Unicon Quarterly Earnings Preview - Q1FY12

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011
QUARTERLY EARNINGS PREVIEW Q1 - FY12
Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in
Executive Summary
Indian market has faced various challenges in the last few quarters in terms of economic parameters, lack of reforms, political pressures & global headwinds. High inflation has been putting pressure on RBI to take anti inflationary measures (increasing the interest rates) at the cost of economic growth. Investments in industries and credit growth thus been hampered in this high interest rate regime. In FY11, IIP registered lower growth of 7.9% as compared to 14.7% in FY10, due to fall in manufacturing (8.3% from 15.9% in FY10) & capital goods industry (14.4% from 37.3% in FY10). The consumer goods registered a lower growth of 7.5% in FY11 from 9.1% in FY10 mainly due to inflationary pressures. The first quarter of this fiscal continued to mirror similar trends with inflation remaining above 9% and IIP registering a lower growth of 6.3% in April 2011. The Nifty during this phase has been highly volatile and slipped down by 186 points to reach 5647 as on 30th June 2011. The FIIs were net sellers in market (INR ~32.99 bn in last quarter) whereas the domestic institutions remained net buyers in the market with INR ~44.4 bn. The volatility in the market was also attributed to uncertain global environment over and above domestic concerns. Going forward, we expect world governments to address various economic challenges like debt crisis in Europe, high global inflation & political instability etc. On domestic front we expect the government continue to take corrective actions on a) high inflation (on back of hike in diesel & cooking gas prices), b) high fiscal deficit (on back of Indian government's decision to scrap import duties on crude oil), c) erratic FII flows d) liberalising the FDI policy. Redressal of these issues will provide much needed stability to economic growth. We believe, the rural economy would continue to remain robust on the back of good monsoon in 2011 supporting the consumption led demand. Also, the government's announcement of tapping US investors for infrastructure financing (USD 1 tn) would increase the investments in the infra space. Thus, we expect the Indian economy to register growth of 8-8.5% in 2011-12. The markets would continue to be range bound till the concerns are addressed properly . Thereafter the rerating would lead to expansion of P/Es on selective basis. This phase should start ideally post 2nd quarter results as by then benefits of lower commodity prices, capex cycle revival and execution of reform should commence. Taking a one year time frame contra & infrastructure sector is expected to outperform as orders have started to flow in the system. We remain positive on Banking, Power Transmission, Agrochemical and consumption oriented sectors.
Table of Content
Sr. No. I 1 2 3 4 5 6 7 8 9 10 II 1 2 III 1 2 IV 1 2 3 4 5 6 7 8 V 1 2 3 VI 1 2 3 4 5 6 Sector / Company Name Infrastructure Hindustan Construction Company Ltd Larsen & Toubro Ltd IVRCL Ltd NCC Ltd Unity Infraprojects Ltd Patel Engineering Ltd Crompton Greaves Ltd Bharat Heavy Electricals Ltd Simplex Infrastructure Ltd Punj Lloyd Ltd Cement Shree Cement Ltd IndiaCement Ltd Oil and Gas Indraprastha Gas Ltd Gujarat State Petronet Ltd Power BGR Energy Systems Ltd Jyoti Structures Ltd Diamond Power Infrastructure Ltd Adani Power Ltd Tata Power Co. Ltd Thermax Ltd CESC Ltd KEC International Auto and Auto Ancillary Tata Motors Ltd Exide Industries Ltd TVS Motor Co Ltd Metal and Mining Tata Steel Ltd JSW Steel Ltd Adhunik Metaliks Ltd Hindalco Industries Ltd Visa Steel Ltd NMDC Ltd Rating Buy Hold Buy Accumulate Buy Hold Accumulate Buy Accumulate Accumulate CMP 32 1800 70 80 65 149 260 2044 271 73 52 Week H / L 73 / 28 2213 / 1461 195 / 60 194 / 75 138 / 51 452 / 131 349 / 228 2695 / 1872 515 / 265 150 / 53
Hold Buy
1785 71
2350 / 1500 128 / 67
Hold Buy
376 88
385 / 253 128 / 84
Accumulate Buy Buy Accumulate Hold Hold Buy Buy
459 85 160 110 1283 592 300 79
950 / 401 169 / 73 265 / 126 146 / 106 1468 / 1133 930 / 537 433 / 252 123 / 70
Buy Buy Hold
997 165 53
1382 / 748 180 / 110 87 / 44
Buy Accumulate Buy Buy Buy Hold
602 874 82 182 59 259
737 / 449 1400 / 751 127 / 70 253 / 140 65 / 33 305 / 227
Sr. No. VIII 1 2 3 4 5 6 7 8 9 10 11 12 IX 1 2 3 4 5 6 7 XII 1 2 3 4 XIII 1 2 3 XIV 1 2 3 XV 1 2
Sector / Company Name Banking & Finance State Bank Of India Union Bank Of India HDFC Bank Ltd IDBI Bank Ltd United Bank Of India Axis Bank Ltd Allahabad Bank Corporation Bank Yes Bank Ltd Indusind Bank Ltd ICICI Bank Ltd Indian Bank Media Zee Entertainment Enterprises Ltd D.B. Corp Ltd HT Media Ltd Hindustan Media Venture Ltd Sun TV Network Ltd UTV Software Communications Ltd Jagran Prakashan Ltd Pharmaceuticals Aurobindo Pharma Ltd Dr Reddy's Laboratories Ltd Biocon Ltd Opto Circuit (India) Ltd Food Processing Shree Renuka Sugars Ltd Ruchi Soya Industries Ltd Rei Agro Ltd Fertiliser Chambal fertiliser & Chemicals Ltd Deepak Fertilizers & Petrochemicals Corp Ltd Coromandal International Ltd Agri Chem Rallis India Ltd United Phosphorus Ltd
Rating Accumulate Buy Hold Buy Buy Buy Buy Buy Buy Accumulate Hold Buy
CMP 2380 299 2489 133 96 1294 196 532 313 275 1087 215
52 Week H / L 3515 / 2120 427 / 285 2540 / 1879 202 / 115 152 / 72 1609 / 1149 272 / 157 815 / 475 388 / 234 309 / 181 1279 / 830 317 / 196
Accumulate Accumulate Hold Accumulate Accumulate Hold Buy
140 236 170 142 343 814 126
162 / 106 310 / 226 186 / 125 220 / 123 557 / 260 844 / 385 157 / 105
Accumulate Accumulate Accumulate Accumulate
178 1561 355 295
275 / 156 1855 / 1277 473 / 301 328 / 224
Accumulate Accumulate Buy
66 97 25
108 / 56 143 / 80 33 / 19
Accumulate Buy Buy
77 161 335
105 / 62 213 / 135 376 / 215
Accumulate Buy
1516 153
1591 / 1031 220 / 125
Sr. No. XVI 1 2 3 XVIII 1 2 3 4 5 6 7
Sector / Company Name Education Educomp Solutions Ltd Everonn Education Ltd NIIT Ltd IT Infosys Ltd HCL Technologies Ltd Tata Consultancy Services Ltd Rolta India Ltd Persistent Systems Ltd KPIT Cummins Infosystems Ltd Hexaware Technologies Ltd
Rating Buy Accumulate Buy
CMP 397 530 55
52 Week H / L 702 / 380 756 / 435 75 / 43
Accumulate Buy Hold Buy Buy Hold Accumulate
2,865 489 1,170 129 368 175 69
3499 / 2639 528 / 351 1247 / 726 189 / 116 505 / 335 193 / 113 74 / 33
XXI Others 1 Mundra Port & SEZ Ltd Hold 2 Allcargo Global Logistics Buy * Most of the stocks are rated on 12-18 months basis, though in the near term valuation remain rich.
157 161
185 / 110 190 / 123
Constructions and Capital Goods

Cooling off of higher commodity prices, interest rates near its peak, reshuffle in cabinet would speed up the decision at centre and state level to award new projects and better margins for infrastructure companies. Barring few regional issues in few states, in our view macroeconomic development remains conducive for companies. Key catalyst to the sector performance and stock specific momentum would thus be based on respective companies ability to increase its order-book and execution thereafter. Since beginning of the calendar year, Capital Goods Index has remained under performer to the broader market indices. The fall was led due to several factors like a) higher valuation, b) higher commodity prices, c) series of scams and policy implementation at snail speed and d) higher interest rate regime. Further hike in interest rates due to higher inflation is expected, but we believe that both large cap and mid-cap companies are trading at attractive valuations and if we take long term view on the sector, risk reward is in favour of investors. We prefer BHEL and Larsen in large cap and Unity Infra in the mid-cap segment.
Hindustan Construction Company Ltd. (HCC)

CMP: 32 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 19,348
*Standalone financials
Q1FY12E 11,106 9,673 1,433 12.9 78 0.7 0.1
Q1FY11 9,924 8,696 1,228 12.4 283 2.9 0.5
Q4FY11 12,097 10,359 1,738 14.4 226 1.9 0.37
YoY(%) 11.9 11.2 16.6 52 bps (72.5) -215 bps (72.5)
QoQ(%) Bloomberg* (8.2) 11,449 (6.6) 9,938 (17.6) 1,511 -147 bps 13.2 (65.6) 141 -117 bps 1.2 (65.5) 0.2 P/E (FY12E):
Buy (INR in Mn) Dev (%) (3.0) (2.7) (5.2) -2 bps (44.9) -43 bps (44.5) 29.0
Valuation and Outlook During the quarter, HCC redeemed its FCCB, nominal value of USD 96.6Mn, at the redemption price of 137.7%. HCC received two project worth INR one project worth INR 9,996.3Mn (INR 2,986Mn from from Sardar Sarovar Nigam Ltd and b) INR 7,010Mn in a JV with Alstom, France). While stock is trading at attractive valuation, the near term concern remains as to its Lavasa project. Significant lower profit estimate than consensus is due to FCCB redemption and accounting for past interest (alternatively this could be adjusted through the Reserve). Due to poor order intake, higher interest cost during the quarter due to FCCB redemption and going forward due to rising working capital, we reduce our target price to 45. Buy-High Risk
Larsen & Toubro Ltd. (L&T)

CMP: 1,800 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 1,095,934
Q1FY12E 94,008 82,351 11,657 12.4 7,427 7.9 12.3
Q1FY11 78,351 68,281 10,071 12.9 6,662 8.5 11.1
Q4FY11 150,784 127,375 23,409 15.5 16862 11.2 27.7
YoY(%) 20.0 20.6 15.8 -45 bps 11.5 -60 bps 11.5
Hold (INR in Mn) QoQ(%) Bloomberg* Dev (%) (37.7) 96,320 (2.4) (35.3) 85,013 (3.1) (50.2) 11,307 3.1 -312 bps 11.7 6 bps (56.0) 7,334 1.3 -328 bps 7.6 4 bps (55.5) 11.8 4.4 P/E (FY12E): 21.4
Valuation and Outlook During the quarter under review, L&T has so far bagged several orders valued at INR 146.26bn across sectors. The orders are from the sub sector like Roads, Oil & Gas, Power, Buildings and Factories and Material handling verticals. Though order intake growth is -6% YoY, the beginning of FY12 is good so far and we expect company to meet its target for FY 12 i.e. growth in order-book at ~2025% on annualised basis for current fiscal. At the CMP, stock trades around 21x its standalone revenue for FY12e. Hold, for price target of INR 1,930.
IVRCL Infrastructure Projects Ltd. (IVRCL)

Q1FY12E 11,914 10,877 1,036 8.7 167 1.4 0.6
Q1FY11 11,062 10,054 1,008 9.1 281 2.5 1.0
Q4FY11 20,516 18,735 1,781 8.7 643 3.1 2.41
YoY(%) 7.7 8.2 2.9 -41 bps (40.6) -114 bps (40.6)
Buy (INR in Mn) QoQ(%) Bloomberg* Dev (%) (41.9) 12,352 (3.6) (41.9) 11,234 (3.2) (41.8) 1,118 (7.3) 2 bps 9.1 -4 bps (74.0) 205 (18.4) -173 bps 1.7 -15 bps (74.4) 0.7 (10.5) P/E (FY12E): 9.2
Valuation and Outlook IVRCL, during current quarter won orders worth INR 8,936.6Mn. Order worth INR 2,947.4Mn is in water division in the state of Gujarat whereas project worth INR 5,174.6Mn is in building division in several states. Of the total order-book, about 18% is from the overseas (ME) market (Gulf region). Order-book diversification in new segment and new geography improves the revenue visibility of the company. However, concerns continue to remain over, stretched working capital cycle coupled with higher cost of debt. Maintain buy for reduced price target of INR 85 (High risk).
NCC Ltd. (NCC)

Q1FY12E 11,594 10,527 1,067 9.2 267 2.3 1.0
Q1FY11 10,851 9,793 1,058 9.7 414 3.8 1.6
Q4FY11 14,496 13,187 1,309 9.0 357 2.5 1.39
YoY(%) 6.8 7.5 0.9 -55 bps (35.6) -152 bps (35.6)
Accumulate (INR in Mn) QoQ(%) Bloomberg* Dev (%) (20.0) 12,292 (5.7) (20.2) 11,137 (5.5) (18.5) 1,155 (7.7) 17 bps 9.4 -20 bps (25.3) 257 3.8 -16 bps 2.1 21 bps (25.4) 1.0 3.7 P/E (FY12E): 9.7
Valuation and Outlook In terms of new order intake, company has not secured any contract during the current quarter under review. We expect, its current order-book at INR 151.68bn. We estimate overall yearly growth of ~ 10-12% in its topline against management guidance of 15% for FY12. For lower order-intake, higher working capital cycle, we lower our price target to INR 90.
Unity Infraprojects Ltd. (UIL)

Q1FY12E 3,825 3,335 490 12.8 187 4.9 2.5
Q1FY11 3,398 2,955 443 13.0 195 5.7 2.6
Q4FY11 5,703 4,918 785 13.8 307 5.4 4.14
YoY(%) 12.6 12.9 10.5 -24 bps (4.0) -84 bps (4.0)
QoQ(%) (32.9) (32.2) (37.6) -96 bps (38.9) -48 bps (39.0)
Accumulate (INR in Mn) Bloomberg Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA P/E (FY12E): 4.2
Valuation and Outlook During Q1FY12, (till date) Unity Infraprojects has secured contracts over ~INR 4bn. UIL aims to raise money through ECB in order to retire its high cost debt. Change rating to accumulate (from Buy) for price target of INR 80.
Patel Engineering Ltd. (PEL)

*Consolidated financials
Q1FY12E 6,777 5,747 1,030 15.2 359 5.3 8.4
Q1FY11 7,023 5,838 1,185 16.9 442 6.3 10.3
Q4FY11 15,965 14,666 1,299 8.1 437 2.7 6.25
YoY(%) (3.5) (1.6) (13.1) -167 bps (18.7) -99 bps (18.7)
QoQ(%) (57.5) (60.8) (20.7) 706 bps (17.8) 256 bps 33.9
Hold (INR in Mn) Bloomberg Variance NA NA NA NA NA NA NA NA NA NA NA NA NA NA P/E (FY12E): 7.1
Valuation and Outlook With no significant order-win during the quarter under review, we expect its order-book to be around INR 85bn. The concerns remains over no incremental growth in its order-book on the one hand and continued pressure on its working capital with higher debt service cost. At the current market price, stock trades at PE of 7. Given the PE of 7.5, in line with other similar infrastructure companies, and value for its real estate business, hold for price target of 150.
Crompton Greaves Ltd. (CGL)

Q1FY12E 27,248 23,923 3,324 12.2 2,153 7.9 3.4
Q1FY11 23,022 20,049 2,973 12.9 1,909 8.3 3.0
Q4FY11 29,080 25,350 3,731 12.8 2514 8.6 3.92
YoY(%) 18.4 19.3 11.8 -71 bps 12.8 -39 bps 12.8
QoQ(%) (6.3) (5.6) (10.9) -63 bps (14.4) -75 bps (14.3)
Accumulate (INR in Mn) Bloomberg Variance 26,390 3.3 23,066 3.7 3,324 0.0 12.6 -40 bps 2,125 1.3 8.1 -15 bps 3.7 (9.2) P/E (FY12E): 16.4
Valuation and Outlook We expect CGL to report an 18% growth in its topline on YoY basis and 12% growth in its PAT on consolidated basis. Completion of low margin legacy orders from recently acquired NELCO's division would reflect from Q2FY12, in our view. During the quarter, CGL has acquired Sweden-based Emotron Group for Euro 57.8Mn (~INR 3700Mn). CGL also concluded an arrangement for the acquisition (subject to regulatory approvals in US) of QEI, Inc. for an enterprise value of ~USD 30Mn. QEI is a market-leading provider of SCADA and automation systems, and products for the management of electric T&D networks. The acquisition would lead to product and geography diversification. Accumulate for price target of 300.
Crompton Greaves Ltd. (CGL)

Q1FY12E 27,248 23,923 3,324 12.2 2,153 7.9 3.4
Q1FY11 23,022 20,049 2,973 12.9 1,909 8.3 3.0
Q4FY11 29,080 25,350 3,731 12.8 2514 8.6 3.92
YoY(%) 18.4 19.3 11.8 -71 bps 12.8 -39 bps 12.8
QoQ(%) (6.3) (5.6) (10.9) -63 bps (14.4) -75 bps (14.3)
Accumulate (INR in Mn) Bloomberg Variance 26,390 3.3 23,066 3.7 3,324 0.0 12.6 -40 bps 2,125 1.3 8.1 -15 bps 3.7 (9.2) P/E (FY12E): 16.4
Valuation and Outlook We expect CGL to report an 18% growth in its topline on YoY basis and 12% growth in its PAT on consolidated basis. Completion of low margin legacy orders from recently acquired NELCO's division would reflect from Q2FY12, in our view. During the quarter, CGL has acquired Sweden-based Emotron Group for Euro 57.8Mn (~INR 3700Mn). CGL also concluded an arrangement for the acquisition (subject to regulatory approvals in US) of QEI, Inc. for an enterprise value of ~USD 30Mn. QEI is a market-leading provider of SCADA and automation systems, and products for the management of electric T&D networks. The acquisition would lead to product and geography diversification. Accumulate for price target of 300.
Bharat Heavy Electricals Ltd. (BHEL)

CMP: 2,044 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 1,000,579
Q1FY12E 78,151 68,226 9,925 12.7 7,581 9.7 15.5
Q1FY11 64,797 55,147 9,650 14.9 6,677 10.3 13.6
Q4FY11 179,214 136,278 42,936 24.0 27980 15.6 57.16
YoY(%) QoQ(%) 20.6 (56.4) 23.7 (49.9) 2.8 (76.9) -219 bps -1126 bps 13.5 (72.9) -60 bps -591 bps 13.5 (72.9)
Buy (INR in Mn) Bloomberg Variance 76,394 2.3 67,068 1.7 9,326 6.4 12.2 49 bps 7,736 (2.0) 10.1 -43 bps 16.8 (7.8) P/E (FY12E): 14.6
Valuation and Outlook During the quarter under review, BHEL has signed provisional INR 15bn deal with the government of Iraq. This could translate into supply of 10 gas turbines of 126 megawatts (MW). During the quarter, company announced order win for solar power project worth INR 620Mn only. The Order-book of the company stands at over over ~INR 1.5Tn and provides revenue visibility over FY13e. Given the a) revenue visibility, b) low valuation, c) low debt on books and d) attempt to diversify its business model in its core area of engineering favours long term investors. Buy for price target of INR 2,650.
10
Simplex Infrastructures Ltd. (SIL)

Q1FY12E 12,520 11,298 1,223 9.8 300 2.4 6.1
Q1FY11 11,745 10,545 1,201 10.2 362 3.1 7.3
Q4FY11 13,654 12,280 1,374 10.1 370 2.7 7.47
YoY(%) 6.6 7.1 1.8 -46 bps (17.0) -68 bps (17.0)
QoQ(%) (8.3) (8.0) (11.0) -30 bps (18.7) -31 bps (19.0)
Accumulate (INR in Mn) Bloomberg Variance 12,802 (2.2) 11,535 (2.1) 1,267 (3.5) 9.9 -13 bps 338 (11.1) 2.6 -24 bps 6.8 (11.0) P/E (FY12E): 8.9
Valuation and Outlook We expect, SIl's order book at ~INR 134bn. We continue to believe that SIL's working capital remain under pressure and expect lower PAT margin compared to consensus. Besides, given the 23% growth in its Sales on YoY basis during last quarter would also reduce the yearly growth in its revenue and profit due to higher base. Given the a) diversification of its order-book across segment and geographies which mitigates the risk of dependency in specific vertical or geography and sound execution track record, maintain, Accumulate for price target of 300.
Punj Lloyd Ltd. (PLL)

Q1FY12E 20,345 18,799 1,546 7.6 264 1.3 0.8
Q1FY11 16,058 14,717 1,341 8.4 (306) (1.9) -0.9
Q4FY11 21,921 19,841 2,080 9.5 177 0.8 0.53
YoY(%) 26.7 27.7 15.3 -75 bps (186.5) 320 bps (186.5)
QoQ(%) (7.2) (5.3) (25.7) -189 bps 49.9 49 bps 50.1
Accumulate (INR in Mn) Bloomberg Variance 19,646 3.6 18,035 4.2 1,611 (4.0) 8.2 -60 bps 108 144.9 0.5 75 bps 0.3 165.2 P/E (FY12E): 19.9
Valuation and Outlook During the quarter, PLL won contracts worth INR 25.08bn. Punj Lloyds unit, Sembawang Development, acquired a 50% stake in a thermal coal mine in Kalimantan, Indonesia. Mine reserves are estimated at 134 MnT. Alike it peers, working capital and higher cost of debt remains a concern for the company. Given the recent orders win, which have lower execution cycle compared to pure infrastructure projects, revenue and margin visibility has improved for the company. Upgrade to Accumulate for price target of INR 85.
11
Cement
Cement companies are expected to report marginally better number this quarter on the back of higher realisation. However, gain from higher realisation would partially be off set by low production and higher raw material cost and fuel. Recent hike in diesel prices would have negative impact on the bottom line of cement companies and would get reflected from Q2FY12. Due to timely and good onset of monsoon this year, pace of infrastructure development activities would also slow down, so we keep cautious approach on the sector. However, from valuation perspectives, our preferred pick remains, Shree Cement and India Cement.
Shree Cement Ltd. (SCL)

Q1FY12E 10,059 7,484 2,575 25.6 835 8.3 24.0
Q1FY11 9,445 6,553 2,892 30.6 1,059 11.2 30.4
Q4FY11 10,701 7,719 2,982 27.9 657 6.1 18.87
YoY(%) 6.5 14.2 (11.0) -502 bps (21.2) -292 bps (21.2)
QoQ(%) (6.0) (3.0) (13.7) -227 bps 27.0 216 bps 27.0
Hold (INR in Mn) Bloomberg Variance NA NA NA NA NA NA NA NA NA NA NA NA NA NA P/E (FY12E): 22.0
Valuation and Outlook We expect Shree Cement to report de-growth of 6% on sequential basis and its EBITDA/ton is expected at 1050-1100/ton. While realisation and margin from its Cement division is expected to remain under pressure due to higher input cost, we expect better realisation from its Power segment would partly off-set the negativity of its cement business. Hold for price target of 1950.
India Cement Ltd. (ICL)

* Standalone Financials
Q1FY12E 10,356 8,720 1,636 15.8 425 4.1 1.4
Q1FY11 8,807 7,785 1,022 11.6 250 2.8 0.8
Q4FY11 10,279 8,469 1,810 17.6 553 5.4 1.799
YoY(%) 17.6 12.0 60.2 420 bps 70.0 126 bps 70.0
QoQ(%) 0.7 3.0 (9.6) -181 bps (23.2) -128 bps (23.5)
Buy (INR in Mn) Bloomberg Variance 10,113 2.4 8,444 3.3 1,669 (2.0) 16.5 -70 bps 458 (7.3) 4.5 -43 bps 0.9 53.0 P/E (FY12E): 12.6
Valuation and Outlook ICL's margin is expected to continue to remain under pressure both on account of higher input cost as well as due to higher power and fuel charges. At the CMP, stock relatively trades at attractive valuation on replacement basis. Moreover, due to the valuation of its franchisee rights in Chennai Super King, we maintain Buy for price target of INR 110.
12
Oil & Gas

Crude oil prices have increased from USD 95 per barrel at the beginning of the quarter to USD 115 per barrel currently on the back of tensions rising in the Middle East. As per a Reuters survey, Libya's production posted the largest drop in OPEC of 1.03 million barrels per day (bpd) in March, to average 320,000 bpd. Until violence broke out earlier this year, output had been running at a normal rate near 1.6 million bpd. Supply also fell in Nigeria in March, because of field maintenance, the survey showed. Saudi Arabia, the United Arab Emirates and Kuwait have boosted production in March, helping to make up for supply lost due to violence in Libya. Supply from all 12 members of OPEC has averaged 29.13 million bpd this month, down from 29.43 million bpd in February. Higher crude prices augur negative for the Indian oil PSUs, whose subsidy burden will increase. We expect crude prices to remain firm on the back of a continuing crisis in the Middle East. We remain positive on the upstream companies like ONGC and Cairn India and negative on the oil refining and marketing companies.
Indraprastha Gas Ltd. (IGL)

Q1FY12E 5,566 4,080 1,486 26.7 735 13.2 5.3
Q1FY11 3,350 2,275 1,075 32.1 571 17.0 4.1
Q4FY11 5,093 3,721 1,372 26.9 692 13.6 4.94
YoY(%) 66.2 79.4 38.3 -539 bps 28.7 -384 bps 28.7
QoQ(%) 9.3 9.7 8.3 -24 bps 6.2 -39 bps 6.3
Hold (INR in Mn) Bloomberg Variance 5,439 2.3 3,993 2.2 1,446 2.8 26.6 11 bps 704 4.4 12.9 26 bps 6.0 (12.5) P/E (FY12E): 17.7
Valuation and Outlook IGL has guided for a volume growth of 20% to 25% for FY12 along with a capex of INR 20 bn over the next three years. IGL plans to spend this amount to expand the infrastructure for compressed natural gas (CNG) and piped natural gas (PNG). Given the higher valuation, maintain price target of INR 390.
13
Gujarat State Petronet Ltd (GSPL)

Q1FY12E 2,629 200 2,429 92.4 1,191 45.3 2.1
Q1FY11 2,518 (27) 2,545 101.1 1,051 41.7 1.9
Q4FY11 2,551 225 2,326 91.2 1506 59.0 2.68
YoY(%) QoQ(%) 4.4 3.1 (840.1) (11.2) (4.5) 4.4 -867 bps 122 bps 13.3 (20.9) 356 bps -1374 bps 13.3 (20.9)
Buy (INR in Mn) Bloomberg Variance 2,703 (2.7) 166 20.4 2,537 (4.2) 93.9 -146 bps 1,205 (1.2) 44.6 72 bps 2.1 (1.2) P/E (FY12E): 15.7
Valuation and Outlook GSPL, Gujarat based company, has a gas pipeline network of 1,900kms in the state. Company aims to invest ~INR 12-15bn over FY13e to expand its footprint in the state. Recently a consortium led by GSPL (52%) won two bids for cross-country pipelines enabling it to expand its operations. These are a) AP to Rajasthan 1,688kms and b) Gujarat to Punjab 1,611kms. These incremental capacity would add to its top-line from 1QFY15. Considering expected new business on the back of higher demand of gas and GSPLs capex plan to capture the opportunity, maintain Buy for Price target of INR 125.
14
Power
We are Neutral on the sector given the delays in setting up capacity. Shortage of fuel and environmental clearances remain a major concern for the sector. Imported coal blending in existing plants are facing limitations - technically and due to inflationary concerns and this may lead to lower PLFs despite capacity addition. The power ancillary companies are expected to post robust earnings on the back of strong order book. However new order inflows for these companies remains slow. Powergrid (PGCIL) is expected to come out with large tenders in CY11 as it goes in for capacity expansion. We expect transmission & distribution EPC companies to do well on the back of expected PGCIL & SEB contracts but competition will remain strong. The investment by the central transmission company are on track to achieve their 11th plan targets. Our top picks are CESC Ltd, KEC International and Diamond Power Infrastructure.
BGR Energy Systems Ltd (BGR)

CMP: 459 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 33098
*Standalone Financials
459 Q1FY12E 11,067 9,789 1,278 11.6 719 6.5 9.98 33098 Q1FY11 9,067 8,029 1,038 11.4 605 6.7 8.4 Q4FY11 14,616 12,943 1,674 11.5 984 6.7 13.63 YoY(%) 22.1 21.9 23.2 11 bps 18.8 -18 bps 18.6 QoQ(%) Bloomberg* (24.3) 10,315 (24.4) 9,170 (23.6) 1,145 10 bps 11.1 (26.9) 653 -23 bps 6.3 (26.8) 9.1
Accumulate (INR in Mn) Dev (%) 7.3 6.7 11.6 11 bps 10.2 6 bps 10.2 P/E (FY12E): 9.4x
Valuation & Outlook Issues related to environmental clearances and coal linkage which could delay the award process could potentially strain revenue growth and visibility in FY13E. Furthermore, increased competition in the BoP as well as BTG space may have a negative impact on margins. Key upside triggers for the stock would be a positive outcome on the Rajasthan project as well as the NTPC bulk tender decision in BGRLs favor.Though the stock has corrected sharply, sustained order inflows in FY12 could re-rate the stock. Recommend Accumulate with a price target of INR 528.
15
Jyoti Structures Ltd

* Consolidated Financials
85 Q1FY12E 6,090 5,396 694 11.4 280 4.6 3.41 6975 Q1FY11 5,643 5,004 639 11.3 263 4.7 3.2 Q4FY11 7,218 6,378 840 11.6 350 4.8 4.27 YoY(%) 7.9 7.8 8.6 7 bps 6.4 -7 bps 6.4 QoQ(%) Bloomberg* (15.6) NA (15.4) NA (17.4) NA -24 bps NA (20.0) NA -25 bps NA (20.0) NA
Buy (INR in Mn) Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 5.8x
Valuation & Outlook As ordering activity from PGCIL gathers pace in FY12, Jyoti Structures Ltd (JSL) stands to benefit from this. The slowdown in order inflows has weighed heavily on the stock. However as order inflows increase we could see the stock getting re-rated. The current order book stands at INR 45 bn which is 1.8x its FY11 sales, thus providing good revenue visibility for FY12. We maintain our Buy rating on the stock with a target price of INR 116.
Diamond Power Infrastructure Ltd (DPIL)

160 Q1FY12E 3,669 3,162 506 13.8 279 7.6 7.49 5953 Q1FY11 3,816 3,270 546 14.3 312 8.2 11.1 Q4FY11 3,424 2,956 468 13.7 252 7.3 6.76 YoY(%) (3.9) (3.3) (7.3) -51 bps (10.7) -58 bps (32.7) QoQ(%) Bloomberg* 7.2 NA 7.0 NA 8.3 NA 15 bps NA 10.8 NA 25 bps NA 10.9 NA
Buy (INR in Mn) Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 5.5x
Valuation & Outlook Diamond Powers foray in Transmission and Extra High Voltage segment will get a boost and the company would be able to leverage its presence by serving all segments of the T&D Industry. Order book position as on Q4FY11 stands at INR 14,000 mn which is 0.84x our FY12 revenue estimates. We expect order inflows to pick in FY12 on the back of high tender activity from PGCIL & SEBs. We maintain our Buy rating on the stock with a target of INR 234.
16
Adani Power Ltd (Adani)

110 Q1FY12E 10,649 4,366 6,283 59.0 2,130 20.0 0.98 239804 Q1FY11 3,531 1,399 2,132 60.4 1,145 32.4 0.5 Q4FY11 YoY(%) 8,556 201.6 3,431 212.0 5,125 194.7 59.9 -138 bps 1,743 86.0 20.4 -1242 bps 0.8 84.3 QoQ(%) Bloomberg* 24.5 12,277 27.3 4,494 22.6 7,783 -90 bps 63.4 22.2 4,448 -37 bps 36.2 22.1 2.0
Accumulate (INR in Mn) Dev (%) (13.3) (2.8) (19.3) -439 bps (52.1) -1623 bps (52.1) P/E (FY12E): 7.9x
Valuation & Outlook Adani Power is currently implementing 16,500 MW of power generation projects across different locations in India. With the commissioning of new units at the Mundra Power plant Adani's project execution remains on track and we can see high earnings growth visibility. Having access to mines in Indonesia, the company has better control on cost and supply of fuel and is better poised as compared to its peers. The average PPA sell for the company is about 70-75%, and balance goes to merchant. This gives an assurance of a steady cash flow for the future. We recommend Accumulate with a price target of INR 124.
Tata Power Ltd

1283 Q1FY12E 58,726 44,045 14,682 25.0 6,166 10.5 22.88 304465 Q1FY11 51,848 41,964 9,885 19.1 3,536 6.8 13.1 Q4FY11 50,155 36,584 13,570 27.1 6,307 12.6 26.68 YoY(%) 13.3 5.0 48.5 594 bps 74.4 368 bps 74.4 QoQ(%) 17.1 20.4 8.2 -206 bps (2.2) -207 bps (14.2) Bloomberg 55,434 41,684 13,750 25.0 4,940 8.9 20.8
Hold (INR in Mn) Dev (%) 5.9 5.7 6.8 0 bps 24.8 18 bps 10.0 P/E (FY12E): 13.5x
Valuation & Outlook The company plans to install over 2,600MW of generation capacity from thermal power in FY12 which will be coming from the Mundra UMPP (1,600MW) and Maithon (1,050MW) plants. With all its projects progressing well on scheduled, the company's growth is expected to remain strong in FY12. The company could face resistance in securing coal at a fixed rate from Indonesia for Mundra units due to possible law changes in Indonesia. This would be an overhang on the stock. The commissioning of Maithon and Mundra power plants and increasing coal prices will be the key triggers for the stock to move up. We maintain Hold with a price target of INR 1367.
17
Thermax Ltd
591 Q1FY12E 9,385 8,328 1,057 11.3 713 7.6 5.99 70421 Q1FY11 7,898 6,938 960 12.2 662 8.4 5.6 Q4FY11 17,713 15,762 1,951 11.0 1,265 7.1 10.62 YoY(%) 18.8 20.0 10.1 -89 bps 7.8 -78 bps 7.9 QoQ(%) (47.0) (47.2) (45.8) 25 bps (43.6) 46 bps (43.6) Bloomberg 8,638 7,636 1,002 11.6 700 8.1 5.9
Hold (INR in Mn) Variance 8.6 9.1 5.5 -34 bps 1.9 -50 bps 1.9 P/E (FY12E): 16.4x
Valuation & Outlook There seems to be a slowdown in the independent power producer segment, despite all the perceived action on setting up new projects in the power sector. Orders from this segment may improve, especially since the company has entered into a joint venture with Babcock and Wilcox to make supercritical boilers. This will add to revenue only from FY13. According to the management, the company will rely on businesses like water, chemicals, and cooling, for incremental orders that will compensate for any lack of traction from the infrastructure side. The pace of order inflows and reduction of cost pressures going forward would be critical to Thermaxs further profitability. We recommend Hold with a revised target of INR 648.
CESC Ltd
300 Q1FY12E 10,475 7,752 2,724 26.0 1,236 11.8 9.89 37481 Q1FY11 10,960 8,400 2,560 23.4 1,100 10.0 8.8 Q4FY11 8,750 6,290 2,460 28.1 1,120 12.8 8.95 YoY(%) (4.4) (7.7) 6.4 264 bps 12.4 176 bps 12.3 QoQ(%) 19.7 23.2 10.7 -211 bps 10.4 -100 bps 10.5 Bloomberg 11,496 8,719 2,778 24.2 1,271 11.1 10.2
Buy (INR in Mn) Variance (8.9) (11.1) (1.9) 184 bps (2.7) 74 bps (2.7) P/E (FY12E): 7.5x
Valuation & Outlook The company would be aggressively scouting for coal equity and linkages both in domestic and overseas market. It expects to import two million tonnes of coal per annum from South Africa for the next 20 years to begin from 2014. CESC is also looking to bid aggressively when auction of coal blocks by the Centre comes through in the next one year. Stake sale in its subsidiaries (Spencers and Haldia Energy) is expected soon. The company was expected to sell anywhere between 15% and 25% in Spencers and Haldia Energy to part finance its expansion. The management has said that its operations of Spencer's are likely to break even after 18-21 months. This however is contingent upon adding trading areas, which in turn, is dependent upon developers completing their projects on time. This turnaround in its retail business remains a key catalyst for the price to move up. We remain positive on the companys power business and recommend Buy with a price target of INR 411.
18
KEC International Ltd

79 Q1FY12E 11,253 10,082 1,170 10.4 495 4.4 1.93 20310 Q1FY11 8,461 7,616 845 10.0 264 3.1 5.1 Q4FY11 15,589 13,954 1,635 10.5 786 5.0 3.06 YoY(%) 33.0 32.4 38.5 42 bps 87.8 128 bps (62.5) QoQ(%) (27.8) (27.7) (28.4) -9 bps (37.0) -64 bps (37.1) Bloomberg 10,152 9,137 1,015 10.0 369 3.6 1.4
Buy (INR in Mn) Variance 10.8 10.3 15.3 40 bps 34.2 77 bps 34.2 P/E (FY12E): 8.5x
Valuation & Outlook KEC International Ltd with a strong order book of INR 78 bn (1.7x FY11 sales) provides very good revenue visibility for FY12. With acquisitions like SAE Towers and Jay Signaling, the company expects to win significant orders from the Americas and from the Indian Railways. The company's diversified business model and well diversified order book in terms of geography makes it less vulnerable to risks as compared to some of its competitors. Recommend Buy with a target price of INR 102.
19
Auto & Auto Ancillaries

Tata Motors Ltd
CMP: INR 997 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 536,774
BUY (INR in Mn) Q1FY12E 372,453 322,810 49,643 13.3 26,532 7.1 49.3 Q1FY11 268,761 230,621 38,140 14.2 19,887 7.4 34.8 Q4FY11 354,711 309,577 45,134 12.7 26,375 7.4 41 YoY(%) 38.6 40.0 30.2 -86 bps 33.4 -28 bps 41.6 QoQ(%) 5.0 4.3 10.0 4.8 0.6 -31 bps 19.2 Bloomberg* 340,160 292,995 47,165 13.9 21,554 6.3 39 Dev (%) 9 10 5 (4) 23 12 26 P/E (FY12E): 5.1x
Valuation & Outlook TATA Motors growth story would continue with enhanced performance by its subsidiary JLR which contributes more than 57% to the topline and ~78% to its bottomline. In addition to this, market's expectation of softening of raw material price would further support the margin of the company. TATA Motor's continuous focus on technology advancement with regular spending on reserach & development would benefit the company going forward. We expect slight slow down in the auto sector specially in the passenger vehicle segment but TATA Motors with its strong market share in CV segment and international presence is expected to perform well. At CMP the stock is trading at PE of 5x its FY12e earnings. We recommend BUY with a target price of INR 1220.
Exide Industries Ltd

BUY (INR in Mn) Q1FY12E 13,376 10,512 2,864 21.4 1,853 13.9 2.2 Q1FY11 11,517 8,885 2,632 22.9 1,653 14.4 2.0 Q4FY11 12,261 9,969 2,292 18.7 1,637 13.3 2 YoY(%) 16.1 18.3 8.8 -144 bps 12.1 -50 bps 11.8 QoQ(%) 9.1 5.5 25.0 272 bps 13.2 50 bps 13.0 Bloomberg* 14,790 11,929 2,861 19.3 1,864 12.6 2 Dev (%) (10) (12) 0 11 (1) 10 (1) P/E (FY12E): 18.9x
Valuation & Outlook Strong automobile sales over the last decade could result in robust replacement demand for batteries, leading to high revenue visibility for the company. Considering the future demand scenario, additional capacity is coming on-stream in Q2FY12 in 4W and 2W battery which will further boost the top line and bottom line of the company. Growth deceleration in the short term in auto sector may impact company's OEM segment. However company's strong presence with higher margin (compared to the OEM segment) in the replacement business will enhance the profitability of the company. With shifting to a profitable product mix, company has started sourcing Lead (major raw material) from its in house smelter which would further mitigate the price volatility risk. At CMP the stock is trading at PE of 17.8x its FY12e earnings and we remain bullish on the counter with a price target of INR 200.
20
TVS Motors
HOLD (INR in Mn) Q1FY12E 18,673 17,395 1,278 6.8 563 3.0 1.2 Q1FY11 13,696 12,659 1,037 7.6 404 2.9 0.9 Q4FY11 16,046 15,134 913 5.7 417 2.6 1 YoY(%) 36.3 37.4 23.2 -73 bps 39.4 7 bps 40.0 QoQ(%) 16.4 14.9 40.1 116 bps 35.1 42 bps 35.2 Bloomberg* 16,275 15,448 827 5.1 469 2.9 1 Dev (%) 15 13 55 35 20 5 20 P/E (FY12E): 11.2x
Valuation & Outlook TVS Motors is expected to perform well on the back of favorable product mix in the motorcycle segment along with higher volume in scooter segment down the line. The company is targeting for higher volumes in the premium segment where margins are better compared to the economy segment. The company plans to launch a new 125cc motorcycle in Q4FY12 which may increase the volume going forward. The Indonesian business of the company may take some time for a significant contribution to the bottomline. At CMP the stock is trading at PE of 10.5x its FY12e earnings. We recommend HOLD with a price target of INR 58.
Metals / Mining
Tata Steel Ltd
BUY (INR in Mn) Q1FY12E 301,450 254,665 46,785 15.5 17,350 5.8 18.1 Q1FY11 270,101 225,775 44,326 16.4 18,253 6.8 20.6 Q4FY11 334,427 289,766 44,661 13.4 41,756 12.5 46 YoY(%) 11.6 12.8 5.5 -89 bps -4.9 -100 bps -12.1 QoQ(%) -9.9 -12.1 4.8 217 bps -58.4 -673 bps -60.7 Bloomberg* 267,694 220,274 47,420 17.7 17,674 6.6 19 Dev (%) 13 16 (1) (12) (2) (13) (7) P/E (FY12E): 8.3x
Valuation & Outlook TATA steel's steady focus towards strategic product mix with continuous stride to deleverage the balancesheet made it attractive Demand for the Steel industry was quite robust for the last quarter which is expected to remain intact for H1FY12 but slowdown in the Europe could hamper the operation of Corus To mitigate the risk of de-growth the company has initiated product restructuring to cater high value market. Further in the recent past, Tata Steel has initiated various new investment and divestment plan with debt restructuring. With expectation of high growth in the auto sector the company is targeting to increase delivery of Auto grade steel by 20% to 1.2 mn tonnes for FY12. The recent decision of 27% stake sales in Riversdale and low cost debt raises will result in high cash flow which will help company to ride over the margin pressure. At an EV/EBIDTA of 5.5x on FY12e, the stock is attractively priced considering the future growth plan Indian operation and streamlining of the European operation. At CMP the stock is trading at EV/EBITDA of 6.5x of its FY12e. We remain positive on the stock with a price target of 690.
21
JSW Steel Ltd (JSW)

ACCUMULATE (INR in Mn) Q1FY12E 89,275 70,805 18,470 20.7 8,395 9.4 37.6 Q1FY11 48,180 37,396 10,784 22.4 2,954 6.1 15.4 Q4FY11 72,094 55,474 16,620 23.1 7,936 11.0 36 YoY(%) 85.3 89.3 71.3 -169 bps 184.2 327 bps 144.8 QoQ(%) 23.8 27.6 11.1 -236 bps 5.8 -160 bps 5.7 Bloomberg* NA NA NA NA NA NA NA Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 6.5x
Valuation & Outlook The recent brown field expansion at Vijaynagar plant has positioned JSW steel as the largest player in the domestic market with current total capacity of 10 MTPA. The management had guided for a volume of ~ +9 mn tones for FY12 which would be an aggressive plan in term of number as well as volume. With major concentration in the domestic market with value added products and JSW Shoppe the company is expected to perform strong volume in FY12 but margins would be pressurize for Q1FY12 due to high raw material prices. Moreover, the takeover of ISPAT industries is expected to provide synergy to the growth story. The material sourcing remains a concern for the company going forward, as mere ~25% of the raw material material requirement (during full capacity utilization) would be met captively. Thus JSW is continuously striving for new mine acquisition as well as value added products to mitigate the raw material price volatility(Prices of iron ore continue to remain firm, while coking coal price contracts for 1QFY2012 have been signed at US$330/tonne). At CMP of INR 874 the stock is trading at EV/EBITDA of 6.7x of its FY12e. Considering the huge expansion plan we remain bullish on the stock with a price target of INR 970.
Adhunik Metaliks Ltd

BUY (INR in Mn) Q1FY12E 5,374 3,769 1,605 29.9 527 9.8 4.3 Q1FY11 4,284 2,716 1,568 36.6 564 13.2 4.6 Q4FY11 5,513 3,882 1,631 29.6 374 6.8 3 YoY(%) 25.4 38.7 2.4 -673 bps -6.6 -336 bps -6.6 QoQ(%) -2.5 -2.9 -1.6 28 bps 40.8 302 bps 40.9 Bloomberg* 5,113 3,525 1,588 31.1 545 10.7 4 Dev (%) 5 7 1 (4) (3) (8) (3) P/E (FY12E): 4.8x
Valuation & Outlook Adhunik Metaliks plan for backward integration got hampered due to delay in the environmental clearance(still pending) for its Suleipat iron ore mine & Keonjhar in Orissa which was expected to commence commercial operations in Q1FY12. Considering market scenario, Adhunik Metaliks has shifted its major focus to the mining segment OMML (Orissa Minerals & Manganese Ltd. 100% wholly owned subsidiary) which has the second largest manganese ore reserve in India with merchant license. The companys strategic plan to concentrate on cost reduction in Steel business through beneficiation and pelletisation along with major focus in high profitable business of mining is expected to provide better margin down the line with rapid increase in the iron & manganese ore prices. At CMP the stock is trading at EV/EBITDA of 6.2x its FY12e. We recommend BUY on the stock with a price target of INR 120. Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in 22
VISA Steel
BUY (INR in Mn) Q1FY12E 4,850 4,121 729 15.0 242 5.0 2.2 Q1FY11 2,205 1,800 405 18.4 76 3.5 0.7 Q4FY11 4,240 3,490 750 17.7 231 5.5 2 YoY(%) 119.9 129.0 79.8 -336 bps 217.4 153 bps 218.8 QoQ(%) 14.4 18.1 -2.9 -267 bps 4.7 -46 bps 4.8 Bloomberg* NA NA NA NA NA NA NA Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 5.4x
Valuation & Outlook Visa Steel, a part of the VISA group has strategically planned to get in to forward integration to cater value added products where margin remains to be at high compared to the crude steel.The recent commencement of the 0.5 MTPA of SMS (Steel Melt Shop) plant and 0.5 MTPA of Bar & Wire rod Mills (expect to commence in Q3FY12) would add value to the bottomline. The higher realization with better margin in upcoming products i.e. Billets and Rolled products compared to the current product lines (Sponge iron & Pig iron) will drive the growth of the company. Moreover VISAs JV with China's Baosteel which is expected to commence from March 2012 will further drive the growth story. At CMP of INR 58 stock is trading EV/EBITDA of 6x and 3.8x of its FY12e & FY13e respectively. We recommend BUY on the stock with a price target of INR 75.
Hindalco Industries Ltd.

BUY (INR in Mn) Q1FY12E 91,506 80,608 10,898 11.9 6,746 7.4 3.5 Q1FY11 51,455 43,130 8,325 16.2 5,344 10.4 2.8 Q4FY11 67,608 58,463 9,145 13.5 7,084 10.5 4 YoY(%) 77.8 86.9 30.9 -427 bps 26.2 -301 bps 26.2 QoQ(%) 35.3 37.9 19.2 -162 bps -4.8 -311 bps -4.9 Bloomberg* 98,203 89,071 9,132 9.3 7,236 7.4 4 Dev (%) (7) (10) 19 28 (7) 0 (1) P/E (FY12E): 12.9x
Valuation & Outlook Hindalco has undergone huge expansion both internationally and domestically in the recent past. The company is doubling its domestic aluminum smelting capacity to 1.29MTPA (current 5LTPA), and tripling its domestic refining capacity to 4.5MTPA (current 1.5MTPA). This expansion is likely to be completed by FY15 in a phased manner at a cost of ~INR 436 bn. By FY12 the company is likely to see a smelting capacity of 917,000 TPA. It is also expanding its global operations by increasing Novelis capacity from the current 3MTPA to 4MTPA. This is likely to be commissioned in a phased manner by FY16 at a cost of $1.5bn.Thus the company is likely to post robust numbers going ahead on the back of strong volume growth. However the continuous delay in the Utkal refinery project and the lack of visibility with respect to the Mahan coal block has setback the domestic growth path of the company. The Utkal refinery is rescheduled to be operational by Q2FY12 which will result in delaying alumina supply to the Mahan smelter. By 2016, when all the projects of the company come on-stream, the company will be one of the lowest cost producers of the aluminium. Considering all these expansion along with continuous rise in the product price realization we feel the stock to do well going forward. We recommend BUY on the stock with a price target of INR 193. Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in 23
NMDC
CMP: INR 259 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 1,026,463
HOLD (INR in Mn) Q1FY12E 34,729 8,889 25,840 74.4 19,326 55.6 4.9 Q1FY11 25,180 4,669 20,511 81.5 15,040 59.7 3.8 Q4FY11 37,698 10,307 27,390 72.7 20,986 55.7 5 YoY(%) 37.9 90.4 26.0 -705 bps 28.5 -408 bps 28.5 QoQ(%) -7.9 -13.8 -5.7 175 bps -7.9 -2 bps -7.9 Bloomberg* NA NA NA NA NA NA NA Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 13.3x
Valuation & Outlook Being the largest domestic player in the iron ore mining, NMDC is least prone to the current iron ore price softening in the market. Prices of iron ore have declined slightly in the last two months on the back of higher supplies of iron ore from Australian part and expected deceleration in the steel production. As NMDCs most of the sales are done in the domestic market where the iron ore prices are floating below the international prices it would have less impact to the companys financials going forward. However we feel that there would not be much growth in the volume due to the Naxal activities in few of its mining region. Considering all this scenario we expect companys margin to be shrink in the near future. The stock is currently trading at 7.7x & 7.1x of its FY12e & FY13e respectively. We recommend HOLD on the stock with a price target of INR 240.
24
Banking
The credit growth of ~24% witnessed in FY11 is likely to slowdown in FY12 due to high interest rate regime. However, we believe that the interest rates are near its peak levels as most of the commodity prices have already started to correct which would lead to softer inflation. Thus banking industry is expected to register a credit growth of approx. 18%. This growth will be primarily led by non-infra & retail loan book which has higher risk to asset quality of banks & can lead to higher provisioning affecting the profitability. Public sector banks are more vulnerable given the asset quality concerns as compared to private sector banks. Growth in deposits which has been lagging till now will see a revival going forward, due to recent SB & FD rate hikes.This along with more focus on branch expansion will help the banks in garnering more CASA, and maintain its NIMs. The Bank Nifty Index has corrected by 3.8% since April 2011 till date pricing in the near term challenges and expected dip in earnings due to lower GDP forecast. However, the correction in public sector banks especially mid cap psus was more than the private sector banks. We remain positive on selective banks which have a) robust deposit franchise, b) diversified loan book & growth visibility, c) healthy capital adequacy and d) comfortable valuation. Our preferred picks are 1) Axis Bank 2) IDBI Bank 3) YES Bank 4) Indian Bank
State Bank of India (SBI)

CMP: 2,379 Particulars Interest Income Interest Expense Net Interest Income Operating Profit Operating Profit (%) Reported PAT PAT (%) EPS Market Cap: 1,510,663
Q1FY12E 238,935 147,564 91,371 88,013 36.8 30,984 12.9 48.79
Q1FY11 184,521 111,484 73,037 61,344 33.2 29,142 15.7 45.90
Q4FY11 217,214 136,633 80,581 60,797 28.0 208 0.1 0.33
YoY(%) 29.5 32.4 25.1 43.5 11 bps 6.3 -280 bps 6.30
QoQ(%) 10.0 8.0 13.4 44.8 32 bps 14796.2 1280 bps 14684.85
ACCUMULATE (INR in Mn) Bloomberg* Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA P/BV (FY12E): 2.0x
Valuation & Outlook Bank has guided the loan growth of 17-18% medium term; NIMs could pick up from here on (management guided to 3.5% NIM in FY12); cost efficiency should improve as much of the pain has already been taken. However, there are still questions on asset quality slippages, management suggests, will provide for it more aggressively than in recent past. We believe next 2-3 quarters we are likely to see some pressures on the stock. However, with much of the pain behind us, we would look to accumulate on further weakness for target price to INR 2777.
25
Union Bank of India

CMP: 298 Particulars Interest Income Interest Expense Net Interest Income Operating Profit Operating Profit (%) Reported PAT PAT (%) EPS Market Cap: 156,251
Q1FY12E 49,845 31,886 17,959 10,996 22.1 6,771 13.6 10.66
Q1FY11 36,857 23,376 13,480 10,437 28.3 6,014 16.3 11.91
Q4FY11 46,153 28,987 17,165 8,695 18.8 5,976 13.0 9.41
YoY(%) 35.2 36.4 33.2 5.4 -626 bps 12.6 -274 bps -10.50
QoQ(%) Bloomberg* NA 8.0 NA 10.0 NA 4.6 NA 26.5 NA 322 bps NA 13.3 NA 63 bps NA 13.28
BUY (INR in Mn) Dev (%) NA NA NA NA NA NA NA NA
P/BV (FY12E): 1.2x
Valuation & Outlook Union Bank of India is expected to grow deposits & credit ~20% & ~22% in FY12E respectively and fee-based income in line with the loan-book thus overall profitability should be up by 22% in FY12E. Going forward margins are likely to witness some pressure, largely in line with the industry trend. On the other hand, we expect slippages to remain elevated in the coming few quarters due to migration to system based NPL recognition method. We have BUY rating on stock for the price target of INR 405.
HDFC Bank
CMP: 2,489 Particulars Interest Income Interest Expense Net Interest Income Operating Profit Operating Profit (%) Reported PAT PAT (%) EPS Market Cap: 1,157,947
Q1FY12E 59,060 28,131 30,929 23,388 39.6 12,800 21.7 27.52
Q1FY11 44,202 20,190 24,011 17,487 39.6 8,117 18.4 17.66
Q4FY11 54,686 26,291 28,395 20,969 38.3 11,147 20.4 23.96
YoY(%) 33.6 39.3 28.8 33.7 4 bps 57.7 331 bps 55.83
HOLD (INR in Mn) Dev (%) NA NA NA NA NA NA NA NA
P/BV (FY12E): 4.0x
Outlook & Valuation HDFC Bank, going forward is expected to keep ~22% of credit growth & also expected to maintain the CASA ratio at ~50%. On back of continuous growth momentum, strong business & credit growth, improvement in asset quality & strong capital adequacy HDFC bank commands a premeium in its valuations. We have HOLD rating on the stock for a target price of INR 2565 next 12-18 months.
26
IDBI Bank
Q1FY12E 56,281 42,691 13,591 13,643 21.3 5,468 8.5 5.55
Q1FY11 42,890 34,378 8,512 8,312 17.5 2,509 5.3 3.46
Q4FY11 50,251 39,166 11,085 11,668 20.4 5,162 9.1 5.24
YoY(%) 31.2 24.2 59.7 64.1 382 bps 117.9 326 bps 60.40
QoQ(%) Bloomberg* NA 12.0 NA 9.0 NA 22.6 NA 16.9 NA 90 bps NA 5.9 NA -54 bps NA 5.92
P/BV (FY12E): 0.8x
Valuation & Outlook The management has maintained its strategy of slower loan book growth, in favour of a higher CASA share and higher NIMs & indicated to take branch network to about 1100 by end of FY12. While the present 810 branches are predominantly urbanconcentrated (67%), the bank intends to increase its presence in semi-urban areas going forward. We believe this would continue to increase the contribution of retail deposits in the banks funding mix and drive strong CASA. In wake of lower NIMs, the bank has indicated a strategy of lower advances growth (~15% for FY12) than the system to concentrate on increasing the percentage of low-cost CASA deposits and consciously shifting focus from large corporate lending to retail and MSME lending to bring in higher-yielding loans. In our view, IDBI will return to growth trajectory over medium to long period as it has now strategically opted for low business growth and improving performance. This would enable the bank to bring its perormance in line with industry average. We value the stock at 1.2x and maintain BUY recommendation with a price target of INR 196.
United Bank of India

Q1FY12E 19,087 12,939 6,148 4,576 21.4 1,840 8.6 5.34
Q1FY11 14,372 9,287 5,086 3,407 21.9 1,079 6.9 3.41
Q4FY11 17,674 11,926 5,748 4,250 21.4 1,432 7.2 4.16
YoY(%) 32.8 39.3 20.9 34.3 -48 bps 70.5 168 bps 56.60
QoQ(%) Bloomberg* NA 8.0 NA 8.5 NA 7.0 NA 7.7 NA -1 bps NA 28.5 NA 139 bps NA 28.37
P/BV (FY12E): 0.8x
Outlook & valuation United Bank of India (UBI) to focus on MSME and agriculture sector and to expand its product suite and services resulting in a healthy bottom line growth in FY12E. Bank to foray into merchant banking & loan syndication business which will help it to increase its fee income. However, RBI's policy measures are likely to affect the bank's margins going ahead. We maintain our BUY rating on the stock for a target price of INR 131.
27
Axis Bank
CMP: 1,293 Particulars Interest Income Interest Expense Net Interest Income Operating Profit Operating Profit (%) Reported PAT PAT (%) EPS Market Cap: 530,836
Q1FY12E 45,850 27,723 18,127 19,711 43.0 10,484 22.9 25.55
Q1FY11 33,256 18,118 15,138 14,825 44.6 7,743 23.3 19.01
Q4FY11 43,667 26,657 17,010 18,208 41.7 10,201 23.4 24.85
YoY(%) 37.9 53.0 19.7 33.0 -159 bps 35.4 -41 bps 34.42
P/BV (FY12E): 2.4x
Outook & Valuation Axis bank (Axis) is targeting a credit growth of ~30% in FY12, much higher than 20% system growth anticipated by RBI. On back of branch expansion (250 branches in FY12) the cost-income ratio is expected to gradually move up to 44-45%. In tighter monetary policy regime banks NIMs are cushioned with higher CASA ratio. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, and multiple sources of sustainable fee income, strong growth outlook. We have BUY rating on the stock for a target price of INR 1580.
Allahabad Bank (ALBK)

Q1FY12E 33,988 21,253 12,735 10,518 31.0 4,430 13.0 9.92
Q1FY11 24,031 15,528 8,503 7,046 29.3 3,471 14.4 7.77
Q4FY11 31,182 19,679 11,503 7,791 25.0 2,567 8.2 5.39
YoY(%) 41.4 36.9 49.8 49.3 163 bps 27.6 -141 bps 27.67
P/BV (FY12E): 0.8x
Valuation & Outlook Allahabad Bank is in a strong growth trajectory with strong distribution network and vast customer base in CASA-rich states. This provides significant business opportunities in the current rising interest rate scenario. This along with a balanced loan portfolio and high proportion of low-cost funds would help the bank earn better margins compared with other public sector banks. The stock trades at 0.9x of its FY12E BV. Maintaining asset quality would be a key challenge for the bank going ahead, but cheap valuations offer a good buying opportunity. We maintain BUY rating on the stock for target price of INR 304.
28
Corporation Bank
Q1FY12E 27,598 19,370 7,868 9,210 33.4 4,399 15.9 29.70
Q1FY11 20,278 13,302 6,976 6,204 30.6 3,338 16.5 23.30
Q4FY11 25,554 17,936 7,618 7,466 29.2 3,453 13.5 23.30
YoY(%) 36.1 45.6 12.8 48.5 280 bps 31.8 -60 bps 27.47
P/BV (FY12E): 0.9x
Valuation & Outlook Corporation Bank is improving interms of its business. We expect credit growth of ~24% in FY12E. Margin improvement is going to be a challenge in increasing interest rate cycle; however, margins are likely to be cushioned with higher CASA ratio of ~27% in FY12E. We have BUY rating on the stock for a target of INR 709.
YES Bank
Q1FY12E 13,326 9,484 3,842 3,976 29.8 2,311 17.3 6.65
Q1FY11 7,392 4,771 2,621 2,490 33.7 1,564 21.2 4.59
Q4FY11 12,226 8,741 3,485 3,488 28.5 2,034 16.6 5.86
YoY(%) 80.3 98.8 46.6 59.7 -384 bps 47.8 -381 bps 44.88
P/BV (FY12E): 2.3x
Valuation & Outlook YES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionally the bank is expanding ~125 branches every year, which would help to improve its CASA ratio to 15% in FY12E. We remain positive on long term prospects of the bank. We maintain BUY rating on the stock for target price of INR 419.
29
Indusind Bank
Q1FY12E 11,537 7,401 4,137 3,282 28.5 1,853 16.1 3.98
Q1FY11 7,715 4,759 2,957 2,306 29.9 1,186 15.4 2.88
Q4FY11 10,488 6,608 3,881 2,980 28.4 1,718 16.4 3.69
YoY(%) 49.5 55.5 39.9 42.3 -144 bps 56.2 69 bps 38.19
QoQ(%) 10.0 12.0 6.6 10.1 3 bps 7.9 -32 bps 7.86
ACCUMULATE (INR in Mn) Bloomberg* Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA P/BV (FY12E): 2.9x
Outook & Valuation Indusind Bank is planning to increase its branch network thereby aiding growth in CASA ratio ~28-30%, which will help the bank increase its NIMs ~3.5% further in FY12. Bank is expected to deliver healthy bottomline growth in FY12 and also to expand its product suite and services. We have ACCUMULATE rating on the stock with target price of INR 320.
ICICI Bank
CMP: 1,093 Particulars Interest Income Interest Expense Net Interest Income Operating Profit Operating Profit (%) Reported PAT PAT (%) EPS Market Cap: 32,247
Q1FY12E 76,574 49,209 27,365 24,846 32.5 15,559 20.3 13.51
Q1FY11 58,125 37,920 19,911 21,881 37.6 10,260 17.7 10.00
Q4FY11 71,565 46,467 25,097 23,049 32.2 14,521 20.3 12.61
YoY(%) 31.7 29.8 37.4 13.6 -519 bps 51.6 267 bps 35.10
HOLD (INR in Mn) Dev (%) NA NA NA NA NA NA NA NA
P/BV (FY12E): 2.2x
Outlook & Valuation ICICI Bank's growth in the past has been mainly retail-driven, the bank is now looking to grow its large corporate and SME segment loan book as well. Progress on the 4C strategy (CASA, capital conservation, cost control and credit charges) has continue to improve fundamentals. We have HOLD rating on the stock for a target price of INR 1193.
30
Indian Bank
Q1FY12E 28,017 16,167 11,851 9,803 24.6 4,697 11.8 10.93
Q1FY11 21,218 11,951 9,267 8,378 27.5 3,681 12.1 8.57
Q4FY11 25,942 14,832 11,110 9,030 24.4 4,389 11.8 10.21
YoY(%) 32.0 35.3 27.9 17.0 -289 bps 27.6 -30 bps 27.54
P/BV (FY12E): 0.9x
Outook & Valuation Indian Banks loan book is skewed towards high yielding segments such as SME, retail and agriculture, which form about 43% of the banks advances. As a result, despite having a moderate CASA ratio of 32%, the banks NIMs are the highest amongst its peer set at around 3.7% as compared to ~3.1% for its peers. Best in class NIMs coupled with sound asset quality and cost efficiencies has led to superior ROAs for the bank ~1.7%. Managements strategy of moderating growth with focus on margins & asset quality would be positive for the bank from long term perspective. We have BUY rating on the stock for target price of INR 275.
31
Media and Entertainment

The overall sentiment in media and entertainment industry are expected to remain positive in coming quarters. FMCG and consumer durable companies are expected to increase there advertising budget to tab the rural market in lieu of good monsoon. Print media companies are expected to report robust ad revenue growth but could witness pressure on the cost side due to firming up of newsprint prices and increasing competition. Broadcasting companies are expected to witness surge in their subscription revenue due to positive regulatory development towards digitization. For movie production companies, there has been growing demand from broadcasters to acquire satellite rights for new movies helping then to de-risk and generate higher yields. As per FICCI-KPMG India, Media and Entertainment Industry is expected to grow at CAGR of 14% to reach INR 1275 bn in 2015 backed by growing media consumption and increasing penetration and growing digitization.
Zee Entertainment Enterprises Ltd

CMP: Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap:
140 Q1FY12E 7,413 5,397 2,016 27 1,483 20 1.52 136920 Q1FY11 6,770 4,900 1,870 27.6 1463 21.6 1.51 Q4FY11 7,980 5,711 2,268 28.4 1,882 23.6 1.92 YoY(%) 9.5 10.2 7.8 -43 bps 1.4 -161 bps 0.4 QoQ(%) Bloomberg* (7.1) 7,613 (5.5) 5,485 (11.1) 2,128 -123 bps 28.0 (21.2) 1,607 -359 bps 21.1 (21.0) 1.6
Accumulate (INR in Mn) Dev (%) (2.6) (1.6) (5.3) 28 bps (7.7) 21 bps (7.7) P/E (FY12E): 20.7x
Valuation & Outlook With increasing digitalization, growing penetration of DTH and increasing declaration with star zee deal is expected to accelerate subscription revenue. ZEE TV remains in the top 3 channels in the GEC space which will help to garner better advertising revenue. Moreover, the losses in the sports business were limited to INR 152 mn against a loss of INR 1,030 mn in Q3FY11. However, company is planning to launch its golf sport channel in addition to re-branding exercise which can affect the margins going forward. We recommend Accumulate on the stock with a price target of INR 160.
32
D.B.Corp Ltd.
236 Q1FY12E 3,489 2,477 1,012 29 628 18 3.37 43920 Q1FY11 2,987 1,851 1,136 38.0 695 23.3 3.74 Q4FY11 3,174 2,378 796 25.1 450 14.2 2.42 YoY(%) 16.8 33.8 (10.9) -903 bps (9.7) -528 bps (9.7) QoQ(%) Bloomberg* 9.9 3,315 4.2 2,372 27.1 943 392 bps 28.4 39.6 536 382 bps 16.2 39.6 2.9
Accumulate (INR in Mn) Dev (%) 5.2 4.4 7.3 56 bps 17.2 183 bps 15.2 P/E (FY12E): 16.6x
Valuation & Outlook DB Corp flagship Hindi daily Dainik Bhaskar (DB) posted steady performance and maintained it second position with 14.1 mn Average Issue Readership in Q12011. It maintained number one position in Chandigarh, Chattisgarh, and Haryana. With the launch of its Marathi news paper DB corp has become the most regionally diversified print media company. The company focus continues to be on Tier II/ III cities, rather than the likes of Mumbai & Pune (large English markets) as they will be the drivers of the next phase of growth with improving literacy rate and strong economic growth (GDP) of the country. However the margins will be affected due to the higher newsprint prices and launch expenses. We have accumulate rating on the stock with target price of INR 280.
HT Media Ltd
169.8 Q1FY12E 5,128 4,169 959 19 523 10 2.23 39903 Q1FY11 4,042 3,243 799 19.8 414 10.2 1.76 Q4FY11 4,704 3,828 876 18.6 529 11.3 2.25 YoY(%) 26.9 28.5 20.0 -107 bps 26.4 -4 bps 26.4 QoQ(%) Bloomberg* 9.0 5,056 8.9 4,037 9.4 1,019 8 bps 20.2 (1.2) 558 -105 bps 11.0 (1.2) 2.4
Hold (INR in Mn) Dev (%) 1.4 3.3 (5.9) -145 bps (6.3) -84 bps (6.3) P/E (FY12E): 18.2x
Valuation & Outlook HT Media continued with its strong performance in Hindi & English segments, outperforming peers. According to IRS Q1 2011, HTML Average Issue Readership (AIR) grew by ~3% QoQ basis. In Delhi, HT regained a growth of ~2% QoQ whereas The Times of India (ToI) registered very marginal de-growth. In Mumbai, it registered 12% on QoQ basis maintaining its position. Hindi daily, Hindi Hindustan (HH) consolidated its leadership position in key market (Bihar-Jharkhand) market though competition also gained driven by cover price action across the market. HT Medias strong presence in key metros and diversified business model with radio and internet segments make the company uniquely positioned in Indian media industry. We Hold on the stock with a target price of INR 185.
33
Hindustan Media Ventures Ltd

*Standalone Financials
142 Q1FY12E 1,382 1,133 249 18 138 10 1.88 10423 Q1FY11 1,328 1,001 327 24.6 183 13.8 3.21 Q4FY11 1,306 1,107 200 15.3 129 9.9 1.76 YoY(%) 4.1 13.2 (23.8) -660 bps (24.6) -380 bps (41.3) QoQ(%) Bloomberg* 5.8 NA 2.4 NA 24.4 NA 270 bps NA 7.2 NA 13 bps NA 7.2 NA
Accumulate (INR in Mn) Dev (%) NA NA NA NA NA NA NA P/E (FY12E): 15.5x
Valuation & Outlook HMVL posted a strong performance in 2011Q1 IRS survey with ~19% YoY and 3% QoQ increase in Average Issue Readership (AIR). HMVLs ad revenue continues to witness robust growth with the rise in readership numbers in existing and new markets. We maintain our Accmulate rating with a target price of INR 160.
SUN TV Networks Ltd.

342.65 Q1FY12E 4,012 843 3,169 79 1,605 40 4.07 67502 Q1FY11 4,404 806 3,599 81.7 1710 38.8 4.34 Q4FY11 4,605 966 3,639 79.0 2,083 45.2 5.29 YoY(%) (8.9) 4.6 (11.9) -271 bps (6.1) 119 bps (6.1) QoQ(%) (12.9) (12.8) (12.9) -2 bps (23.0) -524 bps (23.0) Bloomberg 3,913 760 3,153 80.6 1,589 40.6 4.0
Accumulate (INR in Mn) Dev (%) 2.5 10.9 0.5 -159 bps 1.0 -61 bps 1.0 P/E (FY12E): 14.9x
Valuation & Outlook Sun TV has a robust business model, with dominant market shares and high entry barriers across its markets, and remains almost indispensable for TV advertisers in South India. The extensive movie library and partnership-based slot sales model with significant high viewership share is expected to provide greater revenue growth going forward. Moreover, Sun Tv strength will also help to offset any negative which can be done by the potential cable network nationalisation in Tamil Nadu. However the political and regulatory concerns related to promoter & family can dampen the sentiment. We recommend accumulate rating on the stock with a target price of INR 410.
34
UTV Software Communications Ltd

813.5 Q1FY12E 3,215 2,566 649 20 418 13 10.29 33028 Q1FY11 2,082 1,597 485 23.3 412 19.8 10.15 Q4FY11 2,427 2,128 300 12.3 141 5.8 3.48 YoY(%) 54.4 60.6 33.8 -310 bps 1.5 -678 bps 1.5 QoQ(%) 32.5 20.6 116.7 786 bps 196.0 718 bps 196.0 Bloomberg 3,321.0 2,711.0 610.0 18.4 445.0 13.4 11.0
Hold (INR in Mn) Variance (3.2) (5.4) 6.5 183 bps (6.1) -40 bps (6.1) P/E (FY12E): 16.2x
Valuation & Outlook UTV movie segment is expected to register a strong performance given the 10 movie slate in FY12, within the budget of INR 100 mn to INR 450 mn. The company is planning to invest up to INR 5 bn this year to launch two new broad based channel which can put some pressure on the earnings. Moreover, games segment continues to see delays. We maintain hold on the stock at current levels.
Jagran Prakashan Ltd

126 Q1FY12E 2,655 1,965 690 26 430 16 1.36 39879 Q1FY11 2,698 1,796 902 33.4 556 20.6 1.76 Q4FY11 2,826 2,112 714 25.3 421 14.9 1.33 YoY(%) (1.6) 9.4 (23.4) -742 bps (22.6) -441 bps (22.6) QoQ(%) (6.1) (7.0) (3.3) 73 bps 2.2 131 bps 2.2 Bloomberg 2,988.0 2,109.0 879.0 29.4 499.0 16.7 #DIV/0!
BUY (INR in Mn) Variance (11.1) (6.8) (21.5) -342 bps (13.8) -50 bps #DIV/0! P/E (FY12E): 16.8x
Valuation & Outlook Dainik Jagran the flagship newspaper of Jagran Prakashan Ltd (JPL) posted a decline of ~2% YoY basis in 2011Q1 IRS survey in terms of Average Issue Readership (AIR). However, the fruits of the reinvestment which the company started in its core market are expected to flow in coming IRS survey. Increase in the newsprint prices and print order is expected to affect the earnings going forward. We believe that the company is well placed to capture the high growth story in the existing Hindi/Regional print markets given its leadership position. We maintain BUY on the stock with a target price of INR 150.
35
Pharma
The domestic pharmaceutical industry continues to grow at 11-12%, dwarfing the global average of five-six percent. Good traction in US, Japan and other developed markets along with product approvals and marketing alliances continue to bring traction in the sector. Strong domestic sales continue to act as a major catalyst in the growth of this sector. The quarter observed healthy sales growth despite inflationary headwinds. The government has chalked a 'Vision 2015' statement for the pharmaceutical sector, which indicates an 18% plus CAGR over next five years- translating to a doubling of revenues to USD40 bn. Growth will be driven by all verticals: domestic formulations, generics exports, and outsourcing (CRAMS). The government has also announced an installation of venture fund to target the infusion of INR 20 bn into the sector.
Aurobindo Pharma
Q1FY12E 11,908 9,277 2,632 22.1 1,337 11.2 4.6
Q1FY11 9,223 7,505 1,717 18.6 515 5.6 1.6
Q4FY11 11,544 9,000 2,544 22.0 1,250 10.8 4.3
YoY(%) 29.1 23.6 53.2 348 bps 159.6 564 bps 187.4
QoQ(%) 3.2 3.1 3.4 6 bps 7.0 40 bps 7.0
ACCUMULATE (INR in Mn) Bloomberg* Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA
P/E (FY12E): 7.9x
Valuation & Outlook Aurobindo (APL) would continue to face pressure due to alert on US import and slowdown in Pfizer offtake. The company has undertaken or transformation on its way of becoming a formulation player from a API manufacturer. Besides increase in capacities, strong ANDA pipeline and MNC deals (AstraZeneca) would support APL's growth trajectory. Stock is trading at 7.9x its FY12E earnings. We downgrade the stock to ACCUMULATE with a reduced price target of INR 203.
36
Dr. Reddy's Lab

Q1FY12E 20,657 16,127 4,530 21.9 3,229 15.6 19.1
Q1FY11 16,831 13,416 3,415 20.3 2,091 12.4 12.4
Q4FY11 20,173 15,785 4,388 21.8 3,349 16.6 19.8
YoY(%) 22.7 20.2 32.6 164 bps 54.5 321 bps 54.0
QoQ(%) 2.4 2.2 3.2 18 bps -3.6 -97 bps -3.4
P/E (FY12E): 18.2x
Valuation & Outlook Dr. Reddy's Lab is expected to post strong growth trajectory till FY13 with USD 3bn in revenue. The company would increase the market share in backward integrated products in US market. DRL's growth would arrive from the strong pipeline of existing products, launch of limited competition products in US, strong traction in US, Indian & Russian formulation market and potential upside from GSK alliance. Stock is trading at 18.2x its FY12E earnings. We recommend ACCUMULATE with a reduced price target of INR 1770.
Biocon Ltd
Q1FY12E 5,504 4,153 1,351 24.5 934 17.0 4.7
Q1FY11 6,623 5,296 1,327 20.0 767 11.6 3.9
Q4FY11 7,016 5,565 1,451 20.7 1,008 14.4 5.1
YoY(%) -16.9 -21.6 1.8 451 bps 21.7 539 bps 20.4
QoQ(%) -21.5 -25.4 -6.9 386 bps -7.3 261 bps -8.6
ACCUMULATE (INR in Mn) Bloomberg* Dev (%) 8,001 6,489 1,512 18.9 952 11.9 4.8 -31.2 -36.0 -10.6 565 bps -1.9 508 bps -3.2
P/E (FY12E): 17.1x
Valuation & Outlook We remain positive on Biocon considering the value unlocking of its R&D pipeline, possible deals in research services and strong deal with Pfizer. We expect Biocon to post a strong revenue growth of ~16% till FY13E based on a growth of 18-20% till FY13E in domestic branded formulations. Launch of Pfizer products would further support revenues. Stock is trading at 17.1x its FY12E earnings. We recommend ACCUMULATE with a long term price target of INR 409.
37
Opto Circuits (India) Ltd

Q1FY12E 5,390 3,975 1,415 26.2 1,035 19.2 5.6
Q1FY11 2,920 1,949 971 33.2 831 28.5 4.5
Q4FY11 5,445 4,255 1,190 21.9 1,111 20.4 6.0
YoY(%) 84.6 104.0 45.7 -700 bps 24.5 -927 bps 23.1
QoQ(%) -1.0 -6.6 18.9 439 bps -6.8 -120 bps -6.8
P/E (FY12E): 12.3x
Valuation & Outlook Opto Circuits (OPTC) has successfully restructured its Cardiac Science business. The management expects significant revenue contribution from this business starting FY12. OPTC's subsidiary Eurocor recently launched various drug eluting ballons like Taxcor Plus, Dior, Freeway and Magical. We expect these prodcuts to register a growth of 25-30% in next three years. In noninvasives business growth would be maintained by increasing penetration of products. Stock is trading at 12.3x its FY12E earnings. Considering the prospects of organic and inorganic growth in OPTC we recommend ACCUMULATE on the stock with a price target of INR 330.
Food Processing
Shree Renuka Sugars Ltd (SHRS)
* Consolidated Financials, SY- Sugar Year
Q3SY12E 16,776 13,051 3,725 22.2 1,171 7.0 1.7
Q3SY11 19,995 17,943 2,052 10.3 903 4.5 1.3
Q2SY12 18,403 14,716 3,687 20.0 582 3.2 0.9
YoY(%) -16.1 -27.3 81.5 1194 bps 29.7 246 bps 30.2
QoQ(%) -8.8 -11.3 1.0 217 bps 101.2 382 bps 96.0
P/E (FY12E): 8.3x
Valuation & Outlook Shree Renuka Sugars (SHRS) would benefit from stable sugar prices, around INR 28-29 per kg, in domestic markets. EGoM's approval for export of additional 5 lakh tonne sugar would also support earning growth. In global markets, sugar and ethanol are trading around INR 36 per unit (Indian ethanol price is fixed at INR 27 per litre). SHRS's Brazilian operation is expected to show traction, despite low production. Growth in Brazilian volume, increase in ethanol price and higher sugar realisation would trigger future growth. At CMP of INR 66, the stock is trading at 8.3x its SY12E earnings. We recommend ACCUMULATE on the stock with a reduced price target of INR 74.
38
Ruchi Soya
Q1FY12E 48,700 47,366 1,334 2.7 682 1.4 2.0
Q1FY11 34,570 33,590 980 2.8 524 1.5 1.8
Q4FY11 48,116 46,963 1,153 2.4 218 0.5 0.7
YoY(%) 40.9 41.0 36.1 -10 bps 30.1 -12 bps 15.0
QoQ(%) 1.2 0.9 15.8 34 bps 213.2 95 bps 213.2
P/E (FY12E): 10.3x
Valuation & Outlook Ruchi Soya (RS) is the largest edible oil manufacturer in the country. The company is expanding its oil processing capacity through installation of new units at AP, Karnataka and Orissa. It is also acquiring palm plantations to address the growing requirement of raw material. High capacity utilisation and focus on exports would aid company's growth. RS is trading at 10.3x its FY12E earnings. We downgrade the stock to ACCUMULATE with a reduced price target of INR 109.
REI Agro
Q1FY12E 10,476 8,292 2,184 20.9 1,071 10.2 1.1
Q1FY11 9,498 7,562 1,936 20.4 616 6.5 1.6
Q4FY11 9,762 7,683 2,079 21.3 678 6.9 0.6
YoY(%) 10.3 9.7 12.8 46 bps 73.9 374 bps -28.8
QoQ(%) 7.3 7.9 5.0 -45 bps 58.0 328 bps 77.5
BUY (INR in Mn) Bloomberg* Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA
P/E (FY12E): 7.3x
Valuation & Outlook Basmati industry is set to post a strong growth trajectory on account of rapid increase in production, healthy demand in international markets and possibility of realisation improvement. REI Agro, the leader in Basmati processing, is positioning itself to capitalize the growth opportunity by increasing its processing capacities, improving the operational efficiencies and better positioning of its brands. Stock is trading at 7.3x its FY12E earnings. We recommend BUY on the stock with a reduced price target of INR 32.
39
Fertilizer
Urea has taken centre stage as the Fertilizer Ministry is actively looking at newer options for urea price decontrol (under fixed subsidy proposition). Urea represents almost 50% of all fertiliser products consumed in the country with an annual consumption of 27mn tonnes (mt), of a total fertiliser consumption of 55 mt. The Committee of Secretaries has worked out a viable model to determine urea subsidy based on feedstock usage. (Urea can be produced using different forms of feedstock such as gas, naphtha, fuel oil and coal. Currently, around 80% of India's total urea capacity uses natural gas as its feedstock.) Besides, urea decontrol new investment in urea manufacturing is also expected to be announced considering the upgradation of urea investment policy in Budget 2011. Fertiliser demand is expected to remain healthy on the back of healthy monsoon season in 2011.
Chambal Fertilizers Ltd

Q1FY12E 9,794 8,056 1,738 17.7 783 8.0 1.9
Q1FY11 9,515 7,771 1,744 18.3 640 11.1 1.5
Q4FY11 8,071 6,855 1,215 15.1 677 7.0 1.6
YoY(%) 2.9 3.7 -0.3 -58 bps 22.5 -315 bps 21.7
QoQ(%) 21.3 17.5 43.0 269 bps 15.7 102 bps 15.7
P/E (FY12E): 8.9x
Valuation & Outlook Chambal Fertilisers (CHMB) would continue to gain from strong growth in Urea consumption. Change in Urea investment policy provides further opportunity for expansion. Besides, possible decontrol of urea prices could trigger sector growth. In shipping segment, CHMB continues to face challenge due to expiry of four double-hull Aframax ships in June 2011. Expected drop in Aframax realisation would also affect contributions from shipping segment. Stock is trading at 8.9x its FY12E earnings. We recommend ACCUMULATE with a price target of INR 86.
40
Deepak Fertilisers & Petrochemicals Ltd.

Q1FY12E 4,691 3,590 1,101 23.5 618 13.2 7.0
Q1FY11 3,473 3,307 167 4.8 522 15.0 5.9
Q4FY11 4,266 3,330 935 21.9 527 12.4 6.0
YoY(%) 35.1 8.6 560.3 1866 bps 18.4 -185 bps 18.5
QoQ(%) 10.0 7.8 17.7 153 bps 17.3 82 bps 17.3
BUY (INR in Mn) Bloomberg* Dev (%) 3,002 2,199 803 26.7 441 14.7 5.2 56.3 63.3 37.1 -329 bps 40.3 -150 bps 34.9
P/E (FY12E): 5.6x
Valuation & Outlook Lack of competition, switching of major mining & infrastructure players to technical grade AN (from fertiliser grade AN) and strong growth in infrastructure in Southeast Asia (especially India in 12th Five Year Plan) would support TAN growth. Better utilisation of ANP unit and revision of fertiliser prices under NBS provide strong revenue visibility for the fertiliser segment. Contribution from bentonite sulphur is expected to rise stably till FY13. Stock is trading at 5.6x its FY12E earnings. We maintain BUY with a long term price target of INR 202.
Coromandel International Ltd.

Q1FY12E 21,268 18,751 2,517 11.8 1,656 7.8 5.9
Q1FY11 15,489 13,599 1,889 12.2 1,201 7.8 4.2
Q4FY11 11,786 10,803 983 8.3 710 6.0 2.5
YoY(%) 37.3 37.9 33.2 -36 bps 37.9 4 bps 38.7
QoQ(%) 80.5 73.6 156.0 349 bps 133.3 176 bps 133.2
BUY (INR in Mn) Bloomberg* Dev (%) NA NA NA NA NA NA NA NA NA NA NA NA NA NA
P/E (FY12E): 11.4x
Valuation & Outlook Coromandel's recent acquisition of Gujarat based agrochemical company Sabero Organics would strengthen its topline growth. Sabero has a wide portfolio of 8-9 products across various categories like insecticide, herbicide and fungicide. Strong synergy benefits are expected from this acquisition going forward. The company would also gain from strong agrochemical demand in 2011 as estimated by Dept of Agriculture. Stock is trading at 11.4x its FY12E earnings. We maintain BUY on the stock with a 18 month price target of INR 410.
41
Agrochemicals
India is the fourth largest producer of agrochemicals globally, after United States, Japan and China. The agrochemicals industry is a significant industry for the Indian economy. The Indian agrochemical market is expected grew at the rate of 8.6% from USD 1.22 billion in FY08 to an estimated USD 1.7 billion in FY12. India's agrochemicals consumption is one of the lowest in the world with per hectare consumption of just 0.58 Kg compared to US (4.5 Kg/ha) and Japan (11 Kg/ha). Paddy and cotton account for the maximum share of pesticide consumption in India, with around 28% and 20% share respectively. Limited availability of land and growing population base would drive agrochemical consumption in India. Exports are also expected to double in next four years, if proper strategies and sophisticated technologies are adopted by the industry.
Rallis India Ltd. (RALI)

Q1FY12E 2,455 2,172 283 11.5 177 7.2 9.1
Q1FY11 1,960 1,734 227 11.6 148 7.6 7.6
Q4FY11 2,195 1,845 351 16.0 190 8.6 9.8
YoY(%) 25.2 25.3 24.9 -3 bps 19.3 -36 bps 19.3
QoQ(%) 11.8 17.8 -19.3 -444 bps -6.7 -144 bps -6.7
P/E (FY12E): 17.4x
Valuation & Outlook Rallis is expected to register 10-12% growth in FY12. It has strengthened its grip on the seed business by acquisition of Metahelix Life Sciences a seed research company having 13 products in market and 17 products in pipeline. Rallis is poised for strong growth on account of strong product mix, ability to launch new products successfully, commissioning of Dahej facility, strong distribution channel and contract manufacturing alliance with several multinational agrochemical companies. Stock is trading at 17.4x its FY12E earnings. We recommend ACCUMULATE with a 18 month price target of INR 1698.
United Phosphorus Ltd. (UPL)

Q1FY12E 16,227 13,051 3,176 19.6 2,089 12.9 4.5
Q1FY11 14,302 11,410 2,892 20.2 1,424 16.9 3.1
Q4FY11 18,055 14,382 3,673 20.3 2,167 16.7 4.4
YoY(%) 13.5 14.4 9.8 -65 bps 46.8 -405 bps 46.9
QoQ(%) -10.1 -9.3 -13.5 -77 bps -3.6 -381 bps 2.6
BUY (INR in Mn) Bloomberg* Dev (%) 13,864 10,898 2,966 21.4 1,377 9.9 3.1 17.0 19.8 7.1 -182 bps 51.7 294 bps 48.3
P/E (FY12E): 9.4x
Valuation & Outlook Increasing emphasis on achieving food security and growing pressure to increase yield per hectare would support UPL's (United Phosphorus) growth. It is one of the largest generic players in the agrochemical space and is well positioned to capture the growth in Indian and Brazilian markets. UPL's recent acquisition of 50% stake in Sipcam Isagro Brazil provide immense opportunity to expand its international operations. The management expects 12-14% topline growth in FY12. UPL is currently trading at 9.4x its FY12E earnings. We recommend BUY on the stock with a long term price target of INR 192. Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in 42
Education
The Education sector in itself is poised for strong growth in the coming quarters, especially due to increased government spending in the government education school space. Companies that are catering to this segment are expected to do well. The private education sector has been saturated by services provided by larger players and thus need to improve their business model to include various different segments, especially the lucrative government school sector. Certain smaller players that have a foothold in the coaching class / online-offline tutorial space could see good growth with the onset of the academic year.
Educomp Solutions Ltd.

CMP: 397 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 38,094 mn
Buy (INR in Mn) Q1FY12E 3,235 1,855 1,380 42.7 887 27.4 9.2 Q1FY11 1,658 1,082 576 34.7 442 26.7 4.4 Q4FY11 3,793 1,862 1,931 50.9 1,580 41.7 15.4 YoY (%) 95.1 71.4 139.6 792 bps 100.6 75 bps 108.2 QoQ (%) -14.7 -0.4 -28.5 -825 bps -43.9 -1424 bps -39.9 Bloomberg* 3,079 1,698 1,381 44.9 673 21.9 N.A. Dev (%) 5.1 9.2 -0.1 -219 bps 31.8 556 bps N.A.
P/E (FY12E): 10.5x
Valuation & Outlook Educomp is best positioned to capture the lucractive K-12 market with its past experience and business expertise. Also its leadership in multimedia (smartclass) based education would aid the company as it pursues its growth strategy going forward. The smartclass securitization model would also help in reducing the cash conversion cycle of the company and allay investor concerns. At the current market price, the company is trading at 10.5x its FY12 estimated EPS. We recommend a buy on this stock for a target price of INR 550, implying an upside of nearly 39%.
43
Everonn Education Ltd.

Accumulate (INR in Mn) Q1FY12E 4,425 2,832 1,593 36.0 673 15.2 35.3 Q1FY11 675 458 217 32.2 69 10.3 4.6 Q4FY11 4,247 2,692 1,555 36.6 676 15.9 40.1 YoY (%) 555.6 518.8 633.3 381 bps 870.0 493 bps 669.9 QoQ (%) 4.2 5.2 2.4 -61 bps -0.6 -73 bps -11.8 Bloomberg* N.A. N.A. N.A. N.A. N.A. N.A. N.A. Dev (%) N.A. N.A. N.A. N.A. N.A. N.A. N.A.
P/E (FY12E): 11.7x
Valuation & Outlook Everonn has had several successes over the last four years, especially through its College VSAT business and Classroom software business. We are positive on this company as it has the ability to scale up its business as it grows forward. At the current market price, the stock is trading at 11.7 times its FY12 estimated EPS. We recommend an accumulate on this stock for a target price of INR 610, implying an upside of 15%.
NIIT Ltd.
Buy (INR in Mn) Q1FY12E 3,535 3,090 445 12.6 412 11.7 2.5 Q1FY11 2,780 2,493 287 10.3 130 4.7 0.8 Q4FY11 3,237 2,832 405 12.5 378 11.7 2.3 YoY (%) 27.2 23.9 55.1 226 bps 216.9 698 bps 211.9 QoQ (%) 9.2 9.1 9.9 8 bps 9.0 -2 bps 8.5 Bloomberg* N.A. N.A. N.A. N.A. N.A. N.A. N.A. Dev (%) N.A. N.A. N.A. N.A. N.A. N.A. N.A.
P/E (FY12E): 8.3x
Valuation & Outlook As developed economies crawl towards recovery, there is scope that increased discretionary spending by big multinational firms in their IT budgets could lead to more spending related to training outsourcing, learning products and managed training services, thus benefiting NIIT Ltd. At the current market price, the stock is trading at 8.3x its FY12 earnings estimate. We recommend a buy on this stock for a price target of INR 67, implying an upside of 22%.
44
Information Technology
While the near term macro outlook remains uncertain in western markets, demand for IT services remains robust. Companies with experience in the sector continue to renew existing contracts with their clients as well as source new clients. Increasing focus on the European market as well as the high growth Asian and African markets will reap dividends for these companies in the future as this geographical diversification will also mitigate foreign exchange risk to some extent. Also there is value amongst the mid-cap space where companies are developing niche products to keep their business apart from the regular IT services business model. Companies with strong domain expertise in areas like outsourced product development, cloud computing, enterprise resource planning, etc. should do well in the coming quarter. However, margins could remain under pressure in the near term as the effect of wage hikes as well as the increase in tax rates, post the end of the STPI tax breaks. The rupee appreciation risk also exists for companies which have large exposure to the US market.
Infosys Ltd.
CMP: 2,865 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 1,644,945 mn
Accumulate (INR in Mn) Q1FY12E 75,271 52,025 23,246 30.9 17,210 22.9 30.0 Q1FY11 61,980 37,275 24,705 39.9 14,880 24.0 26.1 Q4FY11 72,500 49,345 23,155 31.9 18,270 25.2 31.8 YoY (%) 21.4 39.6 -5.9 -898 bps 15.7 -114 bps 15.1 QoQ (%) 3.8 5.4 0.4 -105 bps -5.8 -234 bps -5.7 Bloomberg* 74,762 51,960 22,802 30.5 17,434 23.3 30.1 Dev (%) 0.7 0.1 1.9 38 bps -1.3 -45 bps -0.4
P/E (FY12E): 20.5x
Valuation & Outlook Infosys' recent restructuring (dubbed Infosys 3.0) which involved new vertical heads, would take at least a few quarters before its effects will show in the company's financial statements. Also its conservative guidance for FY12 is worrisome in the near-term although Infosys has beaten its guidance in the past. However, the second half of the calendar year has seasonally been strong for Infosys and we expect margins to improve going forward. At the current market price, the stock is trading at 20.5x its FY12 earnings estimate. We recommend accumulate on this stock for a target price of INR 3,250, implying an upside of 13%.
45
HCL Technologies Ltd.

CMP: 489 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS** Market Cap: 336,437 mn
* Consolidated Financials, **FV = INR 2
Buy (INR in Mn) Q4FY11E 42,350 34,855 7,495 17.7 4,692 11.1 6.8 Q4FY10 34,254 27,873 6,381 18.6 3,418 10.0 5.0 Q3FY11 41,382 34,217 7,165 17.3 4,682 11.3 6.2 YoY (%) 23.6 25.0 17.5 -93 bps 37.3 110 bps 35.7 QoQ (%) 2.3 1.9 4.6 38 bps 0.2 -23 bps 9.7 Bloomberg* 42,090 34,726 7,364 17.5 4,603 10.9 6.8 Dev (%) 0.6 0.4 1.8 20 bps 1.9 14 bps -0.1
P/E (FY12E): 15.4x
Valuation & Outlook With continued revenue momentum across verticals and better margin performance, we remain positive on the technology spending environment which is positive for the company. The firm has added new clients as well as extended their current contracts. This provides revenue visibility for the company going forward. The management expects margin expansion for the next two quarters through optimum utilizations and controlling operating expenditure. At the current market price, the stock is trading at 15.4x its FY12 earnings. We recommend a buy on this stock with a target price of INR 590, implying a 21% upside.
Tata Consultancy Services Ltd.

CMP: 1,170 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS Market Cap: 2,289,949 mn
Hold (INR in Mn) Q1FY12E 109,250 77,230 32,020 29.3 23,848 21.8 12.2 Q1FY11 83,127 58,105 25,022 30.1 19,061 22.9 9.7 Q4FY11 101,570 70,640 30,930 30.5 26,230 25.8 13.4 YoY (%) 31.4 32.9 28.0 -79 bps 25.1 -110 bps 25.5 QoQ (%) 7.6 9.3 3.5 -114 bps -9.1 -400 bps -9.0 Bloomberg* 107,069 76,045 31,024 29.0 23,347 21.8 11.8 Dev (%) 2.0 1.6 3.2 33 bps 2.1 2 bps 2.9
P/E (FY12E): 22.2x
Valuation & Outlook Despite the volatile economic environment, business volumes are expected to increase marginally. Discretionary spending from the BFSI segment is seeing an up-move and pricing is expected to increase slightly. The company can cash in on this increased demand with its high utilization rate (80%+) and expected hiring plans. Wage inflation however could put pressure on the company's margin. At the current market price, the stock trades at 22.2x its FY12 expected earnings. We recommend a hold on this stock with a price target of INR 1,280, implying a 9% upside.
46
Rolta India Ltd.

Buy (INR in Mn) Q4FY11E 4,802 2,691 2,111 44.0 754 15.7 4.7 Q4FY10 4,121 2,520 1,601 38.8 691 16.8 4.3 Q3FY11 4,603 2,771 1,832 39.8 840 18.3 5.2 YoY (%) 16.5 6.8 31.9 512 bps 9.1 -107 bps 8.7 QoQ (%) 4.3 -2.9 15.2 416 bps -10.2 -255 bps -10.1 Bloomberg* 4,530 2,772 1,758 38.8 656 14.5 N.A. Dev (%) 6.0 -2.9 20.1 516 bps 15.0 123 bps N.A.
P/E (FY12E): 6.1x
Valuation & Outlook In the past, Rolta has witnessed a decline in earnings primarily due to its increased capital expenditure to complement its Geospatial Imaging and Engineering Design & Automation segments. As these capital expenditures come into stream, the company should improve its profit margins by about 250 bps going forward. Also the company is consolidating its leadership position in these segments by being on the hunt for acquisitions to build a repository of intellectual property. At the current market price, the stock trades at 6.1x its FY12 estimated earnings. We recommend a buy on this stock at current levels for a price target of INR 191, implying an upside of 48%.
Persistent Systems Ltd.

Buy (INR in Mn) Q1FY12E 2,260 1,781 479 21.2 277 12.3 6.9 Q1FY11 1,935 1,467 469 24.2 345 17.8 8.6 Q4FY11 2,215 1,747 468 21.1 331 14.9 8.3 YoY (%) 16.8 21.4 2.2 -302 bps -19.8 -558 bps -19.8 QoQ (%) 2.0 1.9 2.4 7 bps -16.3 -269 bps -16.6 Bloomberg* 2,298 1,844 454 19.8 293 12.8 7.3 Dev (%) -1.6 -3.4 5.5 143 bps -5.5 -50 bps -5.6
P/E (FY12E): 11.1x
Valuation & Outlook Persistent's dominant position in the outsourced product development segment in India makes it a unique company in the IT services space with a niche business model. As companies demand and outsource more of its product development to cut costs, Persistent should benefit from an increase in business. The company's IP led business is also expected to grow and contribute around 10% to total revenue going forward. An increase in the company's tax rate (around 30 - 31%) would be a near term concern however. At the current market price, the stock is trading at 11x its FY12 earnings estimate. We recommend a buy on this stock for a target price of INR 450, implying an upside of 24% from current levels.
47
KPIT Cummins Infosystems Ltd.

CMP: 175 Particulars Revenue from Operations Operating Expenses EBITDA EBITDA (%) Reported PAT PAT (%) EPS** Market Cap: 15,399 mn
* Consolidated Financials **FV = INR 2
Hold (INR in Mn) Q1FY12E 3,144 2,719 425 13.5 261 8.3 3.0 Q1FY11 2,061 1,722 339 16.5 194 9.4 2.4 Q4FY11 3,082 2,649 433 14.1 264 8.6 3.0 YoY (%) 52.5 57.9 25.3 -294 bps 34.8 -109 bps 23.6 QoQ (%) 2.0 2.6 -1.9 -53 bps -1.0 -25 bps -1.1 Bloomberg* 3,132 2,717 415 13.3 249 8.0 N.A. Dev (%) 0.4 0.1 2.4 27 bps 4.8 35 bps N.A.
P/E (FY12E): 12.2x
Valuation & Outlook KPIT Cummins' recent acquisition of a 50% stake in Systime should postively affect the firm's revenue growth over the next few quarters. The company is also on the stage of improving its margins as it improves its employee utilization and shift more efforts off-shore from on-site. At the current market price, the stock is trading at 12.2x its FY12 earnings estimate. We recommend a hold on this stock for a target price of INR 190, implying an upside of 9% from its current levels.
Hexaware Technologies Ltd.

Accumulate (INR in Mn) Q2CY11E 3,325 2,805 520 15.6 497 14.9 1.7 Q2CY10 2,512 2,342 170 6.8 144 5.7 1.2 Q1CY11 3,185 2,730 455 14.3 538 16.9 1.8 YoY (%) 32.4 19.8 205.9 887 bps 245.1 921 bps 46.4 QoQ (%) 4.4 2.7 14.3 135 bps -7.6 -194 bps -6.2 Bloomberg* 3,042 2,537 505 16.6 420 13.8 N.A. Dev (%) 9.3 10.6 3.0 -96 bps 18.3 114 bps N.A.
P/E (FY12E): 10.5x
Valuation & Outlook Hexaware is benefiting from a demand revival in the BFSI segment as well as its travel & transport segments. The company is also witnessing increased IT spending in the enterprise resource planning application segments from various clients. At the current market price, the stock is trading at 10.5x its FY12 estimated EPS. We recommend an accumulate on the stock for a target price of INR 82, implying a 19% upside from current levels.
48
Other
Mundra Port & SEZ
157 Q1FY12E 6,358 1,797 4,561 71.7 3,190 50.2 1.59 314533 Q1FY11 4,157 1,261 2,895 69.7 2,113 50.8 1.1 Q4FY11 6,051 1,682 4,369 72.2 3,347 55.3 1.67 YoY(%) 53.0 42.5 57.5 208 bps 51.0 -64 bps 51.0 QoQ(%) 5.1 6.8 4.4 -47 bps (4.7) -511 bps (4.7) Bloomberg NA NA NA NA NA NA NA
Hold (INR in Mn) Variance NA NA NA NA NA NA NA P/E (FY12E): 26.2x
Valuation & Outlook MPSEZ is aiming at a total capacity of 265 MMTPA by FY13, due in part to the Abbot acquisition. For the year, the company registered a 30% jump in cargo, boosted by higher bulk and container business. The company has improved its market share to over 8.40% in FY11, up by 1.70% as compared to the previous year. With the container business for the year also showing a growth of 33% as compared to corresponding period last year, the growth at Mundra seems set to continue this fiscal. At CMP, the stock is trading at 19x its FY12 earnings estimate. We recommend Hold with a target price of INR 168.
Allcargo Global Logistics Ltd

161 Q2CY11E 8,028 7,139 889 11.1 567 7.1 4.34 21013 Q2CY10 6,395 5,728 667 10.4 400 6.2 2.9 Q1CY11 7,315 6,419 897 12.3 543 7.4 3.83 YoY(%) 25.5 24.6 33.4 65 bps 41.9 81 bps 47.8 QoQ(%) 9.7 11.2 (0.8) -118 bps 4.5 -36 bps 13.4 Bloomberg NA NA NA NA NA NA NA
Buy (INR in Mn) Variance NA NA NA NA NA NA NA P/E (CY11E): 9.6x
Valuation & Outlook Outlook of Allcargo remains upbeat due to growth in container volumes both in the Container Freight Station (CFS) and Multimodal Transport Operation (MTO). There is visible traction in ECU line volumes and profitability. We expect the company to benefit from growth in international trade movement and from the recent acquisition in the high-growth China region. Expected capacity expansion at JNPT CFS by end of CY12E, benefit of capacity expansions undertaken at Chennai and Mundra CFSs in Aug10 and sustained high growth in Project and Engineering Solutions (PES) driven by infrastructure growth in the country are, cumulatively, expected to drive Allcargos growth going forward.Maintain Buy with target price of INR 233.
49
Research Recommendation
Date of Recommendation 16-May-11 4-May-11 28-Apr-11 1-Apr-11 31-Mar-11 29-Mar-11 7-Mar-11 28-Feb-11 3-Feb-11 31-Jan-11 12-Jan-11 31-Dec-10 31-Dec-10 31-Dec-10 22-Dec-10 30-Nov-10 30-Nov-10 18-Nov-10 16-Nov-10 3-Nov-10 27-Oct-10 26-Oct-10 29-Sep-10 16-Sep-10 15-Sep-10 14-Sep-10 31-Aug-10 27-Aug-10 30-Jul-10 26-Jul-10 14-Jul-10 9-Jul-10 26-Jun-10 23-Jun-10 19-Jun-10 18-Jun-10 17-Jun-10 12-Jun-10 5-Jun-10 10-May-10 30-Apr-10 16-Apr-10 16-Apr-10 16-Apr-10 7-Apr-10 6-Apr-10 5-Apr-10 22-Feb-10 6-Feb-10 Company Name Camson Biotechnologies Ltd Ganesh Polytex Ltd. CESC Ltd Unity Infraprojects Ltd Rolta India Ltd. West Coast Paper Mills Ltd Deepak Fertilisers & Petrochemicals Ltd. Ceat Ltd. MIC Electronics Ltd. Diamond Power & Infrastructure Ltd Hathway Cable & Datacom Ltd Jindal Poly Films Ltd Allahabad Bank Sasken Communication Tech. Ltd Banco Product Allcargo Global Logistics Jyoti Structure Pennar Industries HSIL Ltd IDBI Bank MSP Steel and Power Nakoda Textiles Kajaria Ceramics Gokul Refoils Aqua Logistic Lakshmi Precision Screws BGR Energy System Patel Engineering KPR Mills Ltd IDBI Bank Opto Circuit BGR Energy System Ltd Biocon Ltd Emmbi Polyarns Indian Bank Diamond Power & Infrastructure Ltd Man Industries Usher Agro Greaves Cotton Indraprastha Gas Ltd Heidelburg Cement KEC International Ltd Piramal Glass Ltd Setco Automative Den Networks Arshiya International Patni Computer Shree Cement Ltd Report Type Investment Idea Sector Agri Biotech Recommendation Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Accumulate Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Accumulate Hold Accumulate Buy Buy Accumulate Accumulate Buy Accumulate Buy Buy Buy Accumulate Buy Buy Buy Buy Accumulate Accumulate Accumulate Buy Accumulate Buy Buy Buy Recommended Price 116.0 62.0 311.0 69.0 139.0 77.0 212.0 152.0 109.0 31.6 193.0 164.0 525.0 225.0 168.0 93.0 155.0 137.0 49.0 141.0 171.0 72.0 15.0 70.0 97.3 59.1 79.8 786.0 416.0 156.0 125.0 243.0 697.0 321.0 15.6 221.0 196.0 85.0 79.0 67.0 233.0 59.0 570.0 97.0 90.0 197.0 204.0 475.0 1995.0 Target 156.0 102.0 411.0 86.0 191.0 95.0 351.0 202.0 149.0 51.0 257.0 227.0 620.0 304.0 226.0 149.0 233.0 171.0 63.0 171.0 228.0 114.0 23.0 88.0 109.0 60.8 91.8 1020.0 480.0 181.0 142.0 293.0 820.0 387.0 26.0 276.0 226.0 102.0 110.0 82.0 290.0 60.0 655.5 111.6 135.0 226.6 291.0 590.0 2470.0
Initiating Coverage Waste Recycling Initiating Coverage Power Investment Idea Investment Idea Investment Idea Infrastructure IT/ITeS Paper & Paperboard
Hindusthan National Glass & Industries Ltd. Initiating Coverage Glass Initiating Coverage Fertilisers Investment Idea Auto Ancillaries Initiating Coverage Led Display & Lighting Initiating Coverage Power Initiating Coverage Media Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Packaging Banking IT Shipping & Logistics Power Steel
Initiating Coverage Auto
Initiating Coverage Building Product Initiating Coverage Banking Initiating Coverage Steel Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Textiles Ceramic Tiles Food Processing Logistic Fastner
Initiating Coverage Power Initiating Coverage Infrastructure Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Investment Idea Textiles Banking Capital Goods Pharmaceuticals Packaging Banking Power Ancillary Steel Pipes Food Processing Construction Cement Power Transmission Packaging Auto Ancillaries Media Logistic
Initiating Coverage Healthcare
Initiating Coverage Gas Distribution
Initiating Coverage IT Initiating Coverage Cement
50
QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011 Unicon Investment Ranking Methodology
Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%
Disclaimer
This document has been issued by Unicon Financial Intermediaries Pvt Ltd. (UNICON) for the information of its customers only. UNICON is governed by the Securities and Exchange Board of India. This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. The information and opinions contained herein have been compiled or arrived at based upon information obtained in good faith from public sources believed to be reliable. Such information has not been independently verified and no guarantee, representation or warranty, express or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document has been produced independently of any company or companies mentioned herein, and forward looking statements; opinions and expectations contained herein are subject to change without notice. This document is for information purposes only and is provided on an as is basis. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer, or solicitation of an offer, to buy or sell or subscribe to any securities or other financial instruments. We are not soliciting any action based on this document. UNICON, its associate and group companies its directors or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this document, including but not restricted to, fluctuation in the prices of the shares and bonds, reduction in the dividend or income, etc. This document is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or would subject UNICON or its associates or group companies to any registration or licensing requirement within such jurisdiction. If this document is inadvertently sent or has reached any individual in such country, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purpose without prior written approval of UNICON. This document is for the general information and does not take into account the particular investment objectives, financial situation or needs of any individual customer, and it does not constitute a personalized recommendation of any particular security or investment strategy. Before acting on any advice or recommendation in this document, a customer should consider whether it is suitable given the customers particular circumstances and, if necessary, seek professional advice. Certain transactions, including those involving futures, options, and high yield securities, give rise to substantial risk and are not suitable for all investors. UNICON, its associates or group companies do not represent or endorse the accuracy or reliability of any of the information or content of the document and reliance upon it is at your own risk. UNICON, its associates or group companies, expressly disclaims any and all warranties, express or implied, including without limitation warranties of merchantability and fitness for a particular purpose with respect to the document and any information in it. UNICON, its associates or group companies, shall not be liable for any direct, indirect, incidental, punitive or consequential damages of any kind with respect to the document. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Unicon Financial Intermediaries Pvt Ltd.
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Unicon Quarterly Earnings Preview - Q1FY12

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QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

QUARTERLY EARNINGS PREVIEW Q1 - FY12

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

2350 / 1500 128 / 67

385 / 253 128 / 84

Accumulate Buy Buy Accumulate Hold Hold Buy Buy

459 85 160 110 1283 592 300 79

Buy Buy Hold

1382 / 748 180 / 110 87 / 44

Buy Accumulate Buy Buy Buy Hold

602 874 82 182 59 259

737 / 449 1400 / 751 127 / 70 253 / 140 65 / 33 305 / 227

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

Sr. No. VIII 1 2 3 4 5 6 7 8 9 10 11 12 IX 1 2 3 4 5 6 7 XII 1 2 3 4 XIII 1 2 3 XIV 1 2 3 XV 1 2

Accumulate Accumulate Hold Accumulate Accumulate Hold Buy

140 236 170 142 343 814 126

Accumulate Accumulate Accumulate Accumulate

178 1561 355 295

275 / 156 1855 / 1277 473 / 301 328 / 224

Accumulate Accumulate Buy

Accumulate Buy Buy

105 / 62 213 / 135 376 / 215

1591 / 1031 220 / 125

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

Sr. No. XVI 1 2 3 XVIII 1 2 3 4 5 6 7

Rating Buy Accumulate Buy

CMP 397 530 55

52 Week H / L 702 / 380 756 / 435 75 / 43

Accumulate Buy Hold Buy Buy Hold Accumulate

2,865 489 1,170 129 368 175 69

185 / 110 190 / 123

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

Constructions and Capital Goods

Hindustan Construction Company Ltd. (HCC)

Q1FY12E 11,106 9,673 1,433 12.9 78 0.7 0.1

Q1FY11 9,924 8,696 1,228 12.4 283 2.9 0.5

Q4FY11 12,097 10,359 1,738 14.4 226 1.9 0.37

YoY(%) 11.9 11.2 16.6 52 bps (72.5) -215 bps (72.5)

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

Larsen & Toubro Ltd. (L&T)

Q1FY12E 94,008 82,351 11,657 12.4 7,427 7.9 12.3

Q1FY11 78,351 68,281 10,071 12.9 6,662 8.5 11.1

Q4FY11 150,784 127,375 23,409 15.5 16862 11.2 27.7

IVRCL Infrastructure Projects Ltd. (IVRCL)

Q1FY12E 11,914 10,877 1,036 8.7 167 1.4 0.6

Q1FY11 11,062 10,054 1,008 9.1 281 2.5 1.0

Q4FY11 20,516 18,735 1,781 8.7 643 3.1 2.41

Wealth Research, Unicon Financial Intermediaries Pvt. Ltd. Email: wealthresearch@unicon.in

QUARTERLY EARNINGS PREVIEW / Q1 -FY12 Thurday, June 30, 2011

NCC Ltd. (NCC)

Q1FY12E 11,594 10,527 1,067 9.2 267 2.3 1.0

Q1FY11 10,851 9,793 1,058 9.7 414 3.8 1.6

Q4FY11 14,496 13,187 1,309 9.0 357 2.5 1.39

Unity Infraprojects Ltd. (UIL)

Q1FY12E 3,825 3,335 490 12.8 187 4.9 2.5

Q1FY11 3,398 2,955 443 13.0 195 5.7 2.6

Q4FY11 5,703 4,918 785 13.8 307 5.4 4.14