Market Outlook

India Research
February 13, 2012

Dealers Diary
The domestic markets are expected to edge higher following positive opening across most of the Asian markets. Domestic indices fell modestly on Friday, as data showing a slowdown in December IIP numbers prompted investors to book some profits after recent sharp gains. Globally, cues remained mixed. European markets slid moderately on Friday as apprehensions remained over the second bailout package for Greece. Eurozone finance ministers had deferred the approval of a second bailout package for Greece (130bn), demanding Greeces acceptance over a new set of austerity measures. U.S. bourses also ended on a negative note, tracing concerns stemming from the Eurozone. On the domestic front, consistent shrinkage in manufacturing output emphasizes the need to trim rates by RBI. However, domestic bourses seemed to have marked down macroeconomic concerns and have firmed up considerably. Nonetheless, one cannot rule out the pessimism surrounding the Eurozone, which can reverse market directions. Markets will closely trace the developments in the domestic as well global 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 (%)

(Pts)

(Close)

(0.5) (0.6) 0.1 (0.0) (0.7) (0.0) (0.7) (0.2) 0.6 (0.8) (0.3)
Chg (%)

(82.1) 17,749 (30.8) 7.0 (1.6) (45.3) (1.5) (22.2) (70.9) (15.5)
(Pts)

5,382 6,247 6,891 6,347 7,673 9,713 8,771 6,050

(Close)

(81.7) 11,987 71.1 12,364

(0.7) (0.8) (0.7) (0.6) (0.7) 0.1

Chg (%)

(89.2) 12,801 (23.4) (43.1) (55.1) (21.1) 2.4

(Pts)

2,904 5,852 8,947 2,960 2,352

(Close)

Markets Today
The trend deciding level for the day is 17,755 / 5,383 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,883 18,018 / 5,426 5,470 levels. However, if NIFTY trades below 17,755 / 5,383 levels for the first half-an-hour of trade then it may correct up to 17,621 17,492 / 5,339 5,297 levels.
Indices SENSEX NIFTY S2 17,492 5,297 S1 17,621 5,339 PIVOT 17,755 5,383 R1 17,883 5,426 R2 18,018 5,470

(1.1) (226.2) 20,784

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

(1.1) (0.4) (1.7) 0.9

(0.6) (0.0) (0.7) 0.3

BSE

$55.7 $11.3 $37.2 $34.2

NSE

News Analysis
Industrial production for December dips to 1.8% 3QFY2012 Result Reviews DLF, JSW Steel, CCCL 3QFY2012 Result Previews Coal India, State Bank of India, Sun Pharmaceuticals, SAIL, Cipla, Motherson Sumi Systems , Areva T&D, CESC
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

1,435 1,506 106

668 820 77

Net Inflows (February 09, 2012)

` cr FII MFs Purch 3,989 440 Sales 2,538 821 Net 1,450 (381) MTD 8,899 (861) YTD 19,980 (2,716)

Volumes (` cr) BSE NSE

3,663 14,908

FII Derivatives (February 10, 2012)

` cr
Index Futures Stock Futures

Purch 1,872 2,026

Sales 3,238 2,463

Net (1,366) (436)

Open Interest 15,699 30,417

Gainers / Losers
Gainers Company
Motherson Sumi MRF IFCI Cummins India JSW ENERGY

Losers Company
Aurobindo Phar. REC IVRCL LTD Chambal Fert Hindalco Inds

Price (`)
178 9,277 39 459 63

chg (%)
11.1 7.8 7.5 6.3 6.1

Price (`)
111 222 57 88 153

chg (%)
(5.7) (4.4) (4.4) (3.7) (3.6)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Industrial production for December dips to 1.8%

Industrial production (IIP) growth slipped again, growing by weak 1.8% for December, after the strong rebound witnessed in November (growth of 5.9% compared to negative 4.7% growth for October). IIP index growth of 1.8% was the second slowest, after the contraction witnessed in October 2011, in more than two years. IIP growth was also below the median expectation of Bloombergs survey of economists (2.9%). The 12-month rolling industrial production growth, which has been on a declining trend since November 2010 (9.9%), slipped further to 4.7%. The dip in IIP can mostly be attributed to slow growth in the manufacturing sector (growth of 1.8% compared to 6.6% in November 2011 and 8.7% in December 2010), which accounts for ~75% of the overall industrial production. In terms of industries, 15 of the 22 industry groups in the manufacturing sector registered positive growth during December. The slowdown in mining persisted with a contraction of 3.7% for December (5th consecutive month of contraction). Growth in electricity production continued to be healthy, growing by 9.1% in December. As per use-based data, capital goods production data continued to be volatile, declining by steep 16.5%. Production of intermediate goods contracted by 2.8% in December, however growth in consumer goods and consumer durables remained strong, growing by 10.0% and 13.4%, respectively.

3QFY2012 - Result Reviews

DLF
DLF announced its 3QFY2012 numbers. The companys net sales declined by 18.0% yoy and 19.7% qoq to `2,034cr, coming in well below our estimate of `2,719cr. EBITDA came in at `823cr, down 30.2% yoy, on the back of lower revenue and OPM margin compression. OPM contracted by 706bp yoy to 40.4%, above our estimate of 43.7%. PAT declined by 44.6% yoy to `258cr, which was well below our estimate of `414cr, despite a sharp increase in other income, which increased by 217% yoy to `362cr (`114cr). The decline in PAT was largely due lower revenue, OPM contraction and higher interest cost during the quarter, which increased by 44.8% yoy to `620cr in 3QFY2012. We continue to maintain our Neutral recommendation on the stock. We may revise our estimates and target price post managements concall.

February 13, 2012

Market Outlook | India Research

JSW Steel
JSW Steel reported higher-than-expected consolidated adjusted PAT during 3QFY2012. However, the company reported net loss of `48cr in 3QFY2012 on account of exceptional losses. The company had reported better-than-expected standalone numbers for 3QFY2012 on January 20, 2012. Consolidated net sales grew by 40.9% yoy to `8,405cr (slightly below our estimate of `8,843cr). Net sales growth was driven by increases in steel volumes (+20.0% yoy to 1.9mn tonnes) and realization (+18.2% yoy to `43,401/tonne). Consolidated EBITDA increased by 29.6% yoy to `1,317cr. The company reported exceptional items related to forex loss of `504cr and loss of `55cr from JSW Ispat (associate company) during the quarter. Consequently, the company reported net loss of `48cr in 3QFY2012, compared to net profit of `292cr in 3QFY2011. However, adjusted net profit, excluding exceptional items, increased by 75.1% yoy to `511cr (higher than our estimate of `279cr). We remain Neutral on the stock.

CCCL
Consolidated Construction Consortium (CCCL) posted disappointing set of numbers for 3QFY2012, as expected. On the top line front the company posted 10.0% yoy decline to `446.5cr, lower than our estimate of `535.9cr. On the EBITDAM front, CCCL continued its dismal performance and registered a dip of 510bp yoy to 4.6%, which was higher than our estimate of 3.2%. Interest cost came in at `18.3cr a yoy/qoq jump of 45.1%/6.4% respectively, and in line with our estimate of `18.6cr. Owing to poor show at revenue and margin level, along with interest burden, the bottom line posted a loss of `3.2cr in 3QFY2012 vs. profit of `16.7cr in 3QFY2011 and against our estimate of loss of `5.2cr. We maintain neutral view on the stock.

3QFY2012 - Result Previews

Coal India
Coal India is slated to report its 3QFY2012 results. We expect net sales to increase by 39.2% yoy to `17,664cr, mainly on account of coal price increase taken during February 2011. However, EBITDA margin is expected to contract by 264bp yoy to 24.5% in 3QFY2012 on account of higher employee cost provision. Net profit is expected to increase by 39.0% yoy to `3,650cr. We have a Neutral view on the stock.

February 13, 2012

Market Outlook | India Research

State Bank of India

State Bank of India is scheduled to announce its 3QFY2012 results. We expect the bank to report healthy NII growth of 19.3% on a yoy basis (up 3.6% on a qoq basis). Non-interest income growth is expected to be moderate at 14.4% yoy. Operating income of the bank is expected to grow by healthy 18.0% yoy to `14,584cr. Provisioning expenses are expected to increase substantially by 63.4% yoy, considering the cyclical headwinds to asset quality. Hence, net profit growth is expected to be moderate at 10.1% yoy to `3,113cr. We currently have an Accumulate rating on the stock with a target price of `2,364

Sun Pharmaceuticals
For 3QFY2012, Sun Pharma is likely to report 18.7% yoy growth on the sales front, mainly on the back of integration of Taro, which is expected to be the growth driver of export formulation sales. On the domestic front, Indian formulation sales are expected to report a muted performance. Despite strong top-line growth on account of the integration, operating profit margin is expected to expand by 690bp yoy, with margin likely to be around 34.4%. Net profit is expected to register growth of 21.4% yoy during the quarter. We recommend Neutral on the stock.

SAIL
SAIL is expected to announce its 3QFY2012 results. We expect the companys top line to grow by 9.8% yoy to `12,239cr, mainly on account of higher realization. However, EBITDA margin is expected to decline by 211bp yoy to 14.0% on account of higher input costs. The bottom line is expected to decline by 2.2% yoy to `1,083cr. We maintain our Neutral rating on the stock.

Cipla
For 3QFY2012, Cipla is expected to post net sales growth of 10.7% yoy to `1,662cr, driven by the domestic and exports performance. On the operating front, OPM (excluding technical know-how fees) is expected to come in at 21.8%, registering an expansion of 410bp yoy. Further, net profit is expected to increase by 26.8% yoy to `295cr. We recommend Neutral on the stock.

February 13, 2012

Market Outlook | India Research

Motherson Sumi Systems

Motherson Sumi Systems is scheduled to announce its 3QFY2012 results today. On a consolidated basis, we expect the company to report a healthy 13% yoy growth in revenues to `2,343cr for the quarter. On the operating front, the company is expected to report a 282bp yoy contraction in margins to 8.6%. As a result, the net profit is expected to decline by 26% yoy to `79cr. The stock rating is under review.

Areva T&D 4QCY2011

For 4QCY2011, Areva T&D is expected to post subdued top-line growth of 4.2% yoy to `1,383cr, mainly on account of lower volumes, pricing pressures and execution slowdown. Consequently, EBITDA margin is expected to compress by ~443bp yoy to 9.0%, although we expect a sequential improvement of ~100bp due to slight easing of pricing pressures. Led by muted growth and dip in margin, the companys PAT is expected to decline by 35.5% yoy to `56.8cr. At the CMP, the stock is trading at 25.9x and 21.9x CY2011E and CY2012E EPS, respectively. We remain Neutral on the stock.

CESC
CESC is expected to announce its 3QFY2012 results. The company is expected to register 25.6% yoy growth in its standalone top line to `1,157cr, aided by higher sales volume and better realization. OPM is expected to be flat at 27.6%, while net profit is expected to increase by 33.9% yoy to `147cr during 3QFY2012. We maintain our Buy rating on the stock with a target price of `304.

Quarterly Bloomberg Brokers Consensus Estimates

Sun Pharmaceutical - Consolidated (13/02/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 1,928 701 36.4 554 3Q FY11 y-o-y (%) 1,601 441 27.5 350 58 20 59 2Q FY12 q-o-q (%) 1,895 784 41.4 598 (7) 2 (11)

Cipla Ltd - (13/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 1,767 414 23.4 281 3Q FY11 y-o-y (%) 1,501 318 21.2 233 21 18 30 2Q FY12 q-o-q (%) 1,732 475 27.4 309 (9) 2 (13)

February 13, 2012

Market Outlook | India Research

State Bank of India - Consolidated (13/02/2012)

Particulars (` cr) Net profit 3Q FY12E 3,032 3Q FY11 y-o-y (%) 3,710 (18) 2Q FY12 q-o-q (%) 3,470 (13)

Reliance Power - Consolidated (13/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 477 138 28.9 167 3Q FY11 y-o-y (%) 251 62 24.5 144 16 90 124 2Q FY12 q-o-q (%) 488 122 24.9 237 (30) (2) 14

Indian Oil Corp Ltd - (13/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 103,301 1,424 1.4 (1,248) 3Q FY11 y-o-y (%) 75,463 3,292 4.4 1,635 (176) 37 (57) 2Q FY12 q-o-q (%) 88,725 (5,322) -6.0 (7,486) (83) 16 (127)

SAIL - (13/02/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 11,403 1,329 11.7 772 3Q FY11 y-o-y (%) 11,143 1,796 16.1 1,107 (30) 2 (26) 2Q FY12 q-o-q (%) 10,837 1,327 12.2 495 56 5 0

Coal India - Consolidated (13/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 15,682 4,230 27.0 3,663 3Q FY11 y-o-y (%) 12,692 3,380 26.6 2,626 39 24 25 2Q FY12 q-o-q (%) 13,148 2,482 18.9 2,593 41 19 70

Jaiprakash Associates - (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 3,463 747 21.6 152 3Q FY11 y-o-y (%) 2,894 846 29.2 233 (34) 20 (12) 2Q FY12 q-o-q (%) 3,047 748 24.5 129 18 14 (0)

Unitech Ltd Consolidated (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 682 171 25.1 107 3Q FY11 y-o-y (%) 660 209 31.6 111 (4) 3 (18) 2Q FY12 q-o-q (%) 626 138 22.0 92 16 9 24

February 13, 2012

Market Outlook | India Research

Tata Motors - Consolidated (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 41,956 5,421 12.9 2,673 3Q FY11 y-o-y (%) 31,506 4,489 14.2 2,424 10 33 21 2Q FY12 q-o-q (%) 35,938 2,222 6.2 1,877 42 17 144

Essar Oil Ltd - (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 12,638 308 2.4 (125) 3Q FY11 y-o-y (%) 12,233 797 6.5 273 (146) 3 (61) 2Q FY12 q-o-q (%) 12,939 544 4.2 (166) (25) (2) (43)

Reliance Infrastructure Ltd - Consolidated (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 5,457 639 11.7 313 3Q FY11 y-o-y (%) 2,571 558 21.7 405 (23) 112 15 2Q FY12 q-o-q (%) 5,471 626 11.4 382 (18) (0) 2

Nestle India - (14/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 2,004 403 20.1 260 3Q FY11 y-o-y (%) 1,963 416 21.2 261 (1) 2 (3) 2Q FY12 q-o-q (%) 1,763 349 19.8 214 21 14 15

GlaxoSmithKline Pharma - (16/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 562 174 31.0 176 3Q FY11 y-o-y (%) 608 183 30.1 146 21 (8) (5) 2Q FY12 q-o-q (%) 562 199 35.4 148 19 0 (13)

Economic and Political News

Exports up 10%, imports by 20% in January 2012: Commerce secretary Direct tax collection to miss Budget estimate Government may enhance tax deduction for housing loan in Budget

Corporate News
Govt. notifies rules for competitive bidding for coal blocks Punjabs industry strongly objects to 55% hike in power tariff Reliance Industries shuts distillation unit at Jamnagar facility for 3 weeks Tata Motors hikes prices by up to Rs 12,000; leaves Nano, Aria

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

February 13, 2012

Market Outlook | India Research

Results Calendar
13/02/2012 14/02/2012 16/02/2012 17/02/2012 23/02/2012 Coal India, St Bk of India, IOC, Sun Pharma, SAIL, Cipla, Reliance Infra., Aurobindo Pharma, CESC, Punj Lloyd, Amara Raja Batteries, Motherson Sumi Tata Motors, Nestle, Reliance Power, Jaiprakash Asso., Essar Oil, HDIL, Monnet Ispat, Graphite India, Simplex Infra, IVRCL Infra, Madhucon Proj, Indoco Remedies GSK Pharma CRISIL Ranbaxy, ABB, Gujarat Gas, Aventis

February 13, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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February 13, 2012