilities.
„ Post all these facilities coming on-stream FY2011E onwards, Dishman would
strengthen its ties with the Global Innovators leading to stable Revenue flow over
the long run.
„ Further, Revenues from the Abbott-Solvay contract, which constituted 13% of
FY2010 Sales, have also started normalizing. Also, the Carbogen Amics (41% of
FY2010 sales) is expected to witness an uptrend in FY2011. Overall, the company
has guided towards 20% growth in Top-line for FY2011E.

July 2010 7
 Market Strategy

„ Dishman is currently trading at attractive valuations of 9.9x FY2012E Earnings.

Hence, we recommend a Buy on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,099 24.1 142 17.4 15.8 12.2 1.8 9.2 2.2
FY2012E 1,335 25.5 174 21.4 16.8 9.9 1.5 7.2 1.8

Electrosteel Castings (CMP: Rs.48/ TP: Rs.72/ Upside: 51%)

„ Electrosteel Castings (ECL) is venturing into steel-making through its subsidiary

Electrosteel Integrated (EIL), which is setting up a 2.2mn tonne steel plant expected
to be commissioned by FY2012E. Further, ECL plans to list EIL to raise ~Rs300cr,
which is likely to unlock value for ECL.
„ ECL's backward integration initiatives through allocation of coking coal mines are
expected to result in expansion of EBITDA Margin by 1,304bp over FY2009-12E.
„ The company is also awaiting final environmental clearance for its iron ore mine,
which will further lower costs, but has not been factored in our estimates.
„ We recommend a Buy on the stock, valuing the Core business at 7x FY2012E
FDEPS and its investments in the Steel business at 1x Book Value.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,706 26.2 246 6.5 14.2 7.3 0.9 5.6 1.5
FY2012E 1,818 28.0 254 6.7 13.1 7.1 0.8 4.9 1.4

Godawari Power & Ispat (CMP: Rs.225/ TP: Rs.322/ Upside: 43%)

„ Godawari Power commissioned 0.6mn tonne pellet plant in February 2010. We

expect GPIL to save ~Rs125cr from increasing iron ore production from its Ari
Dongri mines and its subsequent conversion into pellets. Further, the capacity of
the mine is expected to increase to 0.9mn tonne by FY2011E, not factored in our
estimates.
„ Currently, trial production is underway at the 0.6mn tonne pellet plant, which is
being set up in its 75% subsidiary Ardent Steel. It expects to start commercial
production by August 2010. We expect the plant to contribute Rs18cr and Rs52cr
to the company’s EBITDA in FY2011E and FY2012E, respectively.
„ The company has secured the necessary clearance for its Boria Tibu mine and
production is expected to start post monsoon. The mine has total reserves of
7.0mn tonne and iron ore of ~62% Fe content. The company expects to produce
~200,000 tonnes in FY2011E.
„ With earning expected to grow at a CAGR of 94.2% over FY2010-12E. We
maintain our Buy recommendation, valuing the stock at 3.5x FY2012E EV/EBITDA

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,084 25.6 150 53.6 26.1 4.2 0.9 3.2 0.8
FY2012E 1,265 26.1 198 70.9 26.7 3.2 0.7 2.1 0.5

July 2010 8
 Market Strategy

Jagran Prakashan (CMP: Rs.125/ TP: Rs.160/ Upside: 25%)

„ Jagran (JPL) continues to post steady growth in revenues, primarily aided by

Advertisement revenues owing to its strong foothold in the Hindi belt and rising
color ad-inventory coupled with ad-rate hikes. Moreover, the Mid-Day deal (not
factored in our numbers) gives Jagran entry into the lucrative English markets thus,
filling the gap in its portfolio.
„ We expect JPL to sustain its operating margins at 30% levels for FY2011-12E, as
the company continues to benefit from benign newsprint prices (we have modeled
in ~10% rise in newsprint cost). Moreover, lower losses in JPL’s new initiatives and
higher operating leverage (as ad-rate hikes get absorbed), renders us optimism.
„ At the CMP of Rs125, Jagran is available at 15.8x FY2012E Earnings, which is
highly attractive given its 16% Earnings CAGR. The stock is attractive given its high
return ratios and strong leadership position. Moreover, Blackstone’s recent
investment of Rs225cr in the company’s promoter entity and strong Operating
Cash flows make Jagran well placed in terms of funding future growth. We
maintain a Buy on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,088 29.8 197 6.6 31.0 19.0 5.7 11.7 3.5
FY2012E 1,260 30.6 237 7.9 34.3 15.8 5.2 9.8 3.0

Small Caps
FAG Bearings (CMP: Rs.593/ TP: Rs.712/ Upside: 20%)

„ With increasing mechanisation, demand for bearings is expected to exceed overall

IIP growth in India. Consequently, the Industrial Segment (which accounts for
almost 50% of the Indian Bearings market) offers immense growth opportunity for
the Bearings industry.
„ Moreover, the Bearings Segment has a direct correlation with Auto Sector growth,
which is expected to grow at around 10% per annum over the next 2-3 years.
„ The stock is currently trading below its average historical valuations at 10x
CY2011E EPS and 1.6x CY2011E BV (v/s average of 2x 1-year forward BV).
Further, we believe that FAG Bearings scores well over its peers and is a good
long-term investment pick in view of its strong financials.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
Dec (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
CY2010E 959 15.0 85 51.3 17.1 11.6 1.8 5.4 0.8
CY2011E 1,084 15.4 99 59.4 17.0 10.0 1.6 4.5 0.7

Greenply Industries (CMP: Rs.193/ TP: Rs.291/ Upside: 51%)

„ GIL is foraying into the lucrative, high-growth MDF market, with the largest MDF
plant in India (1,80,000m3/yr capacity), while continuing its strong expansion in
laminates (88% capacity expansion), that is estimated to drive 21% CAGR in sales
over FY2010-12E.

July 2010 9
 Market Strategy

„ GIL has leading plywood and laminates brands, supported by ad-spend as high as
3.3% of total sales (around 10% of laminates sales). The company also has the
largest distribution network of over 15,000 dealers in industry. These advantages
underpin the strong RoE profile of the company's brand-driven business model
(21% over FY2010-12E).
„ The stock is trading at attractive valuations of 5.3x FY2012E EPS (as against its
historical range of 3.3-9.3x 1-year forward EPS). Hence, we recommend a Buy on
the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 1,088 14.0 57 23.5 18.4 8.2 1.4 5.4 0.8
FY2012E 1,279 15.0 88 36.4 22.8 5.3 1.1 4.2 0.6

JK Tyre & Industries (CMP: Rs.167/ TP: Rs.237/ Upside: 42%)

„ Given the shortage of radial tyres in the Trucks & Buses Segment, the company is
set to fully utilise its enhanced capacity, and that too at higher realisations (70% of
India's total truck/bus radial tyre production), driving strong earnings growth and
improving RoEs.
„ Further, the Tornel acquisition turned profitable in FY2010, aided by the
restructuring exercise implemented by the company.
„ The stock is available at attractive valuations of 3.5x FY2012E EPS and hence we
recommend a Buy.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 5,523 9.2 160 39.0 9.7 4.3 0.7 3.9 0.4
FY2012E 6,001 10.1 195 47.5 15.9 3.5 0.6 3.3 0.3

TajGVK Hotels (CMP: Rs.162/ TP: Rs.240/ Upside: 48%)

„ Robust growth in foreign tourist arrivals (10.8% growth during January to June
2010 v/s -9% in the corresponding period last year) and increased domestic tourist
activity is enabling hoteliers to overcome the tough phase witnessed in the recent
past.
„ Signs of improving demand are visible with occupancy rates staying above ~70%
since 3QFY2010 and Average Room Rates firming up in 1QFY2010.
„ Considering the revival in demand happening in business destinations like
Hyderabad and Chennai, where TAJGVK has presence, we expect the company to
be a significant beneficiary in the coming quarters.
„ Moreover, in comparison to its peers, the stock trades at attractive valuations of
Rs1cr FY2012E EV/Room and 13.3x FY2012E EPS. Hence, we recommend a Buy
on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (Rs cr) (%) (Rs cr) (Rs) (%) (x) (x) (x) (x)
FY2011E 298 40.6 56.2 9.0 17.7 18.1 3.0 9.6 3.9
FY2012E 342 42.8 76.3 12.2 20.3 13.3 2.5 7.5 3.2

July 2010 10
 Stock Watch | July 2010
Company Name Reco CMP Target Mkt Cap Sales (Rs cr) OPM (%) EPS (Rs) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(Rs) Price (Rs) (Rs cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Agri / Agri Chemical
Bayer Cropscien Neutral 795 - 3,142 1,995 2,294 12.6 12.8 44.6 51.8 17.8 15.4 4.4 3.5 27.4 25.3 1.5 1.3
Jain Irrigation Neutral 1,161 - 8,829 4,478 5,641 17.5 17.5 37.6 53.1 30.9 21.9 6.4 5.1 22.5 25.8 2.3 1.9
Rallis India Neutral 1,078 - 1,397 1,050 1,256 19.1 18.4 69.8 89.0 15.5 12.1 4.1 3.4 29.1 30.9 1.9 1.5
United Phosphorous Buy 175 226 7,692 6,235 6,758 19.0 20.0 14.6 17.5 12.0 10.0 2.1 1.8 19.1 19.7 1.4 1.2
Airlines
SpiceJet Buy 56 65 1,351 2,718 3,287 7.0 8.5 5.1 7.2 8.4 6.7 3.7 2.3 - 50.0 0.6 0.4
Auto & Auto Ancillary
Apollo Tyres Buy 69 87 3,452 9,204 10,273 12.8 13.0 8.9 10.9 7.7 6.3 1.5 1.2 23.4 19.0 0.5 0.5
Ashok Leyland Neutral 69 - 9,239 9,609 11,185 10.4 10.5 4.0 4.7 17.3 14.7 3.7 3.3 14.3 15.8 1.1 0.9
Automotive Axle^ Buy 422 528 638 635 750 13.5 13.5 29.5 35.2 14.3 12.0 3.2 2.7 23.7 24.5 0.9 0.8
Bajaj Auto Neutral 2,418 - 34,983 14,866 16,836 18.8 18.3 142.2 157.1 17.0 15.4 8.3 6.2 57.5 46.3 2.1 1.8
Bharat Forge Neutral 330 - 7,352 4,396 5,125 13.1 14.5 10.3 15.5 32.2 21.3 4.5 3.9 14.8 19.6 1.9 1.6
Bosch# Neutral 5,747 - 18,046 5,846 6,671 18.3 18.8 236.7 268.7 24.3 21.4 4.8 4.1 19.7 19.2 2.6 2.2
CEAT Buy 139 165 475 3,372 3,738 6.8 8.1 26.9 41.3 5.2 3.4 0.7 0.6 18.9 15.2 0.3 0.3
Exide Industrie Accumulate 134 144 10,708 4,588 5,406 21.9 22.7 7.2 8.9 18.6 15.1 4.2 3.4 24.8 31.7 2.1 1.7
FAG Bearings* Buy 593 712 986 959 1,084 15.0 15.4 51.3 59.4 11.6 10.0 1.8 1.6 17.1 17.0 0.8 0.7
Hero Honda Neutral 2,010 - 40,140 17,332 19,184 16.5 16.3 120.3 131.4 16.7 15.3 8.4 7.0 56.1 49.4 2.0 1.8
JK Tyre & Ind Buy 167 237 685 5,523 6,001 9.2 10.1 39.0 47.5 4.3 3.5 0.7 0.6 9.7 15.9 0.4 0.3
Mah and Mah Accumulate 638 704 36,931 21,646 24,613 13.2 13.3 37.3 39.7 17.1 16.1 4.0 3.4 24.8 22.1 1.7 1.5
Maruti Suzuki Buy 1,423 1,685 41,116 33,519 39,994 11.2 11.3 92.5 105.3 15.4 13.5 2.8 2.3 19.1 17.9 1.0 0.8
Motherson Sumi Accumulate 149 167 5,412 8,120 9,192 11.3 11.5 9.0 11.1 16.5 13.4 4.2 3.8 27.7 29.7 0.8 0.7
Subros Buy 49 60 291 998 1,109 10.3 10.3 5.2 6.0 9.3 8.1 1.3 1.2 14.7 15.2 0.4 0.4
Tata Motors Buy 771 907 41,935 103,689 116,026 9.5 9.6 58.4 72.1 13.2 10.7 3.5 2.9 25.0 26.3 0.6 0.6
TVS Motor Neutral 119 - 2,835 5,744 6,508 6.9 7.5 7.2 9.4 16.6 12.7 3.1 2.7 19.6 22.8 0.5 0.4
Banking
Axis Bank Buy 1,270 1,466 51,356 10,335 13,076 3.1 3.1 72.5 97.2 17.5 13.1 2.8 2.4 17.1 19.9 - -
Bank of India Neutral 374 - 19,652 9,115 10,569 2.3 2.2 40.4 51.1 9.3 7.3 1.4 1.2 15.6 17.3 - -
Corporation Bank Accumulate 523 561 7,503 3,735 4,254 2.2 2.1 81.6 92.8 6.4 5.6 1.1 1.0 18.8 18.5 - -
Dena Bank Buy 93 115 2,680 1,830 2,048 2.4 2.3 19.4 21.9 4.8 4.3 0.9 0.8 19.2 18.4 - -
Federal Bank Neutral 361 - 6,167 2,218 2,602 3.6 3.4 36.6 46.8 9.9 7.7 1.2 1.1 12.7 14.5 - -
HDFC Bank Accumulate 2,003 2,204 91,538 14,769 18,908 4.3 4.4 85.3 116.1 23.5 17.2 3.7 3.2 17.0 20.0 - -
ICICI Bank Buy 872 1,145 97,137 17,738 21,711 2.6 2.6 44.4 60.2 19.6 14.5 1.8 1.7 11.5 15.1 - -
Indian Bank Neutral 241 - 10,368 4,907 5,536 3.4 3.3 36.1 41.1 6.7 5.9 1.3 1.1 21.9 21.1 - -
IOB Accumulate 107 118 5,843 4,706 5,344 2.6 2.5 15.3 19.9 7.0 5.4 0.9 0.8 12.5 14.6 - -
Oriental Bank Neutral 350 - 8,779 4,821 5,413 2.7 2.5 57.0 59.9 6.1 5.9 1.0 0.9 18.1 16.6 - -
PNB Reduce 1,058 948 33,345 13,392 15,437 3.3 3.2 127.1 145.2 8.3 7.3 1.7 1.5 22.5 21.6 - -
SBI Accumulate 2,369 2,596 150,394 45,694 55,200 2.7 2.7 162.0 228.1 14.6 10.4 2.1 1.8 15.7 19.5 - -
South Ind Bk Neutral 188 - 2,128 841 972 2.4 2.4 21.5 26.5 8.8 7.1 1.3 1.1 15.5 16.7 - -
Union Bank Neutral 313 - 15,803 7,205 8,270 2.6 2.5 48.2 56.3 6.5 5.6 1.5 1.2 24.9 24.1 - -
Capital Goods
ABB Neutral 862 - 18,261 7,543 9,027 9.6 10.7 23.1 30.6 37.4 28.1 6.4 5.3 20.8 21.1 2.3 1.9
Areva T&D Neutral 292 - 6,970 3,887 4,650 8.9 10.5 5.6 9.9 51.6 29.5 7.2 6.0 14.7 22.2 1.9 1.6
BGR Energy Accumulate 744 800 5,359 4,444 5,746 11.0 10.9 38.7 48.1 19.2 15.5 5.9 4.6 34.7 33.6 1.3 1.0
BHEL Neutral 2,393 - 117,130 40,095 47,111 18.1 18.1 109.5 130.0 21.9 18.4 5.9 4.7 30.0 28.6 2.6 2.2
Crompton Greaves Buy 251 307 16,124 10,068 11,354 13.7 13.3 13.7 15.4 18.3 16.4 5.0 4.0 30.9 27.3 1.5 1.3
Elecon Engg Co Accumulate 91 102 841 1,201 1,358 15.0 15.4 7.9 10.2 11.5 8.9 2.2 1.9 20.8 23.1 1.0 0.8
Graphite India Accumulate 106 117 1,821 1,600 1,910 24.4 24.2 12.2 14.0 8.7 7.6 1.3 1.2 16.7 16.6 1.4 1.0
Jyoti Structures Buy 155 215 1,272 2,447 2,851 11.0 11.0 13.5 16.5 11.5 9.4 2.1 1.8 20.2 20.6 0.7 0.6

11
 Stock Watch | July 2010
Company Name Reco CMP Target Mkt Cap Sales (Rs cr) OPM (%) EPS (Rs) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(Rs) Price (Rs) (Rs cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
KEC Int Buy 469 648 2,412 4,563 5,223 10.0 10.0 41.9 49.8 11.2 9.4 2.8 2.2 27.6 26.2 0.7 0.6
McNally Bharat Engg Buy 281 486 871 2,501 3,332 9.7 9.5 27.4 34.7 10.3 8.1 10.0 10.8 28.0 26.1 0.5 0.4
Thermax Neutral 742 - 8,844 4,539 5,720 11.5 11.5 29.7 37.4 25.0 19.9 6.7 5.3 29.6 29.7 1.7 1.3
Cement
ACC* Neutral 836 - 15,695 8,033 8,938 24.6 24.1 66.0 72.2 12.7 11.6 2.3 2.0 19.2 18.4 1.7 1.4
Ambuja Cements* Neutral 111 - 16,908 6,913 7,623 24.3 24.0 6.8 7.4 16.4 14.9 2.4 2.2 15.3 15.3 2.0 1.8
Grasim Buy 1,890 2,216 17,329 19,229 21,004 24.2 25.9 207.9 260.5 9.1 7.3 1.0 0.9 12.8 13.0 1.2 1.0
India Cements Buy 111 135 3,403 4,479 5,050 19.4 18.9 10.1 11.6 11.0 9.5 0.9 0.8 7.1 7.7 0.9 0.9
JK LakshmiCement Buy 65 88 797 1,376 1,570 24.4 26.1 12.5 15.7 5.2 4.1 0.7 0.6 13.9 15.4 0.6 0.6
Madras Cements Buy 101 141 2,397 2,754 3,125 19.7 22.6 6.6 10.7 15.2 9.5 1.4 1.2 9.7 14.0 1.4 1.3
UltraTechCement Buy 858 1,084 10,678 7,334 8,587 24.4 27.1 77.5 98.9 11.1 8.7 2.0 1.6 19.2 20.5 1.4 1.2
Construction
Consolidated Co Neutral 93 - 1,724 2,389 2,807 9.0 9.2 5.9 7.0 15.8 13.3 2.5 2.1 16.9 17.3 0.8 0.7
Gammon India Neutral 221 - 2,660 5,575 6,607 9.2 9.3 10.0 12.1 22.1 18.2 1.3 1.1 6.1 6.6 0.7 0.7
Hind Constr Neutral 125 - 3,804 4,146 4,900 12.7 12.9 3.9 4.5 32.1 27.6 2.3 2.2 7.5 8.2 0.9 0.8
IRB Infra Accumulate 265 289 8,801 3,352 3,916 37.3 38.0 13.8 15.3 19.2 17.3 3.6 3.1 20.3 19.0 3.3 3.5
IVRCL Infras Accumulate 191 216 5,097 6,663 8,294 9.3 9.4 9.6 12.0 19.8 15.8 2.4 2.1 12.9 14.2 1.0 0.9
Madhucon Project Buy 150 190 1,108 1,701 2,120 8.9 9.8 6.4 9.8 23.3 15.3 1.8 1.6 8.0 11.2 0.8 0.6
Nagarjuna Const Neutral 186 - 4,772 5,913 6,758 9.8 9.9 10.0 10.7 18.6 17.3 1.9 1.8 10.9 10.7 1.1 1.0
Patel Eng Buy 433 563 3,021 3,685 4,297 16.0 15.8 31.2 32.9 13.9 13.2 1.7 1.5 13.3 12.4 1.1 1.0
Punj Lloyd Buy 139 170 4,596 11,088 13,407 9.0 9.2 8.3 12.2 16.8 11.4 1.4 1.3 8.7 11.7 0.6 0.5
Sadbhav Eng Neutral 1,322 - 1,653 1,611 1,901 11.7 11.9 70.3 79.7 18.8 16.6 3.4 2.8 19.6 18.7 1.2 1.0
Consumer Durables
Bajaj Electric Neutral 226 - 2,205 2,590 3,080 10.1 10.2 16.9 20.9 13.4 10.8 3.5 2.8 29.1 28.8 0.8 0.7
Blue Star Neutral 451 - 4,053 2,994 3,696 10.5 10.7 24.1 30.3 18.7 14.9 7.7 6.1 42.7 45.7 1.4 1.1
FMCG
Asian Paints Accumulate 2,386 2,350 22,879 7,532 8,731 17.5 17.7 86.5 102.2 27.6 23.3 12.0 10.0 42.7 41.5 3.0 2.6
Colgate Reduce 848 752 11,536 2,268 2,599 21.9 22.1 32.5 37.1 26.1 22.9 27.9 21.5 119.6 106.1 4.8 4.2
Dabur India Neutral 212 - 18,372 3,931 4,525 19.1 19.2 6.7 7.9 31.5 26.9 11.5 9.6 40.7 38.8 4.5 3.9
GlaxoSmith Con* Neutral 1,777 - 54,753 2,279 2,667 16.1 16.4 65.1 77.2 27.3 23.0 51.1 43.2 27.7 27.8 2.9 2.4
Godrej Consumer Neutral 350 - 1,474 2,412 2,720 20.2 20.3 12.7 14.2 27.5 24.6 1.5 1.2 45.4 40.5 4.4 3.8
HUL Reduce 262 226 57,211 19,305 21,530 13.5 13.8 9.9 11.3 26.4 23.1 19.3 16.8 90.0 78.1 2.8 2.5
ITC Neutral 301 - 114,182 19,671 21,673 34.7 34.8 12.1 13.3 24.9 22.6 6.2 5.4 26.8 25.8 5.4 4.8
KS Oils Buy 57 94 2,255 5,838 7,035 11.2 11.6 8.3 10.2 6.9 5.6 1.1 0.9 14.6 15.6 0.5 0.4
Marico Neutral 131 - 7,976 2,983 3,349 13.7 13.6 4.5 5.1 29.1 25.9 9.6 7.6 37.8 32.8 2.7 2.3
Nestle* Neutral 2,983 - 28,756 6,015 6,956 19.4 19.7 81.6 98.5 36.6 30.3 38.4 33.7 118.2 118.6 4.7 4.0
Hotel
Hotel Leela Neutral 49 - 1,846 632 874 40.3 41.6 2.0 2.7 24.6 18.0 2.3 2.1 9.8 12.2 6.5 4.6
Taj GVK Hotels Buy 162 240 1,016 298 342 40.6 42.8 9.0 12.2 18.1 13.3 3.0 2.5 17.7 20.3 3.8 3.1
IT
3i Infotech Buy 65 129 1,242 2,734 3,197 20.1 19.7 14.5 17.6 4.5 3.7 0.7 0.6 16.8 16.5 0.9 0.7
Educomp Sol Buy 544 734 5,159 1,553 2,165 48.2 43.4 35.9 45.9 15.1 11.8 3.1 2.4 22.3 22.9 3.5 2.6
Everonn Edu Buy 508 602 768 393 496 34.0 32.5 25.9 30.5 19.6 16.6 3.2 2.7 17.7 17.5 1.7 1.3
HCL Tech Buy 361 420 24,381 13,611 15,903 21.0 20.5 22.2 26.9 16.3 13.4 3.4 2.9 24.1 24.8 1.8 1.4

12
 Stock Watch | July 2010
Company Name Reco CMP Target Mkt Cap Sales (Rs cr) OPM (%) EPS (Rs) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(Rs) Price (Rs) (Rs cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Infosys Accumulate 2872 3,089 164,273 25,524 31,071 34.0 33.5 117.2 140.3 24.5 20.5 5.9 4.9 26.4 26.2 5.7 4.6
Infotech Enter Buy 184 232 2,039 1,132 1,306 21.6 21.5 16.7 19.3 11.0 9.5 1.8 1.5 17.7 17.0 1.1 0.9
Mphasis Buy 623 872 13,060 5,990 7,043 25.2 25.5 54.5 64.5 11.4 9.7 3.3 2.5 32.7 29.2 1.8 1.3
NIIT Buy 66 83 1,096 1,318 1,459 13.7 14.1 5.0 5.8 13.2 11.5 1.9 1.7 15.1 15.8 1.0 0.9
TCS Buy 775 921 151,585 33,351 38,821 28.7 28.2 37.9 41.9 20.4 18.5 6.0 5.1 31.9 29.8 4.3 3.6
Tech Mahindra Buy 774 1,168 9,468 4,989 5,704 24.0 23.0 58.3 67.0 13.3 11.6 2.8 2.2 24.9 22.0 1.3 1.0
Wipro Buy 400 475 58,746 31,034 37,317 21.3 20.7 20.4 23.7 19.6 16.9 4.5 3.8 24.9 24.5 2.9 2.3
Laminates
Greenply Inds Buy 193 291 426 1,088 1,279 14.0 15.0 23.5 36.4 8.2 5.3 1.4 1.1 18.4 22.8 0.8 0.6
Lotistics
Allcargo Global* Neutral 170 - 2,126 2,352 2,686 10.9 12.2 11.6 14.3 14.6 11.9 1.8 1.6 14.9 15.3 0.9 0.8
Container Corp Reduce 1,390 1,194 18,071 4,003 4,522 26.0 25.3 63.3 70.3 22.0 19.8 4.0 3.6 18.2 18.0 3.9 3.4
Gateway Distri Buy 114 150 1,233 677 853 26.2 28.8 9.1 12.1 12.5 9.5 1.9 1.6 13.6 16.1 1.8 1.4
Media
Balaji Telefilm Neutral 56 - 365 183 238 7.2 10.3 2.5 3.7 22.1 15.0 0.1 0.1 4.3 6.1 0.5 0.4
Cinemax India Buy 53 85 148 214 264 19.6 20.9 5.7 7.7 9.3 6.8 0.5 0.3 9.3 11.7 1.0 0.9
Deccan Chronicle Buy 138 193 3,360 1,038 1,192 48.8 48.6 12.4 14.6 11.1 9.5 0.1 0.1 21.0 21.6 2.7 2.3
HT Media Buy 154 182 3,632 1,668 1,906 19.0 19.4 7.6 9.1 20.4 16.9 0.1 0.1 16.3 16.9 1.9 1.5
INOX Leisure Buy 63 81 389 281 351 20.0 22.7 3.7 5.8 17.2 11.0 0.2 0.2 7.2 10.3 1.5 1.3
Jagran Prakashan Buy 125 160 3,755 1,088 1,260 29.8 30.6 6.6 7.9 19.0 15.8 0.8 0.2 31.0 34.3 3.3 2.8
PVR Buy 152 192 389 510 603 15.9 16.6 9.1 12.8 16.6 11.8 0.6 0.4 7.3 9.5 0.9 0.7
SUN TV Network Buy 430 497 16,932 1,978 2,217 75.7 76.1 277.8 318.5 1.5 1.3 0.3 0.2 33.0 30.6 8.2 7.2
TV Today Network Neutral 100 - 597 328 371 21.5 23.7 8.9 10.2 11.3 9.8 0.3 0.2 14.3 14.3 1.2 1.1
Metal
Bhushan Steel Buy 1,484 1,979 48,430 6,290 7,131 37.5 41.1 228.0 296.4 6.5 5.0 1.5 1.2 26.0 26.1 1.7 1.3
Electrosteel Castings Buy 48 72 1,560 1,706 1,818 26.2 28.0 6.5 6.7 7.3 7.1 0.9 0.8 14.2 13.1 1.2 1.1
Godawari Power Buy 225 322 7,346 1,084 1,265 25.6 26.1 53.6 70.9 4.2 3.2 0.9 0.7 26.1 26.7 0.8 0.5
Hindalco Buy 149 208 4,849 63,898 67,521 13.0 13.8 19.1 20.3 7.8 7.3 1.1 1.0 15.3 14.1 0.6 0.7
Hindustan Zinc Buy 962 1,399 31,400 9,764 12,884 60.0 60.2 119.8 162.4 8.0 5.9 1.8 1.4 24.7 26.1 2.4 1.3
JSW Steel Buy 1,082 1,360 35,307 24,174 29,363 23.6 23.5 108.2 129.2 10.0 8.4 1.8 1.5 22.1 21.3 1.2 1.2
NALCO Sell 425 316 13,872 5,655 6,376 28.4 31.3 15.8 18.7 26.9 22.7 2.5 2.3 9.7 10.7 4.2 3.7
NMDC Reduce 265 247 8,637 11,793 14,232 82.4 81.2 18.1 21.7 14.6 12.2 5.2 3.9 41.8 36.7 7.5 5.8
SAIL Neutral 194 - 6,335 47,370 52,932 21.6 22.5 15.5 16.7 12.5 11.6 2.1 1.9 18.2 17.0 1.2 1.2
Sesa Goa Neutral 352 - 11,493 9,717 10,662 54.6 54.7 48.3 52.3 7.3 6.7 2.6 1.9 44.4 34.0 2.1 1.6
Sterlite Ind Buy 168 245 5,469 28,845 32,994 41.3 41.7 22.9 25.0 7.3 6.7 1.3 1.1 17.6 15.7 1.3 0.8
Tata Steel Buy 496 697 16,186 113,849 119,171 12.5 12.8 61.0 57.2 8.1 8.7 1.4 1.2 17.9 14.7 0.7 0.7
Oil & Gas
Cairn India Neutral 301 - 57,061 7,863 14,761 81.2 83.9 23.2 46.1 13.0 6.5 1.5 1.5 11.8 22.6 6.7 3.5
GAIL Buy 472 580 59,828 36,672 40,840 15.9 17.6 30.3 35.2 15.6 13.4 3.0 2.6 19.6 19.4 1.4 1.2
GSPL Buy 102 120 5,759 1,134 1,208 93.4 93.3 7.7 8.4 13.3 12.1 3.0 2.6 22.8 21.0 6.1 5.1
Gujarat Gas Neutral 301 - 3,858 1,665 2,042 21.2 20.6 17.0 20.4 17.7 14.7 4.2 3.5 23.6 23.7 1.9 1.5
IndraprasthaGas Accumulate 286 317 4,001 1,612 1,985 29.3 30.5 17.5 21.3 16.4 13.4 4.1 3.4 24.8 25.3 2.4 2.0
ONGC Neutral 1,294 - 276,813 117,551 124,021 44.9 46.1 114.6 123.3 11.3 10.5 2.3 2.0 20.6 19.4 2.0 1.8
Petronet LNG Accumulate 82 87 6,135 12,872 18,011 8.2 6.1 6.3 6.7 12.9 12.2 2.4 2.2 18.7 17.8 0.5 0.3
Reliance Buy 1,056 1,260 346,973 234,754 243,596 17.6 20.0 69.5 87.3 15.2 12.1 2.1 1.8 13.8 15.0 1.5 1.3
Shiv Vani Oil Accumulate 459 510 2,014 1,667 1,725 41.9 41.8 58.6 63.7 7.8 7.2 1.5 1.2 19.1 17.3 2.2 1.9

13
 Stock Watch | July 2010
Company Name Reco CMP Target Mkt Cap Sales (Rs cr) OPM (%) EPS (Rs) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(Rs) Price (Rs) (Rs cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Packaging
Essel Propack Accumulate 52 58 811 1,350 1,811 19.5 20.3 4.0 9.9 12.9 5.2 1.0 0.9 8.4 18.5 1.0 0.7
Pharmaceuticals
Alembic Buy 56 74 749 1,315 1,478 12.4 12.0 5.6 6.5 10.0 8.6 1.7 1.5 18.8 19.0 0.9 0.7
Aventis Pharma Reduce 1,938 1,658 4,463 1,087 1,220 17.8 18.5 80.8 92.1 24.0 21.0 4.2 3.7 18.8 18.9 3.5 3.0
Cadila Health Accumulate 652 714 13,316 4,308 5,100 20.1 21.0 30.6 39.6 21.3 16.4 6.6 5.0 34.8 34.7 3.3 2.7
Cipla Accumulate 338 360 27,142 5,857 6,744 20.2 21.1 13.9 17.1 24.3 19.7 4.1 3.5 17.9 19.1 4.6 4.0
Dishman Pharma Buy 212 279 1,707 1,099 1,335 24.1 25.5 17.4 21.4 12.2 9.9 1.8 1.5 15.8 16.8 2.2 1.8
Dr Reddys Labs Neutral 1,463 - 24,706 8,416 9,797 18.9 19.4 59.1 78.1 24.8 18.7 5.3 4.2 23.8 25.2 3.0 2.5
GlaxoSmithKline Sell 2,112 1,700 17,892 2,145 2,422 35.2 35.2 65.4 73.9 32.3 28.6 8.8 7.8 29.0 28.9 7.4 6.5
Indoco Remedies Accumulate 489 541 601 455 537 15.4 16.6 39.5 54.1 12.4 9.0 1.8 1.6 15.2 18.7 1.4 1.2
Ipca Labs Neutral 297 - 3,720 1,834 2,150 20.9 21.0 19.5 23.7 15.2 12.6 3.8 3.1 27.5 27.1 2.2 1.9
Lupin Accumulate 1,921 2,099 17,083 5,645 6,579 18.9 19.5 93.4 116.6 20.6 16.5 5.8 4.6 31.8 31.2 3.1 2.7
Orchid Chemical Neutral 183 - 1,288 1,220 1,652 17.2 18.0 10.0 15.7 18.4 11.7 1.0 1.2 5.6 9.4 1.7 1.4
Piramal Health Neutral 512 - 10,702 4,190 4,863 20.4 20.8 27.2 33.8 18.8 15.1 5.5 4.5 32.5 32.7 2.8 2.3
Ranbaxy Labs Neutral 464 - 19,504 8,231 9,988 16.0 19.0 25.8 28.7 18.0 16.2 3.8 3.2 21.5 21.6 2.4 2.0
Sun Pharma Neutral 1,742 - 36,089 4,830 5,581 32.5 33.5 71.6 84.8 24.3 20.5 3.9 3.4 17.1 17.7 6.5 5.5
Plastics
Sintex Industries Buy 325 385 4,434 4,067 4,835 16.8 17.8 28.3 35.0 11.5 9.3 2.1 1.7 18.0 18.7 1.5 1.3
Power
CESC Buy 401 460 5,013 4,166 4,887 23.7 23.9 43.0 54.8 9.3 7.3 1.2 1.0 13.2 14.8 1.8 1.9
Guj Ind Power Accumulate 119 135 1,800 1,422 1,727 23.2 23.3 9.6 12.0 12.4 10.0 1.3 1.2 11.1 12.8 1.5 1.4
NTPC Buy 198 230 163,384 52,812 62,152 29.8 30.4 11.8 14.1 16.8 14.1 2.3 2.1 14.5 15.5 3.0 2.5
Power - Cable
Finolex Cables BUY 54 85 833 1,994 2,398 10.2 10.4 5.7 9.2 9.5 5.9 1.2 1.0 13.0 18.4 0.5 0.4
Power - Trading
PTC India Buy 106 136 3,134 10,906 13,698 1.3 1.3 5.1 6.5 21.0 16.3 1.4 1.3 7.0 8.6 0.2 0.2
Real Estate
Anant Raj Inds Buy 120 178 3,550 342 610 93.5 90.4 8.8 13.1 13.7 9.2 1.0 0.9 7.3 9.9 8.4 5.6
DLF Neutral 296 - 50,192 9,668 14,413 46.6 50.4 13.8 23.9 21.5 12.4 1.5 1.4 7.4 11.7 1.3 0.7
HDIL Buy 250 302 8,635 1,775 3,106 49.1 52.4 19.1 34.8 13.1 7.2 1.2 1.0 9.5 15.2 6.8 3.8
Retail
Pantaloon Ret Neutral 463 - 9,545 10,704 13,137 10.1 10.1 15.6 20.4 29.8 22.7 2.9 2.7 10.4 12.2 1.2 1.0
Shoppers Stop Neutral 620 - 2,162 1,819 2,210 8.1 8.3 17.4 22.8 35.7 27.2 6.8 4.8 20.9 19.4 1.3 1.0
Titan Industries Neutral 2,501 - 11,104 5,716 7,031 8.6 8.7 72.5 92.0 34.5 27.2 11.7 9.0 38.3 37.5 2.0 1.6
Shipping
ABG Shipyard Buy 259 327 1,320 2,035 2,634 20.0 20.0 23.8 38.5 10.9 6.7 1.4 1.2 13.6 19.1 1.1 0.9
GE Shipping Buy 300 396 4,573 3,100 3,980 35.5 39.7 45.1 70.8 6.7 4.2 0.7 0.7 11.7 16.5 1.2 1.0
Sugar
Bajaj Hindusthan^ Neutral 121 - 2,321 5,485 5,133 3.7 15.2 - 9.5 - 12.7 1.2 1.1 - 9.3 0.9 0.9
Balrampur Chini Mills^ Neutral 87 - 2,393 2,922 3,009 13.4 16.0 6.4 8.8 13.5 9.9 1.9 1.7 14.2 18.0 1.0 0.9
Telecom
Bharti Airtel Buy 308 360 116,893 42,773 47,328 35.3 35.6 22.0 24.9 13.6 12.0 2.4 2.1 18.6 17.9 2.8 2.4
Idea Cellular Sell 67 50 22,059 14,557 16,510 23.2 23.7 1.7 2.5 40.0 27.2 1.8 1.7 4.4 6.1 2.0 1.8
Reliance Comm Sell 193 155 39,887 22,412 24,592 31.5 30.0 17.0 17.1 11.3 11.3 0.9 0.9 8.7 8.1 2.2 1.9
Note: For some stocks we have kept a BUY rating inspite of lower than benchmarked returns, as we believe these stocks have potential to get re-rated and hence would provide good upsides from a long term perspective. Source: Company, Angel Research, * estimates for CY10E and CY11E;
^ estimates for SY10E and SY11E

14
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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%)
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Research Team

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Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG, Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
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Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
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Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com

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V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
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