Market Outlook

India Research
October 24, 2011

Dealers Diary
The Indian markets are expected to open in green tracing firmness across Asian markets in the early market trade and the strong gains logged by US & European markets on Friday. The domestic indices retreated and closed in red on Friday as investors turned cautious ahead of Sunday's meeting of European leaders. Also, the INR fell to a 30-month low past the 50 per US$ level for the first time in more than two years. Global cues remain mixed on the outcome of European summit. European leaders on Sunday ruled out tapping the European Central Banks balance sheet to boost the regions rescue fund and outlined plans to aid banks, inching toward a revamped strategy to contain the Greece-fueled debt crisis. On the domestic front, crucial corporate earnings season has gathered steam. The street would also be keeping a close eye on the RBIs monetary policy review scheduled for Tuesday (October 25, 2011) where a 25bp hike is already factored in by the markets, in our view. No major negative surprise so far has retained the investor confidence in markets.

Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com

Chg (%) (0.9) (0.8) (0.7) (0.6) (0.3) (0.6) (0.7) (0.2) (1.4) (0.5) (0.4) Chg (%) 2.3 1.5 1.9 (0.0) 0.2 0.7 (0.6)

(Pts) (151.3) (42.0) (41.7) (41.2) (16.1) (45.4) (75.0) (17.3) (152.8) (39.9) (21.9) (Pts) 38.8 104.0 (3.3) 42.6 18.4 (14.1)

(Close) 16,786 5,050 6,112 6,825 5,928 7,376 11,094 8,848 11,100 8,650 5,526 (Close) 2,637 5,489 8,679 18,026 2,712 2,317

267.0 11,809

Markets Today
The trend deciding level for the day is 16,857/5,070 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,961 17,137 / 5,101 5,152 levels. However, if NIFTY trades below 16,857/5,070 levels for the first half-an-hour of trade then it may correct up to 16,681 16,577 / 5,018 4,987 levels.
Indices SENSEX NIFTY S2 16,577 4,987 S1 16,681 5,018 R1 16,961 5,101 R2 17,137 5,152

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 2.2 1.8 1.8 1.6

(Pts) 1.2 0.2 0.6 0.5

(Close) $55.6 $9.6 $35.5 $31.4

News Analysis
INEOS ABS announces open offer 2QFY2012 Result Reviews L&T, Axis Bank, Idea, Asian Paints, JSW Steel, GCPL, United Phosphorus, Federal Bank, Syndicate Bank, Jagran Prakashan, HT Media, Bank of Maharashtra, HCC, Electrosteel Steels, GIPCL, NIIT, Sarda Energy, Hitachi Home, PVR, Siyaram Silk 2QFY2012 Result Previews ITC, Sterlite, GAIL, Union Bank of India, Sadbhav Engg., Jyoti Structures
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 1,112 1,682 126

NSE 494 928 71

Net Inflows (October 20, 2011)

` cr FII MFs ` cr Index Futures Stock Futures Purch 1,469 303 Sales 1,900 490 Purch Net (431) (187) Sales Net MTD (796) 76 YTD (2,750) 5,574 Open Interest

Volumes (` cr) BSE NSE 2,343 8,909

FII Derivatives (October 21, 2011)

5,422 5,733
Gainers Company Price (`) chg (%) Company

4,936 6,136

486 (403)

15,145 29,564
Losers Price (`) chg (%)

Gainers / Losers

Chambal Fert United Brew Gujarat NRE Coke Manappuram Fin Patni Computer

90 420 24 58 331

3.2 2.8 2.5 2.2 2.0

Jain Irrigation Asian Paints Union Bank L&T Indiabulls Fin

124 3,015 240 1,336 163

(5.1) (4.4) (4.1) (3.5) (3.4) Sebi Registration No: INB 010996539

Please refer to important disclosures at the end of this report

Market Outlook | India Research

INEOS ABS announces open offer

On October 22, 2011, INEOS ABS announced an open offer to acquire a maximum of 29,31,920 shares, representing 16.67% of the voting capital of the company at a price of `606.8 per share. We had recommended the stock at a price of `559 with a target price of `702. On account of the offer the stock is currently under review.

Result Reviews L&T

Larsen and Toubro (L&T) posted good set of numbers for 2QFY2012, which were above our expectations mainly on account of good top-line performance. On the order booking front, L&T has an order backlog of `1,42,185cr as of 2QFY2012. Order inflow for the quarter stood at `16,096cr (`20,464cr), led by the infrastructure segment (31%). The company has significantly cut its guidance of order inflow from 15-20% to 5% for FY2012, mainly to factor in general slowdown faced by the sector; but it has maintained revenue growth guidance of 25% for the whole year, which we believe is aggressive. We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers. Further, at current valuations, after an underperformance of ~16.5% to BSE Sensex over the last three months, we believe most of the negatives are factored in and, hence, we maintain our Buy view on the stock with a revised target price of `1,714 (`1,857). We have assigned lowered PE multiple of 18x (earlier 19x) to L&T parents FY2013E EPS of `76.4 and its subsidiaries to factor in macro headwinds faced by the sector and economy.

Axis Bank
For 2QFY2012, Axis Bank reported healthy 25.2% yoy growth in its net profit to `920cr, above our estimates and in-line with consensus estimates. A sharp uptick in NIM and healthy fee income growth more than compensated the higher provisioning expenses. Business growth momentum for the bank picked up during the quarter, with advances growing by 6.2% qoq (up 26.7% yoy) and deposits rising by 5.9% qoq (up 23.9% yoy). CASA deposits grew at a healthy pace of 26.0% yoy (10.4% qoq), leading to a rise in CASA ratio to 42.2% from 40.5% in 1QFY2012. Reported NIM rebounded sharply to 3.8% (up 50bp qoq) on the back of stronger build-up in CASA deposits, stable funding rates and a pick-up in yield on advances. The uptick in NIM coupled with healthy business growth led to healthy 24.3% yoy (16.4% qoq) growth in NII, which came in well above our estimates. Asset quality showed initial signs of stress with annualized slippage ratio rising to 1.4% from 0.8% in 1QFY2012 and advances restructured during the quarter rising to `312cr from `107cr restructured in 1QFY2012. Gross and net NPA ratios were stable sequentially; however, provision coverage ratio including technical write-offs came off slightly to 77.7% (80.0% in 1QFY2012). The bank added 35 branches during

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Market Outlook | India Research

the quarter. Tier-I CAR including profits declined to 9.3% from 9.8% in 1QFY2012 due to faster business growth. The banks substantial branch expansion over the past 2-3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY201213, leading to more CASA market share gains. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is currently trading at 1.8x FY2013E ABV. We maintain our Buy recommendation on the stock while keeping the target price under review.

Idea
For 2QFY2012, Idea Cellular (Idea) reported modest growth in revenue, which was in-line with our expectation; however, the company disappointed on the bottom-line front. Revenue came in at `4,620cr, up 2.2% qoq, on the back of growth in ARPM by 4.1% qoq to `0.427/min and subscriber growth of 5.4% qoq with end-of-period subscriber base standing at 100.2mn. The effect of these positive factors was partially overshadowed by the negative impact from the decline in minutes of usage by 6.9% qoq to 364min from 391min in 1QFY2012. EBITDA margin decreased by 95bp qoq to 25.7% due to higher employee costs and roaming and access charges. However, EBITDA per minute stood flat qoq at `0.11. PAT came in at `106cr, down 40.3% qoq, due to higher interest costs of `294cr and higher depreciation and amortization expenses of `737cr on account of 3G-related expenses. We maintain our Neutral view on the stock.

Asian Paints
For 2QFY2012, Asian Paints (APL) posted a good performance on the top-line front but a weak performance on the earnings front. The companys top line grew by 24.3% yoy to `2,251cr (`1,811cr), in-line with our estimates. Earnings declined by 3% yoy to `209cr (`215cr), below our estimates. Operating profit dipped by 396bp yoy to `323cr (`331cr) due to high raw-material costs and other expenses (up 55bp yoy). We maintain our Neutral view on the stock.

JSW Steel
JSW Steel reported better-than-expected standalone numbers for 2QFY2012. Although JSW Steels crude steel production increased by 10.6% yoy to 1.7mn tonnes, production was lower by at least 0.5mn tonnes on account of shortage of iron ore. Despite lower production, standalone net sales grew by 33.5% yoy to `7,625cr, in-line with our estimate of `7,607cr. Net sales growth was driven by the increase in steel sales volumes (up 18.9% yoy to 1.9mn tonnes) as well as blended realizations (up 14.6% yoy to `42,831/tonne). However, EBITDA/tonne grew only by 9.9% yoy to `6,887 due to higher raw-material costs. EBITDA increased by 30.6% yoy to `1,296cr. The company reported exceptional items related to forex loss of `513cr during the quarter. Consequently, net profit decreased by 71.5% yoy to `127cr. However, adjusted net profit, excluding
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Market Outlook | India Research

exceptional items, increased by 43.7% yoy to `640cr (higher than our estimate of `432cr). The company has now lowered its production and sales volumes estimates for FY2012 and FY2013 by 14.0% and 13.0% to 7.5mn tonnes and 7.8mn tonnes, respectively. We maintain our Buy rating on the stock; our target price is under review.

GCPL
Godrej Consumer (GCPL) posted a modest set of numbers for the quarter, largely in-line with our estimates. Consolidated top line grew by 24.5% yoy, with domestic sales and international business posting healthy growth of 24% and 19% yoy, respectively. Soaps, household insecticides and hair colors performed well for the company. On the operating front, the company reported a marginal decline in its margin (down 23bp yoy), which came in at 17.6%. Recurring PAT grew by 13.3% yoy; whereas on a reported earnings basis, the company posted a decline of 2.5% yoy in earnings and stood at `128cr (`131cr). The quarter witnessed robust growth in the hair colors and household insecticides categories, growing by more than double the category growth rates (32% yoy and 29% yoy), respectively. At the CMP of `404, the stock is trading at 18.8x FY2013E earnings of `21.5. We maintain our Accumulate rating on the stock with a revised target price of `452 (`457), based on 21x FY2013E EPS.

United Phosphorus
For 2QFY2012, United Phosphorus reported net sales and net profit of `1,776cr and `56.9cr, respectively. Top-line growth of 41.3% yoy was driven by India (25% growth) and rest of the world (ROW, 105% growth). Growth in ROW was driven mainly by acquisitions. The company's operating margin came in at 15.3%, reporting a dip of 325bp from 18.5% in 2QFY2011. Overall, net profit came in at `56.9cr, reporting a decline of 50.4% yoy, higher than the dip in operating profit on the back of forex losses. Going forward, management has upped its guidance for FY2012 to 30-35%, driven by strong volume growth. On the OPM front, management expects OPM of 19-20%. At the CMP, the stock is trading at 9.3x FY2012E and 8.6x FY2013E earnings, respectively. We maintain our Buy rating on the stock with a target price of `180.

Federal Bank
For 2QFY2012, Federal Bank recorded strong net profit growth of 36.2% yoy (up 30.8% qoq), above our estimates, mostly due to lower provisioning expenses than built in by us. The banks asset quality improved significantly during the quarter, with slippages reducing by `58cr qoq and credit cost improving by 46bp qoq. For 2QFY2012, advances and deposits registered strong growth. Advances grew by 21.6% yoy (up 5.1% qoq) to `33,607cr and deposits grew by 30.9% yoy (up 10.1% qoq) to `47,263cr. CASA deposits grew by a less impressive 14.5% yoy compared to deposit growth, leading to CASA ratio shrinking by 367bp yoy (down 151bp qoq) to 25.7%. Including NRE deposits, total low-cost deposits constituted
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Market Outlook | India Research

31.3% of total deposits (32.8% in 1QFY2012). A major portion of the banks loan book is on a floating basis, which led to a sharp rise of 76bp qoq in yield in advances to 12.7% in 2QFY2012. However, cost of deposits also rose by 42bp qoq, leading to a sequential 10bp decline in reported NIM to 3.8%. During 2QFY2012, non-interest income remained flat sequentially (down 18.8% yoy) at `117cr. CEB income came in at `31cr (flat qoq), however recoveries continued to be weak at `14cr, declining by 41.4% qoq. Asset quality of the bank witnessed a significant improvement in 2QFY2012, with gross NPA ratio declining by 33bp qoq to 3.6% and net NPA ratio declining by 16bp qoq to 0.6%. Slippages for 2QFY2012 reduced by `58cr sequentially to `265cr (annualised slippage ratio at 3.3%). The bank had witnessed higher retail slippages in 1QFY2012 due to oneoff employee-related issues. At the CMP, the stock is trading at 1.0x FY2013E ABV. While lower leverage is leading to low RoE at present, the banks core RoA is relatively high. We recommend Buy on the stock with a target price of `444.

Syndicate Bank
For 2QFY2012, Syndicate Bank reported 36.2% yoy growth in its net profit to `323cr, well ahead of our as well as street estimates. However, earnings growth was partly driven by a lower effective tax rate than expected. On the PBT front, numbers were 7.5% ahead of our estimates. Healthy expansion in NIM coupled with largely stable asset quality (in spite of completion of deadline for switchover to system-based NPA recognition platform) were the key positive takeaways from the results. Healthy business growth with stable asset quality: The banks advances grew by 3.3% qoq (up 18.9% yoy), while deposits accretion picked up pace to rise by 6.2% qoq (up by 21.5% yoy). The banks reported NIM for the quarter rebounded by 28bp qoq to 3.4% on the back of a 71bp qoq expansion in loan yields as compared to a 33bp rise in cost of deposits. Asset quality was largely maintained despite completion of deadline for switchover to system-based NPA recognition platform. Gross and net NPA ratios were almost flat sequentially at 2.4% and 0.9%, respectively. Provision coverage ratio including technical write-offs remained healthy at 78.5%. At the CMP, the stock is trading at attractive valuations of 0.7x FY2013E ABV compared to its five-year range of 0.7-1.3x one-year forward ABV with a median of 0.9x. Keeping in mind the banks stable asset quality, moderate growth strategy over the past couple of years and moderate NIM, its valuation appears cheap relative to peers. We value the stock at 0.85x FY2013E ABV and maintain a Buy recommendation with a target price of `125.

Jagran Prakashan
For 2QFY2012, Jagran Prakashan (JPL) reported a weak performance on the revenue and earnings front. Ad revenue grew by ~9.5% yoy and muted 3.7% qoq and circulation growth stood at ~11.6% yoy and ~5.2% qoq. Non-publishing business revenue which comprises event, outdoor and digital businesses grew by
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Market Outlook | India Research

13% yoy, though declined by 27.1% qoq. During the quarter readership for Dainik Jagran and I-Next increased by 4.82lakh 0.37lakh respectively. Circulation during 2QFY2012 for Dainik Jagran and I-Next increased by 9.6% yoy and 30% yoy respectively. A detailed note would be released post the conference call with the management today. The stock is currently under review.

Concall is scheduled on Monday, October 24, 2011 at 12.00 noon IST, dial in numbers: 022 6629 0034, 022 3065 0034

HT Media
For 2QFY2012, HT Media reported a modest performance on the revenue as well as the profitability front. The companys top line grew by 13.4% yoy to `489cr. Recurring earnings grew by 11.6% yoy on account of high other income and a significant decrease in tax rate. Key highlights for the quarter include 1) overall growth of ~15% yoy in advertising revenue, driven by ~12.5% yoy growth in English and ~24% yoy growth in Hindi; however, sequentially, advertising revenue growth in English was higher at 35.4%, while advertising revenue in Hindi grew by ~2.3% qoq, 2) a ~21% yoy/4.5 qoq increase in circulation revenue, 3) a ~11% yoy jump and a ~27% qoq decline in radio revenue and 4) 125bp yoy OPM contraction due to high other expenditure. A detailed note would be released

post the conference call with the management today. The stock is currently under review. Concall is scheduled on Monday, October 24, 2011 at 11.00 AM IST, dial in numbers: 022 6629 0034, 022 3065 0034

Bank of Maharashtra
For 2QFY2012, Bank of Maharashtra posted strong net profit growth of 52.0% yoy to `100cr, above our estimates, due to higher-than-expected growth in net interest income and non-interest income and significantly lower provisioning expenses than built in by us. Sequential improvement in NIM, healthy growth in fee income and sharp improvement in asset quality were the key positive takeaways from the results. Remarkable quarter in terms of earnings quality: During 2QFY2012, advances grew strongly by 24.0% yoy to `50,043cr, while deposits grew moderately by 12.5% yoy to `63,976cr. Consequently, the banks incremental CD ratio for 2QFY2012 stood at 227.6%, leading to overall CD ratio improving from 69.1% in 1QFY2012 to 72.1% in 2QFY2012. CASA deposits growth was comparable to deposit growth of 12.4% yoy, with saving account deposits rising by 13.3% yoy. On the back of reasonable growth in CASA deposits, the bank was able to improve its CASA ratio albeit marginally to 40.7%. During 2QFY2012, yield on advances increased by 62bp to 11.5%, while cost of deposits increased by a lower 36bp, leading to a sequential expansion in reported NIM. The bank surprised on the asset-quality front, with slippages declining by 50.3% qoq to `93cr (average `226cr since 1QFY2010). Slippages, which have been on a declining trend since 1QFY2011, improved sharply in 2QFY2012 to 0.8% compared to 1.6% in 1QFY2012 and 4.0% in 1QFY2011. Gross NPA ratio improved to 2.2% compared to 2.4% in 1QFY2012, while net NPA ratio halved from 1.2% in 1QFY2012 to
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Market Outlook | India Research

0.6%. Provision coverage ratio (including technical write-offs), which was as low as 54.7% in 1QFY2011, increased from 73.2% in 1QFY2012 to 86.0%. We expect the bank to deliver healthy 38.1% earnings CAGR over FY2011-13E on the back of largely stable NIM, pick-up in fee income and improving asset quality. At the CMP, in our view, the stock is trading at attractive valuations of 0.6x FY2013E ABV vs. its five-year range of 0.6-1.2x and median of 0.9x. We recommend Buy on the stock with a target price of `57, implying an upside of 19.5% from current levels.

HCC
For 2QFY2012, HCCs numbers came much lower than our and street expectations. On the top-line front, HCCs revenue declined by 6.3% yoy to `828.6cr (`884.6cr), against our estimate of `946.5cr, due to slowdown in execution. EBITDAM came in at 11.3% (12.8%), a dip of 150bp yoy and lower than our estimate of 13.2%, on account of commodity price pressures and fixed overheads not covered by lower revenue. On the earnings front, HCC reported a loss of `40.5cr vs. profit of `12.1cr in 2QFY2011, against our estimate of loss of `7.4cr. Shocking performance on the bottom-line front was due to lower revenue and EBITDA margin and higher interest cost (`107.4cr, growth of 60.2% yoy). Owing to the uncertainties surrounding Lavasa project and other concerns such as subdued order inflow, deteriorating working capital situation and high interest cost, we continue to maintain our Neutral view on the stock.

Electrosteel Steels
Electrosteel Steels (ESL), an associate of Electrosteel Castings (34.4% stake), reported its 2QFY2012 results. ESL did not report any sales during 2QFY2012, as it suspended operations during the quarter to synchronize its various units. However, on account of certain fixed costs, the company reported net loss of `23cr in 2QFY2012. ESL had commenced operations of pig iron during FY2011. However, it was subsequently shut down for synchronization with other facilities at the plant. We believe ESLs financials would turn around once it receives coking coal and iron ore from Electrosteel Castings at a substantial discount to market prices. Meanwhile, we maintain our Buy rating on Electrosteel Castings with a target price of `35.

GIPCL
For 2QFY2012, GIPCLs top line reported growth of 41.9% yoy to `304cr. Growth was driven by higher capacity, even though generation rose marginally by 3% yoy to 986MU. SLPP station II became commercial operational only in September 2010 and, hence, did not contribute to the top line in the first two months of 2QFY2011. All of the companys plants, barring SLPP station II, had healthy plant availability factor during the quarter. Vadodara stations I and II operated at PAF of 97.7% (95.4% in 2QFY2011) and 98.9% (90.7% in 2QFY2011), respectively. SLPP I and II stations operated at PAFs of 78.4% (68.0% in 2QFY2011) and 61.6%
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Market Outlook | India Research

(53.2% in 2QFY2011). The companys OPM stood at 31.2%, down 774bp yoy due to higher gas prices. GIPCLs 2QFY2012 bottom line rose by 77.5% yoy to `28cr (in-line with our estimates), aided by higher PAF. We maintain our Buy rating on the stock; the target price is under review.

NIIT
For 2QFY2012, NIIT reported a decent performance, which was in-line with our expectations. The companys consolidated revenue came in at `384cr, up 19.5% yoy. Revenue from ILS, SLS and CLS businesses increased by 11.9%, 12.4% and 9.6% yoy to `180.2cr, `40.5cr and `163.0cr, respectively. The companys blended EBITDA margin improved by 501bp yoy to 14.6% on the back of margin expansion in SLS as well as CLS businesses. These gains in margins by the CLS and SLS businesses were partially overshadowed by margin decline in the ILS business and higher operating expenses due to facility overlap and some preoperative expenses related to skill building solutions. PAT came in at 30.2cr. We maintain our Buy view on the stock with a target price of `60.

Sarda Energy
Sarda Energy reported its 2QFY2012 results. Net sales grew by 25.5% yoy to `251cr, driven by higher revenue from the steel segment. The steel segments revenue grew by 58.8% yoy to `157cr, while the ferro alloys segments revenue declined by 13.1% yoy to `89cr. The companys EBITDA increased by 118.9% yoy to `35cr due to strong profitability performance by the steel segment. The steel segments EBIT increased by 556.2% yoy to `24cr, which was partially offset by the decrease in the ferro alloy segments EBIT, which declined by 25.4% yoy to `10cr. The company reported net loss of `10cr, mainly on account of exceptional items primarily related to forex losses. The company reported exceptional items of `33cr during the quarter. Excluding these exceptional items, the company's adjusted PAT stood at `23cr compared to `1cr in 2QFY2011. We maintain our Buy rating on the stock; our target price is under review.

Hitachi Home & Life Solutions

Hitachi Home & Life Solutions (HHLS) reported lower-than-expected numbers for 2QFY2012. The companys revenue declined by 2.1% yoy from `131cr in 2QFY2011 to `128cr (8.3% lower compared to our estimates of `139cr). The companys EBITDA margin came in at 1.6%, down 705bp yoy, due to higher employee and other expenses. The company reported a higher forex loss on ECB during the quarter, which led to loss of `7cr as compared to profit of `5cr in 2QFY2011. We expect the companys sales volume to increase at a CAGR of 14.7% over FY2011-13E, which would lead profits to increase to `41cr in FY2013E from `29cr in FY2011. At the CMP of `165, the stock is trading at attractive valuations with PE of 9.3x FY2013E earnings. We maintain our Buy rating on the stock with a target price of `212, based on a target PE of 12x for FY2013E.

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Market Outlook | India Research

PVR
PVR reported modest performance for 2QFY2012. The companys revenue grew by 2.5% yoy. Earnings grew robust at 58.2% yoy due to lower depreciation costs and decrease in tax rate. The companys OPM feel by 434bp yoy on account of increase in rent and staff costs. Occupancy increased to 36% in 2QFY2012 from 30% in 2QFY2011. ATP decreased by ~5% yoy during the quarter to `152. Footfalls increased to 7.1mn in 2QFY2012 from 5.7mn in 2QFY2012. A detailed

note would be released post the conference call with the management today. The stock is currently under review. Concall is scheduled on Monday, October 24, 2011 at 2:30 PM IST, dial in numbers: 022 6629 0349, 022 3065 0129

Siyaram Silk Mills

Siyaram Silk Mills (SSML) registered strong top-line growth during 2QCY2012. The companys net sales grew by 34.9% qoq and 13.5% yoy to `244cr. SSML reported a 68bp yoy and 136bp qoq expansion in its OPM to 13.4%, largely on the back of a decline in staff cost and purchase of traded goods as a percentage of sales. Operating profit increased by 19.5% yoy to `33cr (`27cr) on the back of higher revenue and margin expansion during the quarter. Net profit increased by 16.9% yoy to `17cr (`15cr). Net profit margin increased marginally by 21bp yoy to 6.9% (6.7%). We continue to maintain our Buy recommendation on the stock. We will be coming with a detailed report post management interaction.

Result Previews ITC

ITC is expected to announce its 2QFY2012 results. For the quarter, we expect ITC to report 17.5% yoy growth in its top line to `5,948cr, impacted by strong growth in its hotels, paperboards and packaging and cigarettes segments. ITCs earnings for the quarter are expected to grow by 18.5% yoy to `1,227.4cr, driven largely by top-line growth. We expect OPM for the quarter to improve by 60bp yoy to 36%. We remain Neutral on the stock.

Sterlite Industries
Sterlite Industries is slated to announce its 2QFY2012 results. The companys top line is expected to grow by 61.2% yoy to `9,726cr, mainly due to higher sales volume and realization for its zinc business. The companys EBITDA margin is expected to improve by 340bp yoy to 27.8%. The companys bottom line is expected to grow by 60.5% yoy to `1,641cr. We maintain our Buy rating on the stock with a target price of `158.

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Market Outlook | India Research

GAIL
GAIL is expected to announce its 2QFY2012 results. Transmission volumes for the quarter are likely to stay flat qoq. We expect the company to report top-line growth of 8.3% yoy to `8,779cr. Operating margin is expected to contract by 38bp yoy to 17.3%. On the bottom-line front, we expect GAIL to report growth of 3.3% yoy to `954cr. We maintain our Buy recommendation on GAIL with a target price of `508.

Union Bank of India

Union Bank of India is scheduled to announce its 2QFY2012 results. We expect the bank to post muted 1.8% qoq and 5.4% yoy growth in NII to `1,619cr. Noninterest income is expected to decline by 13.1% yoy to `443cr, primarily on account of lower treasury gains. Pre-provision profit of the bank is expected to decline by 2.2% yoy on account of relatively faster rise in operating expenses. On account of substantially lower provisioning expenses (primarily due to high base effect) and lower effective tax rate compared to 2QFY2011, net profit is expected to register healthy 60.9% yoy growth to `488cr. At the CMP, the stock is trading at valuations of 0.9x FY2013E ABV. We maintain our Buy recommendation on the stock with a target price of `286.

Sadbhav Engineering
We expect Sadbhav Engineering (SEL) to post robust 48.0% growth to `386.1cr (`260.9cr) on the top-line front, owing to pick-up in the execution of captive road BOT projects. EBITDA margin is expected to witness a fall of 70bp yoy to 11.3% (12.0%) on account of higher sub-contracting charges for the quarter. On the earnings front, despite lower margins, the company is expected to post decent growth of 22.9% yoy to `16.9cr (`13.7cr). At current levels, the stock is trading at valuations of 12.6x FY2013E earnings and 2.0x FY2013E P/BV on a standalone basis. Based on a target P/E multiple of 9x and valuing the companys BOT arm on DCF basis, our SOTP-based target price works out to `167. Hence, we maintain a Buy view on the stock.

Jyoti Structures
For 2QFY2012, we expect Jyoti Structures to report decent top-line growth of 14.0% yoy to `618.3cr. EBITDA margin is expected to come in at ~11.1%. Despite the NCD issue, interest cost is expected to remain at elevated levels, resulting in flat bottom-line growth. PAT is expected to come in at `25.2cr. Currently, we maintain our Buy rating with a target price of `90.

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Quarterly Bloomberg Brokers Consensus Estimates

Gail -(24/10/2011)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 9,215 1,646 18 1,033

2QFY11 8,104 1,457 18 924

yoy (%) 13.7 13.0 11.9

1QFY12 8,867 1,577 18 985

qoq (%) 3.9 4.3 4.9

ITC Ltd -(24/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 5,952 2,127 36 1,469

2QFY11 5,061 1,875 37 1,247

yoy (%) 17.6 13.5 17.9

1QFY12 5,767 1,976 34 1,333

qoq (%) 3.2 7.7 10.3

Sterlite Industries Ltd - Consolidated (24/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 9,846 2,662 27 1,541

2QFY11 6,029 1,529 25 1,008

yoy (%) 63.3 74.1 52.8

1QFY12 9,824 2,758 28 1,640

qoq (%) 0.2 (3.5) (6.0)

Union Bank Ltd - (24/10/2011)

Particulars (` cr) Net profit
Source: Bloomberg

2QFY12E 548

2QFY11 303

yoy (%) 80.8

1QFY12 464

qoq (%) 18.1

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Dr. Reddys Laboratories Ltd - Consolidated (25/10/2011)

Particulars (` cr) Net sales Net profit
Source: Bloomberg

2QFY12E 2,126 286

2QFY11 1,870 287

yoy (%) 13.7 (0.3)

1QFY12 1,978 263

qoq (%) 7.5 8.9

Kotak Mahindra Bank Ltd - (25/10/2011)

Particulars (` cr) Net profit
Source: Bloomberg

2QFY12E 325

2QFY11 195

yoy (%) 66.7

1QFY12 252

qoq (%) 28.8

NTPC Ltd -(25/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 14,120 3,332 24 2,024

2QFY11 12,989 3,872 30 2,107

yoy (%) 8.7 (13.9) (4.0)

1QFY12 14,171 3,219 23 2,076

qoq (%) (0.4) 3.5 (2.5)

Sesa Goa Ltd - Consolidated (25/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 913 346 38 302

2QFY11 907 303 33 385

yoy (%) 0.7 14.0 (21.6)

1QFY12 2,095 1,147 55 841

qoq (%) (56.4) (69.9) (64.1)

NHPC (28/10/2011)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg

2QFY12E 1,476 1,010 68 732

2QFY11 1,240 1,059 85 690

yoy (%) 19.0 (4.6) 6.1

1QFY12 1,431 1,038 73 791

qoq (%) 3.1 (2.7) (7.4)

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Market Outlook | India Research

Economic and Political News

Law soon to make private sector bribery a criminal offence: PM Ministry to set aside coal from e-auction for NTPC Aviation FDI may soon take wing More trouble brewing for power distribution firms India to review tax treaty with Mauritius in December

Corporate News
Coal Indias revenue threatened as defaults by utilities rise 14-day strike at Maruti ends JSW steel to raise steel prices by 3-4% KPIT Cummins sells financial services biz to Infrasoft Delay in CCI as regulator for pharma deals irks MNCs

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
24/10/2011 25/10/2011 28/10/2011 29/10/2011 ITC, GAIL, Sterlite Inds, Titan Inds., Union Bank, Sadbhav Engg., Jyoti Structures NTPC, Kotak Mah. Bank, Dr Reddy's, Sesa Goa, KEC International NHPC, Tata Global, CCCL, Maruti, LIC Housing Fin., IOB, Electrosteel Castings, J K Lakshmi Cements

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Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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