ValueGuide Mar2012

Sharekhan ValueGuide
March 2012
March 2012
CONTENTS
From Sharekhans Desk

Perils of timing the market
The equity markets continued to build on the gains of January 2012 in February also. Many common investors missed out on the rally because they were waiting on the sidelines either in a bid to time the market or because they were simply petrified by a slew of negative news flow globally. 06
EQUITY FUNDAMENTALS Market Outlook Sharekhan Top Picks Stock Idea Stock Update Sharekhan Special Thematic report TECHNICALS Sensex COMMODITY 7 11 15 16 26 27 Sector Update Viewpoint REGULAR FEATURES Report Card Earnings Guide DERIVATIVES 29 View 30 4 I 28 28
PMS DESK ProPrimeTop Equity ProPrimeDiversified Equity ProTechDiversified ProTechNifty Thrifty ProTechTrailing Stops ADVISORY DESK Smart Trades Derivative Trades MID Trades MUTUAL FUNDS DESK Top MF Picks (equity) Top SIP Fund Picks 44 45 43 43 43 38 39 40 41 42
FUNDAMENTALS Crude oil Gold Silver TECHNICALS Gold Silver Crude Oil CURRENCY FUNDAMENTALS INR-USD INR-EUR TECHNICALS USD-INR EUR-INR
31 Copper 32 Lead 32 Zinc 34 Copper 34 Natural gas 34 Nickel
32 32 33 35 35 35
36 INR-GBP 36 INR-JPY
36 36
37 GBP-INR 37 JPY-INR
37 37
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disclaimer
March 2012
REPORT CARD
STOCK IDEAS STANDING (AS ON MARCH 02, 2012)
COMPANY RECO PRICE
W NE
EQUITY
FUNDAMENTALS
PRICE TARGET 3000.0 785.0 570.0 ** 1588.0 980.0 1294.0 1050.0 86.0 1612.0 600.0 1009.0 1065.0 384.0 1893.0 328.0 450.0 636.0 164.0 1122.0 471.0 400.0 497.0 2980.0 523.0 406.0 1070.0 84.0 227.0 597.0 794.0 186.0 1382.0 345.0 71.0 ** 2725.0 105.0 129.0 ** 1620.0 818.0 298.0 173.0 89.0 330.0
RECO DATE 14-12-11 19-Nov-07 23-Dec-03 30-Dec-03 18-Feb-08 5-Feb-04 6-Mar-06 6-Dec-05 27-Jul-09 27-Dec-11 26-May-08 26-May-08 22-Apr-12 22-Apr-12 25-Sep-06 11-Nov-05 8-Jan-07 19-Dec-03 19-Aug-05 31-May-11 1-0ct-10 17-Jul-08 7-May-09 30-Aug-04 30-Dec-03 29-Jul-11 23-Dec-03 17-Nov-05 12-Aug-04 6-Jan-06 1-Apr-04 22-Aug-02 23-Jan-12 9-May-11 22-Mar-11 9-Feb-11 13-Feb-12 26-Sep-08 12-Aug-05 31-Oct-11 24-Feb-05 21-Mar-06 15-Nov-10 2-Feb-12 25-Jan-12 14-Sep-10
CURRENT RECO Buy Hold Hold Hold Buy Buy Buy Buy Buy Reduce Buy Buy Buy HOLD Buy HOLD Buy Buy Hold Buy Buy Buy Buy Buy Buy Hold Buy Buy Buy Buy Hold Buy Hold Reduce Buy Reduce Buy Buy Hold Hold Buy Buy Buy Buy Hold Buy
PRICE AS ON 02-MAR-12 2585.0 672.7 518.8 2845.7 1299.7 814.1 1217.3 874.1 79.6 1750.0 633.8 804.6 824.9 368.5 1580.3 296.9 350.4 464.2 142.9 737.0 371.3 309.7 449.9 2718.1 481.7 382.9 902.7 67.3 205.3 488.2 680.0 157.4 1330.6 447.6 57.5 56.8 2246.7 84.8 120.6 429.0 1166.7 708.5 184.4 151.5 82.3 190.1
GAINLOSS (%) 1.6 24.6 624.5 313.0 -26.5 187.2 185.6 22.4 115.0 -8.0 16.3 8.4 245.1 19.3 42.6 146.6 11.9 112.9 183.5 -3.9 -22.0 -48.3 210.2 142.9 367.6 18.2 217.9 -12.1 490.6 505.0 486.2 1943.5 14.4 -6.8 -27.3 21.5 372.0 -40.7 52.8 20.5 408.7 257.3 -0.9 15.6 -0.8 -47.5
ABSOLUTE PERFORMANCE 1M 3M 6M 12M -2.8 -2.8 3.4 4.2 -5.0 -2.4 8.1 7.8 12.1 10.1 38.8 21.1 8.9 7.9 15.6 17.3 -4.2 11.4 -0.9 -6.2 -0.8 4.4 1.5 3.4 10.1 -1.1 -0.7 2.1 2.6 0.9 -1.0 4.8 8.3 6.3 17.5 1.5 6.8 -0.2 13.0 3.2 6.0 8.5 -9.1 17.2 -0.5 -8.4 3.2 2.0 13.3 7.6 -1.3 1.5 7.8 -2.7 24.6 4.1 46.2 13.4 15.7 10.2 7.9 8.4 -8.7 31.3 11.5 -2.0 -5.1 -1.7 13.1 13.1 20.9 -2.6 15.9 14.9 1.6 3.7 -6.6 6.1 36.7 23.6 22.1 18.6 21.6 -8.4 39.8 10.5 18.5 0.8 -17.7 14.1 5.2 11.4 7.4 1.0 8.9 22.6 -20.6 3.6 17.6 -3.5 38.5 12.8 18.7 7.5 11.7 19.0 5.2 -15.3 -14.4 5.3 -4.7 2.6 -8.2 -4.8 5.0 26.9 19.6 19.8 1.2 -5.8 3.4 7.5 -7.6 6.3 20.5 22.6 -16.8 -2.6 12.4 -41.1 31.9 27.3 7.5 -15.9 -13.4 16.5 -8.6 4.0 25.6 4.3 21.0 -6.1 -20.0 -17.3 10.1 11.6 47.5 36.6 44.6 7.3 -5.9 -19.2 -4.4 -26.0 2.8 -15.2 -42.5 24.2 -14.3 8.1 23.6 20.9 5.2 34.9 -12.8 -15.4 21.9 22.7 4.3 31.6 2.6 -0.4 -32.4 -10.0 -16.9 -43.7 38.1 -2.8 -9.5 -4.0 31.2 34.1 -2.5 -6.8
1M -4.4 -4.4 1.7 2.5 -6.5 -4.0 6.3 6.1 10.3 8.4 36.6 19.2 7.2 6.2 13.8 15.4 -5.7 9.6 -2.5 -7.7 -2.4 2.7 -0.2 1.7 8.3 -2.7 -2.3 0.5 1.0 -0.8 -2.6 3.1 6.5 4.5 15.6 -0.1 5.1 -1.8 11.2 1.5 4.2 6.7 -10.6 15.3 -2.1 -9.8
RELATIVE TO SENSEX 3M 6M 12M -3.4 -4.5 6.1 0.7 -7.6 -5.0 0.9 -8.9 16.6 -2.5 36.9 6.2 8.3 3.1 1.0 1.5 -14.5 22.9 4.4 -8.2 -11.2 -8.0 5.8 5.9 13.2 -8.9 8.5 7.5 -4.9 -3.0 -12.6 -0.7 27.9 15.7 14.3 11.0 13.8 -14.3 30.8 3.4 10.9 -5.6 -23.0 6.8 -1.6 4.3 1.6 -4.5 3.0 15.9 -24.9 -2.0 11.2 -8.7 30.9 6.6 12.2 1.6 5.7 12.5 -0.6 -19.9 -19.1 -0.4 -9.9 -3.0 -13.2 -9.9 -0.7 20.0 13.1 13.3 -4.3 -10.9 -2.2 1.7 -12.7 0.5 13.9 16.0 -21.4 -7.9 6.3 -44.3 24.7 20.4 1.6 -20.5 -18.1 10.2 -13.5 -1.7 29.9 7.9 25.1 -2.9 -17.3 -14.5 13.8 15.4 52.5 41.3 49.5 10.9 -2.7 -16.4 -1.1 -23.4 6.4 -12.3 -40.6 28.5 -11.3 11.8 27.9 25.1 8.8 39.6 -9.8 -12.5 26.1 26.9 7.8 36.1 6.1 3.0 -30.1 -6.9 -14.1 -41.7 42.8 0.5 -6.4 -0.7 35.7 38.7 0.9 -3.6
EVERGREEN
GSK Consumers HDFC HDFC Bank Infosys Larsen & Toubro Reliance Ind Tata Consultancy Services 2544.0 540.0 71.6 689.1 1768.0 283.5 426.3 714.0 37.0 1610.0 545.0 741.9 239.0 309.0 1108.0 120.4 313.0 218.0 50.4 767.0 476.0 599.0 145.0 1119.0 103.0 324.0 284.0 76.6 34.8 80.7 116.0 7.7 1163.0 417.0 79.0 69.0 476.0 143.0 78.9 356.0 229.4 198.3 186.0 131.0 83.0 362.0
W NE
APPLE GREEN
Aditya Birla Nuvo Apollo Tyres Bajaj Auto Bajaj Finserv Bajaj Holdings Bank of Baroda Bank of India Bharat Electronics Bharat Heavy Electricals Bharti Airtel Corp Bank Crompton Greaves Divi's Labs GAIL Glenmark Pharmaceuticals GCPL Grasim HCL Technologies Hindustan Unilever ICICI Bank Indian Hotel Company ITC# Lupin M&M Marico Maruti Suzuki Piramal Healthcare PTC India Punj Lloyd SBI Sintex industries^ TGBL(Tata Tea)^ Wipro
EMERGING STAR
Axis (UTI) Bank Cadila Healthcare# Eros International Media Gateway Distriparks Greaves Cotton^ ITNL
March 2012
EQUITY
FUNDAMENTALS
REPORT CARD
STOCK IDEAS STANDING (AS ON MARCH 02, 2012)

COMPANY IRB Infra Max India Opto Circuits India Thermax Yes Bank Zydus Wellness RECO PRICE 234.0 212.0 199.0 124.2 332.0 530.0 27.0
W NE
PRICE TARGET 200.0 234.0 393.0 526.0 431.0 323.0 27.0 142.0 405.0 188.0 522.0 310.0 105.0 436.0 36.0 105.0 800.0 277.0 70.0 179.0 65.0 62.0 1340.0 132.0 500.0 500.0 283.0 692.0 779.0 1550.0 259.0 167.0 227.0 400.0 70.0 400.0 107.0 271.0 156.0 131.0 148.0 **
RECO CURRENT DATE RECO 29-Nov-10 Buy 24-Nov-09 13-May-08 14-Jun-05 2-Dec-10 18-Nov-11 2-Feb-12 30-Aug-11 29-Jun-11 17-Mar-05 16-Mar-10 5-Apr-10 12-Aug-11 5-Nov-07 8-Oct-09 30-Dec-03 7-Oct-10 19-Jan-11 23-Dec-09 3-Nov-10 18-Jan-10 6-Jul-10 19-Dec-03 8-Dec-05 3-Nov-11 20-Mar-06 4-Oct-07 24-Dec-03 4-Oct-07 10-Aug-05 25-Jan-12 27-Aug-09 6-Sep-10 9-Jan-08 30-Aug-05 31-Dec-07 26-Feb-08 25-Aug-06 3-Feb-11 19-Jun-09 10-Feb-11 17-Nov-05 Buy Buy Hold Buy Reduce Reduce Buy Buy Buy Buy Buy Hold Buy Buy Buy Hold Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold Buy Buy Buy Buy Hold Buy Buy Buy Hold Hold Hold
PRICE AS ON 02-MAR-12 188.4 169.0 271.5 524.0 350.5 367.7 28.7 114.1 265.9 156.6 415.2 133.0 100.4 335.1 29.5 74.9 640.0 239.0 57.6 156.5 47.6 34.5 953.7 107.8 352.4 285.6 208.9 566.6 568.1 1424.6 232.7 135.8 188.5 328.1 55.8 355.6 49.9 189.7 126.2 112.8 141.0 2799.8
GAINLOSS (%) -19.5 -20.3 36.4 321.9 5.6 44.1 -5.8 4.7 -5.7 209.4 60.9 -66.2 39.4 153.8 -31.5 349.0 49.9 13.8 -59.4 -4.6 -27.1 -43.5 429.8 99.5 -8.9 392.4 -43.5 838.1 207.1 271.0 405.8 -16.7 16.4 -58.9 160.7 -13.5 -63.9 159.9 -4.9 6.4 60.2 529.2
ABSOLUTE PERFORMANCE 1M 3M 6M 12M 2.7 22.5 22.9 -6.2 -1.3 11.6 8.9 1.1 -11.1 -2.4 12.2 4.8 11.8 -0.3 15.8 19.3 8.1 0.7 2.7 2.0 13.8 26.3 9.0 2.3 34.3 -0.7 1.4 1.5 2.3 -3.2 0.1 0.1 14.3 -2.8 -3.3 -1.6 8.1 5.3 3.8 29.3 16.2 25.7 11.6 18.4 27.1 -0.2 33.4 13.9 21.8 -19.0 12.5 3.4 2.8 6.0 9.6 30.0 37.0 35.3 14.5 15.2 -11.4 16.9 106.2 28.8 47.0 37.0 5.3 2.5 -8.0 6.8 11.4 5.3 2.7 21.6 5.3 0.9 4.9 21.0 15.3 2.5 62.4 20.1 28.1 18.4 26.6 39.1 -16.5 2.9 8.4 22.5 -37.1 12.3 0.1 -11.8 -4.8 7.9 1.5 49.9 11.5 -9.6 22.6 -14.9 25.1 63.2 22.8 5.1 22.0 2.1 5.0 1.5 1.4 24.4 12.7 -4.7 32.4 -5.6 -2.4 -8.1 3.7 -3.2 7.4 -1.7 6.3 -1.7 4.4 61.1 74.3 13.4 9.8 -10.5 26.0 -36.7 11.3 19.7 -12.6 4.3 12.4 -28.0 16.7 26.4 -38.3 -9.4 33.2 29.5 23.7 -13.4 -14.1 -17.4 -11.5 -14.4 29.8 -11.2 -22.0 24.2 8.7 49.1 -27.7 2.4 15.3 -6.5 19.0 10.5 -14.6 -6.1 -6.4 -15.9 50.6 68.1
1M 1.0 -2.9 9.8 7.1 -0.5 -12.6 -4.0 10.4 3.2 10.0 -1.9 14.0 17.4 6.3 -0.9 1.1 0.3 12.0 24.3 7.2 0.6 32.1 -2.3 -0.2 -0.1 0.6 -4.8 -1.5 -1.5 12.5 -4.4 -4.8 -3.2 6.4 3.6 2.1 27.2 14.3 23.6 9.8 16.5 25.1
RELATIVE TO SENSEX 3M 6M 12M 14.7 16.2 -3.0 -6.6 24.9 6.6 14.0 -24.2 5.3 -3.2 -3.7 -0.8 2.6 21.7 28.3 26.7 7.1 7.8 -17.1 9.4 93.0 20.6 37.6 28.2 -1.4 -4.1 -13.9 -0.1 4.2 -1.5 -3.8 13.8 -1.4 -5.5 -1.8 13.3 7.9 -4.1 52.0 12.4 19.9 10.8 18.5 30.2 -21.1 -2.7 2.5 15.8 -40.5 6.2 -5.4 -16.6 -9.9 2.0 -4.0 41.8 5.4 -14.6 15.9 -19.5 18.3 54.4 16.1 -0.6 15.4 -3.5 -0.7 -4.0 -4.2 17.7 6.6 -9.9 25.2 -10.7 -7.7 -13.1 -2.0 -8.4 1.5 -7.1 0.5 -7.0 -1.3 52.4 64.9 17.3 13.6 -7.4 30.3 -34.5 15.1 23.8 -9.6 7.9 16.2 -25.5 20.7 30.7 -36.2 -6.3 37.7 33.9 27.9 -10.4 -11.2 -14.6 -8.4 -11.4 34.2 -8.1 -19.4 28.4 12.4 54.2 -25.2 5.9 19.2 -3.3 23.1 14.3 -11.7 -2.9 -3.2 -13.0 55.7 73.8
UGLY DUCKLING
Ashok Leyland # Bajaj Corp CESC Deepak Fert Federal Bank Gayatri Projects India Cements Ipca Laboratories ISMT Jaiprakash Associates KKCL NIIT Technologies Orbit Corporation Polaris Financial Techn Pratibha Industries Provogue India Punjab National Bank Ratnamani Metals Raymond
W NE
109.0 282.0 50.6 258.0 393.0 72.0 132.0 43.0 16.7 427.0 210.0 142.0 164.0 65.2 61.0 180.0 54.0 387.0 58.0 370.0 60.4 185.0 384.0 46.0 163.0 162.0 799.0 21.4 411.0 138.4 73.0 120.1 106.0 88.0 445.0
Selan Exploration Tech Shiv-Vani Oil & Gas Sun Pharma Torrent Pharma UltraTech Cement Union Bank of India United Phosphorus V-Guard Industries
VULTURE'S PICK
Mahindra Lifespace Orient Paper and Industries Tata Chemicals Unity Infraprojects
CANNONBALL
Allahabad Bank Andhra Bank IDBI Bank Madras Cement Shree Cement
**Price target under review ^ Reco price adjusted for stock split
#Reco price adjusted for bonus
March 2012
FROM SHAREKHANS DESK
from sharekhans desk

March 2012
Perils of timing the market

The equity markets continued to build on the gains of January 2012 in February also. Many common investors missed out on the rally because they were waiting on the sidelines either in a bid to time the market or because they were simply petrified by a slew of negative news flow globally. Timing the market is an obsession with many common investors or even some institutional investors. However, many successful fund managers and investment gurus do not worry too much about timing the market but rather focus on stock picking and valuations. Since inception of their funds, Warren Buffet and one of the most successful fund managers in India (Prashant Jain of HDFC Mutual Fund in case of HDFC Prudence Fund since 1994) have given close to 20% annualised returns over a period of decades without worrying about timing the market. As they say, it is not about timing the market but the time in the market that really matters to the equity investors. And the equity market has its own ways to remind the same to investors. The recent sharp rally is a case in point. No doubt, the equity market can test your conviction in the near term but investment decisions made at right valuations in quality stocks tend to generate healthy returns over a longer period of time. Analysis of the past data suggests that the market has given returns of over 100% in a period of three years if the investments were made at multiples of below 12x one-year forward earnings (one can adjust the consensus estimate to factor in the potential earnings downgrades). After the sharp rally in the past two months, the major excesses of the pessimism in the valuations have been filled up now. Our research team points out that the Sensex multiple has moved up from just below 12x forward earnings to over 14x forward earnings and is only at a slight discount to the long-term average multiple of around 14.8-15x one-year forward earnings. From here on, the markets re-rating will depend upon the domestic triggers, such as policy push and the Reserve Bank of Indias stance on the pace of monetary easing. Refer to our Market Outlook report on page 7 for details. Do not rue the missed opportunity. The market seems to be taking a break to digest the sharp gains of the past two months and is waiting for the outcome of the major policy related events scheduled for this month. Moreover, there is always value to be explored in the broader market. There are still many quality stocks available at discounted valuations. Our research teams endeavour is to help you identify some of these stocks that have a secular growth story and are available at reasonable valuations.
EQUITY
FUNDAMENTALS
MARKET OUTLOOK
MARKET OUTLOOK
MARCH 03, 2012
Policy push needed for the next leg up

March cluttered with eventspoll results, budget, RBI policy: This March has several key events like election results (March 6, 2012), the Reserve Bank of India (RBI)s policy review (March 15, 2012) and Union Budget (March 16, 2012) in addition to the usual liquidity pressure driven by the advance tax payment. The high turnout in the Uttar Pradesh elections and media surveys suggest a possible gain in vote share by Samajwadi Party (SP) and Congress Party at the expense of the ruling Bhahujan Samaj Party (BSP), which could lead to an alliance of the Congress Party and SP at the state level and a possible extension of the same at the Centre. This would reduce the ruling United Progressive Alliance (UPA)s dependence on Mamata Banerjees Trinamool Congress (TMC) and enable the government to push forward reforms. Though no fireworks are expected from the budget, the key triggers to watch out for are: a credible roadmap for fiscal consolidation and some definitive steps to boost the investment cycle. Inflation and economic growth moderate sharply but firm crude prices cast a shadow on the trajectory of monetary easing by RBI: The sharp run-up of 17% to $125 per barrel in the crude oil prices since January this year, fuelled by the rising geopolitical tensions and easy liquidity conditions globally, has brought back the fears of its damaging impact on inflation and economic growth globally. Indias dependence on imports for its crude oil needs and lack of reforms in its oil sector make it more vulnerable in such a scenario and could result in the reallocation of funds by foreign investors away from India to resource-rich countries (like Brazil, Russia, Indonesia) within the emerging markets. Moreover, the RBI could delay the much-awaited policy rate cuts in view of the inflationary pressure emanating from the rising crude oil prices. Q3 earnings growth below expectations but pace of earnings downgrades slowing down: While the Q3FY2012 earnings growth was in low single digits, the revenue growth momentum remains strong driven by a healthy growth in volumes, better price realisation and a favourable currency. Since April 2011 the Sensex earnings estimates have been downgraded by 7.5% and 14.8% for FY2012 and FY2013 respectively. But the pace of the earnings downgrades has slowed down considerably with a marked improvement in the earnings upgrades/downgrades ratio in the third quarter of FY2012. However, the revival in the corporate earnings upgrade cycle is possibly still a couple of quarters away and would depend on the RBI and the governments policies. Short covering blip behind us: fundamentals would come to fore again: The BSE small-cap index appreciated by 25% compared to the 14% upmove in the benchmark indices. The short covering in view of the surge in the market has resulted in more than 50% rise in many debt-laden high beta stocks. This has provided an opportunity to churn portfolios in favour of quality stocks, not necessarily from the defensive sectors. With the technical blip behind us, we expect the fundamentals to come to the fore again. Need policy push for further re-rating of multiples: After the recent run-up, the Sensex valuations have expanded from around 12x to close to 14x FY2013 earnings estimate which is close to its long-term average multiple. The global scenario is much more conducive now with the injection of huge liquidity through the Long-Term Refinancing Operation (LTRO) in Europe and improving economic data points in the USA. However, for the liquidity-driven rally to sustain, there is a need for domestic triggers in the form of adequate support from the government policies (in power, infrastructure, subsidy, foreign direct investment [FDI] etc) accompanied by monetary easing from the RBI. Our base case assumption is a likely consolidation phase around the current level before another leg of the rally unfolds.
SENSEX P/E (BASED ON ROLLING ONE-YEAR FORWARD EPS)
30 27 24 21 18 15 12 9 6 Feb-93 Feb-94 Feb-95 Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: Bloomberg
Marchbig events awaited (poll results, budgets, RBI policy)

Several events like Union Budget, state assembly election results, Railway Budget and the RBI policy review will fall in March this year, thereby making it a crucial month for the market. Apart from that, liquidity will remain exceptionally tight due to the advance tax payments and credit disbursal by banks. Since the market has rallied substantially ahead of these events, investors would be looking at these events for future course of the market. While the election outcome will determine the strength of the government in pushing through reforms, the budget will throw light on the means and measures to contain the twin deficits. The expectations from the RBIs policy have come down in the wake of the high crude prices and the market may take solace from a likely cut in the cash reserve ratio (CRR) in the coming monetary review.
EVENTS IN CHRONOLOGICAL ORDER Date 06-Mar-12 12-Mar-12 14-Mar-12 14-Mar-12 15-Mar-12 16-Mar-12 Events Election Results IIP Inflation Rail Budget RBI mid-quarter policy review Union Budget
March 2012
MARKET OUTLOOK
Political permutations will shape the market
The poll results will be out for five states (Uttarakhand, Punjab, Goa, Manipur and Uttar Pradesh, which is the most crucial state among these) on March 6, 2012. The high turnout in the Uttar Pradesh polls in all the six phases indicates trouble for the incumbent BSP government which will either benefit SP or the Congress Party. Further, most of the opinion polls, surveys etc indicate the possibility of a hung assembly in Uttar Pradesh with no single party likely to get a majority. In such a case, three scenarios are possible: (1) an SP-Congress alliance; (2) a BSP-Bharatiya Janata Party (BJP) alliance; and (3) mid-term polls. The SP-Congress alliance will be positive for the market as the alliance could be extended at the Centre and would aid in the passing of some of the controversial bills even without the support from the TMC. The BSP-BJP alliance would further consolidate the opposition against the government and affect the key decisions which would be perceived as a negative by the market.
POSSIBLE COMBINATIONS (SP-CONGRESS, BSP-BJP) States Punjab Uttarakhand Manipur Uttar Pradesh Goa Poll dates Jan 30, 2012 Jan 30, 2012 Jan 28, 2012 Feb 8-28, 2012 (in 7 phases) Mar 3, 2012 Verdict Mar 6, 2012 Mar 6, 2012 Mar 6, 2012 Mar 6, 2012 Mar 6, 2012
EQUITY
FUNDAMENTALS
clearly articulated that reduction in policy rates would depend on credible action from the government on the fiscal deficit front and allaying of the inflation fears. So inflation continues to be an issue due to the increase in the crude oil prices while fiscal deficit will remain high contributed by the lumpy expenditure budget. This could actually delay the much awaited repo rate cut and we expect that to happen not before April 2012. Therefore, in the budget the government will try to address the concerns on fiscal deficit and promote the investment activity in the economy.
FISCAL DEFICIT AND OIL PRICES
4500 4000 3500 3000 2500 2000 1500 1000 500 0 Mar-12E Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 140 120 100 80 60 40 20 0
Fis c al Def ic it
Crude
Source: Ministry of Finance, Bloomberg
Source: Election Commission of India
Union Budgetlikely to address fiscal deficit and growth concerns in a limited way
The Union Budget, to be tabled in the parliament on March 16, 2012, will throw light on fiscal management amid high pressure on the expenditure side (food security, subsidies etc). We do not foresee any path-breaking measures except for some initiatives on increasing the indirect taxes, such as customs duty, import duty and services tax. Given the limited flexibility on the revenue side, the fiscal consolidation will hinge on disinvestment and collections from the 3G auctions. Therefore, the market would look on the fiscal deficit estimate and the borrowing target that would shape the RBIs policy, and the reforms announced will be taken very positively by the market.
FISCAL DEFICIT, GOVERNMENT BORROWINGS
6,000 5,000 4,000 3,000 2,000 1,000 0 FY2012BE FY2002A FY2003A FY2004A FY2005A FY2006A FY2007A FY2008A FY2009A FY2010A FY2011A 7% 6% 5% 4% 3% 2% 1% 0%
Acute liquidity shortage (advance tax, capital mop-up) will lead to CRR cuts
The borrowings from the liquidity adjustment facility (LAF) window of the RBI have increased to Rs1.9 lakh crore (as on March 1, 2012) compared to the RBIs target of about Rs60,000 crore. This indicates an acute liquidity crisis which has fired the short-term rates and may affect the smooth functioning of the market. The current crisis has been driven by a rise in disbursement by banks, a slower deposit growth and highter government borrowings. Going ahead, the initial public offering mop-ups (through divestment of ONGC etc) and advance tax payments could further strain the liquidity. Therefore, the RBI could ease the CRR or the statutory liquidity ratio (SLR) to address the liquidity issues in the March mid quarter policy review.
LAF RBI, CP RATES
1000 500 0 Feb-11 Jul-11 May-11 Sep-11 Nov-11 -500 -1000 -1500 -2000 9.5 9 LA F CP Rates
Source: Bloomberg
11.5 11 Aug-11 Dec-11 Feb-12 Mar-11 Jan-11 Jun-11 Apr-11 Jan-12 Oct-11 10.5 10
Net Debt Market Bor r ow ings
Central Fis c al Def ic it

Source: Economic Survey
RBIs monetary action hinges on fiscal roadmap to be given by the government

The market has rallied based on the indications of the RBI cutting rates against the backdrop of a slowing growth and the peaking of inflation. However, the RBI in its third quarter policy review had
Earnings growth yet to pick up but downgrades bottoming out

While the Q3FY2012 earnings growth was in low single digits, the revenue growth momentum remains strong and exceeds the estimates. So for the past three quarters the top line growth has
March 2012
EQUITY
FUNDAMENTALS
MARKET OUTLOOK
unwinding of the monetary tightening policy which will weaken the market sentiment. Further, the rising crude oil prices would derail the global recovery that is already quite fragile and would affect our export scenario. India is more sensitive to a rise in crude oil prices as the same will increase the input cost and feed inflation especially in H2FY2013 when the high base effect will wane. Further, this will delay the easing of the interest rates by the RBI, thereby affecting the economic recovery and the outflow of funds.
PERFORMANCE OF CRUDE OIL, SENSEX
25000 20000 15000 10000 5000 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 160 140 120 100 80 60 40 20 0
been expanding even on a sequential basis whereas the rising input cost and interest cost are hurting the profitability. The other contrasting thing seen in the Q3FY2012 results is the significant drop in the downgrades which indicates a likely peaking of the downgrade cycle. Since April 2011 the Sensex earnings estimates have been downgraded by 7.5% and 14.8% for FY2012 and FY2013 respectively. This suggests the factoring of the imminent concerns and the bottoming of the downgrade cycle which augurs well for the market. However, the revival in the corporate earnings cycle is possibly still a couple of quarters away and would depend on the RBI and the governments policies.
SECTOR-WISE EARNINGS GROWTH IN Q3FY2012, EARNINGS ESTIMATE DOWNGRADES AND UPGRADES
1550 1500 1450 1400 1350 1300 1250 1200 1150 1100 May-11 Nov-11 Aug-11 Dec-11 Sep-11 Feb-12 Jun-11 Jul-11 Apr-11 Jan-12 Oct-11
Sens ex
Crude
Source: Bloomberg
FY 2012E
FY 2013E
FII flowsso far so good

Source: Bloomberg
Macro indicators suggest sluggish recovery

Macro data remains weak as the gross domestic product (GDP) growth has decelerated to 6.1%, the lowest in ten quarters, while industrial production is growing in low single digits. The weak core sector numbers (in January 2012) and a secular decline in the fixed capital formation remain causes for worry as the same would affect the investment activity in the economy. The 7% growth targeted for FY2012 and the target of around 7.5% growth for FY2013 seem to have been factored in by the market but the downside risks are more than the upside risks. This requires the government to focus on structural problems like the easing of the supply-side constraints to tackle the price pressures and fiscal consolidation.
GDP IIP, FIXED CAPITAL FORMATION
25% 20% 15% 10% 5% 0% Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 -5% -10%
Led by an influx of liquidity on account of the LTRO the market has appreciated sharply. In 2012 so far the foreign fund flows in equities have been to the tune of $7.3 billion compared with -$512 million in the entire CY2011. The flows have been relatively higher on the debt side compared with equity. Going ahead, the foreign institutional investor (FII) flows would be supportive and will be aided by LTRO II of around $713 billion. In the event of sustained firmness in crude oil prices there could be a shifting of foreign investors allocation to the other resource-rich countries (like Brazil, Russia, Indonesia) within the emerging markets.
FII INFLOWS AND CRUDE PRICES
140000 120000 100000 80000 60000 40000 20000 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 0 -20000 -40000 -60000 120 100 80 60 40 20 0 FII Crude
Source: Bloomberg
GDP
IIP
Source: Bloomberg
Short covering blip behind us: fundamentals would come to fore

The CNX Small-cap Index has rallied 24% while the CNX Midcap Index has climbed 26% YTD compared with the 13% appreciation in the benchmark indices. The CNX Mid-cap Index, which had reached the lows of 6,095, bounced back driven by the short covering of high beta stocks, indicating the factoring
Rise in crude prices raises macro concerns

The crude oil prices have appreciated by almost 17% in the year till date (YTD; about $125 per barrel) fueled by global liquidity. The rising crude oil prices will feed inflation and the RBI may delay the
March 2012
MARKET OUTLOOK
in of the imminent concerns. Individual stocks have risen by as much as 50% in the first two months of CY2012. This has provided an opportunity to churn the portfolios in favour of the quality stocks and avoid the debt-laden mid-cap/small-cap stocks. Since the technical blip is behind us, we expect the fundamentals to drive the stock valuations going ahead.
BSE SMALL-CAP INDEX, BSE MID-CAP INDEX
135 130 125 120 115 110 105 100 95 90 Feb-12 Feb-12 Feb-12 Feb-12 Jan-12 Jan-12 Jan-12 Jan-12 Jan-12
EQUITY
FUNDAMENTALS
Europe and the improving economic data points in the USA. Barring a few blips on account of events like budget or election results, the fundamentals would come to the fore again. However, for the liquidity-driven rally to sustain, there is a need for domestic triggers in the form of adequate support from government policies (in areas of power, infrastructure, subsidy, FDI etc) accompanied by monetary easing from the RBI. Our base case assumption is that the market would consolidate around the current level before another leg of the rally unfolds. The consolidation phase could provide entry points for the fence-sitters (investors waiting on the sidelines) who have missed out on the initial phase of the rally.
SENSEX P/E (BASED ON ROLLING ONE-YEAR FORWARD EPS)

30 27 24 21 18 15 12 9 6 Feb-93 Feb-94 Feb-95 Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Sens ex
CNX Midc ap
CNX Smallc ap
Source: Bloomberg
Valuations
The Sensex valuation has expanded to about 14x one-year forward earnings and the benchmark index now trades closer to its longterm mean of 15x. The global scenario is much more conducive now with the injection of huge liquidity through the LTRO in
Source: Bloomberg
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
March 2012
10
EQUITY
FUNDAMENTALS
SHAREKHAN TOP PICKS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

After building on the gains of January this year, the equity market faltered in the later part of February delivering flattish returns since our previous issue of the ValueGuide released on February 3, 3012. Our basket of Top Picks also performed in line with the market and ended with a marginal loss of 0.6% during the same period. The performance was marred by a rather unexpected decline of 15% in Eros International Media despite its robust Q3FY2012 performance. Consequently, we are replacing Eros International Media with Orient Paper and Industries, which is our preferred mid-cap stock in the cement sector. In this month, we are increasing the beta of the Top Picks basket by replacing GlaxoSmithKline Consumer Healthcare with ICICI Bank. The second change in the Top Picks basket is to hedge against the rising crude oil prices by bringing in Selan Exploration Technology (which benefits in terms of higher average realisation) in place of GAIL (where the subsidy burden could increase due to higher underrecoveries resulting from firm crude oil prices).
ABSOLUTE OUTPERFORMANCE (RETURNS IN %)

140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Since Jan 2009 YTD CY2012 YTD CY2011 CY2010 CY2009 -20.0% -40.0%
CONSTANTLY BEATING NIFTY AND SENSEX (RETURNS IN %)

180.0% 160.0% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Feb-10 Feb-11 Dec-09 Dec-10 Aug-09 Aug-10 Aug-11 Dec-11 Feb-12 Jun-09 Jun-10 Jun-11 Oct-09 Oct-10 Apr-09 Apr-10 Apr-11 Oct-11
Sharekhan
Sensex
Nifty
Sharekhan
Sens ex
Nif ty
NAME Bank of Baroda Bharat Electronics Divis Laboratories Grasim ICICI Bank Marico Orient Paper Pratibha Ind Selan Exploration Sun Pharma TCS
* CMP as on March 02, 2012
CMP* (RS) 825 1,577 738 2,724 903 157 56 47 284 566 1,217
FY11 7.7 15.0 22.8 11.5 20.2 37.4 7.9 6.1 15.2 32.3 27.4
PER FY12E 7.1 13.9 20.2 9.8 16.7 29.6 6.3 5.0 10.6 24.1 22.0
FY13E 6.3 12.5 16.0 8.9 14.7 22.1 5.3 3.8 7.6 21.6 17.9
FY11 23.5 17.2 23.9 14.8 9.6 32.7 17.0 18.8 18.7 19.2 33.6
ROE (%) FY12E 20.4 14.9 23.4 14.7 10.8 30.7 18.4 14.9 21.9 21.1 33.0
FY13E 19.9 13.8 25.6 13.6 11.4 31.7 18.9 17.0 23.6 19.2 32.4
PRICE TARGET 1,065 1,893 1,122 2,980 1,070 186 70 65 500 692 1,294
UPSIDE (%) 29 20 52 9 19 18 25 38 76 22 6
11
March 2012
SHAREKHAN TOP PICKS

NAME CMP (RS) 825 PER FY12E 7.1 ROE (%) FY12E 20.4
EQUITY
FUNDAMENTALS
PRICE TARGET 1,065 UPSIDE (%) 29
FY11 7.7
FY13E 6.3
FY11 23.5
FY13E 19.9
BANK OF BARODA
Remarks:
Bank of Baroda stands out among the PSU banks as it continues to deliver strong earnings growth with improvement in key operational metrics. The banks business growth is expected to remain better than industrys (contributed by stronger overseas growth) with relatively stable margins which will lead to a healthy growth in the top line. While the asset quality of most PSU banks has deteriorated significantly over the past two to three quarters, BoBs asset quality has remained healthy due to lower slippages. Although, the asset quality risks have risen due to weak macro environment and policy issues, yet BoB is expected to fare better than the other PSU banks in terms of asset quality, resulting in lower credit cost and higher growth in earnings. The operating metrics of BoB has improved significantly led by strong focus on CASA, margins, fee income etc. The bank is expected to post RoE and RoA of around 20% and 1.1% respectively over the next two years. We believe BoB commands a premium over the other PSU banks due to a steady growth in its core income and a healthy asset quality. Currently, the stock is trading at 1.2x FY2013 book value which is reasonable. We recommend a Hold on the stock with a price target of Rs1,065.
BHARAT ELECTRONICS
1,577
15.0
13.9
12.5
17.2
14.9
13.8
1,893
20
Remarks:
BEL, a public sector unit, is one of the leading defence companies in India. With the increase in the defence budget and the focus on modernisation of the defence technology, BEL is best placed to take a sizeable pie of the defence spend. The companys order book currently stands at Rs27,000 crore, which is around 5x its FY2011 revenues. This gives us a strong revenue visibility for at least the next two to three years. BEL has entered into joint ventures and technology collaborations to strengthen its position in the defence services space, reap the benefits of the offset clause (which it believes is worth $300 million in the next five to seven years) and enter into newer areas of operations. The March quarter is the strongest for BEL and the upcoming budget could also have something positive to offer to the defence sector and in turn to BEL. The key risk remains its execution: a delay in release of orders could lead to slower execution. At the current market price the stock trades at 12.5x its FY2013E earnings. The company has huge cash reserve of Rs5,875 crore, which translates into cash per share of Rs734 and gives the stock further support. We maintain our Buy recommendation on the stock.
DIVIS LABORATORIES
738
22.8
20.2
16.0
23.9
23.4
25.6
1,122
52
Remarks:
Strong M9FY2012 performance (PAT growth 27%) has re-affirmed our confidence in the growth potential of Divis Labs. The new DSN SEZ facility at Vishakhapatnam that started production from one of its blocks in June 2011 (the remaining blocks of this facility are likely to get operational over FY2012-13) is likely to bring better economies of scale and tax benefits. A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit growth opportunities in niche segments like high potency drugs for oncology and steroids for contraceptives. With the order inflow picking up and its new plant getting operational, Divis has a strong revenue growth visibility and the operating leverage in the business will boost its margins. At the current market price the stock trades at a price earning (PE) multiple of 16.0x discounting its FY2013E earnings. We maintain our Buy recommendation.
GRASIM
2,724
11.5
9.8
8.9
14.8
14.7
13.6
2,980
Remarks:
Grasim Industries is well placed to capture the growing opportunity in its core business of VSF in terms of both volume and healthy realisation. In addition, the performance of its cement business (ie its key subsidiary UltraTech Cement) has shown signs of improvement with an increase in the average cement price. Due to the improved demand environment, the performance of the VSF and Chemical division has improved. The VSF realisation has sustained at a healthy level and increased by 4-5% to Rs129 per kg in Q3FY2012. On the other hand, the chemical division has witnessed an improvement in its profitability. The cement capacity of the company at the consolidated level is the highest among the other domestic players at 52.75MTPA. Hence the company will be the key beneficiary of a likely pick-up in the demand through government infrastructure projects in the coming couple of months. On the other hand, the company is planning to expand its VSF capacity by another 120,000 tonne by FY2013 and its cement capacity by 9.2MTPA by FY2014. We believe the capacity addition will provide volume growth in the longer run. We believe the company will benefit due to its strong balance sheet as most of its capex will be met through internal accruals. However, in light of the upcoming capacity and stabilisation of the newly-added capacity, the cement prices are expected to come under pressure. Moreover, cost pressure in terms of coal prices and higher freight cost remains a key concern. At the current market price the stock trades at PE of 8.9x its FY2013 earnings estimate on a consolidated basis.
March 2012
12
EQUITY
NAME
FUNDAMENTALS
CMP (RS) 903 PER FY12E 16.7 ROE (%) FY12E 10.8
SHAREKHAN TOP PICKS

PRICE TARGET 1,070 UPSIDE (%) 19
FY11 20.2
FY13E 14.7
FY11 9.6
FY13E 11.4
ICICI BANK
Remarks:
ICICI Bank is back on growth path as its advances are growing at a healthy rate (up 19.1% YoY and 5.2% QoQ in Q3FY2012). We expect the advances of the bank to grow by 18% CAGR over FY2011-13. This should lead to a 15% CAGR growth in the net interest income in the same period. ICICI Banks asset quality has shown a turnaround as its NPAs have continued to decline over the last six quarters led by contraction in slippages. This has led to a sharp reduction in the provisions and an increase in the profitability. Going forward, we expect the NPAs to decline further which will lead to lower NPA provisions and hence aid the profit growth. With a pick-up in the business growth and an improvement in the margins the RoEs are likely to expand to about 12% over the next two years while the RoA would improve to 1.4%. This would be driven by a 17% CAGR in profits over FY2011-13. Despite the run-up the stock over the past two months it trades at 1.6x FY2013E book value. We expect the stock to re-rate, given the improvement in the profitability led by lower NPA provisions, a healthy growth in the core income and improved operating metrics. We recommend Buy with a price target of Rs1,070, with an upside of 18% from the current levels.
MARICO
157
37.4
29.6
22.1
32.7
30.7
31.7
186
18
Remarks:
Marico is one of the strongest players in the Indian hair care and edible oil markets. Its flagship brand Parachute along with Nihar commands a 54% share in the domestic branded coconut oil market. Its portfolio of value-added hair oil got strong traction in the domestic market helping it to clock around 20% volume growth in the domestic market. The companys good for heart edible oil brand Saffola is also witnessing mid-teen volume growth on account of improving consumer awareness. Apart from domestic operations, Marico has strong international presence in Bangladesh, Egypt, South Africa, and the recently entered South East Asia. Though the nearterm performance has been affected by political instability and high inflationary environment in some of the international markets, we believe the long-term growth potential is intact in these markets. Kaya is showing signs of improvement with a double-digit same-store collection growth in the past few quarters. Any significant increase in the prices of the key raw materials (including copra) and a slowdown in the sales volume growth would act as the key risks to our earnings estimates. We expect the top line to grow at a CAGR of about 25% over FY2011-13 and the bottom line to grow at a CAGR of 30% over the same period (on the back of an expected improvement in the margins due to the softening of raw material prices). At the current market price the stock trades at 29.6x its FY2012E EPS of Rs5.3 and 22.1x its FY2013E EPS of Rs7.1.
ORIENT PAPER
56
7.9
6.3
5.3
17.0
18.4
18.9
70
25
Remarks:
OPIL, a part of CK Birla group, is a diversified conglomerate operating in three segments; cement, paper and fans. The cement division contributes over 53% of the total revenue. The company benefits due to its diversified business model. Due to the recent increase in cement prices, the present realisation of the company is higher by over 24% over FY2011. The surge in the realisation will be able to offset the cost inflation and the profitability of the division is likely to improve (marginally). In the electrical division, due to the new product launches and gaining market shares, the company would deliver over 11% revenue growth in FY2012. Going forward, the division can witness growth on the back of lighting products (CFL) and household appliances. The restructuring plan to demerge the cement division augurs well for the company as the uncertainty in the profitability of the paper division was one of the major overhangs on the stock. Hence, the valuation could get re-rated going ahead. However, the key concern remains the poor volume offtake in its key market, ie Andhra Pradesh (which accounts for 37% of the total dispatches). At the current market price of Rs56, the stock trades at a PE of 5.3x and EV/EBIDTA of 4x, discounting its FY2013 earnings estimate.
PRATIBHA IND
47
6.1
5.0
3.8
18.8
14.9
17.0
65
38
Remarks:
Pratibha Industries (Pratibha) is one of the fastest growing small construction companies with expertise in water, surface transport and civil construction segments. The order book of Rs4,959 crore, which is 3.0x its FY2012E revenues, provides strong revenue visibility. It has gradually moved up the value chain by diversifying into high-margin segments like urban infrastructure, tunneling and oil & gas. It is looking at either exiting the HSAW pipe business or roping in a strategic investor for the same, which has been a drag for more than a year. Success on either front will help the company to reduce its costs and improve its margins. Further, the proceeds from the same will help Pratibha to reduce the debt and improve the return ratios. With the order book standing at 3x its FY2012E revenues, the timely execution of projects remain the key to Pratibhas success. Further, development on the HSAW pipe business needs to be watched. At the current market price, the stock trades at 5.0x and 3.8x its FY2012E and FY2013E earnings. We maintain our Buy recommendation on the stock.
13
March 2012
SHAREKHAN TOP PICKS

NAME CMP (RS) 284 PER FY12E 10.6 ROE (%) FY12E 21.9
EQUITY
FUNDAMENTALS
PRICE TARGET 500 UPSIDE (%) 76
FY11 15.2
FY13E 7.6
FY11 18.7
FY13E 23.6
SELAN EXPLORATION
Remarks:
Selan Exploration (Selan) has rights to develop five small discovered (minimal exploration risk) oil fields (Bakrol, Lohar, Indrora, Karjisan and Ognaj) in Cambay Basin (Gujarat) with proven oil & gas reserves. Between FY2006 and FY2009, Selan ramped up its production by 4x. In the next phase (FY2009-11), with stagnate oil production it did preparatory work to ramp up drilling in the existing fields and the new field, Indrora (the most prolific one with significant reserves). Currently, the company is waiting for the final approval for drilling which could ramp up its production significantly in the near future. Based on this, we expect the company to ramp up its production more than two times by FY2014 over that of FY2011. It would lead to an earnings growth (CAGR) of 41% during FY2011-13. At the current market price, the stock trades at a PE of 7.6x and EV/EBITDA of 3.6x based on our FY2013 estimates. We remain bullish on its production ramp-up plan and recommend Buy with a price target of Rs500.
SUN PHARMA
566
32.3
24.1
21.6
19.2
21.1
19.2
692
22
Remarks:
The combination of Sun Pharma and Taro offers an excellent business model for Sun Pharma, as has been reflected in the M9FY2012 performance (its revenue grew 31% YoY in M9FY2012). Though Taro may not show a similar performance in the next quarter, but we expect a better performance from Sun Pharma going forward mainly driven by the resumption of sales from the US based Cranbury facility, which has been cleared by the USFDA recently. Sun Pharma seeks to acquire the remaining equity in Taro and, if successful, that will not only help achieve better synergy but also boost earnings from the first year itself. We expect 24% and 22% revenue and PAT CAGR respectively over FY2011-13. With a strong cash balance, Sun Pharma is well positioned to capitalise on the growth opportunities. Its debt-free balance sheet insulates it from the negative impact of volatile currency. At the current market price, Sun Pharma is trading at 24.1x and 21.6x FY2012 and FY2013 estimated EPS respectively. We maintain our Buy recommendation on the stock with a price target of Rs692, which implies 26x FY2013E EPS.
TCS
1,217
27.4
22.0
17.9
33.6
33.0
32.4
1,294
Remarks:
TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most service offerings and is in the process of further consolidating its leadership position through the organic and inorganic route as well as by winning large deals. TCS has consistently increased its market share amongst the top 5 Indian outsourcers with market share in terms of revenues increasing from 29.2% in the March 2009 quarter to 30.3% in the September 2011 quarter. We continue to like TCS amongst the offshore IT vendors on account of its mammoth scale of operations and resilient cost model that allows it to withstand headwinds in the sector. On the other hand, at the current juncture TCS is well placed to garner incremental deals in the sector with the organisational structure in place, unlike Wipro and Infosys that are going through a phase of organisational restructuring. At the current market price the stock trades at 17.9x its FY2013E earnings. We have a Buy recommendation on the stock with a price target of Rs1,294.
March 2012
14
EQUITY
FUNDAMENTALS
STOCK IDEA
EMERGING STAR
GATEWAY DISTRIPARKS
BUY; CMP: RS131
FEBRUARY 2, 2012
Ahead of the pack

COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no of shares): BSE code: NSE code: Sharekhan code: Free float (no of shares): Rs173 Rs1,413.6 cr Rs153/101 1.1 lakh 532622 GDL GDL 6.44 cr
KEY POINTS
Evolving as an integrated player: With its dominant presence in the container freight station (CFS) segment and forays into the rail freight and cold chain businesses Gateway Distriparks Ltd (GDL) has evolved as an integrated logistic player. The proposed capex planned in all three segments will strengthen its presence in each of the segment and increase its pan-India presence. CFSa steady cash cow business: GDL is one of the largest CFS players in India with a capacity of about 450,000 TEUs operating at four locations. The CFS business is the companys dominant business and contributed about 68% to its EBITDA in FY2011. Growing steadily the business has reached a stage where it continues to generate cash that can be utilized to not only grow the same business but also for investment in other businesses of cold storage and rail container freight. The CFS business is likely to remain the cash cow for GDL as it has high margins and very low debt on its books. Besides, the working capital requirement is not high in this business. Capacity expansion will further strengthen GDLs position in the CFS space. Foray into rail freight adds to the value chain, time to reap fruits: GDL ventured into the rail freight business in 2007 after the government opened the sector to the private players. Despite its capital intensive nature the business managed to break even in Q3FY2011 even though GDLs competitors in this field are still struggling. Today, GDL has emerged as the countrys second largest container rail freight operator after Concor and largest private player. It owns and operates a fleet of 21 trains from its three inland container depots (ICDs) and plans to increase its capacity further in terms of both rakes and ICDs. With its Faridabad ICD ready to become operational in a month and more rakes coming in, the business is going to fuel its growth over the coming years. We expect GDLs revenue and net profit to grow at 17% and 11% CAGR respectively over FY2012-14. Buy with price target of Rs173: We like GDL since it has evolved as an integrated logistic player. Its CFS business is a cash cow while its investments in the rail and cold storage businesses have started bearing fruits. The expansion in all the business segments would boost the earnings and support the valuations. The stock currently trades at 10.5x and 9.7x its FY2012E and FY2013E earnings. Using the DCF method we have valued all the three divisions, assigning values of Rs139 to the core CFS business Rs22 to the rail freight business and Rs12 to the cold storage venture. We thus arrive at a total value of Rs173. At our price target, GDL shall trade at 12.8x its FY2013E earnings, which is lower compared to its five-year average PER of 13.5x. We, therefore, recommend a Buy on GDL.
KEY FINANCIALS Particulars Sales (Rs cr) % Y-o-Y growth EBITDA (Rs cr) Margins (%) Adjusted net profit (Rs cr) % Y-o-Y growth EPS (Rs) 3m -11.4 -10.7 6m -3.5 1.7 12m 29.1 32.5 % Y-o-Y growth PER (x) Book value (Rs) P/BV (Rs) RoCE (%) RoNW (%)
SHAREHOLDING PATTERN
Corporate Bodies 6% Institutions 15%
Promoters 41%
Foreign 28%
Public & others 10%
PRICE CHART
160 150 140 130 120 110 100 90 Jan-11 Jul-11 Apr-11 Jan-12 Oct-11
FY2010 516.6 14.6 124.9 24.2 79.2 0.0 7.3 -0.2 17.9 63.2 2.1 9.9 12.3
FY2011 599.1 16.0 159.7 26.7 96.8 22.2 9.0 22.1 14.6 64.9 2.0 11.5 14.3
FY2012E 764.0 27.5 244.8 32.0 134.5 39.0 12.4 38.9 10.5 70.3 1.9 16.9 18.8
FY2013E 877.5 14.9 271.3 30.9 146.6 9.0 13.6 9.0 9.7 76.8 1.7 17.3 18.7
FY2014E 1,051.3 19.8 316.1 30.1 164.4 12.1 15.2 12.1 8.6 85.0 1.5 19.0 19.1
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -1.1 -11.8
For further details, please visit the Research section of our website, sharekhan.com.
15
March 2012
STOCK UPDATE
EQUITY
FUNDAMENTALS
ANDHRA BANK
CANNONBALL
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs140 Rs6,172 cr Rs190/1112 5.6 lakh 532418 ANDHRABANK ANDHRABANK 23.5 cr
BUY; CMP: RS110 FEBRUARY 3, 2012 Price target revised to Rs140

RESULT HIGHLIGHTS
Andhra Banks Q3FY2012 results were in line with our estimates as the net profit at Rs303 crore showed a decline of 8.4% year on year (YoY) and 4.1% quarter on quarter (QoQ). The decline in the profits was mainly due to a sharp rise in provisions (up 80% YoY). The net interest income (NII) growth was slightly higher than our estimate as it grew by 17.1% YoY. The growth in the NII was contributed by a sequential growth in advances (up 6.3% QoQ) and stable net interest margins (NIMs; ie 3.81% in Q3FY2012 vs 3.82% in Q2FY2012). Led by a strong growth in recoveries the asset quality improved on a sequential basis as the gross and net non-performing assets (NPAs) were at 2.38% and 1.21% compared with 2.67% and 1.48% respectively in Q2FY2012. The bank restructured Rs1,200 crore of advances in Q3FY2012 (outstanding restructured advances at Rs3,676 crore). The non-interest income registered a growth of 18.4% YoY and 32.3% QoQ contributed by a growth in the fee income (up 11.9% YoY and 24.7% QoQ). The cost-to-income ratio declined to 37% from 39.2% in Q2FY2012.
Public & others 14% Foreign 13% Promoter 58%
MF & FI 15%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 34.1 19.2 3m -8.7 -8.7 6m -21.1 -18.4 12m -18.3 -16.5
Valuations: We expect the earnings of the bank to grow at a CAGR of 11.5% (FY201113) leading to a return on asset of approximately 1.1%. Therefore, due to the improving trends on the asset quality front and the attractive valuations (0.7x FY2013 book value) we revise our price target to Rs140 (0.9x FY2013E earnings). We upgrade the rating on the stock from Hold to Buy.
BHARTI AIRTEL
APPLE GREEN
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs450 Rs134,053 cr Rs447/309 57.3 lakh 532454 BHARTIARTL BHARTIARTL 119.6 cr

RESULT HIGHLIGHTS
Results below expectations: Bharti Airtel (Bharti)s Q3FY2012 earnings fell short of our as well as the Streets expectations. The adjusted net profit for the quarter stood at Rs1,003 crore (down 15.7% quarter on quarter [QoQ]), which was 23% lower than our expectation. The biggest negative surprise for the quarter came in the form of a 140-basis-point sequential contraction in the operating profit margin (OPM). The consolidated OPM for the quarter came in at 32.2% vs our expectation of 34.4%. Non-mobile business the biggest reason behind the underperformance: The core business (India mobile business + Africa business), which forms approximately 90% of the companys total business, performed decently on the revenue as well as margin fronts. The performance of the non-mobile business deteriorated during the quarter Incorporating results; adjusting earnings estimates for FY2012 and FY2013: We have adjusted our FY2012 and FY2013 earnings estimates downwards by 19.2% and 13% respectively. Steady performance of core business and likely improvement in competitive environment keep us bullish: The core business continued to deliver well. There were signs of improving competitive intensity in the market place too (read Supreme Court verdict on cancellation of the licence of 122 competitors). Further, the potential in the Africa business keeps us bullish on Bharti. We maintain our Buy rating on the stock with a revised price target of Rs450 (8.1x FY2013 EV/EBITDA).
Public & Others 2% Foreign 18% Institutions 8% Non-promoter corporate 4%
Promoters 68%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 14.5 3.0 3m -4.7 -5.1 6m -8.7 -10.7 12m 13.7 14.8
March 2012
16
EQUITY
FUNDAMENTALS
STOCK UPDATE
CESC
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs405 Rs3,391 cr Rs364/186 1.9 lakh 500084 CESC CESC 6 cr
RESULT HIGHLIGHTS
Results below estimate on lower sales and higher provisioning: CESCs sales in Q3FY2012 grew by 11% year on year (YoY) but declined by 17% quarter on quarter (QoQ) to Rs1,032 crore, 5% lower than our estimate. The fuel cost as a percentage of sales surged from 36% in Q3FY2011 and 37% in Q2FY2012 to 42% in Q3FY2012. Moreover, the company is awaiting tariff order for 2011-12; hence it has made some provision for higher operational and maintenance costs, translating into higher operating cost compared with the last year. The operating profit margin (OPM) contracted by 656 basis points YoY to 23%. The profit before tax (PBT) reported at Rs92 crore is down 33% YoY and 35% QoQ. The net profit recorded a decline of 33% YoY and 35% QoQ to Rs74 crore, against our estimate of Rs113 crore. We fine-tune estimates and price target: We have revised down our sales estimate by 3% each for FY2012 and FY2013. We have trimmed our operating profit estimate by 8% and 6% for FY2012 and FY2013 respectively. Effectively, we have cut our net profit estimate by 15% for FY2012 and by 13% for FY2013. Consequently, we have cut our price target from Rs413 to Rs405. Spencers sustained profitability at store level: The total number of Spencers outlets by the end of M9FY2012 stood at 195 and the total trading area remained at 1,017,000 square feet (sq ft) by the end of M9FY2012. The same-store sales have increased by 15.9% YoY to Rs1,000 per sq ft in M9FY2011. It recorded EBITDA of Rs35 per sq ft per month in M9FY2012 against Rs31 per sq ft in H1FY2012. Valuation and view: We revise down our price target from Rs413 to Rs405. However, we continue to rate CESC as a Buy as we believe it is one of the cheapest utility stocks available (0.6x FY2012 BV) in the Indian market.
Others 13% Institutions 17%
Promoters 52%
Foreign 18%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 30.7 19.0 3m 3.2 0.8 6m -14.0 -17.3 12m 3.3 0.2
EROS INTERNATIONAL MEDIA

EMERGING STAR
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs298 Rs1,923 cr Rs277/124 3.0 lakh 533261 EROSMEDIA EROSMEDIA 2.02 cr
BUY; CMP: RS210 FEBRUARY 14, 2012 Stellar performance in a seasonally strong quarter
RESULT HIGHLIGHTS
Strong performance: For the quarter ended December 2011, Eros International Media Ltd (EIML) reported a strong set of numbers powered by a strong box office performance of its releases like Ra.One, Rockstar and Desi Boyz. The three releases taken together had a box office collection of about Rs330 crore. For the quarter, the companys revenues jumped by 46% year on year (YoY) to Rs408.4 crore Overall, the company released 19 films in the quarter including six in Hindi, 12 in Tamil and one in Punjabi. Impressive margin performance: The EBITDA margin improved by 250 basis points YoY to 24.7% on the back of the strong revenue performance and higher catalogue sales in the Tamil film business. On a reported basis, after the prior-period tax provisioning of Rs2.3 crore the net profit grew by 61.4% YoY to Rs69.1 crore. Big releases lined up for CY2012: EIML has lined up strong releases for CY2012 including Agent Vinod, which is to be released in March 2012, and Housefull 2, to be released in April 2012. As per the current plan, the company has ten Hindi films, the Rajnikanth starrer Tamil 3D film Kochadaiyaan and the Vijay starrer Yohan (due for release in Q3FY2013) lined up for CY2012. Valuation: We remain positive about EIMLs growth prospects for the coming years and derive comfort from the strong execution expertise of its management. The growing traction in the satellite rights and other media segments would provide further opportunity to de-risk its business model. At the current market price of Rs210, the stock is attractively available at a reasonable valuation of 9x FY2013 earnings estimate. We maintain our Buy rating on the stock with a price target of Rs298.
Foreign 9% Public & Others 7% Institutions 3% Non-promoter corporate 3% Promoters 78%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 4.0 -5.6 3m -21.3 -23.9 6m 1.5 -4.3 12m 36.4 34.1
17
March 2012
STOCK UPDATE
EQUITY
FUNDAMENTALS
GLAXOSMITHKLINE CONSUMER HEALTHCARE

EVERGREEN
COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no of shares): BSE code: NSE code: Sharekhan code: Free float (no of shares): Rs3,000 Rs11,100 cr Rs2700/1972 16,678 500676 GSKCONS GSKCONS 2.4 cr
BUY; CMP: RS2,637 FEBRUARY 6, 2012 PAT largely in line with expectations
RESULT HIGHLIGHTS
GlaxoSmithKline Consumer Healthcare (GSK Consumer)s net sales grew by 18.6% year on year (YoY) in Q4CY2011 with the overall volume growth standing at 11% YoY. The price-led growth during the quarter stood at 8% YoY. The raw material cost inflation for the quarter stood at 13%. However, the price hikes in the portfolio aided in mitigating the cost pressure and hence the gross profit margin stood almost flat at 64.4%. However, a substantial increase in the advertisement spend and other expenses resulted in the operating profit margin (OPM) declining by 127 basis points YoY to 10.2%. Hence, the operating profit grew by just 5.5% YoY to Rs61.6 crore. However, a 33.3% growth YoY in the business auxiliary income and a 37.5% growth YoY in the interest resulted in a 21.2% growth YoY in the profit before tax. The adjusted net profit grew by 23.0% YoY to Rs66.0 crore, which was largely in line with our expectation of Rs63 crore for the quarter. Outlook and valuation: We have broadly maintained our earnings estimates for CY2012 and CY2013. We expect GSK Consumers top line to grow at a CAGR of 20% over CY2011-13E with the sales volume growth standing in the range of 10-12% over the same period. With the OPM likely to be in the range of 16-17%, we expect the bottom line to grow at a CAGR of 20% over the same period. We like GSK Consumer largely on account of its market leadership in the lowly penetrated malted food drinks segment, strong balance sheet with cash of more than Rs1,000 crore and good dividend pay-out policy. We maintain our Buy recommendation on the stock with a price target of Rs3,000. At the current market price the stock is trading at 25.8x its CY2012E EPS of Rs102.0 and 21.7x its CY2013E EPS of Rs121.7.
Others 25% Promoters 43% FIIs 15% Domestic institutions 17%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 5.4 -4.7 3m 11.9 11.0 6m 10.5 12.1 12m 30.0 34.3
INDIA CEMENTS
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs105 Rs2,887 cr Rs105/62 9.3 lakh 530005 INDIACEM INDIACEM 23.0 cr
HOLD; CMP: RS94 FEBRUARY 6, 2012 Price target revised to Rs105

RESULT HIGHLIGHTS
India Cements in its Q3FY2012 results delivered an impressive performance and posted a 177.4% year-on-year (Y-o-Y) growth in its adjusted net profit to Rs56 crore which is well ahead of our as well as the Streets estimates largely on account of better than expected operating profit margin (OPM) and much lower than expected effective tax rate. The net sales of the company grew by 20.6% YoY to Rs941.5 crore (much in line with our estimates). The net sales also include revenues from the Indian Premier League (IPL) franchise, wind power and shipping businesses. The revenue from the cement division has improved by 24% YoY driven by a 15.7% growth in the average cement realisation. On the margin front the OPM expanded by 450 basis points YoY to 20.7% due to a 15.7% increase in realisations. The blended EBITDA per tonne has increased by 89% YoY to Rs861. The effective tax rate worked out to just 9.2% as compared to 35% in the corresponding quarter of the previous year on account of tax paid on redemption of foreign currency convertible bonds (FCCBs). A power plant of 50MW capacity at Tamil Nadu for captive requirement has been commissioned during the month of January 2012. Hence the positive impact in terms of regular power supply and cost savings will reflect in FY2013. We are incorporating better than expected average realisations and upgrading our earnings estimates for FY2012 and FY2013. The revised earnings per share (EPS) now stands at Rs9.7 and Rs11.9 respectively. We maintain our Hold recommendation on the stock with a revised price target of Rs105. At the current market price the stock trades at a price earning (PE) of 8x discounting the EPS for FY2013E and EV/EBITDA of 4.5x its FY2013E earnings.
Institutions 16% Promoters 26%
Foreign 27% Public & others 31%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 35.0 22.1 3m 17.1 16.1 6m 41.3 43.3 12m 4.2 7.6
March 2012
18
EQUITY
FUNDAMENTALS
STOCK UPDATE
IPCA LABORATORIES
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs389 Rs7,944 cr Rs351/230 1.3 lakh 524494 IPCALAB IPCALAB 6.8 cr
BUY; CMP: RS316 FEBRUARY 1, 2012 Strong traction in international business

RESULT HIGHLIGHTS
Impressive operating performance, but high fixed costs and forex losses eat into profit: During Q3FY2012, Ipca Laboratories (Ipca) reported a 29% year-on-year (Y-o-Y) growth in net sales to Rs601.8 crore. The growth was mainly driven by the export of formulations, which grew 73% year on year (YoY) to Rs290 crore during the quarter on the back of favourable currency movement and increase in the uptake in the tender business (up 312% YoY). The operating profit margin (OPM) improved by an impressive 346 basis points to 23% during the quarter, mainly on a better product mix and favourable foreign exchange (forex) position. However, a 93% Y-o-Y rise in the interest cost and a 223% jump in depreciation, coupled with a forex loss of Rs40 crore (vs a gain of Rs11.2 crore in Q3FY2011), led the net profit to flatten during the quarter to Rs63.9 crore. Excluding the impact of the forex losses, the adjusted net profit would have grown by an impressive 97% YoY to Rs104 crore. We fine-tune our estimates: We have upped our revenue estimates by 5.3% and 4.8% for FY2012 and FY2013 respectively to factor in the better than expected revenues from the institutional tender business, the ramp-up in US sales and the pick-up in the domestic formulation market. Besides, a better than expected other operating income and lower depreciation prompt us to revise our earnings estimates by 14% and 7% for FY2012 and FY2013 respectively. Maintain Buy with a revised price target of Rs389: The stock is currently trading at 12.1x and 10.7x FY2012E and FY2013E earning per share (EPS) respectively. We maintain our Buy rating on the stock with a revised price target of Rs389 (13.2x FY2013E EPS).
Public and others 12% Non-promoter corp 10% Institutions 23%
Promoters 46%
Foreign 9%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 8.2 -2.9 3m 17.8 21.1 6m -8.7 -3.8 12m -0.7 4.3
ISMT
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs36 Rs439 cr Rs60/22 57,886 532479 ISMTLTD ISMTLTD 7.1 cr
RESULT HIGHLIGHTS
Steady revenue growth: ISMT reported steady revenue numbers for Q3FY2012 with its net sales rising by 22.5% year on year (YoY) to Rs464.5 crore on the back of a volume growth and an improvement in the realisation. The tube segment reported a 14.7% volume growth and a 6.8% improvement in its realisation YoY. The steel segment reported a 13.9% growth in its volume and a 7.4% improvement in its realisation YoY in the same quarter. OPM declines: Despite the volume growth and realisation improvement, the EBITDA margin contracted by 510 basis points YoY to 11.4% mainly due to input cost pressures. The raw material cost as a percentage of sales increased from 45.2% in Q3FY2011 to 51.4% in Q3FY2012 which led to a 16.5% fall YoY in the EBITDA to Rs53.6 crore. Bottom line affected by forex charge: On the back of the rupees depreciation against the dollar, the company booked a foreign exchange (forex) loss of Rs6.9 crore against a gain of Rs2.9 crore in the previous quarter. On the back of a tax credit of Rs4.5 crore, against tax provisioning of Rs10 crore in the corresponding previous quarter, the fall in the net profit was restricted to 87.9% at Rs1.8 crore against a 111% fall in the profit before tax. Valuation and view: In view of the cost pressures we have lowered our margin estimates to 12.7% and 14.3% for FY2012 and FY2013 respectively. We have downgraded our earnings estimates by 33% and 14.3% for FY2012 and FY2013 respectively. At the current market price, the stock is available at 5x FY2013 estimated earnings. We maintain our Buy rating on the stock with a revised price target of Rs36.
Public & Others 27% Foreign 7% Institutions 10% Non-promoter corporate 4% Promoters 52%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 6.2 -5.9 3m -13.5 -15.9 6m -10.2 -15.4 12m -39.4 -41.1
19
March 2012
STOCK UPDATE
EQUITY
FUNDAMENTALS
MADRAS CEMENT
CANNONBALL
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs138 Rs3,069 cr Rs131/79 1.2 lakh 500260 MADRASCEM MADRASCEM 23.3 cr

RESULT HIGHLIGHTS
Madras Cements in its Q3FY2012 results delivered an impressive performance and posted an adjusted net profit of Rs76.8 crore (up 76.7% year on year [YoY]) which is well ahead of our as well as the Streets estimates. The impressive performance during the quarter was on account of a healthy growth in its volume as well as average realisation. Further the company has also benefited in terms of a better operating leverage. The overall revenue of the company increased by 27.9% YoY to Rs741 crore. The revenue growth has been driven by a strong volume growth of 15.9% YoY and increase in average realisation by 11.7% YoY. The demand environment in the southern region has partially recovered particularly in Tamil Nadu and Kerala. The operating profit margin (OPM) expanded by 243 basis points YoY to 28% on account of increase in the realisation by 11.7%. However, cost pressure has partially offset the benefit arising from increase in realisation. The EBDITA per tonne for the quarter increased by 27.2% YoY to Rs1,161. We are upgrading our earnings estimates for FY2012 and FY2013, mainly to factor in higher than expected cement realisation. The revised earnings per share (EPS) for FY2012 now stands Rs14.9 and for FY2013 we estimate the EPS to be Rs16.3. We maintain our Hold recommendation with a revised price target of Rs138. At the current market price the stock trades at a PE of 7.9x and EV/EBITDA of 5.2x its FY2013 estimated earnings.
Institutions 21% Promoters 42%
Foreign 8%
Public & others 29%
PRICE PERFORMANCE
MAHINDRA & MAHINDRA

APPLE GREEN
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs740 Rs42,164 cr Rs875/585 22.9 lakh 500520 M&M M&M 45.8 cr

Q3FY2012 PAT in line, adjusted for one-time exchange reversal: Mahindra and Mahindra (M&M) reported a stand-alone profit after tax (PAT) of Rs662 crore for Q3FY2012. This includes a one-time gain of Rs39.86 crore related to the reversal of an exchange difference charge. Adjusting for this the company reported a PAT of Rs635 crore, marginally higher than our estimate.
Highlights of Q3FY2012 performance

A 30-basis-point sequential improvement in the earnings before interest and tax (EBIT) margin for the tractor business has surprised us. Our concerns of deteriorating profitability of the tractor division were unfounded. A favourable operating leverage was witnessed in the staff cost, which moderated to 5.4% of sales, the lowest in six quarters. The other expenses after adjusting for the Rs39.86 crore of exchange reversal were the lowest ever for any quarter at 8.6% of the sales. The operating profit margin (OPM) adjusting for the exchange reversal was the lowest in two years at 11.7% on account of a sharp increase in the raw material cost. Outlook and valuation: We value the M&M stand-alone company at Rs550 a share, discounting the FY2013E earnings by 13x. We have given a lower discount as we expect the parent companys margin to drop to lower double digits in FY2013 as the proportion of the traded products manufactured by Mahindra Vehicle Manufacturers Ltd (MVML) increases. We have valued MVML separately at Rs55 a share. The total value of the subsidiaries including MVML is estimated at Rs190 a share. We arrive at a price target of Rs740 and recommend Hold on the stock.
Public & Others 15% Non Corp Holdings 10% Institutions 20% Promoters 25%
Foreign 30%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 5.5 -5.1 3m -17.5 -17.9 6m 5.6 3.2 12m 4.7 5.7
March 2012
20
EQUITY
FUNDAMENTALS
STOCK UPDATE
MARICO
APPLE GREEN
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs186 Rs9,960 cr Rs174/117 2.7 lakh 531642 MARICO MARICO 22.9 cr
RESULT HIGHLIGHTS
Maricos Q3FY2012 consolidated net sales grew by 29.4% year on year (YoY) to Rs1,057.8 crore, driven by a mix of volume growth (of 20% YoY) and a price-led growth in Q3FY2012. The gross profit margin (GPM) improved by 114 basis points YoY and 518 basis points sequentially to 48.5%. However the operating profit margin (OPM) was down 68 basis points YoY to 11.5% mainly on account of a higher than expected surge in the advertisement spends during the quarter. The operating profit grew by 22.1% YoY to Rs121.7 crore. However, higher depreciation charges and a higher incidence of tax YoY resulted in a 12.9% growth YoY in the adjusted net profit to Rs78.5 crore. Marico will acquire Set Wet, Livon, Zatak and certain other personal care brands from Reckitt Benckiser (RB) for an undisclosed sum (media reports put the deal value in the range of Rs450-500 crore). These brands are the top three in the domestic hair gel, leave-on hair serum and male deodorant categories respectively, and are growing at around 25% per annum. The brands collectively are expected to achieve around Rs150 crore of revenues in FY2012. The GPM of these brands is much higher than Maricos GPM. Though this acquisition is positive from longer-term perspective, we dont expect the same to add to the bottom line of Marico in the near term. Outlook and view: We have revised the price target for the stock to Rs186 (22x its FY2014E EPS of Rs8.4). At the current market price the stock trades at 22.8x its FY2013E EPS of Rs7.1 and 19.2x its FY2014E EPS of Rs8.4. We recommend a Buy on the stock.
Others 6% Foreign & Institutions 31%
Promoters 63%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 8.7 -3.6 3m 11.1 2.9 6m 4.3 -3.9 12m 31.2 29.9
ORBIT CORPORATION
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs70 Rs608 cr Rs62/25 3 lakh 532837 ORBITCORP ORBITCORP 6.04 cr
RESULT HIGHLIGHTS
Revenue down but margin improves; interest cost dents PAT: Orbit Corporation (Orbit)s consolidated revenues were down 37% year on year (YoY) and 31% sequentially in Q3FY2012 due to weak execution across projects and poor presales. The operating profit margin (OPM) was up 125 basis points YoY to 54% due to higher revenue booking from the Napean Sea Road premium properties which garnered high margins. However a dip in the top line along with escalating interest burden and a higher tax payout completely negated the strong margin expansion. As a result, the profit after tax (PAT) declined by 86% YoY and by 20% on a sequential basis. Presales improve sequentially: The presales for the quarter stood at Rs71.1 crore, better compared to Q2FY2012s presales of a mere Rs2.41 crore but poor as against Rs133.5 crore of presales attained in Q3FY2011. Downgrading estimates for FY2012 but retaining FY2013s: For FY2012 we are lowering our EBITDA by 3% on account of lower margins. Further with a rise in interest cost for the company and a dip in margins we are reducing our FY2012 earnings by 17%. Maintain Buy, price target revised to Rs70: The next couple of quarters need to be keenly watched in terms of the cut in interest rate cycle and the progress on the approvals front for the company. We like Orbit given its presence in the key property market Mumbaiwhere it caters to the luxury segment which is relatively stable in terms of pricing. Hence we maintain our Buy rating on the stock and reduce our discount given to the net asset value (NAV) to 50% which results in a revision of the target price upwards to Rs70 from Rs50 earlier. At the current market price, the stock trades at 7.2x its FY2013E earnings.
Bodies Corporate 24% Institutions 1% Foreign 1% Public 26% Promoters 48%
PRICE PERFORMANCE
21
March 2012
STOCK UPDATE
EQUITY
FUNDAMENTALS
PRATIBHA INDUSTRIES
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs65 Rs483 cr Rs74/28 86,128 532718 PRATIBHA PRATIBHA 4.7 cr
BUY; CMP: RS49 FEBRUARY 9, 2012 Large order win translates into strong revenue
RESULT HIGHLIGHTS
Strong results: Pratibha Industries Ltd (PIL)s Q3FY2012 consolidated revenues grew by 53% year on year (YoY) led by strong execution and start of revenue recognition from the recent order wins. However the manufacturing division disappointed with a 48% YoY decline in revenues. The operating profit margin (OPM) contracted by 250 basis points YoY to 12.5% due to the cost booked in some new projects but the revenue is not recognised. Thus a lower OPM and a higher interest cost led to a 17% growth in the adjusted net profit. However, the reported net profit grew by 35% YoY led by profit from the sale of office premises in Chembur, Mumbai for Rs3.7 crore. To merge PPSL, later hive it off into a subsidiary: PIL is planning to merge Pratibha Pipes and Structural Ltd (PPSL) into itself, and later hive off the merged entity along with the HSAW pipe division into a 100% subsidiary unit. PIL has proposed a share exchange ratio of 6:1 which would result in a 12.5% equity dilution for PIL. Based on the current market price, the deal looks fairly priced at a price to book value (P/BV) of 1x. Price target revised to Rs65: We have raised our revenue estimates for FY2012 and FY2013 to factor in strong order inflow and strong execution. However we are lowering our FY2012 earnings estimate by 3% due to lower OPM and a higher interest cost. But we are revising our FY2013 net profit estimate upward by 9.5% to factor in the strong revenue growth. The earnings estimate for FY2013 will fall by 6% due to the equity dilution of 12.5%. Once we consolidate PPSLs earnings with PIL, it will be earnings accretive. Going ahead, the key trigger would be the roping in of a strategic partner in the HSAW pipe business. We maintain our Buy recommendation with a revised price target of Rs65.
Institutions 5% Foreign 17% Promoters 53% Public & others 25%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 28.1 14.7 3m 11.1 10.1 6m -0.2 -4.7 12m -8.3 -9.2
PROVOGUE INDIA
UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs62 Rs378 cr Rs49/17 3.2 lakh 532647 PROVOGUE PROVOGUE 6.3 cr
BUY; CMP: RS33

RESULT HIGHLIGHTS
FEBRUARY 17, 2012
Deep valuemaintain Buy; price target revised to Rs62

Q3FY2012 weak results; below expectation: Provogue India posted a weak performance for Q3FY2012 and the same was below our expectation. Though the revenue grew by 20.5% year on year (YoY), a sharp erosion in the operating profitability (led by an increased cost of goods sold) resulted in a 41.7% contraction in the operating profit and a 48.3% year-on-year (Y-o-Y) contraction in the net adjusted
Public & Others 26% Foreign 18% Institutions 1% Non-promoter corporate 10%
Valuation and view

Taking cognisance of the poor Q3FY2012 performance and the general slowing economy we have reduced our FY2012 earnings estimate by 18% and our FY2013 earnings estimate by 12%. Our revised earnings estimates for FY2012 and FY2013 are Rs2.8 and Rs3.6 respectively. Despite the weak results and the reduction in our estimates, we remain positive on Provogue India as we believe the company provides an exciting opportunity to play the buoyancy in the domestic consumption space with the brand Provogue and the retail-centric real estate business Prozone. We value Provogue India on a sum-of-the-parts (SOTP) basis. We value the core business on a price-to-earnings basis at 10x FY2013 (Rs36 per share). Based on the net asset value (NAV) the share of the real estate business (Prozone) works out to Rs26 per share (we are discounting the NAV by 30% of the actual Rs37). Thus, we maintain our Buy recommendation on the stock with a revised price target of Rs62.
Promoters 45%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 26.7 12.9 3m 24.3 14.7 6m 11.6 2.5 12m -24.1 -24.6
March 2012
22
EQUITY
FUNDAMENTALS
STOCK UPDATE
PTC INDIA
APPLE GREEN
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs71 Rs1,504 cr Rs103/38 11.2 lakh 532524 PTC PTC 21.6 cr
BUY; CMP: RS51

RESULT HIGHLIGHTS
FEBRUARY 2, 2012
No respite on SEBs woes, price target revised to Rs71

PTC Indias Q3FY2012 results were starkly below expectations as the traded volumes (of power) fell sharply on a yearly basis and the interest cost rose to Rs10.3 crore for the quarter. The interest cost rose because the company had raised debt during Q2FY2012 to support its liquidity. The liquidity got squeezed as payments from the state electricity boards (SEBs) continued to come with a lag (mainly from Tamil Nadu and Uttar Pradesh SEBs). The trading margins also contracted due to a fall in the higher-margin short-term trade volumes. The company is sitting on a cumulative surcharge of Rs150 crore to be booked on a receipt basis when the payments come from the above mentioned SEBs. We have further downgraded our estimates for FY2012 and FY2013 by 21% and 23% respectively in view of the lower trade volumes, the other income assumption and the higher interest cost. We expect the profit from its core trading business to post a CAGR of 4.2% over FY2011-13. We expect the overall power traded volumes will be significantly boosted by the longterm power purchase agreements (PPAs) in the next two to three years when the undersigned power projects would start commercial operations. However, a power tariff hike and an improvement in the execution of the power projects have become essential to keep PTC Indias growth story intact. At the current market price, the stock is trading at 0.6x FY2012 estimated book value which still looks attractive. Hence, we maintain our Buy rating with a revised sum-of-the-parts based price target of Rs71.
Others 24% Promoters 16% Foreign 14%
Institutions 46%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 25.9 12.3 3m -30.5 -29.9 6m -35.1 -31.7 12m -50.2 -48.9
RATNAMANI METALS AND TUBES

UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs132 Rs508 cr Rs134/90 8,159 520111 RATNAMANI RATNAMANI 1.9 cr
BUY; CMP: RS110 FEBRUARY 16, 2012 Strong revenue performance

RESULT HIGHLIGHTS
Revenues surge: Ratnamani Metals & Tubes (Ratnamani) reported another strong quarter in terms of revenue growthin Q3FY2012 its revenues grew by 74.2% on a year-on-year (Y-o-Y) basis to Rs280.7 crore. The sales growth was backed by a 140% growth year on year (YoY) in the carbon steel tube and pipe (CS pipe) segment and a 57% Y-o-Y jump in the stainless steel tube and pipe (SS pipe) segment. OPM affected by forex loss: The gross profit margin (GPM) dipped by 180 basis points YoY to 36.7% despite an increase in the realisation mainly due to a higher raw material cost. The operating profit margin (OPM) was down 560 basis points YoY to 14.9% despite a surge in the revenues. The fall was due to a foreign exchange (forex) loss of Rs12 crore on the marked-to-market (MTM) forex denominated loans. On the back of a 70% fall in the other income and a 54.8% increase in the tax outgo (with the effective tax rate up by 520 basis points to 29.6%), the net profit growth was at 19.2% to Rs19.8 crore. Valuation: In view of the volume and revenue performance of the quarter, we have tweaked our estimates for FY2012 and FY2013. Our revenue growth estimates have increased by 3.9% and 4.6% for FY2012 and FY2013 respectively while our earnings estimates have increased by 5.4% and 4.5% for FY2012 and FY2013 respectively. At the current market price, the stock is attractively trading at a price/earnings (PE) multiple of 4.7x its FY2013E earnings. We maintain our Buy rating on the stock with a price target of Rs132.
Foreign 12% Public & Others 24% Institutions 2% Non-promoter corporate 3% Promoters 59%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 9.0 -3.3 3m 6.9 -1.0 6m 9.3 0.7 12m -9.4 -10.3
23
March 2012
STOCK UPDATE
EQUITY
FUNDAMENTALS
STATE BANK OF INDIA

APPLE GREEN
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs2,400 Rs135,191 cr Rs2960/1576 29.8 lakh 500112 SBIN SBIN 25.8 cr
BUY; CMP: RS2,129 FEBRUARY 13, 2012 Price target revised to Rs2,400
RESULT HIGHLIGHTS
State Bank of India (SBI)s Q3FY2012 results were ahead of our estimates as the net profit grew by 15.4% year on year (YoY; up 16.1% quarter on quarter [QoQ]) to Rs3,263 crore. This was on account of a strong growth in the net interest income (NII) and a decline in the provision expenses. The NII grew by 26.7% YoY (up 10% QoQ) and was ahead of our estimate. The growth in the NII was contributed by a sequential expansion in the margins and a strong growth in the advances. The domestic net interest margin (NIM) expanded by 32 basis points QoQ to 4.39%. The business growth remained strong as the advances of the bank grew by 19.6% YoY (up 10% QoQ) led by a strong growth in the international as well as the agriculture advances. The deposits of the bank registered a growth of 13.9% YoY while the current account and savings account (CASA) ratio was at 47.5% (47.6% in Q2FY2012). The non-interest income of the bank declined by 35.8% YoY due to the losses (of Rs1,090 crore) contributed by the treasury, largely from the equity book. The fee income growth also remained subdued, partly contributed by a large base of Q3FY2011. The asset quality of the bank deteriorated on a sequential basis as the gross and net non-performing assets (NPAs) increased to 4.61% and 2.22% during the quarter from 4.19% and 2.04% in Q2FY2012 respectively. The provision coverage ratio of the bank declined to 62.5% from 63.5%. The bank also restructured Rs2,188 crore of advances in Q3FY2012.
Public & others 14% Foreign 8% MF & FI 19% Promoter 59%
PRICE PERFORMANCE
SUN PHARMACEUTICAL INDUSTRIES

UGLY DUCKLING
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs692 Rs52,898 cr Rs603/403 9.1 lakh 524715 SUNPHARMA SUNPHARMA 37.6 cr
BUY; CMP: RS552 FEBRUARY 13, 2012 Taro jacks up growth; price target set at Rs692
RESULT HIGHLIGHTS
Q3FY2012 results better than expected; guidance revised for FY2012: Sun Pharmaceutical Industries (Sun Pharma) in Q3FY2012 reported a 34% year-on-year (Y-o-Y) growth in net sales to Rs2,145 crore, which exceeded our estimate by 12%. The operating profit margin (OPM) swelled by 1,740 basis points year on year (YoY) to 44.9% during the quarter which helped the company register a 90% Y-o-Y rise in the net profit to Rs668 crore. The results were better than expected mainly on account of (a) an impressive performance by Taro Pharmaceutical Industries (Taro; a 66.3% subsidiary of Sun Pharma); (b) favourable currency movement; and (c) an upsurge in the bulk drug business (a 35% Y-o-Y rise in sales). The companys management has revised the revenue growth guidance to 32-34% for FY2012 from 28-30% earlier. We set a target price of Rs692; maintain Buy: As we get close to the end of FY2012, we base our price target on the FY2014 estimates. Our new price target at Rs692 implies 23x FY2014E earnings. We maintain our Buy rating on the stock. The stock is currently trading at 18.4x FY2014E earnings per share.
Non-promoter corporate 5% Institutions 6%
Public and others 5%
Foreign 19% Promoters 65%
Outlook:
1m 4.9 -4.6 3m 10.3 7.8 6m 13.1 8.7 12m 30.7 26.8
PRICE PERFORMANCE
(%) Absolute Relative to Sensex
In view of the better than expected performance by Taro, the management of Sun Pharma has revised the revenue guidance to 32-34% for FY2012 from 28-30% earlier. Though the revenue growth during Q3FY2012 was partially helped by a weaker rupee, but we believe the company has performed well at the operating front as well. We expect a CAGR of 24% and 22% in the revenue and profit respectively over FY2011-13E, mainly driven by Taros performance and organic growth in the base business.
March 2012
24
EQUITY
FUNDAMENTALS
STOCK UPDATE
TATA CHEMICALS
VULTURES PICK
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs400 Rs9,222 cr Rs392/288 3.0 lakh 500770 TATACHEM TATACHEM 17.6 cr
HOLD; CMP: RS362 FEBRUARY 13, 2012 Downgraded to Hold

RESULT HIGHLIGHTS
Tata Chemicals Ltd (TCL)s revenue from operations during Q3FY2012 was significantly higher than our expectation mainly due to a higher than expected growth in the volume offtake and a higher realisation across segments. The operating profit margin (OPM) at 14.6% decreased by 70 basis points (as per our expectation) compared to the Q2FY2011 OPM due to an increased input cost. During the quarter there were some extraordinary items, which included an unrealised loss of Rs7 crore on revaluation of an unhedged external commercial borrowing (ECB), impairment of assets worth Rs23 crore of bio fuel and Rallis India (Turbhe plant), a voluntary retirement scheme (VRS) of Rs17 at Rallis India and a profit of Rs21 crore from the sale of assets. The urea business would get affected by a planned shutdown of a plant in March and April this year. The outlook for soda ash and its prices would depend on the Chinese demand, which could soften in the coming months. There are signs of slower volume offtake in the North East Asia, China and Japan. We have largely kept our consolidated earnings estimate unchanged for FY2012, however we are marginally reducing our revenue and earnings estimates for FY2013 to factor in the lower than expected volume growth due to a planned shutdown of urea plant in April 2012. On the valuation front, we value TCL at 9.3x FY2013E earnings per share (EPS) and investment value of Rs45 per share and arrive at a fair price of Rs400. Given the limited upside from the current level and the relatively weak outlook, we downgrade our recommendation on the stock to Hold.
Public & others 24%
Promoter 32%
Foreign 13% MF & FI 31%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 11.3 1.3 3m 7.6 5.1 6m -1.4 -5.2 12m 20.5 16.9
UNITY INFRAPROJECTS
VULTURES PICK
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (No of shares): BSE code: NSE code: Sharekhan code: Free float (No of shares): Rs107 Rs359 cr Rs78/22 1.8 lakh 532746 UNITY UNITY 2.76 cr
RESULT HIGHLIGHTS
OPM expands; PAT contained by high interest cost: Unity Infrapojects (Unity)s net sales grew 10% year on year (YoY) and 26% quarter on quarter (QoQ) owing to the scheduled execution across projects. The operating profit margin (OPM) expanded by 210 basis points YoY to 14.5% in spite of the hike in cement, steel and diesel prices during the quarter. The profit after tax (PAT) growth was contained to 10% YoY and 20% sequentially on account of a higher interest burden which was up by 70% YoY owing to high debt on books. Plans private equity fund raising: Unity is looking at raising upto Rs175 crore from private equity in two of its projects namely 1)road build operate transfer (BOT) project in Rajasthan and 2)Nagpur real estate project and has initiated discussions for the same. It expects the deals to be through in three months. Upward revision in estimates for FY2013: We have revised our revenue estimate for FY2012 downwards by around 6% to factor in the slightly lower execution. However, the effect gets nullified due to an upward revision in the OPM by around 90 basis points. Thus, we are retaining our PAT estimate for FY2012. However, for FY2013 we are revising the net profit estimate upward by 4% on the back of the 60 basis point improvement in the OPM which gets marginally offset by a higher interest cost. Maintain Buy with a revised price target of Rs107: We continue to like the company, given its strong order inflow momentum and healthy lowest bidder position despite the adverse macro-economic environment. Further, the private equity fund raising would ease the liquidity pressure. Hence, we maintain our Buy recommendation on the stock with a revised price target of Rs107. At the current market price the stock is trading at a price earning (PE) multiple of 3.6x FY2012 and 2.7x FY2013 estimated earnings.
Foreign 3% Public & others 28% Institutions 6%
Promoters 63%
PRICE PERFORMANCE
25
March 2012
SHAREKHAN SPECIAL
EQUITY
FUNDAMENTALS
S SPECIAL SHAREKHAN HAREKHAN S PECIAL Monthly economy review

Economy: Industrial growth remains subdued; inflation continues to decline
In December 2011 the Index of Industrial Production (IIP) grew by 1.8%, which is a tad lower than the markets expectations. The relatively subdued growth was led by a weak performance in the manufacturing sector and a sharp decline in the capital goods sector. On a year-till-date (YTD) basis, the IIP growth stands at 3.6% as against 8.3% in the corresponding period of FY2011. The Wholesale Price Index (WPI)-based inflation for January 2012 came in at 6.55%, slightly lower than the Streets expectations. However, the inflation rate for November 2011 has been revised upwards to 9.46% from the provisional figure of 9.11%. The trade deficit for January 2012 expanded to $14.7 billion from $12.7 billion in December 2011. On a year-on-year (Y-oY) basis, the trade deficit increased by 117.9% and remains at higher levels. The growth in exports remained weak showing an increase of 10.1% YoY (up 6.7% in December 2011). Imports grew by 20.3% YoY (up 19.8% in December 2011).
OF CTOBER 06, 2008 EBRUARY 27, 2012

The deposits registered a growth of 15% YoY (as on February 10, 2012), which was lower than the 17.2% Y-o-Y growth seen during the previous month (on January 13, 2012). The growth in deposits has fallen due to the higher yields offered by the other debt instruments. The yields on the government securities (G-Secs; of ten-year maturity) stood at 8.21% as on February 24, 2012, in line with the previous months levels. The G-Sec yields across the long-term maturities have increased on a month-on-month (M-o-M) basis.
Equity market: FIIs remain buyers

During the month-till-date (MTD) period in February 2012 (February 1-15), the foreign institutional investors (FIIs) were net buyers of equities and the domestic mutual funds were net sellers of equities. For the MTD period in February 2012 (February 1-15), the FIIs bought equities worth Rs13,222 crore while the domestic mutual funds sold equities worth Rs1,015 crore.
Banking stocks outperform

In the last one month, the BSE Bankex has risen by 12.9% as compared with a gain of 8.3% recorded in the Sensex in the same period. The outperformance has been driven by the 50-basis-point CRR cut and the drop in the inflation numbers which favour monetary easing. In addition, the government has announced capital infusion in State Bank of India and the other public sector banks via Life Insurance Corporation of India.
For further details, please visit the Research section of our website, sharekhan.com
Banking: In view of tight liquidity another CRR cut expected

In its last policy meeting, the Reserve Bank of India (RBI) had reduced the cash reserve ratio (CRR) by 50 basis points. In line with the continued liquidity pressure and the need to support growth we expect the RBI to continue with its liquidity easing measures and expect another cut in the CRR in the forthcoming mid quarter policy review meeting. The credit offtake registered a growth of 15.7% YoY (as on February 10, 2012), which was higher than the growth of 16.4% recorded in the previous month (as on January 13, 2011). The credit growth is lower than the RBIs guidance of 16%.
SHAREKHAN SPECIAL S HAREKHAN S PECIAL Q3FY2012 earnings review

Earnings growth lower than estimated; margin pressure continues
During the third quarter of FY2012 the aggregate adjusted earnings of the Sensex companies (ex energy companies) grew by 4.8% year on year (YoY) and the performance was below expectations. The major negative surprises came from stocks like Reliance Industries Ltd (RIL), Tata Steel, Tata Power, DLF and Bharti Airtel. However, the shortfall was made up by the better than expected results from Tata Motors, Larsen and Toubro (L&T), Hindustan Unilever Ltd (HUL), Infosys, Sun Pharmaceuticals and Coal India. The aggregate revenue growth momentum remained strong at 25.2% during the quarter. The growth of the Sensex companies (ex energy companies) was all the better at 27% YoY. The revenue growth was boosted by the favourable impact of the rupees depreciation for export-oriented companies like RIL, Tata Motors and Sun Pharmaceuticals, and technology majors like Infosys and Tata Consultancy Services (TCS). Better average blended realisations also boosted the revenues (mainly of the consumer and automobile [auto] companies). The margin pressure continued in Q3FY2012 as well. The operating profit margin (OPM) of the Sensex companies (ex banks, oil companies and RIL) declined by 185 basis points, marking the fifth consecutive quarter of declining margins. In
OF CTOBER 06, 2008 EBRUARY 24, 2012

addition to the rising input cost, the foreign exchange (forex) related cost push also dented the margins and limited the growth in the aggregate earnings.
Slowing pace of earnings downgrades

The Sensex earnings estimate for FY2012 has been downgraded by 7.5% since April 2011 whereas the earnings estimate for FY2013 has been downgraded by 14.8% over the same period. The ratio of downgrades to upgrades is even as stocks like State Bank of India (SBI), Tata Motors, Maruti Suzuki and ICICI Bank have seen upgrades in their earnings estimates. However, stocks like Bharti Airtel, Tata Steel and RIL have witnessed downgrades due to their lower than expected third quarter results. Despite a sharp rise in the past six to seven weeks the sensex trades at around 13.7x one-year forward earnings, which is below the long-term mean of 15.0x price/earnings (PE) band. Going ahead, the pace of the downgrades is likely to decline while the market would for look for triggers in the Union Budget and the Reserve Bank of India (RBI)s policy review.
March 2012
26
EQUITY
FUNDAMENTALS
THEMATIC REPORT
SHAREKHAN SPECIAL B ANKING
OF CTOBER 06, 2008 EBRUARY 17, 2012 Switch from HDFC Bank to HDFC
iaries and investments at Rs235 per share) and upgraded our recommendation on the stock to Buyfrom Hold earlier. HDFC Bankthe best operational metrics among private sector banks but offers limited upside: While HDFC Bank is among the best private sector banks but tactically it can underperform HDFC in the next 6-12 months as seen in the past. This is due to the relatively slower rate of repricing of its assets and liabilities. The bank is essentially current account and savings account (CASA) funded for which the cost is fixed (4% for savings deposits) and is facing increased competition from the other private sector banks that are offering higher rates on saving deposits. The bank has also raised its deposit rates recently by 50-100 basis points to catch up with its peers; this will also affect its margins. In addition, 70% of its non-CASA deposits are from the retail segment where the cost is stickier. Further, the valuations have run up over the three-year mean and further upside seems limited from these levels.
HDFC BANKS VALUATION PREMIUM/DISCOUNT TO HDFC VS INTEREST RATES
40% 30% 20% 10% 0% Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 -10% -20% -30% -40% -50% Prem/(Dis c ) (% ) LHS A v g Dis c (% ) 10 y ear Gs ec (RHS) 4 3 Aug-11 Feb-12 8 7 6 5 10 9
KEY POINTS
Tactical switch from HDFC Bank to HDFC: In the past one year, HDFC Bank has appreciated by close to 30% as compared to the 14% appreciation in HDFC in the same period. This has usually been the case in a rising interest rate scenario due to HDFCs dependence on bulk/wholesale deposits and corporate loans. On the other hand, HDFC Bank benefits from its strong retail deposit (current account/savings account) and asset base. However, it is the other way round when the interest rate cycle reverses. HDFC tends to outperform relative to HDFC Bank in a declining interest rate scenario. The empirical evidence from the past interest rate cycle supports our argument. Thus, we expect the discount in the valuation of HDFC Bank (vs HDFC) to revert to a mean of 20% plus (from around 6-7% now) over the next one year. HDFCrelatively better placed to gain from the reversal in the interest rate cycle: As the interest rates ease out, HDFCs cost of funds is expected to decline relatively faster due to its dependence on wholesale funds that constitute 75% of its funding. Even on the assets side (advances), the bulk of its mortgage loans are on a floating rate. Plus, the advances under the dual rate home loan scheme (Rs22,000 crore of teaser loans with a lower interest rate for the initial two years) are scheduled to get re-priced over the next one year). Going ahead, as the operating environment improves the performance of the subsidiaries (insurance, asset management etc) should also improve, boosting the overall valuations and leading to a re-rating of the stock. In this note, we have revised our sum-of-the-parts (SOTP) based price target for HDFC to Rs785 per share (valuing the subsidHDFC VS HDFC BANK (P/BV)
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: Sharekhan Research
PERFORMANCE OF HDFC, HDFC BANK VS INTEREST RATES

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 HDFC Bank HDFC 10 year Gsec 10 9 8 7 6 5 4 3 2 1 0
HDFC Bank
HDFC
Source: Bloomberg
Source: Sharekhan Research, Bloomberg
27
March 2012
SECTOR UPDATE
EQUITY
FUNDAMENTALS
FERTILISERS
FEBRUARY 14, 2012 Consumption shift toward cheap fertilisers
Key points
Increase in import of NPK fertilisers (mainly low graded) and urea: In January 2012, the aggregate sales of the domestically produced fertilisers (by 15 leading manufacturers) declined by 17% as compared to that in the same period of the last year. In January 2012 the import of complex fertilisers and urea increased by 180% and 4% respectively. The DAP production was hit by a lower demand, an increase in the stock pile and the high cost of the other inputs. However, the shortfall was made up by the import of low-grade complex fertilisers, which are cheaper than DAP and MOP. Government to decrease subsidy pay-out for complex fertilisers: The government may reduce the subsidy pay-out range by 5 to 25% to complex fertiliser manufacturers in view of the decline in fertiliser prices in the international market. The prices of fertilisers have seen a declining trend in recent times due to a decrease in the demand. According to media sources, for FY2013 the government may reduce the subsidy pay-out on DAP by 24% to Rs15,000 per tonne (a decline of Rs4,763 per tonne) and that on MOP by 7% (a decline of Rs1,054 per tonne) to Rs15,000 per tonne. Consumption of urea declined during the month: There was a decrease of 8% in the consumption of urea in January 2012 mainly
due the low rainfall in coastal Andhra Pradesh, Rayalaseema and Telangana during the north-east monsoon rains. The total urea consumption decreased from 22.11 lakh tonne to 20.26 lakh tonne in January 2012. Urea is the largest fertiliser consumed in India as its price is still under government control. The fall in the consumption of urea was much lower compared with the nonurea fertilisers, which saw a fall of nearly 31% in January 2012 on account of higher prices and lower rainfall. Consumption of fertilisers has seen a marginal decline on YTD basis: For the first ten months of FY2012, the cumulative (including imports and domestic production) fertiliser sales declined slightly in the country. On a year-till-date (YTD) basis, the sales of the domestically produced fertilisers have seen a decline of 1.2% whereas the imports have declined by 14%. The reasons for the lower imports are the higher price in the international market, the low demand for MOP and DAP, and the huge pile of stock in the domestic market due to an increase in the prices of both nutrients.
TATA MOTORS
VIEWPOINT CMP: RS286
Firing on all cylinders
Stand-alone Q3FY2012 results: OPM remains under pressure, higher depreciation and forex loss affect profitability
In Q3FY2012 Tata Motors Ltd (TML)s revenues grew by 15.8% year on year (YoY) to Rs13,337.9 crore on the back of a 19.2% growth in the volumes. The realisation per vehicle dropped 2.9% YoY mainly on account of an adverse mix. The contribution per vehicle declined 15.4% YoY and 5.9% sequentially. The stand-alone operating profit margin (OPM) continued to decline for the fourth consecutive quarter. The margin at 6.4% was the lowest in three years and continued to face pressure on account of the rising commodity prices and higher marketing expenses particularly on passenger cars. A higher depreciation charge and a foreign exchange (forex) loss of Rs83 crore (on account of the revaluation of the foreign currency loans) further affected the profit after tax (PAT), which declined by 57.6% YoY to Rs173.67 crore. TML effected a price increase of 0.7% in the commercial vehicle (CV) segment and that of 1.6 to 2% in the passenger vehicle segment to mitigate the rising cost pressures. growth outlook for China with the premium segment outgrowing with an expectation of a mid double-digit growth. Jaguar is expected to build the momentum on the XF model by expanding its reach in various geographies in the Rest of World countries. Evoque is the biggest trump card for Land Rover and would continue to be the growth leader. The stand-alone outlook is positive on light commercial vehicles (LCVs) with additional capacity in Dharwad coming up on schedule. However, the company expects the competitive intensity to increase in passenger cars and the medium and heavy commercial vehicle segment. The variants from the Prima range, the World LCV range and ACE variants are expected.
FEBRUARY 15, 2012
Valuation
The Jaguar and Land Rover revenues and the stand-alone revenues form 96% of the consolidated entity. We have adjusted the impact of GBP60 million on the consolidated margin. We expect a margin of 14.1% in Q4FY2012. Our FY2012 consolidated earnings per share (EPS) estimate stands at Rs36. The stock has traded between 8x and 9x one-year forward earnings in the past. We are positive on the stock.
Outlook
The overall growth in various geographies is expected to remain modest. The management also indicated a single-digit industry
March 2012
28
EQUITY
TECHNICALS
TREND & VIEW
Out of the Channel

KST (-0.69561)
Sensex: Daily view

The Sensex had been forming higher tops and higher bottoms, completing a leg on the upside. It is now expected to consolidate between 18000 and 17000 levels in the short term. Wave 1 or A is already completed from 15135 levels and wave 2 or B is in process. The momentum indicators have given a negative crossover and are trading around the zero line, which is a negative sign for the market in the short term. Key supports are around 17280 and 17000 and resistance would be faced around 18000 and 18520 levels.
100.0%
-5
0.0%
18500
18000 23.6% 17500 38.2%
50.0%
17000
61.8% 16500
16000
15500
Short term Trend Up Trend reversal 17280 Support 17280 Resistance 18520 Target 18520
15000 24 31 8 November 14 21 28 5 12 December 19 26 2 2012 9 16 23 30 6 February 13 21 27 5 March 12
Sensex: Weekly view

The Sensex has broken out from the downward sloping channel, forming higher tops and higher bottoms and is also in the process of retesting the pattern. According to the Elliott wave theory, the Sensex has completed W-X-Y-X-Z correction and a new move on the upside has started, which can lead the Sensex up to 18520 and then till 19800.
W
KST (7.25795) 10 5 0 -5 -10 21500 21000 20500 X 20000 19500 19000
^
X 18500 18000 17500 17000
The first leg on the upside as wave 1 or A has completed and wave 2 or B is in the process with reversal of 17000 and target of 18830. The momentum indicators have given a positive crossover and are trading above the zero line, which is a positive sign for the market in the medium term.
Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Jun Jul Aug
16500
16000 Y
15500
15000
Sep
Oct
Nov
Dec
2012
Feb
Mar
Apr
May
Sensex: Monthly view

The Sensex has formed a double top around the all time high ie 21207, which is a crucial resistance going forward. It has been forming lower tops and lower bottoms, trading below the 20 month moving average (MMA) ie 18164, which will act as a crucial resistance in the medium term. The Sensex is now expected to retrace at least 61.8% of the entire fall from 2010 November highs (ie 21108) to the current lows (15135). The index is expected to target at least 18830 and then 19800, which are 61.8 % and 78.6% retracement levels respectively. The Sensex has retraced close to 50% of the previous rally from the 2009 lows ie 7697 to 2010 November high (ie 21108) and has now started a new cycle on the upside.
Medium term Trend Up Trend reversal 17000 Support 17000 Resistance 18830 Target 18830/19800
KST (-5.49638)
50 40 30 20 10 0 -10 -20 -30 -40 23000 22000
0.0%
21000 20000 19000
23.6%
18000 17000
38.2%
16000 15000
50.0% 14000 61.8% 13000 12000 11000
10000
9000
8000 100.0%
7000 2006 A M J J A S O N D 2007 A M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011 A M J J A S O N D 2012 A M J J A S O N D 2013
29
March 2012
MONTHLY VIEW
EQUITY
DERIVATIVES
Derivative view: Gains magnified

The February series had a cheerful start and continued its winning streak for the second consecutive month even though there were lots of uncertainties both domestically and globally. The rally paused a bit just before the day of expiry but it couldnt hinder the overall positive set-up of the market and the series finally settled with a gain of 6.30%. The March series witnessed a negative start as uncertainties brewed up ahead of major events, such as state assembly election results, monetary policy review by the Reserve Bank of India (RBI), the Railway Budget and the Union Budget. The March series commenced the month with Rs13,931 crore vs Rs12,365 crore in Nifty futures in the February series; Rs29,562 crore vs Rs27,499 crore in stocks futures in the February series; Rs48,830 crore vs Rs45,111 crore in index options in the February series; and Rs2,198 crore vs Rs2,078 crore in stocks options in the February series. The same were above the Streets expectations compared with the February series.
MARKET WIDE AND NIFTY ROLLOVER PAY-OFF DIAGRAM
80 60 40 20 0 4500 4600 4700 4800 4900 5000 5100 5200 5300 5400 5500 5600 5700 5800 5900 6000 -20 -40
Strategy for the month: Nifty Bear Put Spread

A bear put spread is created when the index is expected to move in a downward direction. The bear put spread is created by buying slightly out-of-the-money put options and selling higher out-of-the-money put options of the same index and expiry. It is a limited profit, limited loss strategy with a favourable risk: reward ratio.
SCRIP Nifty PE 5300 Nifty PE 5200 ACTION Buy Sell FORMATION RATE 117.85 85.05 QUANTITY 100 100 OUTFLOW 32.80
The strategy has an initial outflow of 32.80 points in the Nifty, which is Rs3,280 (32.80*100), and a maximum profit potential of 67.20 points in the Nifty, which is Rs6,720 (67.20*100). The breakeven point is 5267.20 (the higher strike price [5300] the gross outflow [32.80 points]).
On the call option side, the strike of 5600 stands with the highest number of shares in open interest followed by the strikes of 5500 and 5400 whereas on the put option side, the strikes of 5300 and 5200 have combined open interest of 1.38 crore shares with the implied volatility (IV) shooting up from its recent low. This indicates a broad range of 5200-5650 for the market with high volatility and lots of uncertainty in the coming days.
Top five stock futures with the highest open interest in the current series
STOCK FUTURES (SHAREKHAN SCRIP CODE) RELIANCE SBIN TATAMOTORS INFY ICICIBANK OPEN INTEREST (RS CR) 1172.31 1080.31 1075.53 1041.64 968.23
View
The Nifty has turned around from a higher range of 5650 and it would continue to retrace the overall rally of the last two months as its trading below the volume weighted average price of 5450 for the February series. The index is closer to the lower range of 5200. If it is unable to sustain at this level then there is room for a downside. Hence, to play this view we are forming a Bear Put Spread Strategy.
Top five stock options with the highest open interest in the current series
STOCK OPTIONS (SHAREKHAN SCRIP CODE) SBIN TATAMOTORS RELIANCE ICICIBANK LT OPEN INTEREST (RS CR) 669.84 400.21 296.91 238.26 228.42
March 2012
30
PR O FIT /L OS S
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Commodities: A mixed performance Macro-economy

Key points The euro-area banks tapped the ECB for more three-year cash (529.5bn euros) than economists forecast ECB leaves interest rates unchanged at 1%, as expected The euro economy to contract as Italy and Spain tumble, European Union says Merkel says, euro-area debt crisis wont be solved overnight German economy contracted in fourth quarter as exports fell Euro-area central banks said to swap Greek portfolio bonds European leaders reach Greek deal Greek rescue leaves Europe default risk alive as austerity bites Italy, Spain ratings cut by Moodys as UK top rank at risk China Central Bank lowers reserve ratio requirement by 0.5% China risks 4-point growth-rate cut in case European crisis worsensIMF Chinas imports fell more than forecast in January 2012 Chinas first trade contraction in two years adds growth concern World Bank warns: China is a ticking time bomb Japan swings to contraction in Q4 as yen undermines exports Bank of Japan boosts easing with 1% goal for inflation Japans current-account surplus slid to a 15-year low in 2011; trade deficit widens to record levels OECD December leading indicator rose to 100.4 from 100.2 in November Retail sales in the USA trail forecasts as auto purchases drop Fed's Fisher says: QE3 Wall Street Fantasy won't happen Bernanke holds to 2014 low-rate vow even as unemployment falls; slim QE3 possibility in near term Durable goods in the USA slump most in three years; US home prices at post-crisis lows: Case-Shiller US January consumer spending rises 0.2%, incomes up 0.3%
COMMODITY PRICES IN FEBRUARY (IN $) Commodity Copper Zinc Lead Gold Silver Crude oil High 8765.0 2166.5 2305.0 1790.8 37.5 110.0 Low 8131.0 1944.9 2002.0 1689.0 32.7 95.8 Close 8499.0 2112.0 2160.5 1696.8 34.7 107.1 % Mon chg 2.2 0.3 -2.4 -2.4 4.5 8.3
MONTHLY CHANGE IN DOE CRUDE STOCKS (JAN-FEB) Crude oil Change in (000' bbls) 27-Jan-12 Change in (%) 5926 338942 1.75 Dist. -3970 145410 -2.73 Gasoline -220 230147 -0.10
Refinary utlisation rate was at 83.6% in the last week of February.
MONTHLY CHANGE IN SHFE STOCKS (JAN-FEB) Copper Change (in tonne) 19-Jan-12 Change (in %) 84441 131645 64.14 Lead 8275 29434 28.11 Zinc 11090 369698 3.00
MONTHLY CHANGE IN LME STOCKS (JAN-FEB) Copper Change (in tonne) 31-Jan-12 Change (in %) -34400 330825 -10.40 Lead 6800 363150 1.87 Zinc 23125 844300 2.74
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: 15-20% supply risk premium in prices.

Key points Libya targets 1.7mn barrels of oil in 2012, minister says Iran halts oil sales to the UK and France before EU bans imports Iran may disrupt Hormuz shipping, supporting oil price, S&P says OPEC lowers 2012 oil demand forecast IEA cuts 2012 oil demand forecast on Darkening growth outlook Chinas January oil imports rise to record 23.41mn ton Crude oil prices at record high in euro, pound US officials escalated warnings that the nation may join Israel in attacking Iran Oil prices carry 15-20% geo-political risk premium
WTI NYMEX crude oil
CMP: $108.50
Crude oil compensated for its dismal performance in January 2012 as the counter rallied over 8% on Chinas reserve ratio cut, European Central Bank (ECB)s second round of long-term refinancing operation (LTRO), and mostly dovish US Federal Reserve (Fed). However, the major factor responsible for this stunning rally despite weak intrinsic fundamentals has been the ongoing war of words between Iran and the West. While Iran maintains that its nuclear facilities are for civil purposes, the West remains wary of the nations intentions. Talks of Israel going it alone to attack the nuclear plants in Iran or the USA joining Israel against Iran are not uncommon nowadays. We wrote in the last issue of the ValueGuide that crude oil runs a risk of correction to $90 level. It fell to $95.81 but since then it has recovered strongly. Though the fundamentals remain weak, the upside speculative risk can come from the Iran issue yet again. We suggest selling into rallies. Look for the range $105-115.
31
March 2012
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Precious metals: Silver outperforms gold on catch-up play

Key points Gold imports by China fell 62% in December 2011 as demand slowed Gold imports by India seen declining US Mint's silver, gold coin sales tumble in February 2012 on high prices Gold falls over $100 on February 29; mild recovery on Asian interest Funds bullish positions were at 5-month high Gold still to play a role in monetary system as hedge--Chatham House IMF: Kazakhstan, Turkey, Belarus boost gold holdings in January 2012 Singapore government to exempt gold, other precious metals from goods and services tax World Gold Council: ETF demand for gold halves in 2012, recovery seen World Gold Council: China likely to surpass India as the largest gold buyer Silver ETP holdings have turned positive of late Chinas silver imports were 191.7 ton in January 2012
Gold
CMP: $1,721
Gold missed our stated target of $1,815 last month as the yellow metal turned back sharply from $1,790 level as the US Fed chief Ben Bernanke didnt signal further quantitative easing (QE) in his testimony for the Congress on February 29, 2012. Bearish factors for gold include a marked improvement in the risk appetite as the problems in the euro-region appear to be contained for now after the second LTRO and Greece bail-out, fading possibility of QE by the Fed in the near term, lack of physical buying interest around $1,800 level and firmer tone in the dollar. However, the medium-to-long-term outlook remains bullish on account of the sovereign debt issues, geopolitical tensions, low rates and ultra-easy monetary policies. Strong buying interest is seen around $1,680 levels. The upcoming Federal Open Market Committee meeting on March 13, 2012 would be crucial for the short-term direction. The upside capped at $1,815.
Silver
CMP: $35.50
The white metal after reaching our intended target of $35.70 is likely to extend its rally to $38 level; a rise to $41 level is possible in the best-case scenario as investors risk appetite improves, though the supply-demand scenario is not very favourable. A strong support is seen around $33.70 level.
Base metals: Limited upside

Key points Base metal prices may be lower on average in 2012: China Non-ferrous Metals Industry Association China to raise copper output to boost self-sufficiency: China Non-ferrous Metals Industry Association Zinc industry faces chronic supply problem, Selwyn CEO says China copper production increases by 623.4kt, Chile's dips by 167kt in 2011: WBMS Chinas January copper imports fall from record; scrap slumps Japans zinc exports rise 49% in January as sales to China jump Chinas lead demand weak presently Zinc, lead prices too low, dont reflect input costs: China Non-ferrous Metals Industry Association Shanghai Futures Exchange (SHFE) inventories mostly in rising trend
Copper
CMP: Rs431
Copper traded in a tight range of around $600 throughout the month. Chinese traders are not interested in the metal at the current level due to a high level of inventories in the nations bonded warehouse, SHFE inventories being in a rising trend, and tight credit conditions. This is why the imports fell from a record high in January 2012. SHFE-London Metal Exchange (LME) arbitrage window remains closed. Though the metal moved in a backwardation briefly, but the tight spread has disappeared now. A decline in the LME inventories is being offset by a build-up in the SHFE inventories. Copper is unlikely to rise above Rs442 level unless the physical demand improves. Buying interest is seen around Rs400 level.
Lead
CMP: Rs107
The heavy metal was quite volatile. Chinas demand for the metal is noted to be weak currently, however support is seen coming from a possible decline in the supplies due to lead poisoning cases in China. Lead is unlikely to be in deficit before 2013. The cash-to-3-month spread doesnt reflect any supply concerns. Watch the range Rs98 to Rs111.
March 2012
32
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Zinc
CMP: Rs104
Record production expands inventories to the highest since at least 1984. Japans zinc exports jumped 49% to 11,498 metric ton in January this year from a year earlier as shipments to China more than doubled. Teck Resources, the worlds fourth-largest zinc miner, sees the demand exceeding the supply because of mine closures and rising demand for the metal in China and India. The expected end to the supply gut could come in the next two years. The metal is likely to trade between Rs100 and Rs108.
CMP as on March 01, 2012
Major economic events in March 2012

Date 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 5-Mar-12 5-Mar-12 5-Mar-12 5-Mar-12 6-Mar-12 7-Mar-12 8-Mar-12 8-Mar-12 8-Mar-12 8-Mar-12 8-Mar-12 9-Mar-12 9-Mar-12 9-Mar-12 9-Mar-12 9-Mar-12 9-Mar-12 10-Mar-12 13-Mar-12 13-Mar-12 13-Mar-12 13-Mar-12 13-Mar-12 14-Mar-12 16-Mar-12 16-Mar-12 16-Mar-12 20-Mar-12 20-Mar-12 22-Mar-12 22-Mar-12 22-Mar-12 23-Mar-12 26-Mar-12 27-Mar-12 27-Mar-12 28-Mar-12 29-Mar-12 29-Mar-12 30-Mar-12 30-Mar-12 30-Mar-12 Region China Event PMI Manufacturing Forecast 50.9 52 50.1 49 54.5 ---0.10% 0.00% -0.30% 1.60% -0.50% -0.10% -1.00% 3.40% 12.40% --$49.0B 211K 8.30% -$8.50B ------------------------Actual 51 51.2 50.2 49 -------------Prior 50.5 52.1 50.1 49 54.1 56 -11.1 -0.40% 1.10% -0.30% 1.70% 325B 0.50% -0.60% -6.90% 1.00% 4.50% Impact Markets treating it as positive as the data shows expansion,however it's a borderline case. Important for GBP, industrial commodities Crucial as manufacturing looks like teetering on border. Lower than expected data would weigh on Euro, industrial commodities. Sustainibilty of encouraging data would support industrial commodities. Important for GBP, industrial commodities Important for industrial commodities,Euro. Important for industrial commodities,Euro. Important for industrial commodities, US Dollar. Euro region's economy contracting is a foregone conclusion. Severity in focus. Important for industrial commodities,Euro. No hint of further easing would be supportive for the GBP. Focus would be on assessment of economy. Lower number would weigh on JPY and industrial commodities. Important forindustrial commodities. Focus on assessment of economy. Lower than expected number would be positive for industrial commodities on increased possibility of further easing. Important for industrial commodities. Important for industrial commodities, GBP. Deficit won't matter much as demand is recovering. Crucial for all the commodities. Only statistically important as pool size shrinking. Both import and export figures need to be analyzed as domestic as well as the global economy look shaky. Lower deficit would support the GBP. Focus would be on clues to further easing. JPY would fall on dovish stance. Important for industrial commodities,Euro. Important for all commodities with focus of QE 3 Important for all commodities with focus of QE 3 Important for bullions. Larger surplus bullish for the Euro. Higher than expected data would be bearish for all commodities, Dollar bullish. Important for industrial commodities. Lower number would support GBP. Important for base metals like copper,aluminium.Housing is still a weak spot. Trade deficit would hurt JPY. Important for industrial commodities, Euro. Important for industrial commodities, Euro. Important for base metals like copper,aluminium. Important for industrial commodities,Euro. Important for industrial commodities,Euro. Higher confidence would support industrial commodities.Gold can fall. Important for all commodities with focus of QE 3 Important for industrial commodities, Euro. Important for all commodities with focus of QE 3 Important for base metals mainly. Important for industrial commodities. Higher confidence would support industrial commodities.Gold can fall.
UK PMI Manufacturing GE PMI Manufacturing Euro Zone PMI Manufacturing US ISM Manufacturing UK PMI Services Euro Zone Sentix Investor Confidence Euro Zone Euro-Zone Retail Sales (MoM) US Factory Orders Euro Zone Euro-Zone GDP s.a. (QoQ) GE Factory Orders MoM (sa) UK BOE Asset Purchase Target UK BOE ANNOUNCES RATES JN Gross Domestic Product (QoQ) JN Machine Tool Orders (YoY) Euro Zone ECB Announces Interest Rates China Consumer Price Index (YoY) China UK US US US China Industrial Production (YoY) Industrial Production (MoM) Trade Balance Change in Nonfarm Payrolls Unemployment Rate Trade Balance (USD)
12.80% - - 0.50% - - -$48.8B -243K - - 8.30% - - $27.28B - - -3748 - - 0.10% --8.1 - - 0.40% - - 0.40% ---9.7B - - 2.30% - - 0.00% - - 3.60% - - 1.50% - - -1475.0B - - 1.90% --20.3 - - -0.90% -109.6 -6 -70.8 - - -3.20% --0.18 - - 3.00% - - 18.60% -64 ---
UK Trade Balance JN BOJ Target Rate Euro Zone ZEW Survey (Econ. Sentiment) US Advance Retail Sales US FOMC Rate Decision Euro Zone Euro-Zone CPI (YoY) Euro Zone Euro-Zone Trade Balance US CPI Ex Food & Energy (YoY) US Industrial Production UK CPI (YoY) US Housing Starts MOM% JN Merchnds Trade Balance Total Euro Zone Industrial New Orders SA (MoM) Euro Zone Euro-Zone Consumer Confidence US New Home Sales MoM GE IFO - Business Climate GE GfK Consumer Confidence Survey US Consumer Confidence US Durables Ex Transportation Euro Zone Business Climate Indicator US GDP QoQ (Annualized) JN Vehicle Production (YoY) US Chicago Purchasing Manager US U. of Michigan Confidence
33
March 2012
TREND & VIEW
COMMODITY
TECHNICALS
Gold: Bears attack

Gold faced selling pressure near the 61.8% retracement mark. The fall found support at the intermediate rising channel line. Thus a short term bounce is likely, which should be used as an opportunity to sell. The level for the same would be near $1,745 (20 day moving average [DMA]). The daily momentum indicator has given a bearish crossover. The high of $1,791 is unlikely to get surpassed. The target on the downside would be the medium term falling trendline ($1,615).
Trend Down Trend reversal $1,791 Supports $1,685/1,650 Resistances $1,720/1,745 Target $1,615
uly August KST (0.53096) 5 0 -5 2000 1950
100.0%
1900
78.6%
1850
1791
61.8%
1800
1750
50.0%
1700
38.2%
1650
23.6%
1615
1600
1550
0.0%
1500
1450
Septem ber
October
November
December
2012
February
March
Ap
Silver: About turn

Silver kissed and tumbled from the medium term falling trendline. The weekly momentum indicator has done a pullback cycle. The white metal is also being pushed down by the weekly upper Bollinger Band. The key levels on the downside are $30.62 ie the 61.8% retracement of the rise and $27.75, ie the weekly lower Bollinger Band. Reversal can be kept above the high ie $37.46.
SILVER [CASH] (35.3600, 37.4600, 34.1300, 34.5900, -0.78000) MACD (-0.22990) 5 4 3 2 1 0 -1 -2
100.0%
50
45
61.8% 50.0% 38.2%
37.46
0.0%
40
35
23.6%
50.0% 61.8%
30.62 27.75
30
Trend Down
Trend reversal $37.46
Supports $33.3/32.2
Resistances $35/36.7
Target $30.62/ $27.75
0.0%
100.0%
25
Aug Sep Oct
Nov Dec
2011
Mar Apr
May Jun Jul
Aug Sep
Oct Nov Dec
2012
Mar Apr May
Jun Jul
Aug
Light sweet crude oil: Heat is on

Crude oil has taken off from the key weekly moving averages. It formed an inside bar on the weekly chart at that level and broke out on the upside.
LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] (109.670, 109.770, 104.840, 107.070, -2.70000) KST (9.08260) 20 15 10 5 0 -5 -10 130 125 120
It has crossed the key hurdle of $103, which will now act as a key support. The weekly momentum indicator is showing strength. The oil is now set to test of the high of $114.83; the equality target beyond that is $127. A crucial support stands at the lower end of the channel, ie at $100.
Trend Up Trend reversal $100 Supports $104.26/103 Resistances $110/120 Target $114.83/ $127
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Feb Mar
127
114.83
115 110 105
103 100
100
95
90
85
80
75
Apr
May
Jun
Jul
March 2012
34
COMMODITY
TECHNICALS
TREND & VIEW
Copper: Fibonacci is the key

Copper formed a triangle in the second leg of the pullback. With the triangle breakout it formed the third leg on the upside, which achieved its equality target ($3.9). The base metal also reached the weekly upper Bollinger Band and is near the 61.8% retracement mark ($4.02). It posted a weekly negative close there. Hence unless the key Fibonacci level is crossed on a weekly closing basis, there is a high probability of the bears pushing the red metal down. The targets on the downside would be the 20 week moving average (WMA; $3.6) and the swing low of $3.38.
Trend Down Trend reversal $4.02 Supports $3.75/3.69 Resistances $3.99/4.02 Target $3.6/ $3.38
KST (8.67044) 15 10 5 0 -5 -10 -15
HG COP PER CONTINUOUS 25000 LB S [COMEX] (3.86450, 3.96150, 3.80500, 3.93150, +0.06850) 4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4.0 3.9 3.8 3.7 3.6 3.5
100.0%
61.8% 50.0% 38.2%
4.02
3.6 3.38
23.6%
3.4 3.3 3.2 3.1
0.0%
3.0 2.9 2.8 2.7 2.6
Sep
Oct
Nov
Dec
2011
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2012
Mar
Apr
May
NG: Bearish triangle

MCX Natural Gas (NG) has been consolidating in the past few weeks. The consolidation has taken form of a bearish triangle. The last leg of the pattern got over near the 40 day exponential moving average (DEMA) and the daily upper Bollinger Band. From there NG has started tumbling down. The daily momentum indicator is poised to start a new cycle on the downside. On the downside NG is expected to target the low of 112.3 and the weekly lower Bollinger Band (106.7). Reversal would be above the upper end of the pattern and the 40-DEMA ie Rs132.
Trend Down Trend reversal Rs132 Supports Rs118.8/116.3 Resistances Rs126.7/129.6 Target Rs112.3/ Rs106.7
24 31 7 14 November 21 28 5 12 December 19 26 2 9 2012 16 23 30 6 13 February 20 27 MACD (-1.10721) 0 -5 -10 NATURAL GAS MMBTU - 1 MONTH (128.700, 129.100, 121.700, 122.900, -5.80000) 205 200 195 190 185 180 175 170 165 160 155 150 145 140 135
132
130 125 120 115
112.3 106.7
5 12 March 19 26 2 9 April 1
110 105
Nickel: Next leg down

Nickel formed a three wave pullback that retraced 50% of the previous fall. From there it has started the next leg down. The weekly momentum indicator has given a bearish crossover. In terms of price pattern the right shoulder of a head and shoulders (H&S) pattern is in formation. The neckline is at Rs855; below that the equality target is Rs695. Reversal for the bearish view has been kept above the high of Rs1,087.
Trend Down Trend reversal Rs1,087 Supports Rs882/845 Resistances Rs1,009/1,066 Target
S O N D 2009 A M J J A S O N D 2010 A MJ J A S O N D 2011 A M J J A S O N D 2012 A M J J A S KST (2.07643) 0
NICKEL 1 KG - 1 MONTH (985.000, 995.600, 965.200, 978.400, -4.89996)
100.0%
61.8% 50.0% 38.2% 23.6%
1087
1500 1450 1400 1350 1300 1250 1200 1150 1100 1050 1000 950 900
0.0%
855
850 800 750 700
695
650 600 550 500 450
400
Rs855/ Rs695
35
March 2012
MONTHLY VIEW
CURRENCY
FUNDAMENTALS
Currency market : The rupee records second monthly advance

Key points
CURRENCY LEVELS IN FEBRUARY (IN RS) High 48.955 64.35 77.3525 60.47 Low 49.75 65.95 78.66 65.13 Close 49.05 65.90 77.77 60.47 Monthly chg (%) 1.41 -0.42 -0.89 7.11
Indias inflation, fiscal gap weighing on outlook, S&P says Currency Indias fiscal deficit exceeded the full-year target in the 10 months INR-USD through January INR-EUR Indian economy grows the least since 2009 INR-GBP Japans current-account surplus slid to a 15-year low in 2011 INR-JPY BOE ramps up stimulus effort with GBP50bn of new bond buys UK economy to gain momentum in 2012 after avoiding a recession, CBI says UK economy shrinks in fourth quarter on company investment Indian Rupee completes second monthly gain as inflows increase
February contract price movement
50 49.8 49.6 (in Rs.) 49.4 49.2 49 48.8 48.6 2-Feb-12 6-Feb-12 8-Feb-12 10-Feb-12 14-Feb-12 17-Feb-12 22-Feb-12 24-Feb-12 31-Jan-12 USDINR JPY INR 66 65
(in Rs.)
February contract price movement

66.5 66 65.5 65 64.5 64 2-Feb-12 6-Feb-12 8-Feb-12 10-Feb-12 14-Feb-12 17-Feb-12 22-Feb-12 24-Feb-12 31-Jan-12 EURINR GBPINR 79 78.8 78.6 78.4 78.2 78 77.8 77.6 77.4 77.2 77
64 63 62 61 60
INR-USD
CMP: Rs49.50
The rupee rallied against the dollar and the yen. Indias rupee recorded a second monthly advance on the slowest inflation in more than two years and the demand for high yielding assets attracted a huge inflow of around $5bn in February 2012. Investment in local currency debt rose by $100mn to an all-time high of $30.3bn as of February 24, 2012. However, the coming months could be tough as the nations growth in Q42011 had fallen to the slowest in two years. The gross domestic product (GDP) rose 6.1% following the previous quarters 6.9% climb. Indias fiscal deficit exceeded the full year target in the 10 months through January 2012. It may top 6% of the GDP in this fiscal. Surging crude oil prices are another source of worry. We suggest buying the USD-INR pair on dips. The range to watch is Rs47.85 to Rs50.70 (spot) with an upward bias for the dollar.
INR-EUR
CMP: Rs66.01
The euro appreciated 1.84% vs the dollar last month on Greece bail-out and the second round of LTRO. The euro-dollar pair can rally to 1.36 level in the near term before the single currency begins falling again on contracting economy, sovereign debt issues and a possibility of further easing by the European Central Bank (ECB). Watch the range Rs64.95 to Rs66.50 with an upward bias for the euro.
INR-GBP
CMP: Rs78.92
The pound rose 1% vs the greenback last month. The economic indicators out of the UK have been mostly better than expected of late. Also, after the 50-billion-pound asset purchase plan announced in February this year the Bank of England (BoE) is likely to refrain from further stimulus. Hence, the pound is likely to trade firmer. Watch the range Rs76.15 to Rs79.50 (spot) with an upward bias for the pound.
INR-JPY
CMP: Rs61.15
The yen has been hit badly on account of Japans trade deficit, high oil prices and reduced possibility of further easing by the US Fed anytime soon. The dollar is likely to rally to 85 level vs the yen in the medium term. The rupee can extend its rally to 59.32 (spot), the September 2011 high. A rebound towards 62.25 (spot) can be used to initiate short positions in the yen.
CMP as on March 01, 2012
March 2012
36
CURRENCY
TECHNICALS
TREND & VIEW
USD-INR: Tumbling down

USD-INR has fallen significantly in a channelised manner. It is currently at the upper end of the falling channel. There is a possibility of a short term bounce towards 50-50.32, from where fresh shorts can be initiated. On the other hand, if the low of 48.60 is breached, then the fall will continue without any bounce. The key resistances are 50.32 51.5. The targets on the downside are 47.9 46.1.
GBP-INR: Bears warmed up

GBP-INR has been consolidating after a sharp fall. The consolidation has taken form of a triangular pattern. The junction of the daily upper Bollinger Band and the 40 day exponential moving average (DEMA) is an ideal zone for the next leg down to begin. The targets on the downside are 75.6 (61.8% retracement mark) and 73 (equality target). Tight reversal should be kept above the high of 78.74 on a closing basis, if that is crossed higher levels are possible.
MACD (-0.22587) 0.5
0
KST (-0.32542)
0.0 -0.5
USDI NR - INDI AN RUPEE (49.0700, 49. 1000, 48.8200, 49. 1000, +0.14000)
55. 0 54. 5 54. 0 53. 5 53. 0 52. 5
-1.0 GBPI NR (77.8610, 78.3990, 77.7460, 78.1570, +0.30099) 85. 5 85. 0 84. 5 84. 0 83. 5 83. 0 82. 5 82. 0 81. 5 81. 0 80. 5 80. 0 79. 5 79. 0 78. 5 78. 0 77. 5 77. 0 76. 5 76. 0 75. 5 75. 0 74. 5 74. 0 73. 5 73. 0 72. 5 72. 0 71. 5 71. 0 70. 5 70. 0 69. 5
0.0%
100.0%
0.0%
23.6%
61.8% 50.0% 38.2%
51.5 50.32
52. 0 51. 5 51. 0 50. 5 50. 0 49. 5
23.6%
38.2% 23.6% 50.0% 0.0% 61.8%
38.2%
78.74
49. 0
48.60 47.9
48. 5 48. 0 47. 5 47. 0 46. 5
50.0%
61.8%
75.6
78.6%
46.1
46. 0 45. 5 45. 0 44. 5
73
100.0%
44. 0 43. 5
100.0%
July
August
September
Oct ober
November
December
2012
February
March
April
June
July
August
Sept ember
Oct ober
November
December
2012
February
March
EUR-INR: Bearish potential

As a follow through of multiple bearish formations EUR-INR has tumbled sharply. It has reached the lower end of the rising channel and is consolidating at the channel line. In terms of price pattern it has formed a bearish triangle. The daily momentum indicator has completed a pullback cycle On the downside, the targets are 63.2 and 61.3 (50% and 61.8% retracement of the entire rise respectively). Reversal has been kept at 66.22.
MACD (-0. 00384) 0.5 0.0 -0.5 -1.0 EURINR (65.9200, 66.1410, 65.3670, 65.4260, -0.49900) 72.0 71.5 71.0 70.5 70.0 69.5 69.0
JPY-INR: Sell on rise

JPY-INR has almost achieved the equality target. It has recently formed a piercing line which is a bullish candle at the daily lower Bollinger Band. The daily momentum indicator is showing positive divergence. Hence there is a possibility of a short term bounce towards key daily moving averages. Thus fresh short positions can be created near 0.63 with reversal above 0.6528. Overall the price is heading towards the long term rising trendline, ie 0.585.
KST (-3. 27364) 5
JPYINR (0.60840, 0. 61030, 0. 60330, 0. 60490, -0. 00370) 0.71 0.70 0.69 0.68 0.67
0.0%
23.6% 38.2% 50.0% 61.8%
68.5 68.0 67.5 67.0
0.6528
0.66 0.65 0.64
66.22
66.5 66.0 65.5 65.0
0.63
0.63 0.62 0.61 0.60 0.59
100.0%
64.5 64.0
63.2
63.5 63.0 62.5 62.0
0.585
0.58 0.57 0.56 0.55 0.54
161.8%
61.3
61.5 61.0 60.5
April
May
June
July
August
Sept ember
November
2012
February March
April
August
Sept ember
Oct ober
November
December
2012
February
March
Currency USD-INR GBP-INR EUR-INR JPY-INR
View Down Down Down Down
Reversal 51.50 78.74 66.22 0.6528
Supports 48.6/47.9 76.61/75 64.8/63.53 0.6000/0.5900
Resistances 49.76/50 78.4/78.74 65.8/66.15 0.6245/0.6355
Target 47.9-46.1 75.6-73 63.2-61.3 0.5850
37
March 2012
PMS FUNDS
PMS
DESK
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio Management Service (PMS) in which we completely manage your investment portfolio so that you stop worrying about the market volatility and focus your energy on things that you like to do! We have a wide range of strategies that you can choose from. Our strategies are based on fundamental research and technical analysis. We have the following strategies on offer:
ProPrime (based on fundamental research)

Top Equity Nifty Thrifty Trailing Stoploss Diversified Equity Diversified
ProTech (based on technical analysis)
PROPRIME - TOP EQUITY

OVERVIEW
The ProPrimeTop Equity PMS strategy is suitable for the long-term investors looking to create an equity portfolio through disciplined investments that will lead to a growth in the portfolios value with low to medium risk.
(In %) 1 month 3 month 6 month
Product performance as on February 29, 2012

Scheme 3.2 7.4 1.3 -3.3 11.3 -8.1 -4.4 -11.0 Sensex 3.3 10.1 6.5 -2.4 11.3 -8.9 -3.1 -12.7 Nifty 3.6 11.4 7.7 -1.8 12.4 -9.3 -3.2 -12.5
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough fundamental research. Investments are made primarily in the Nifty Fifty or the BSE 100 scrips. Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and that of minimum of 90% in the BSE 100 stocks. Endeavours to create a core portfolio of blue-chip companies with a proven track record and have partial exposure to quality companies in the mid-cap space.
1 year 3 year Since inception* Best month Worst month Best quarter Worst quarter
#18-May-11
Disclaimer: Returns are based on a clients returns since inception and may be different from those depicted in the risk disclosure document.
PRICING
Minimum investment of Rs25 lakh Charges 2% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 12% hurdle is crossed at the end of every fiscal
Top 10 stocks
Bank of Baroda Bharat Heavy Electricals Divis Laboratories Godrej Consumers HDFC ICICI Bank Reliance Communication Reliance Industries Selan Exploration Technology
Fund Manager: Gaurav Dua

FUND OBJECTIVE
Sintex Industries
A good return on money through long-term investing in quality companies
March 2012
38
PMS
DESK
PMS FUNDS
PROPRIME - DIVERSIFIED EQUITY

OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors looking to create an equity portfolio through disciplined investments that will lead to a growth in the portfolios value with medium to high risk.
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough fundamental research. A balanced mix of value and growth stocks (mid-cap and small-cap) is created that represents investment opportunities across sectors and market capitalisation. Invests in quality value and growth stocks with good earnings visibility and healthy balance sheet. The fund manager, with the help of extensive, in-house, superior research, identifies fundamentally sound companies to invest in. The fund manager strives to capture the short-term trading opportunities to maximise the potential of the swings in specific stocks.
(In %) 1 month 3 month 6 month 1 year 3 year

Scheme 6.9 16.6 0.0 -14.2 33.6 100.7 37.5 -24.1 65.0 -29.1 S&P CNX 500 4.7 12.2 5.9 0.7 102.4 189.1 34.4 -27.2 51.2 -28.6
Since inception*
PRICING
Minimum investment of Rs25 lakh Charges 2.5% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 15% hurdle is crossed at the end of every fiscal
Best month Worst month Best quarter Worst quarter

*24-Sept-04
FUND MANAGERS VIEW

Our strategy to keep on investing at every low point of the market has proved to be extremely successful. Our fundamental research, stock selection, and view-based entries and exits have helped the Pro-Prime Diversified Equity portfolio to deliver a whopping 28% return in the last month compared with the 13% return given by the BSE 500 over the same period. In spite of the sharp rise in the past six to seven weeks the Sensex trades at around 13.7x one-year forward earnings, which is below the long-term mean of 15.0x price/ earnings band. Therefore, at Pro-Prime Diversified Equity we have diversified our stock selection amongst the private banking, automobile, home finance, infrastructure and consumption themes. Stocks like IL&FS Transportation Network, Arshiya International, Gateway Distriparks, Adani Ports and Special Economic Zone, and Diamond Power Infrastructure will unlock great value for the portfolio. At the same time, Tata Motors, HDFC, Gail, SAIL, Bharti Airtel and Sterlite Industries will play an important role in encashing the volatility in the market. We are also consolidating our position in stocks like Divis Laboratories and GlaxoSmithKline Consumer Healthcare with a longer-term perspective. We believe the India growth story is very attractive and the huge opportunity can be capitalised on with the right stock selection. A government that is very aggressive about consolidating the fiscal deficit, the falling inflation, the appreciating local currency and the declining interest rates will keep Indias consumption story alive and kicking. Going ahead, the pace of the downgrades is also likely to decline while the market would look for triggers in the Union Budget and the Reserve Bank of Indias policy review.
Top 10 stocks
Bank of Baroda Diamond Power Infrastructure Divis Lab GAIL Gayatri Projects ITNL Reliance Industries Reliance Infrastructure Sterlite Industries (India) United Phosphorous
Fund Manager: Suhas Samant

FUND OBJECTIVE
A good return on money through long-term investing regardless of short-term volatility
39
March 2012
PMS FUNDS
PMS
DESK
PROTECH - DIVERSIFIED
OVERVIEW
The ProTechDiversified PMS strategy is suitable for long-term investors who desire to profit from both bullish and bearish market conditions. The strategy involves going long (buying) or going short (selling without holding) on certain investment classes by predicting the market direction based on a back-tested automated model.

(In %) 1 month 3 month 6 month 1 year 3 year Since inception* Scheme 0.8 11.5 11.0 14.8 29.9 11.4 -5.6 6.3 -1.3 Sensex 3.3 10.1 6.5 -0.4 1.1 11.7 -10.6 13.4 -12.7 Nifty 3.6 11.4 7.7 1.0 2.0 12.4 -10.2 13.5 -12.5
INVESTMENT STRATEGY
This strategy has the potential to generate profits irrespective of the market direction by going long or short on specific indices and stocks. It invests in the Nifty and the Bank Nifty indices (via futures) and 10 stock futures. An automated basic back-testing model is used to predict the market direction for each of the indices and stocks which then decides the strategy to be deployed in terms of going long or short. The portfolio is not leveraged, ie its exposure will never exceed its value.
PRICING
Minimum investment of Rs25 lakh Charges AMC fees: Brokerage: Profit sharing: 0% 0.05% Flat 20% charged on a quarterly basis
Best month Worst month Best quarter Worst quarter

*16-May-2010
FUND MANAGERS VIEW

The market carried the momentum from January and continued its wining streak for the second consecutive month, ending with a gain of 3.5%. The market is likely to continue its upward journey, though with bouts of volatility as lots of events are scheduled in March which can provide ample trading opportunity during the month. We feel that 5200 will act as the trend decider for the market and as long as this holds, we can expect the upward trend to continue till 5700-5800 levels. The failure to hold 5200 can take the Nifty all the way down to 4800 and this fall can be triggered by any of the events scheduled during the month. So one should take preventive measures either through options or futures in case the level of 5200 is breached. February was a very volatile month and wide swings were witnessed in the net asset value of ProTech Diversified, but finally the portfolio settled with a gain of 0.82% for the month. Since its inception the scheme has delivered close to 30% return and has clearly outperformed the Nifty. The product is likely to do well in the coming months as it tends to do well in a trending market.
Investments in*
Aban Offshore Bank Nifty DLF IDBI Bank Jindal Steel Jaiprakash Associates Nifty Punj Llyod Ranbaxy Sesa Goa Tata Motors Yes Bank
Fund Manager: Abhinay Jain
*Traded stocks
FUND OBJECTIVE
Absolute returns irrespective of market conditions through a long-short strategy followed in multiple investments
March 2012
40
PMS
DESK
PMS FUNDS
PROTECH NIFTY THRIFTY

OVERVIEW
The ProTechNifty Thrifty PMS strategy is suitable for long-term investors who desire to profit from both bullish and bearish market conditions. The strategy involves going long (buying) or going short (selling without holding) on Nifty futures by predicting the market direction based on a back-tested automated model.

(In %) 1 month 3 month 6 month 1 year 3 year Since inception* Best month Scheme -0.5 -0.6 3.5 13.3 56.9 143.8 28.9 -17.1 33.3 -11.7 Sensex 3.3 10.1 6.5 -0.4 99.7 75.4 28.3 -23.9 49.3 -25.0 Nifty 3.6 11.4 7.7 1.0 94.9 78.2 28.1 -26.4 42.0 -24.5
INVESTMENT STRATEGY
The strategy has the potential to generate profits irrespective of the market direction by going long or short on Nifty futures. An automated basic back-testing model is used to predict the market direction for the Nifty which then decides the strategy to be deployed in terms of going long or short. The portfolio is not leveraged, ie its exposure never exceeds its value.
PRICING
Worst month Best quarter Worst quarter

*01-Feb-2006
Investments in
FUND MANAGERS VIEW

The month was going great till the last week when the index lost gains amassed over weeks in a week. This erased the gains of ProTech-Nifty Thrifty too and we closed with a decline of 0.45%. The market remains a trending one, so whatever direction it takes next we should be able to make the most of it. Intra-month the net asset value (NAV) of the portfolio did hit an all-time high of 26+ in the last month, but the NAV closed at 24.38. The directional moves of the market have started getting bigger as the market is expanding volatility after the sluggish period seen till August 2011. This is great news from the products point of view and means that there should be many opportunities to profit from in the current financial year. So irrespective of where the market goes we expect to reap the returns that a trending market may offer. We hope the directional moves continue to expand in size and time.
Nifty Index
Fund Manager: Rohit Shrivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.
41
March 2012
PMS FUNDS
PMS
DESK
PROTECH TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and bearish market conditions. It is designed to payout book profits on monthly basis.* It is also for those investors who are looking for better income than Fixed Income or Deposits. This strategy involves going Long (buying) or Short (selling without holding) on stock futures. * Terms and conditions apply
(In %) 1 month

Scheme 3.8 23.2 27.1 Sensex 3.3 10.1 6.5 -4.4 11.3 -8.9 1.5 -12.7 Nifty 3.6 11.4 7.7 -2.99 12.4 -9.3 1.73 -12.5
INVESTMENT STRATEGY
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls. A risk model has been developed for stock portfolio allocation that reduces the risk and portfolio volatility through staggered building of positions. It is non-leveragedthe exposure will never exceed the value of the portfolio.
3 month 6 month 1 year 3 year
Since Inception-RSD* 34.9 Best month Worst month 9.1 -3.2 9.9 -1.0
PRICING
Best quarter Worst quarter
*09th May 2011 (Revised strategy date)
Investments in
FUND MANAGERS VIEW

Since August of 2011 the market has been offering clear-cut trends to trade and this tendency continued in both January and February of 2012. The market moved both ways up for most of the last month but reacted at the end. We reduced our exposure to the market, thereby narrowing down the returns as well as the risks in an increasingly volatile situation. Therefore a 3.83% return at the end of February 2012, we believe, was a good achievement given the environment. Risk management has become the core focus of the ProTech-Trailing Stops to be able to deliver returns month after month. Reducing positions during uncertainty and increasing them during certainty reduces the portfolios volatility. The market has completed its most bullish move of the last 12 months and we are assessing whether the bullish trend can continue. Till we are sure we will be underpositioned in the direction of the trend. Its possible that we have already made the top for the year but we cannot be sure. March of this year carries a lot of economic and social events that could affect the sentiment of the market and we need to wait for clarity to emerge in order to profit from the opportunities that may present themselves during the course of the month.
Stock futures
Fund Manager: Rohit Shrivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.
March 2012
42
ADVISORY
DESK
MONTHLY PERFORMANCE
Advisory Products & Services

Sharekhans Advisory Desk is a central desk consisting of Mumbaibased expert advisory team that runs various sample model portfolios (for illustration purposes only) for clients of all profiles, be they traders or investors. Targeted at all types of clients, it is ideal for those who do not have the time to monitor the market tick by tick or to sift through pages of research for data or to pour over complex charts to catch a trend. Advisory Desk caters to both traders and investors. For traders it has three products, Smart Trades, Derivative Trades and MID Trades. For investors it runs the Sharekhan Portfolio Doctor service under which it reviews an existing portfolio on various parameters and suggests recommendations on a regular basis to improve its performance.
PRODUCTS & SERVICES
Investors
Portfolio Doctor
Traders
Smart Trades
Derivative Trades
MID Trades
FOR INVESTORS PORTFOLIO DOCTOR

Portfolio Doctor evaluates an existing portfolio on various parameters and suggests recommendations on a regular basis to improve its performance. It is targeted at long-term investors with a portfolio value of more than Rs10 lakh. The Portfolio Doctor service involves three simple steps: analysis of an existing portfolio, realignment of the portfolio with Sharekhans recommendations and creation of a Model Portfolio.
FOR TRADERS SMART TRADES

Smart Trades are calls generated based on the market pulse or the flavour of the season (these calls are not based on fundamental research). These calls are targeted at short-term delivery traders with a medium risk profile.
MID TRADES
MID Trades are trading calls on liquid stocks where momentum is expected before or after the announcement of results or where there is some news/event probable. These calls are generated by our Market Intelligence Desk and are rolled out based on the market pulse. The calls under MID Trades are not based on fundamental research but are generated using basic technical indicators and derivatives analysis. MID Trades are for intra-day and short-term swing traders. All these products require perfect discipline and money management for desired results.
DERIVATIVE TRADES
Derivative Trades are generated by the Sharekhan Derivatives Desk based on the analysis of open interest and other indicators. It is a leveraged product and ideal for aggressive futures traders. Product performance Product Ticket size (Rs) Month No of calls Profit and loss (Rs) Returns (%) Strike rate (%) Smart Trades 300,000 Feb 2012 YTD FY12 37 -8,766 -2.92 NA 234 -55,185 -18.40 NA
Derivative Trades 300,000 Feb2012 YTD FY12 13 3,841 1.26 NA 268 25,343 8.45 NA
MID Trades NA Feb 2012 56 NA NA 57 YTD FY12 415 NA NA 50
Sensex Performance NA Feb 2012 YTD FY12 NA NA 3.26 NA NA NA -8.71 NA
* Net of brokerage; the product has done much better compared to the Sensex, though its a "long only" product.
For more details on any of the Advisory Desk products write to us at info@sharekhan.com READY FOR ROARING ADVICE
43
March 2012
MF PICKS
MUTUAL FUNDS
DESK
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)

Scheme name Star rating NAV (Rs) Absolute 6 months 16.3 210.3 25.9 20.5 13.6 17,193.5 43.2 13.7 15.3 17.2 23.7 5,871.7 46.2 54.4 32.5 17.2 27.9 6,717.5 20.6 206.7 16.7 15.6 13.9 4,082.9 15.8 12.1 23.7 11.9 21.1 5,199.3 56.0 81.5 301.8 47.1 48.1 -4.3 -3.3 -8.0 -0.3 -2.1 -6.2 -7.3 -12.1 -8.9 -11.8 -5.8 -15.2 -7.6 -9.0 -6.4 -7.6 -1.6 -7.8 -6.1 -4.2 -8.4 -6.4 -4.1 -7.6 -6.3 -11.0 -9.5 -7.1 -8.6 -5.8 -4.9 -3.6 -3.8 -4.2 -3.3 -1.6
FEBRUARY 24, 2012

Data as on January 31, 2012
Returns (%) Compounded annualised 1 year 3 years 5 years 0.1 -1.2 -8.6 7.9 -1.4 -6.2 12.7 0.8 1.8 -4.9 2.2 -14.5 -4.7 3.7 -0.7 -1.0 3.4 -8.1 -4.2 0.7 -1.2 -2.9 2.6 -7.7 -4.3 -5.0 3.8 4.7 -4.8 -5.6 4.6 1.4 -1.7 3.4 0.1 -0.5 30.6 28.5 28.2 25.1 24.4 22.2 44.4 37.3 36.5 33.6 -25.9 40.1 38.0 33.6 31.3 31.0 24.1 29.2 28.8 28.4 26.6 23.2 22.7 30.0 26.1 25.6 25.5 25.0 21.8 29.5 25.4 25.0 21.3 19.2 16.9 -9.0 8.0 --4.1 6.3 -----0.6 10.5 3.2 12.4 7.0 13.6 3.9 9.8 9.3 10.4 8.4 -0.3 3.8 5.4 -7.9 -7.2 5.0 11.6 9.9 10.7 5.3 7.2 6.6
Since inception 13.4 25.4 16.3 25.1 6.4
Large-cap funds ICICI Prudential Focused Bluechip Equity Fund - Ret Franklin India Bluechip Principal Large Cap Fund UTI Wealth Builder Fund - Series II DSP BlackRock Top 100 Equity Fund - IP Indices BSE Sensex Mid-cap funds SBI Magnum Sector Funds Umbrella - Emerg. Buss. Fund Religare Mid Cap Fund HDFC Mid-Cap Opportunities Fund IDFC Sterling Equity Fund IDFC Premier Equity Fund - Plan B Indices BSE MID CAP Multi-cap funds ICICI Prudential Discovery Fund SBI Magnum Global Fund 94 Tata Dividend Yield Fund Tata Contra Fund UTI Opportunities Fund Indices BSE 500 Tax saving funds Fidelity Tax Advantage Fund Franklin India Taxshield Religare Tax Plan Tata Tax Advantage Fund - 1 BNP Paribas Tax Advantage Plan Indices CNX500 Thematic funds Fidelity India Special Situations Fund DSP BlackRock Natural Resources & New Energy Fund Birla Sun Life India GenNext Fund UTI India Lifestyle Fund Canara Robeco Infrastructure Fund Indices S&P Nifty Balanced funds HDFC Balanced Fund Tata Balanced Fund Birla Sun Life 95 ICICI Prudential Balanced FT India Balanced Fund Indices Crisil Balanced Fund Index
21.6 6.5 9.2 14.1 34.4
22.4 13.0 17.6 8.8 16.6
12.8 26.5 10.4 7.7 5.3
10.1 7.9 14.1 3.3 12.5
16.2 15.8 22.1 13.3 13.7
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
March 2012
44
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP SIP FUND PICKS

Investment period Total amount invested (Rs) Funds would have grown to (Rs) Large-cap funds ICICI Prudential Focused Bluechip Equity Fund - Ret Franklin India Bluechip Principal Large Cap Fund Birla Sun Life Frontline Equity Fund - Plan A DSP BlackRock Top 100 Equity Fund BSE Sensex Multi-cap funds Quantum Long-Term Equity Fund Tata Equity P/E Fund Tata Dividend Yield Fund UTI Opportunities Fund HDFC Capital Builder Fund BSE 500 Mid-cap funds SBI Magnum Sector Funds Umbrella Emerg. Buss. Fund IDFC Premier Equity Fund - Plan A DSP BlackRock Small and Midcap Fund Sundaram Select Midcap UTI Mid Cap Fund BSE Midcap Tax saving funds ICICI Prudential Taxplan Fidelity Tax Advantage Fund Franklin India Taxshield Religare Tax Plan Reliance Tax Saver (ELSS) Fund S&P Nifty 11,426.6 11,492.5 12,089.6 11,856.8 11,659.0 11,331.7 -4.8 -4.2 0.7 -1.2 -2.8 -5.6 61,612.6 56,557.7 56,189.3 55,824.4 54,481.3 50,199.8 34.4 29.2 28.8 28.4 26.9 21.8 13,529.2 12,260.5 11,203.3 11,422.2 11,532.1 10,258.7 12.7 2.2 -6.6 -4.8 -3.9 -14.5 72,934.6 63,700.1 62,750.5 62,333.8 59,214.6 53,607.7 44.4 36.4 35.5 35.1 32.0 25.9 11,534.1 12,443.1 11,920.0 12,413.3 11,700.7 11,025.3 -3.9 3.7 -0.7 3.4 -2.5 -8.1 69,651.5 65,430.9 60,800.6 58,248.5 57,772.6 52,077.8 41.7 38.0 33.6 31.0 30.5 24.1 12,015.1 11,853.5 10,973.6 11,248.1 11,785.7 11,257.4 0.1 -1.2 -8.6 -6.3 -1.8 -6.2 57,867.4 55,915.3 55,642.1 53,349.0 51,828.0 50,520.4 30.6 28.5 28.2 25.6 23.8 22.2 1 year 12,000 Present value (Rs) Avg. annual return (%) Present value (Rs) 3 years 36,000 Avg. annual return (%)
FEBRUARY 24, 2012

Data as on January 31, 2012
5 years 60,000 Present Avg. annual value (Rs) return (%)
60,000.0 75,424.1 73,476.9 76,021.2 78,886.5 66,467.2 81,223.6 64,972.9 82,550.7 85,265.6 83,894.5 66,131.3 70,310.6 95,947.3 73,668.7 73,095.1 65,964.2 60,893.6
0.0 9.0 8.0 9.3 10.7 4.1 11.8 3.2 12.4 13.6 13.0 3.9 6.3 17.9 8.1 7.8 3.8 0.6
71,407.9 77,029.1 76,021.2 78,261.2 68,704.7 68,006.1
6.9 9.8 9.3 10.4 5.4 5.0
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
45
March 2012
EARNINGS GUIDE
EQUITY
FUNDAMENTALS
Prices as on March 02, 2012
Sharekhan Earnings Guide

Company Price (Rs) FY11 Sales FY12E FY13E FY11 Net Profit FY12E FY13E FY11 EPS FY12E (%) EPS Growth FY13E FY13/FY11 PE (x) ROCE (%)
RONW (%) FY13E
DPS
FY11 FY12E FY13E FY12E FY13E FY12E
Div Yield (Rs) (%)
Evergreen
GSK Consumers HDFC HDFC Bank Infosys Larsen & Toubro Reliance Ind TCS 2,585.0 672.7 518.8 2,845.7 1,299.7 2,306.1 4,247.0 14,878.0 27,501.0 52,089.1 2,685.5 5,108.0 17,810.0 34,384.3 62,396.6 321,240.5 49,529.1 3,238.6 6,089.0 21,038.0 39,403.5 68,269.2 299.8 3,536.0 3,926.0 6,835.0 3,920.9 355.2 4,156.0 5,190.0 8,440.3 4,930.0 429.0 4,895.0 6,218.0 9,605.8 5,680.8 71.3 24.1 16.9 119.5 64.5 58.7 44.4 84.5 28.3 21.1 147.6 81.1 63.1 55.2 102.0 32.3 25.3 167.9 93.5 69.9 68.1 20% 16% 22% 19% 20% 9% 24% 36.3 27.9 30.7 23.8 20.1 13.9 27.4 30.6 23.8 24.6 19.3 16.0 12.9 22.1 25.3 20.8 20.5 16.9 13.9 11.6 17.9 51.7 40.4 12.0 12.1 42.5 51.6 36.4 12.4 13.0 41.3 33.8 21.0 19.0 29.1 16.9 11.9 33.0 34.1 19.2 19.6 27.1 16.8 11.6 32.4 35.0 9.0 3.3 60.0 14.5 9.0 14.0 1.4 1.3 0.6 2.1 1.1 1.1 1.2
814.1 265,810.6 1,217.3 37,324.5
319,424.5 19,293.7 59,230.5 8,682.9
20,730.5 22,960.3 10,802.0 13,332.7
Applegreen
Aditya Birla Nuvo @ Apollo Tyres Bajaj Auto Bajaj Finserv Bajaj Holdings Bank of Baroda Bank of India Bharat Electronics BHEL Bharti Airtel Corp Bank Crompton Greaves Divi's Labs GAIL Glenmark Pharma GCPL Grasim HCL Technologies Hindustan Unilever ICICI Bank Indian Hotel Co ITC# Lupin M&M Marico Maruti Suzuki Piramal Healthcare PTC India Punj Lloyd SBI Sintex Industries^ TGBL(Tata Tea)^ Wipro 874.1 79.6 1,750.0 633.8 804.6 824.9 368.5 1,580.3 296.9 350.4 464.2 142.9 737.0 371.3 309.7 449.9 2,718.1 481.7 382.9 902.7 67.3 205.3 488.2 680.0 157.4 1,330.6 447.6 57.5 56.8 2,246.7 84.8 120.6 429.0 5,436.0 8,867.8 16,609.0 2,444.0 898.2 11,611.0 10,453.0 5,471.7 41,566.1 59,467.0 4,264.0 10,005.1 1,307.1 32,458.6 2,949.1 3,643.0 21,269.0 16,034.2 19,691.0 15,665.0 2,891.7 21,468.3 5,706.8 23,494.0 3,128.3 36,965.0 2,556.0 8,997.3 7,849.6 48,351.0 4,483.5 6,004.5 31,054.2 6,012.0 12,560.3 20,164.6 13,380.0 11,299.4 6,294.8 48,747.8 71,383.0 4,717.0 11,677.9 1,621.4 40,519.9 3,959.5 4,763.3 24,431.0 20,910.9 22,795.7 17,832.0 3,295.4 24,947.8 6,774.5 30,731.6 4,057.8 34,255.0 2,043.1 8,314.8 10,043.1 56,408.3 4,755.0 6,532.1 37,763.3 6,877.0 14,266.3 22,936.4 15,112.0 12,994.5 6,984.3 50,538.3 80,169.0 5,459.0 13,265.0 1,964.1 47,376.1 4,402.0 5,903.9 26,379.0 23,908.5 25,866.9 20,708.0 3,844.4 29,130.2 8,163.4 36,088.7 4,860.3 46,942.1 302.2 440.9 2,615.0 1,114.8 2,322.8 4,242.0 2,489.0 841.4 6,011.2 5,859.0 1,413.0 926.8 429.3 3,561.3 392.8 476.9 2,164.0 1,710.0 2,134.4 5,151.0 -105.6 4,987.6 862.5 2,662.0 256.9 2,289.0 367.5 456.2 3,193.0 4,560.0 2,357.5 910.6 6,221.6 5,141.0 1,463.0 453.6 483.8 3,868.5 733.7 616.1 2,555.0 2,247.7 2,513.7 6,200.0 116.7 6,061.0 955.8 2,607.1 322.9 1,343.0 110.0 113.4 -178.4 473.0 583.8 3,333.1 5,137.0 3,101.1 1,008.0 6,544.9 8,291.0 1,707.0 790.1 612.1 3,999.1 619.6 786.6 2,797.0 2,845.5 2,989.1 7,090.0 234.2 7,319.7 1,178.5 2,801.7 437.3 2,199.4 26.6 8.7 90.4 77.1 219.0 107.6 45.5 105.2 24.6 15.4 95.3 14.3 32.4 28.1 14.5 14.7 236.0 24.4 9.9 44.7 -1.4 6.4 19.3 42.0 4.2 79.2 32.4 9.0 110.4 115.7 43.1 113.8 25.4 13.5 98.7 7.1 36.5 30.5 27.1 17.0 278.7 32.1 11.6 53.9 1.5 7.8 21.4 42.5 5.3 46.5 6.4 3.8 -5.4 172.2 11.8 5.2 23.4 41.7 11.6 115.3 130.4 56.7 126.0 26.7 21.8 115.2 12.3 46.2 31.5 22.9 21.6 305.1 40.6 13.8 61.6 2.9 9.4 26.4 45.6 7.1 76.1 19.3 5.1 3.0 228.2 14.0 6.8 26.5 21% 17% 4% 30% -2% 4% 32% -3% 30% 11% 25% 15% 13% 10% 12% 9% 4% 19% 10% -7% 19% 6% 26% 21% 14% 29% 18% 17% 32.9 9.1 19.4 7.7 8.1 15.0 12.1 22.8 4.9 10.0 22.7 13.2 21.4 30.6 11.5 19.7 38.7 20.2 -48.1 32.1 25.3 16.2 37.5 16.8 -2.2 12.2 -11.8 17.3 5.7 30.1 20.0 27.0 8.8 15.9 7.1 8.6 13.9 11.7 26.0 4.7 20.2 20.2 12.2 11.4 26.5 9.8 15.0 33.0 16.7 44.9 26.3 22.8 16.0 29.7 28.6 69.9 14.9 -10.5 13.0 7.2 23.2 18.3 21.0 6.9 15.2 6.3 6.5 12.5 11.1 16.1 4.0 11.6 16.0 11.8 13.5 20.8 8.9 11.9 27.7 14.7 23.2 21.8 18.5 14.9 22.2 17.5 23.2 11.3 18.9 9.8 6.1 17.7 16.2 8.9 15.5 51.5 21.0 39.8 18.9 17.7 28.9 21.1 18.6 17.7 18.6 27.9 104.0 5.9 47.0 21.3 23.9 25.4 12.6 -0.3 7.2 5.9 11.0 8.1 22.5 10.0 17.0 38.8 19.9 34.3 20.0 24.8 30.9 17.8 15.3 19.5 17.5 29.4 93.9 8.5 51.8 21.8 22.2 29.9 18.9 1.4 8.4 8.4 11.4 9.5 23.1 7.1 15.9 54.6 20.4 13.0 14.9 25.4 16.1 19.0 12.4 23.4 18.8 22.1 26.4 14.7 27.0 81.6 10.8 4.7 36.8 22.4 21.4 30.7 9.3 0.8 5.0 -5.9 15.8 11.5 8.0 21.9 8.3 17.2 42.8 19.9 15.3 13.8 22.6 18.0 19.1 18.4 25.6 17.1 15.8 24.5 13.6 27.8 73.6 11.4 8.6 40.3 21.4 19.8 31.7 13.9 2.3 6.4 3.2 18.4 15.6 9.7 21.4 5.5 0.5 40.0 1.3 35.0 16.5 7.0 21.6 6.3 1.0 20.0 1.0 10.0 7.5 0.4 4.5 20.0 7.5 3.5 14.0 1.0 4.5 3.0 11.5 0.7 7.5 12.0 1.5 0.2 30.0 0.7 2.0 6.0 0.6 0.6 2.3 0.2 4.4 2.0 1.9 1.4 2.1 0.3 4.3 0.7 1.4 2.0 0.1 1.0 0.7 1.6 0.9 1.6 1.5 2.2 0.6 1.7 0.4 0.6 2.7 2.6 0.3 1.3 0.8 1.7 1.4
2,411.5 -3,435.8 10,372.1 12,712.4 64,190.5 5,202.7 7,082.7 42,636.0 138.5 -160.0 8,265.0 460.5 248.0 5,253.3
334.4 -204.6 150.3 101.2 4.7 -4.8 130.2 14.9 4.0 21.4
10,935.8 14,485.9 364.3 324.5 5,731.9 434.2 418.7 6,511.8
Emerging Star
Axis (UTI) Bank Cadila Healthcare# Eros Intl Media Gateway Distriparks
@Stand-alone financials
1,166.7 708.5 184.4 151.5
11,195.0 4,630.3 707.0 599.1
13,467.0 5,346.9 891.3 764.0
15,787.0 5,854.9 1,103.7 877.5
3,389.0 711.1 117.3 96.8
4,077.0 770.9 154.9 134.5
4,725.0 938.8 201.8 146.6
82.5 34.7 12.9 9.0
99.3 37.7 16.9 12.4
115.1 45.9 22.1 13.6
18% 15% 31% 23%
14.1 20.4 14.3 16.8
11.7 18.8 10.9 12.2
10.1 15.5 8.3 11.1
20.8 22.7 16.9
21.4 24.7 17.3
19.7 27.8 20.9 18.8
19.4 26.1 22.8 18.7
14.0 6.3 0.0 3.0
1.2 0.9 0.0 2.0
**June ending company
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
46
March 2012
EQUITY
Company Price (Rs)
FUNDAMENTALS
Sales FY11 FY12E 1,801.7 5,232.3 3,110.9 2,269.9 5,524.6 2,556.0 327.4 FY13E 1,992.5 6,425.1 4,117.3 2,622.9 5,864.8 3,235.0 360.0 FY11 169.7 432.3 452.4 32.0 367.2 383.5 727.1 59.6 Net Profit FY12E 145.7 463.8 484.4 465.6 410.9 990.0 60.6 FY13E 153.0 574.3 482.9 549.7 447.8 1,175.0 70.1 FY11 7.0 22.3 13.6 19.7 32.2 20.9 15.2 EPS FY12E 7.2 23.9 14.6 25.0 34.5 25.9 15.5 (%) EPS Growth FY13E FY13/FY11 6.7 29.6 14.5 29.5 37.6 30.8 17.9 -2% 15% 3% 22% 8% 21% 9% 11.8 8.5 13.9 13.8 16.3 16.8 24.2 PE (x) ROCE (%)
EARNINGS GUIDE
RONW (%) FY13E 23.1 14.0 15.7 26.7 23.5 18.3 33.4 DPS Div Yield (Rs) (%) 1.1 3.5 1.5 4.5 9.0 2.5 4.0 1.3 1.8 0.8 1.7 1.7 0.7 1.1
FY11 FY12E FY13E FY12E FY13E FY12E 11.4 8.0 12.9 10.9 15.2 13.5 23.7 12.3 6.4 13.0 9.2 13.9 11.4 20.5 37.6 13.0 13.8 19.8 40.9 45.9 34.2 11.6 12.5 19.9 37.0 40.5 25.6 15.3 18.3 28.9 26.0 20.5 37.2
Greaves Cotton^ ITNL IRB Infra Max India Opto Circuits India Thermax Yes Bank Zydus Wellness
82.3 190.1 188.4 169.0 271.5 524.0 350.5 367.7
1,667.3 4,048.3 2,438.2 6,668.0 1,585.6 4,884.4 1,870.2 336.5
Ugly Duckling
Ashok Leyland # Bajaj Corp CESC Deepak Fert Federal Bank Gayatri Projects India Cements Ipca Laboratories ISMT Jaiprakash Asso KKCL NIIT Technologies Orbit Corporation Polaris Financial Pratibha Industries Provogue India PNB Ratnamani Metals Raymond Selan Exploration Shiv-Vani Oil & Gas Sun Pharma Torrent Pharma UltraTech Cement Union Bank of India United Phosphorus V-Guard Industries 28.7 114.1 265.9 156.6 415.2 133.0 100.4 335.1 29.5 74.9 640.0 239.0 57.6 156.5 47.6 34.5 953.7 107.8 352.4 285.6 208.9 566.6 568.1 1,424.6 232.7 135.8 188.5 11,117.6 359.4 3,939.9 1,564.8 2,263.4 1,440.6 3,501.0 1,898.9 1,611.4 13,320.2 236.6 1,232.2 385.6 1,586.3 1,268.1 565.4 15,420.0 812.2 3,036.0 71.0 1,461.9 5,721.4 2,122.0 13,209.9 8,255.0 5,804.3 726.3 12,025.0 467.9 4,485.5 2,227.7 2,557.0 1,683.3 4,141.0 2,385.5 2,040.7 14,651.0 301.2 1,650.3 379.9 2,182.8 1,650.4 646.6 17,621.0 1,148.4 3,466.0 91.9 1,533.2 7,973.2 2,547.4 17,474.5 8,860.0 7,548.0 977.0 13,263.4 562.4 4,852.6 2,593.2 2,911.0 2,047.4 4,525.0 2,774.2 2,311.3 17,265.0 363.6 2,061.0 562.7 2,638.1 2,068.7 725.6 20,140.0 1,369.0 3,780.0 129.2 1,542.9 8,777.7 2,960.0 18,997.5 10,268.0 8,583.9 1,266.1 636.1 103.1 488.4 186.6 587.1 62.4 66.3 262.8 75.4 653.0 46.2 180.9 78.3 191.7 71.5 33.4 4,434.0 80.5 149.2 31.8 225.0 1,816.1 248.2 1,278.7 2,082.0 585.8 39.0 432.5 117.9 437.4 215.2 707.0 69.8 298.0 326.1 40.8 657.0 53.5 217.0 32.2 218.5 77.6 32.3 4,781.0 83.1 199.8 45.5 205.3 2,434.2 339.4 1,995.8 1,628.0 641.2 44.9 460.8 142.8 500.8 266.0 847.0 98.7 364.0 368.5 87.8 900.0 66.1 232.7 82.0 266.3 107.8 40.7 5,692.0 107.5 239.4 63.2 219.0 2,715.9 416.2 2,255.4 2,274.0 759.0 67.7 2.4 7.0 38.9 21.2 34.3 52.1 2.2 20.9 5.1 3.1 37.5 30.5 6.9 20.4 7.2 2.9 139.9 17.4 24.3 18.7 48.5 17.5 29.3 54.0 39.7 12.7 13.1 1.6 8.0 34.8 24.4 41.3 27.0 9.7 26.0 2.8 3.1 43.4 36.6 2.8 23.1 7.7 2.8 150.9 17.9 32.5 26.8 44.3 23.5 40.1 72.8 31.1 13.9 15.0 1.7 9.7 39.9 30.2 49.5 38.1 11.9 29.4 6.0 4.2 53.6 39.2 7.2 26.9 9.5 3.6 179.7 23.2 39.0 37.2 47.2 26.2 49.2 82.3 43.4 16.7 22.7 -15% 18% 1% 19% 20% -14% 133% 19% 9% 16% 20% 13% 2% 15% 15% 11% 13% 15% 27% 41% -1% 22% 30% 23% 5% 25% 32% 11.9 16.3 6.8 7.4 12.1 2.6 45.6 16.0 5.8 24.1 17.1 7.8 8.3 7.7 6.6 11.9 6.8 6.2 14.5 15.3 4.3 32.4 19.4 26.4 5.9 10.7 14.4 17.9 14.3 7.6 6.4 10.1 4.9 10.3 12.9 10.5 24.1 14.7 6.5 20.6 6.8 6.2 12.3 6.3 6.0 10.8 10.7 4.7 24.1 14.2 19.6 7.5 9.6 12.6 16.6 11.8 6.7 5.2 8.4 3.5 8.4 11.4 4.9 17.8 11.9 6.1 8.0 5.8 5.0 9.6 5.3 4.7 9.0 7.7 4.4 21.6 11.5 17.3 5.4 8.0 8.3 10.0 37.3 6.3 12.8 14.2 7.0 25.8 9.8 9.3 30.6 32.4 7.8 26.0 18.1 8.0 18.0 13.9 26.5 13.5 25.6 25.9 19.6 14.6 21.7 10.3 40.6 6.5 13.8 15.3 8.0 24.2 11.8 10.4 35.4 30.7 10.8 27.4 18.0 9.1 19.9 16.8 30.4 12.6 23.0 26.3 19.8 15.3 25.2 10.6 29.6 7.7 18.8 13.1 14.7 7.0 26.8 6.4 7.0 27.0 26.1 3.4 19.5 14.9 4.6 20.4 17.6 14.1 21.9 12.4 21.1 29.1 16.0 12.2 15.1 23.8 10.7 32.3 8.3 20.1 14.2 15.1 8.0 24.2 12.1 9.0 27.9 24.0 8.1 20.4 17.0 5.3 20.7 19.1 16.0 23.6 12.8 19.2 27.9 15.6 15.2 15.7 29.0 1.0 1.9 4.0 5.0 8.5 2.5 1.5 3.2 1.3 0.9 10.0 7.5 1.5 4.5 0.6 0.3 22.0 2.5 1.0 1.8 1.0 3.5 8.0 6.0 8.0 2.0 3.5 3.5 1.7 1.5 3.2 2.0 1.9 1.5 1.0 4.2 1.3 1.6 3.1 2.6 2.9 1.3 0.7 2.3 2.3 0.3 0.6 0.5 0.6 1.4 0.4 3.4 1.5 1.9
Vulture's Pick
Mahindra Life@ Orient Paper Tata Chemicals Unity Infraprojects 328.1 55.8 355.6 49.9 476.7 1,959.0 11,060.2 1,701.5 462.4 2,349.0 12,885.7 1,890.1 452.4 2,733.0 14,299.6 2,310.0 103.1 143.1 690.4 94.4 114.6 180.0 864.4 100.1 115.5 215.0 970.5 132.6 24.9 7.1 27.1 12.7 27.7 8.9 33.9 13.5 27.9 10.5 38.1 17.9 6% 22% 19% 19% 13.2 7.9 13.1 3.9 11.8 6.3 10.5 3.7 11.8 5.3 9.3 2.8 13.9 13.0 16.4 17.4 12.9 13.0 16.9 19.1 10.7 18.0 14.3 14.4 9.9 19.0 14.4 16.5 5.0 1.2 10.0 1.0 1.5 2.2 2.8 2.0
Cannonball
Allahabad Bank Andhra Bank IDBI Bank Madras Cement Shree Cement 189.7 126.2 112.8 141.0 2,799.8 5,393.0 4,118.0 6,412.5 2,605.0 3,511.9 6,733.0 4,778.0 6,418.2 3,124.0 4,289.0 7,880.0 5,330.0 7,420.6 3,383.0 5,178.0 1,423.0 1,267.0 1,650.0 211.0 258.2 1,902.0 1,438.0 1,695.0 356.0 201.0 2,256.0 1,569.0 1,962.0 388.0 341.0 29.9 22.6 16.8 8.9 74.1 39.9 25.7 17.2 14.9 57.6 47.4 28.0 19.9 16.3 98.0 26% 11% 9% 35% 15% 6.3 5.6 6.7 15.8 37.8 4.8 4.9 6.6 9.5 48.6 4.0 4.5 5.7 8.7 28.6 9.0 8.0 9.0 11.0 20.6 20.4 11.1 19.0 10.0 20.8 19.1 11.8 18.0 15.0 5.0 5.5 3.5 1.8 8.0 2.6 4.4 3.0 1.2 0.3
#UltraTech numbers are post merger of Samruddhi Cement.
47
March 2012
EARNINGS GUIDE
Remarks
EQUITY
FUNDAMENTALS
Evergreen GSK Consumers GSK is one of the leading players in the MFD segment with a market share of 71% in the domestic market. Judicious new launches and brand extensions and the expansion of its distribution reach have helped GSK to stay ahead of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, GSK has expanded its product portfolio by entering into new categories such as biscuits, noodles, energy bars, sports drinks and oats in the recent years. With cash balance of Rs1,000 crore the company can invest into growth initiatives as well as reward the investors with healthy dividend payment. Hence we recommend a Buy on the stock with a price target of Rs3,000. HDFC is among the top mortgage lender providing housing loans to individuals, corporates and developers. It has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are growing faster than HDFC, the value contributed by them would be significantly higher going forward. HDFC Bank was established in 1994 as a part of liberalisation of the Indian banking industry by the Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle' approval from the RBI to set up a private sector bank. Its relatively high margins (compared with its peers), strong branch network and better asset quality make HDFC Bank a safe bet. Infosys is India's premier IT and IT-enabled services company. It is one of the key beneficiaries of the strong trend of offshore outsourcing. The company is relatively better positioned to weather the tough business environment and is also among the major beneficiaries of the revival in IT spending. However, visa litigation and quarterly underperformance would remain an overhang on the stocks performance. Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the strong domestic infrastructure boom. Strong potential from its international business, its sound execution track record, bulging order book and strong performance of subsidiaries further reinforce our faith in it. There also lies great growth potential in some of its new initiatives. However, the recent cut in its order inflow guidance amid a tough business environment has hampered the stocks sentiments in the recent times. RIL holds a great promise in E&P business with gas production from KG basin starting from April 2009 and crude oil production commencing from September 2008. We expect the companys GRM to pick up with a likely improvement in the light-heavy crude oil price differential. The company is likely to fetch premium over Singapore Complex GRM due to its superior refinery complexity and captive use of KG D-6 gas. We expect the petrochem margins to be maintained in the medium term on uptick in the domestic demand. Currently the decline in gas output from KG D6 basin has weighed high on the stock price, however its recent deal with BP is expected to benefit RIL in terms of the global expertise of BP in deep-water exploration to ramp-up production at KG-D6. TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most service offerings and is in the process of further consolidating its leadership position through the inorganic route and large deals. At the current juncture TCS is well placed to garner incremental deals in the sector with organisational structure in place, unlike Wipro and Infosys, which are going through a phase of organisational restructuring. Its consistent quarterly performance coupled with the higher predictability of its earnings would keep it the Streets favourite over Infosys. Apple Green Aditya Birla Nuvo We believe the value businesses of the company (insulators, textiles, fertilisers, carbon black and rayon) have started witnessing increased efficiency as reflected in sharp improvement in their operating margins, while the growth businesses (retail, BPO, life insurance and financial services) are showing improved revenue visibility and gaining strong market share. We believe strong internal cash flows from value businesses coupled with promoter funding would aid in meeting the funding requirement of the growth businesses. Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. A strong demand in the OEM and replacement tyre segments coupled with the commencement of additional capacity at its new Chennai facility is likely to see a healthy growth in its volume going forward. The European and South African acquisitions have yielded regional and product diversification. The Indian operations contribute about 62%; VBBV contributes around 25%; and Apollo Dunlop, South Africa contributes approximately 13% to the consolidated revenues. Bajaj Auto is a leading two-wheeler automobile company. It is moving up the value chain by concentrating on the executive and premium motorcycle segments. The launch of the new Pulsar and the KTM range would be the key for it to maintain its leadership position in the premium bike segment and for maintaining domestic volume growth. Exports remain the key for the company to drive overall volumes. Bajaj Finserv is actively present in businesses such as vehicle finance, consumer finance, distribution etc with insurance being the dominant contributor to revenues. It is one of the top few players in the fast growing life insurance segment and also has a sizable presence in the general insurance segment.
HDFC
HDFC Bank
Infosys
L&T
Reliance Ind
TCS
Apollo Tyres
Bajaj Auto
Bajaj Finserv
48
March 2012
EQUITY
FUNDAMENTALS
Remarks
EARNINGS GUIDE
Bajaj Holdings
Bajaj Holdings is the holding company of the Bajaj group, having a 30% stake each in Bajaj Auto and Bajaj Finserv. The two-wheeler sales are expected to improve going forward with new product launches. The insurance business makes it one of the largest players in the insurance space. BoB is among the top PSU banks having sizeable overseas presence (86 offices in 25 countries) and a strong domestic network of over 3,400 branches across the country. It has a stronghold in the western and eastern parts of India. The bank has laid out aggressive plans to expand its income streams from both domestic and international businesses. Bank of India has a wide network of branches, spread across the country and abroad, along with a diversified product and services portfolio and steadily growing assets. The asset quality had posed concerns and affected the operating performance of the bank. Bharti Airtel continues to perform well in the African telecom market in terms of both, growth in subscriber base and revenue market share. The return of pricing power in the domestic market visible through recent tariff hikes coupled with improving efficiency and market share in the acquired Zain Africa operations puts Bharti Airtel in a sweet spot. Bharat Electronics Ltd (BEL), a PSU manufacturing electronic, communication and defence equipment, is benefiting from the enhanced budgetary outlay for strengthening and modernising the countrys security. The growth in revenue is also expected to be aided by the civilian and export orders. The companys current order book of Rs27,000 crore provides revenue visibility for the next two years. BHEL, India's biggest power equipment manufacturer will be the prime beneficiary of the four-fold increase in the investments being made in the domestic power sector. The current order book of Rs1,46,500 crore stands at around 3.5x its FY2011 revenues providing revenue visibility for at least the next three years. However, the key challenge before the company now would be to maintain a robust order inflow amid rising competition in the power equipment space and a profitable execution of the order book. Corporation Bank is a mid-sized PSU bank having strong presence in the corporate segment. The bank is planning to expand its retail and SME book, and expand the CASA ratio which will improve the net interest margin over the medium term. The bank is most aggressive on technology implementation which gives it a competitive edge over its peers. Crompton Greaves' key businessesindustrial and power systemsholds huge potential in view of investment opportunities in infrastructure particularly Transmission and Distribution sector in India. Its consumer products segment, which has done very well in the recent years, also led to diversification in its business exposure. The synergy from the acquisition of Pauwels, GTV, Microsol, Emotron and QEI will drive the companys consolidated earnings. However, continuing disappointment in the Q3FY2012 results have added to the investors concerns on the companys growth slowdown and competitive margin pressure. M9FY2012 performances have re-affirmed our confidence in Divis Laboratories growth potential. The new DSN SEZ facility at Vishakhapatnam which started in June 2011 is likely to bring better economies of scale and tax benefits. A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit growth opportunities in niche segments like high potency for oncology and steroids for contraceptives. GAIL India, a leading gas transmission company, is aggressively expanding its pipeline network and plans to invest more than Rs28,000 crore over FY2011-14 in a phased manner to significantly expand its gas pipeline network to over 14,000km and its transmission capacity to around 300mmscmd. On account of lower domestic gas production, we expect a subdued performance from its core gas transmission business in the next 1-2 years. However, the LNG trading business is likely to see an uptick in the same period. Glenmark Pharmaceuticals has exhibited an impressive operating performance during M9FY2012 but for forex losses which dented profits. Through the successful development and out-licencing of five molecules in a short span of eight years, Glenmark has become India's best play on research-led innovation. It has built a pipeline of 14 molecules and has clinched five out-licensing deals worth $1,672 million (received $192 million as initial milestone payment).Its core business has seen stupendous success due to its focus on niche specialties. Godrej Consumer Products Ltd (GCPL) is a major player in personal wash, hair colour and household insecticide market segments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies has helped the company to expand its geographic footprint. We believe the decent sales volume growth in the domestic business coupled with a strong growth in Megasari (Indonesian business), African and the Argentine business would help GCPL to achieve an above 20% CAGR top line and bottom line growth over FY2011-14.
Bank of Baroda
Bank of India
Bharti Airtel
BEL
BHEL
Corp Bank
Crompton Greaves
Divi Labs
GAIL
Glenmark Pharma
GCPL
49
March 2012
EARNINGS GUIDE
Remarks
EQUITY
FUNDAMENTALS
Grasim
Grasim is better placed compared to the other large players in the cement space due to its strong balance sheet, comfortable debt-equity ratio (0.33x H1FY2012), attractive valuation and due to its diversified business. The demand for VSF products continues to be strong in the global market and Grasim being a leading domestic player is well placed to capture incremental demand. Further, the company is in the process of adding another 120,000 tonne capacity in VSF by FY2013 with an investment of Rs1,690 crore. HCL Tech is one of the leading Indian IT service vendors. It has outperformed its peers in terms of better financial performance in the past few quarters on the back of a ramp-up in business from large deals bagged earlier. We expect HCL Tech to show a superior earning CAGR of 29% over FY2011-2013E with a broad based revenue growth and margin improvement. With improved revenue visibility and consistency in financial performance, we now value HCL Tech at a 25% discount to Infosys. HUL is India's largest FMCG company. It would achieve around 15% Y-o-Y top line growth driven by a mix of sales volume and a price-led growth. However, the higher input prices will continue to sustain pressure on the profitability in the near term. Overall we expect HULs bottom line to growth at CAGR of 18% over FY2011-14. In the long term, HUL will be one of the key beneficiaries of the Indian consumerism story. ICICI Bank is India's largest private sector bank with a network of over 2,500 branches in India and a presence in around 18 countries. The bank has once again entered an expansionary mode after making a conscious effort to contract its advances book due to asset quality concerns. The bank offers substantial value unlocking opportunities with the expected listing of its subsidiaries like ICICI Securities and ICICI Prudential Life Insurance. Indian Hotels is the largest hotelier in India with a vast portfolio of hotel properties around the globe. Over the long term the company would benefit from increase in tourism and corporate travel in India. Also, a turnaround in profitability of its overseas properties would boost its earnings. ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some of which are at nascent stage. Thus we believe the company will deliver sustained and steady growth in coming years. The expected ramp up in the launch of oral contraceptives, ophthalmic products and a robust pipeline of new launches in the domestic and overseas markets provide strong growth visibility for Lupin. Further, with an expanded field force and therapy focused marketing division; its formulation business in the domestic market has been performing better than the industry. The deal with Eli-Lilly to distribute human insulin would open an incremental revenue stream for Lupin in the Indian market. M&M is a leading maker of tractors and utility vehicles in India. New product launches are likely to drive its growth going forward in the automobile segment, while the company has consolidated well in the tractor segment with the acquisition of Punjab Tractors. Further, its investments with world majors in passenger cars and commercial vehicles have helped it diversify into various automobile segments, while the value of its subsidiaries adds to its sum-of-theparts valuation. Marico is among India's leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing in the market. It follows a three-pronged strategy which hinges on expansion of existing brands, launch of new product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic product portfolio is likely to achieve a steady growth in volumes, the international business is expected to post a robust growth on the back of an increase in distribution to neighbouring countries and extension of its international product portfolio over the long run. Maruti Suzuki is India's largest small carmaker. It is the only pure passenger car play in the domestic market. While the new Swift has seen unprecedented response from the market, there is considerable stress in its petrol portfolio. Suzuki of Japan has also identified India as a manufacturing hub for small cars for its worldwide markets. Even though the pharma business is witnessing strong traction, diversification into unrelated areas allays our fears of losing focus on the core business. With the NCE business becoming an integral part of the parent company, the risk profile of the company has increased. We value the company at a higher discount rate of 50% (from 20% earlier) as it still has a hefty cash balance of Rs8,500 crore (part to be received over a period of 4 years), which could be utilised for high risky ventures.
HCL Tech
HUL
ICICI Bank
Indian Hotels Co
ITC
Lupin
M&M
Marico
Maruti Suzuki
Piramal Health
50
March 2012
EQUITY
FUNDAMENTALS
Remarks
EARNINGS GUIDE
PTC India
PTC India Ltd is a leading power trading company in India with a market share of around 33% in short term power trading in CY2011. Driven by a strong growth in trading volumes and an uptick in the trading margins, the company is estimated to show a robust growth in its earnings over the next few years. In the last few years, the company has made substantial investments in various areas like power project financing via PFS or taking direct equity stake, coal trading and power tolling which have great growth potential in the future. However, the deteriorating financial health of state electricity boards has put pressure on its working capital cycle and the company has raised debt in Q2FY2012. Still, its valuations look quite attractive on a sum-of-the-parts basis. Punj Lloyd is the second largest EPC player in the country (first being Larsen & Toubro) with a global presence. However, since FY2009, the profitability has come under severe pressure due to cost overruns/ liquidated damages in some of Simon Carves (subsidiary) projects. Thus it has put Simon Carves under administration. Further Libyan projects will take another three-four quarters to begin execution. Therefore, going ahead, the successful execution of its projects along with debt reduction and working capital management hold the key as the company enjoys a robust order book. State Bank of India is the largest bank of India with loan assets of Rs7.9 lakh crore. The loan growth is likely to remain slightly subdued in FY2012 while the core operating performance will be healthy with stable net interest margin. Successful merger of the associate banks could provide further upside for the parent bank. The asset quality of the bank would remain a key monitorable. A key player in the plastic specialties space, Sintex Industries has a diverse business model with presence in construction, prefabs, custom moulding and textile businesses. Being a pioneer in the monolithic construction technique, it has a good order book position. But owing to policy paralysis, the company is going slow on the execution front, which is likely to break the strong growth momentum seen by it in the last two years. The stock has underperformed the Sensex and the Nifty. The stock is currently trading at 4.4x its one year forward earnings which is around the bottoms of the valuation it commanded in April 2009. Thus we maintain Buy on it. Over the past few years, Tata Global Beverage Ltd (TGBL, formerly Tata Tea) has transformed its focus from being a mere tea and coffee company to a complete beverage maker. The recent addition of Mount Everest mineral water to its product portfolio and its tie-up with Pepsico Inc to make a mark in the non-carbonated beverage space are likely to be the new growth drivers for the company in the long run. Also its JV with Starbucks would help it to explore opportunities in the coffee retailing space. Its intention to acquire companies in the US, Europe and Russia also augurs well to enhance its geographical footprint. Wipro is one of the leading Indian IT service companies. The company has lagged the other IT biggies in terms of performance. In the medium term we expect Wipro to demonstrate a relatively weaker earnings growth vis--vis its peers with the organisational re-structuring and lower presence in the banking and financial services space. We expect Wipros earnings to grow at a CAGR of 11% over FY2011-13E. Emerging Star
Punj Lloyd
SBI
Sintex Industries
TGBL
Wipro
Axis Bank
Over the last few years, Axis Bank has grown its balance sheet aggressively. Notably, the bank has maintained a delicate balance between aggressive balance sheet growth and profitability. Besides the core banking business, the bank has forayed into the asset management business and is acquiring the securities and investment banking business of ENAM. We expect the quality of its earnings to improve as the proportion of fee income goes up. Despite a weak performance in M9FY2012, Cadila's improving performance in the US generic vertical and emerging markets along with steady progress in the CRAMS space (through joint ventures)enrich its growth visibility of achieving a $3 billion revenue target by 2015. It has acquired three entities in FY2012 namely, Nesher Pharma (US), Bremer Pharma (Germany) and Biochem Pharma (India) during FY2012, which should supplement the growth. Eros is one of the largest integrated film studios in India with multi-platform revenue streams and a well-established distribution network across the globe. With its proven track record, de-risked business model and aggressive rampup plans, we believe the company is well poised to gain from the rising discretionary spending on film entertainment driven by the countrys favourable demographics. Thus, EIML is a compelling value play on the Indian media and entertainment industry. With its dominant presence in the container freight station segment and recent forays into the rail freight and cold chain businesses, GDL has evolved as an integrated logistic player. Its CFS business is a cash cow while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest player in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold storage business. The further proposed capex planned in all the three segments will strengthen its presence in each of the segment and increase its pan-India presence. We expect GDLs revenue and net profit to grow at 17% and 11% CAGR respectively over FY2012-14.
Cadila
Eros Intl Media
GDL
51
March 2012
EARNINGS GUIDE
Remarks
EQUITY
FUNDAMENTALS
Greaves Cotton
Greaves Cotton is a midsize and well-diversified engineering company. The Companys core competencies are in Diesel/Petrol engines, Power Gensets, Agro engines & pumpsets (Engines segment) and Construction Equipment (Infrastructure equipment segment). The engine business accounts for ~85% of the companys revenue, while the rest comes from infrastructure equipment. Given the sharp deterioration in growth and margins in the core three-wheeler business we cut our FY2013 estimates and maintain our Hold recommendation. ITNL is Indias largest player in the BOT road segment with a pan-India presence and a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the geographical diversification across 12 states reduces the risk to a large extent and provides comfort. Further, a strong pedigree along with the outsourcing of civil construction activity helps ITNL to scale up its portfolio faster. Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector. IRB is the largest toll road BOT player in India and the second largest BOT operator in the country with all its projects being toll based. It has an integrated business model with an in-house construction arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free and it has presence in high-growth corridors which provides healthy cash flow. Thus, IRB is well poised to benefit from the huge opportunity in the road development projects on the back of its proven execution capability and the scale of its operations. Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insurance and healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sector players, has gained the critical mass and enjoys some of the best operating parameters in the industry. With insurance penetration picking up in India and with the company entering into a tie up with Axis Bank we expect to see a healthy growth in the companys annual premium equivalent (APE) going ahead. Having strong presence in organ monitoring systems, Opto Circuits has diversified into the invasive space, supplying stents for medical use. A lower cost base and an attractive pricing strategy have enabled the company's stents to gain acceptance globally. Besides, the Criticare acquisition has further enabled it to diversify into gas monitoring system and strengthen its position in the USA. The quick turnaround in the recently acquired Cardiac Lifescience is impressive and would drive the future growth. The energy and environment businesses of Thermax are set to benefit from a continuing rise in India Inc's capex. Its group order book stands at Rs5,809 crore, which is 1.1x its FY2011 consolidated revenue. While its super-critical boilers foray is yet to see some major order inflow, we remain positive on its diversified sector exposure and opportunities in the infrastructure sector. Yes Bank, a new generation private bank, started its operations in November 2004 and is the only greenfield bank approved by the RBI in the last decade. The bank is promoted by Rana Kapoor and Ashok Kapur. Yes Bank follows a unique business model based on knowledge banking, which offers product depth and a sustainable competitive edge over established banking players. Knowledge led banking also enables the bank to generate strong fee income, which eventually translates into higher return ratios. Zydus Wellness owns three high growth brands, Nutralite, Sugar free and Ever Yuth in the niche health and wellness segment. The company focuses on rampant growth by increasing the distribution of existing products, scaling up the existing product portfolio through variants and new product launches leveraging the three brands. However the company is facing intensifying competition in some of its key categories, which has moderated the sales growth in H1FY2012. Though the top line growth is likely to remain subdued, the bottom line is likely to grow by around 10% on the back of tax benefits from the new facility in Sikkim. Ugly Duckling Ashok Leyland, the second largest commercial vehicle (CV) manufacturer in India, is a pure CV play. The new greenfield facility in Pantnagar in Uttaranchal has provided strategic cost and diversification benefits. The company has ventured into LCV space with the launch of Dost together with Nissan. It has also entered into construction equipment space through JV with John Deere. Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in the premium light hair oil (LHO) category with its Almond Drops hair oil. With its strong brand positioning, distribution strength and healthy balance sheet, it is well poised to ride on the strong consumer demand emerging due to the rising disposable income and growing aspirations of the Indians. Any initiative on the companys part to expand its limited product portfolio or strengthen its core business would be the key upside trigger for the stock. Hence, we recommend Buy on the stock with a price target of Rs142.
IL&FS Trans
IRB Infra
Max India
Opto Circuits
Thermax
Yes Bank
Zydus Wellness
Ashok Leyland
Bajaj Corp
52
March 2012
EQUITY
FUNDAMENTALS
Remarks
EARNINGS GUIDE
CESC
CESC is the power distributor in Kolkata and Howrah backed by 1,225MW of power generation capacity, which is a strong cash generating business. Further, it is adding 1,200MW of generation capacity which would be on stream by FY2015. Moreover, having 80% of assured coal supply from invested company and coal linkages, CESC has a high degree of integrated status among peers. Despite that, the stock is currently one of the cheapest stock in the Indian utility space trading at a discount to its book value primarily on account of the concerns related to losses from its retail business, Spencers. However, we believe the concerns are overdone and the company has started exhibiting store level profit in FY2011 which is an initial sign of revival as per the management. Nevertheless, this possible turnaround of retail business is not priced in the current stock price; hence the stock is a rerating candidate. DFPCL manufactures and supplies industrial chemicals and ANP fertilisers. Given the expansion in TAN capacity, introduction of new products in the fertiliser division and ability to manage cost pressures, we expect the company to report a good growth in revenue on the back of good volumes from the fertiliser segment. Going forward the company may see pressure on margin due to increase in price of key input materials for the chemical segment. Federal Bank is the fifth largest private sector bank in India in terms of asset size and has traditionally been a strong player in south India especially Kerala. The bank is expected to witness an improvement in its RoE due to leveraging of its equity and easing of cyclical asset-quality pressures. Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and industrial construction businesses. The order book excluding Andhra Pradesh irrigation projects stands at Rs5,239 crore, which is 3.1x its FY2012E revenues. It is also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private equity. We feel the company has potential to transform itself into a bigger player and expect its net profit to grow at a CAGR of 24% over FY2011-13. India Cements installed capacity has got enhanced to 16MTPA which will result in volume growth and drive the earnings of the company. The company is also setting up a 100MW captive power plant, which is expected to come on stream by FY2013. However, in spite of cost inflation we expect the profitability of the company to improve in FY2012 due to the increase in the cement realisation on account of supply discipline followed by the manufacturers. Ipca has successfully capitalised on its inherent strength in producing low-cost drugs to tap the export markets. The company's ongoing efforts in the branded formulations business in the emerging economies, revival in the UK operations, pan-European initiatives, likely approval of one additional product under institutional business and a significant scale-up in the US business will drive its formulation exports. The USFDA approval for the Indore SEZ are expected shortly, which would help ramp up sales in the US. A leading maker of seamless tubes, ISMT is likely to benefit from improving demand in its traditional user industries like automobile and mining. It would also gain from efforts taken to expand its product offerings and it increasing the size of its addressable market by penetrating into energy and oil exploration sectors. However, a delay in commissioning of its 40MW power plant has led to a delay in margin expansion for the company. With the power plant now expected to be commissioned in FY2013, we have lowered our estimates and now expect the profit to grow at a CAGR of 9% over FY2011-13E. Jaiprakash Associates, India's leading cement and construction company, is all set to reap the benefits of India's infrastructure spending. The company has also monetised very well on the real estate properties of Yamuna Expressway. Moreover, the marked improvement in macro environment has improved accessibility to capital and thus eased the concerns of liquidity to some extent. However, higher leverage could act as drag on the valuation. Kewal Kiran Clothing Ltd is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has created a niche space in the minds of consumers. With a gross market turnover of approximately Rs145 crore, Killer is ahead of its rival--Spykar. We believe that a strong brand profile, a disciplined management and a consistent track record coupled with a robust balance sheet position (cash on books at ~Rs120 a share) puts KKCL in a sweet spot. With its strong domain expertise in a few niche verticals and competitive advantage in terms of significant contribution from its non-linear initiatives, NIIT Technologies is well placed to benefit from the overall improvement in the demand environment. The recent large deal wins give further revenue visibility for the future. Moreover, the company has healthy cash on the books with minimal debt which leaves scope for further acceleration in growth through inorganic initiatives and act as another re-rating trigger for the stock. Given its unique business model, Orbit is expected to cash in the massive re-development opportunities in southern and central Mumbai. Further, given its presence in the luxury segment, which is less price sensitive, it will be able to revive faster once the real estate industry recovers.
Deepak Fert
Federal Bank
Gayatri Proj
India Cements
Ipca Lab
ISMT
Jaiprakash Asso
KKCL
NIIT Tech
Orbit Corp
53
March 2012
EARNINGS GUIDE
Remarks
EQUITY
FUNDAMENTALS
PNB
Punjab National bank (PNB) has one of the best deposit mixes in the banking space with low-cost deposits constituting around 39% of its total deposits that helps it maintain one of the highest margins in the sector . A strong liability franchise and technology focus will help the bank boost its core lending operations and fee income related businesses. Polaris Software Lab (Polaris) is one of the few integrated midcap IT companies having a strong foothold in the BFSI vertical and having offerings in both, the services and solutions segments. We continue to remain positive on the Intellect side of the business and expect a faster and stronger growth momentum in the coming years which would in turn enable margin improvement as well. Pratibha Industries is a dominant player in water & irrigation and urban infrastructure space. It has also diversified into other high-margin areas like road BOT, power and oil & gas. The current order book stands at Rs4,959 crore, which is 3.0x its FY2012E revenues. Given the governments thrust on developing these segments, we expect the net profit to grow at a CAGR of 23% over FY2011-13. Further the company is looking at exiting HSAW pipe manufacturing business (which has been an overhang for past one year) which will improve balance sheet and profitability. Provogue India is a strong bet to play the up-cycle in the discretionary consumption space. The companys core businessfashion apparels continues to do well. Further, its subsidiary Prozone, which is developing multipurpose infrastructure in tier II cities with a well-funded balance sheet and good portfolio of land bank, has received clearance certificate for the Indore property and expects to soon get clearance for its Coimbatore project. Ratnamani Metals and Tubes is the largest stainless steel tubes and pipes maker in India. In spite of the challenging business environment due to increasing competition, we believe the stock is attractively valued. The management has maintained a strong outlook on the potential opportunities in the oil & gas sector. The company has reported strong revenue growth but margins have been trending downwards. Revenues and earnings are likely to grow at a CAGR of 30% and 15% respectively for FY2011-13E. Raymond is present in the fast growing discretionary & lifestyle category of branded textiles and apparels. With the growing income, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable demographics, the segment of branded apparels & fabrics presents a tremendous growth opportunity and Raymond with its brands and superior distribution set up is very well geared to encash the same. We believe that Raymond with its strong brands and an enviable distribution reach is a quality play on the fast growing lifestyle & discretionary segment. Further the company's efforts towards enhanced focus on its power brands coupled with benefits of turnaround performance are not getting reflected in the valuations and hence we believe the stock is due for a rerating. Further, any development with regard to the Thane land in the form of either joint development or disposal would lead to value unlocking and provide significant cash to the company. Selan Exploration is an oil exploration & production company with five oil fields in the oil rich Cambay Basin of Gujarat. The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production. Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based on this, we expect the company to ramp up its production more than two times by FY2014 over that of FY2011. It would lead to an earnings growth of 41% (three years CAGR over FY2011-13) as it is expected to take advantage of the ramp-up in production, higher crude price and stable operating cost. Hence, we rate this stock as Buy. The company is the largest on-shore oil exploration service provider in the domestic market. Its strong order book of Rs2,700 crore, which is 1.8x its FY2011 revenues, provides healthy visibility to its revenues for two years. Currently the stock is trading attractively at low valuation. The combination of Sun Pharma and Taro offers an excellent business model. With a stronghold in the domestic formulation market, Sun Pharma has become an aggressive participant in the Para IV patent challenge space. Along with the exclusivities in the USA, the recent consolidation of the Taro acquisition has provided the much-needed boost to the stock. The resumption of Caraco and Cranbury facilities, and Para IV approvals would act as re-rating factors for the stock. A well-known name in the domestic formulation market, Torrent has been investing in expanding its international presence. With the investment phase now over, Torrent should start gaining from its international operations in Russia and Brazil. The impending turnaround of its German acquisition, Heumann, will also drive the profitability of the company. UltraTech is Indias largest cement company with approximately 52 million tonne cement capacity. The company has benefited from an improvement in its market mix. Further, ramping-up of the new capacity and savings accruing from new captive power plants will improve the companys cost efficiency.
Polaris
Pratibha Ind
Provogue India
Ratnamani Metals
Raymond
Selan Exploration
Shiv-vani
Sun Pharma
Torrent Pharma
UltraTech Cement
54
March 2012
EQUITY
FUNDAMENTALS
Remarks
EARNINGS GUIDE
United Phos
A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro Brazil will help the company to have a strong presence in the Brazilian market and help in growing inorganically. United Phosphorus has reduced its revenue growth guidance for FY2012 due to the extended winter weather in some of its major markets. The company expects a revenue growth of 25-30% for the year 2011-12 which is much lower than the 35-40% growth guidance given earlier. Union Bank has a strong branch network and an all-India presence. The banks earnings growth has deteriorated due to asset quality pressures. V-Guard Industries is an established brand in the electrical and household goods space, particularly in South India. Over the years, it has successfully ramped up its operation and network to become a multi-product company. The company has recently also forayed into non-South India and is particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products. We expect VGI to post a CAGR of 32% in its earnings over FY2011-13E. Vulturess Pick
UBI V Guard Ind
Mahindra Lifespace
The company is the first in India to own two integrated business cities (IBC; which is a combination of SEZ and domestic area)one in Chennai and the other at Jaipur and both have become operational. Further, it has acquired land at Pune and Chennai to come up with two more IBCs. Apart from this, it has 3.75 million sq ft of residential and commercial projects under construction across various cities and an additional land bank of 12.6 million sq ft for future development. Consequently, we expect the company's stand-alone net profit to grow at a CAGR of 5.9% over FY2011-13. Orient Paper has increased its cement capacity from 3.4 million tonne to 5 million tonne and installed a 50MW captive power plant to save on power costs. We believe, the company will be able to deliver an impressive volume growth in FY2012 due to the commissioning of its new capacity. Further, a change in its market mix in favour of the western region compared to southern region augurs well for the company. The company is also in the process to de-merge its cement division which could act as a value unlocking. With a combined capacity of 5.5MMTPA Tata Chemicals is the second largest soda ash producer in the world. Tata Chemicals has purchased 25% stake in urea-ammonia green field project at Goban with investment at $290mn. Further changes in urea policy are likely to benefit the company further. We expect IMACID to show a strong performance on the back of a steep increase in the price of phosphoric acid, the main raw material for the production of DAP. TCL is expected to show a strong performance on the back of a relatively healthy demand for soda ash and sodium bicarbonate in India compared to the rest of the world. With a well-diversified order book, Unity Infrastructure is expected to be the key beneficiary of the government's thrust on infrastructure spending. The order book remains strong at Rs3,991 crore, which is 2.1x its FY2012E revenues. We expect its net profit to post a CAGR of 18.5% on the back of a strong order book during FY2011-13. Further, it has recently forayed into road BOT segment and plans to enter power segment also. Cannonball
Orient Paper
Tata Chemicals
Unity Infra
Allahabad Bank
With a wide network of over 2,200 branches spread across India, Allahabad Bank enjoys a strong hold in north and east India. With an average RoE of ~20% during FY2010-12E, coupled with improving asset quality trends the bank is one of the stronger players in the public sector banks. Andhra Bank, with a wide network of over 1,200 branches across the country, has a strong presence in south India especially in Andhra Pradesh. Though the bank is available at attractive valuation, concerns on asset quality front and political situation within the state would affect its operations. IDBI Bank is one of leading public sector banks of India. The bank is expected to improve its core performance significantly, which is likely to reflect in the form of better margins and return ratios. Due to rising asset quality risks and slower business growth the stock is likely to underperform in the near term. Madras Cement, one of the most cost-efficient cement producers in India, will benefit from the capacity addition carried out ahead of its peers in the southern region. The 3-million-tonne expansion will provide the much-needed volume growth in the future. However, regional demand remains lacklustre but on account of the improvement in the realisation due to supply discipline and a likely change in the market mix, we believe, the profitability of the company would improve in FY2012. The companys cement grinding capacity has enhanced to 13.5MTPA which will support the volume growth of the company in the coming years. Additionally, the company has set up 300MW power plant entirely for merchant sale, which is expected to support revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue accruing from the sale of surplus power will drive the earnings of the company.
Andhra Bank
IDBI Bank
Madras Cement
Shree Cement
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Sharekhan ValueGuide

From Sharekhans Desk

31 Copper 32 Lead 32 Zinc 34 Copper 34 Natural gas 34 Nickel

STOCK IDEAS STANDING (AS ON MARCH 02, 2012)

#Reco price adjusted for bonus

FROM SHAREKHANS DESK

from sharekhans desk

Perils of timing the market

MARCH 03, 2012

Policy push needed for the next leg up

Marchbig events awaited (poll results, budgets, RBI policy)

Source: Election Commission of India

Net Debt Market Bor r ow ings

Central Fis c al Def ic it

RBIs monetary action hinges on fiscal roadmap to be given by the government

Earnings growth yet to pick up but downgrades bottoming out

FII flowsso far so good

Macro indicators suggest sluggish recovery

Short covering blip behind us: fundamentals would come to fore

Rise in crude prices raises macro concerns

SENSEX P/E (BASED ON ROLLING ONE-YEAR FORWARD EPS)

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

ABSOLUTE OUTPERFORMANCE (RETURNS IN %)

CONSTANTLY BEATING NIFTY AND SENSEX (RETURNS IN %)

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Ahead of the pack

Public & others 10%

BUY; CMP: RS110 FEBRUARY 3, 2012 Price target revised to Rs140

BUY; CMP: RS354 FEBRUARY 8, 2012 Price target revised to Rs450

EROS INTERNATIONAL MEDIA

GLAXOSMITHKLINE CONSUMER HEALTHCARE

HOLD; CMP: RS94 FEBRUARY 6, 2012 Price target revised to Rs105

Foreign 27% Public & others 31%

BUY; CMP: RS316 FEBRUARY 1, 2012 Strong traction in international business

HOLD; CMP: RS129 FEBRUARY 3, 2012 Price target revised to Rs138

Public & others 29%

MAHINDRA & MAHINDRA

HOLD; CMP: RS687 FEBRUARY 8, 2012 Price target revised to Rs740

Highlights of Q3FY2012 performance

BUY; CMP: RS33

FEBRUARY 17, 2012

Deep valuemaintain Buy; price target revised to Rs62

Valuation and view

BUY; CMP: RS51

No respite on SEBs woes, price target revised to Rs71

RATNAMANI METALS AND TUBES

BUY; CMP: RS110 FEBRUARY 16, 2012 Strong revenue performance

STATE BANK OF INDIA

SUN PHARMACEUTICAL INDUSTRIES

Public and others 5%

Foreign 19% Promoters 65%

HOLD; CMP: RS362 FEBRUARY 13, 2012 Downgraded to Hold

Foreign 13% MF & FI 31%

S SPECIAL SHAREKHAN HAREKHAN S PECIAL Monthly economy review

OF CTOBER 06, 2008 EBRUARY 27, 2012

Equity market: FIIs remain buyers

Banking stocks outperform

Banking: In view of tight liquidity another CRR cut expected