Portfolio Managemnt

9/15/2011
The portfolio has been constructed considering various factors that drive broader markets and affect investment philosophies (Value Investing, Growth Investing, GARP Investing etc) of different set of investors. These factors are (a) Different background of investors (b) Risk Appetite (c) Investment Horizon. We have classified th model portfolio f th W h l ifi d the d l tf li for three ki d of i kind f investors- C t Conservative, Mild A ti Aggressive, A i Aggressive. i Conservative portfolio is designed for the investors who would like to limit the risk and in turn have lower but steady return expectations. For such investors, value investing is more important than momentum. Churning portfolio too often or overweight in one sector/scrips are uncommon in such kind of portfolio. Typically their returns would be benchmarked to the Sensex / Nifty Nifty. Mild Aggressive Portfolio - A Mild Aggressive Portfolio comprises of stocks which can give good returns to the investors with average risk appetite without compromising on occasional opportunities thrown open by a mid-cap rally. Aggressive Portfolio - investors with higher risk in anticipation of higher profit, at times by having a short-term horizon gg g g y g and frequently churning their portfolios based on momentum, flavour etc. This aggressive portfolio may not necessarily follow any particular sectoral balance and at times maybe overweight on any sector or stock.
9/15/2011
Conservative
Mild Aggressive
Aggressive
Investment Horizon
9-12 months
9-12 months
9-12 months
Return
15%-20%
20% - 25%
>25%
Risk Retrun
Low Risk Low Return
Medium Rrisk - Medium Return
High Risk - High Return
Benchmark
Sensex/Nifty
CNX 100
BSE 200
Review Intervals
Quarterly
Quarterly
Monthly
9/15/2011
MODEL PORTFOLIO
TYPE CONSERVATIVE SBI NTPC POWER GRID HUL ITC GODREJ CONSUMER STOCKS COVERED HCL TECH COAL INDIA INFOSYS VOLTAS CIPLA M&M MARUTI SUZUKI MILD AGGRESSIVE AUROBINDO PHARMA IRB CENTRAL BANK DCB TATA STEEL HINDALCO IDEA BHARTI UCO BANK BAJAJ ELECTRICALS M& M FINANCE KPIT CUMMINS ADHUNIK METALIKS AGGRESSIVE JINDAL STEEL BATA INDIA GMR INFRA IVRCL LTD REDINGTON INDIA AXIS BANK TATA MOTORS ESCORTS COROMANDEL INT. IDFC ICICI BANK SHASUN PHARMA
9/15/2011
SELECTED STOCKS
SBI NTPC POWER GRID HUL ITC GODREJ CONSUMER HCL TECH COAL INDIA INFOSYS VOLTAS CIPLA M&M MARUTI SUZUKI
* HUL does not fit into this criteria
CONSERVATIVEPORTFOLIO SECTOR ALLOCATION% Market Cap > Rs. 500cr 5Y Year CAGR N t S l >= 15%* Net Sales 5 Year CAGR Net Profits >= 10%* Average Beta=0.85 Average Dividend Yield=1.5%
DIVERSIFI ED, 8 MINING, 8 FMCG, 23 PHARMA, 8 AUTO, 15 BANKS & NBFC, 8
POWER, POWER 1 5
IT, 15
9/15/2011
SELECTED STOCKS
AUROBINDO PHARMA IRB INFRA CENTRAL BANK DCB TATA STEEL HINDALCO IDEA BHARTI UCO BANK BAJAJ ELECTRICALS M& M FINANCE KPIT CUMMINS ADHUNIK METALIKS
METALS,1 5 IT,8 TELECOM, 15 STEEL,8
Market Cap > Rs. 500cr Average Beta=0.97 Beta=0 97 Average Dividend Yield=1.4%
CONSUME R DURABLES, 8 INFRA,8 INFRA, 8 PHARMA, 8 BANKS& NBFC,31 NBFC 31
9/15/2011
SELECTED STOCKS
JINDAL STEEL BATA INDIA GMR INFRA IVRCL REDINGTON INDIA AXIS BANK TATA MOTORS ESCORTS COROMANDEL INT IDFC ICICI BANK SHASUN PHARMA
* Mkt C of Sh Cap f Shasun Ph Pharma Rs. 318cr R 318
FERTILIZER S,8 AUTO,17 AUTO 17 IT,8 FMCG,8 FMCG, 8
Market Cap > Rs. 500cr * p Average Beta=1.04 Average Dividend Yield=1.3%
INFRA,17
BANKS& BANKS & NBFC,25
PHARMA, 8 STEEL,8
9/15/2011
Company
Market Cap (Rs. Cr) 119,380 119 380 134,401 44,097 74,659 74 659 153,088 13,751 26,342 240,402 128,793 3,921 23,661 48,561 31,056
Beta (6M)
Div Yield %
CMP (Rs)
Target Price (Rs)
Potential Upside
STATE BANK IND NTPC LTD POWER GRID CORP HINDUSTAN UNILEV ITC LTD GODREJ CONSUMER HCL TECH LTD COAL INDIA LTD INFOSYS LTD VOLTAS LTD CIPLA LTD M&M MARUTI SUZUKI Average
1.1 11 0.9 0.7 0.6 06 0.8 0.5 1.2 0.7 1.1 0.9 0.8 1.1 0.8 0.85
3.0 30 2.3 1.8 2.0 20 1.4 1.1 1.7 1.0 1.3 1.6 0.7 1.3 0.7 1.7
1880.0 1880 0 163.0 95.3 345.5 345 5 197.5 424.8 380.0 378.6 2226.0 119.0 293.0 785.0 1075.0
2480.0 2480 0 195.0 115 360.0 360 0 230.0 530.0 480.0 430.0 2760.0 165.0 340.0 840.0 1280.0
32% 20% 21% 4% 16% 25% 26% 14% 24% 39% 16% 7% 19%
9/15/2011
STATE BANK OF INDIA
Rating
Buy 1880 2480 32
COMPANY PROFILE SBI is the largest Indian banking and financial services company (by turnover and total assets) with its headquarters in Mumbai India Mumbai, India. With an asset base of $352 billion and $285 billion in deposits, SBI is a regional banking behemoth and is one of the largest financial institution in the world. It has a market share of about 20% in deposits and loansamong Indian commercial banks.The State Bank of India is the 29th most reputed company in the world according to Forbes INVESTMENT RATIONALE Benefiting from its scale on the borrowing cost side, SBI generates NIM of ~3% on a sustainable basis. We believe strong net interest income growth over the next few years will boost operating profits. SBI with its return ratios of 0.8-1% RoA and 14-16% RoE is expected to trade at a premium to other public sector banks due to its scale. All major subsidiaries i l di j b idi i including SBI Lif are profitable. A Life fit bl Associate b k expected t b i t banks t d to be merged over the next 12-24 months have also generated RoA of 0.8- 1%, which will keep consolidated return ratios healthy. VALUATIONS With strong economic growth, the financial services sector should outperform and SBI will be a significant contributor in the same. The stock is currently trading at 15.6x FY11P/E and 2.2xFY11 P/B. We think the current price largely factors in most of the bad news on asset quality and with return ratios likely to improve from H2FY11 onwards, we think this constitutes a good entry point with a target price of Rs.2480.
CMP (Rs.) Target (Rs.) Upside U id %
ShareholdingPattern%(ason 30thJune,2011) 12.27 Promoters 17.45 10.88 59.4 FIIs DIIs Others
9/15/2011
NTPC
Rating Buy 163 195 20
COMPANY PROFILE NTPC is a diversified power major with presence in the entire value chain of the power generation business. Apart from power generation, NTPC has already ventured into consultancy, consultancy power trading ash utilisation and coal mining trading, mining. NTPC ranked 341st in the 2010, Forbes Global 2000 ranking of the Worlds biggest companies and received Maharatna status in May, 2010, one of the only four companies to be awarded this status. INVESTMENT RATIONALE NTPC is Indias largest power company with total installed capacity of 34854 MW generating India s ~28% of total power generation in the country due to its focus on high efficiency. NTPC's capacity addition shall accelerate as 14.7GW of projects under construction are expected to be commissioned over FY12-14. Company has complete fuel supply arrangement for all its plants including under construction ones. By 2017, company targets to procure 20% of its coal requirement from own mines, 70% through li k th h linkages and b l d balance th through i h imported coal. t d l Also, in a weak sector outlook, the company stands to gain on pre-emptive steps taken by securing regulated PPAs for the 40GW capacity under various stages of expansion. This is a key positive in a competitive bidding regime, which will ensure secured returns with pass through of increased fuel prices.
CMP (Rs.) Target (Rs.) Upside % p
3.66 3.54
ShareholdingPattern%(as on30thJune,2011)
8.3 Promoters FIIs DIIs 84.5 Others
VALUATIONS We believe that ideal imported coal blending to optimize production cost and timely execution of capacity addition will be the key for NTPC. We assign a BUY rating on the stock with a target price of Rs.195. The stock is currently available at 2.0xFY11P/BV and 14.7x FY11P/E.
9/15/2011
10
POWER GRID CORPORATION OF INDIA LTD (PGCIL)

Rating Buy 95 115 21
COMPANY PROFILE POWERGRID, the Central Transmission Utility (CTU) of the country, is engaged in power transmission business with the mandate for planning, co-ordination, supervision and control over complete Inter-State transmission system. POWERGRID, as on July 2009, owns and operates about 71,600 ckt kms of transmission lines at 800/765 kV, 400 kV, 220 kV & 132 kV EHVAC & +500 kV HVDC levels and 122 sub-stations with transformation capacity of about 81,200 MVA. Recognizing the role of POWERGRID in the overall development of transmission and power sector, Govt. of India has conferred Navratna upon status to POWERGRID in May` 08. INVESTMENT RATIONALE PGCIL (61.42%owned by the Government of India) is India's Central Transmission Utility (CTU) mandated to establish and operate regional and national grids to facilitate transfer of power within and across regions. PGCIL plans Rs545bn of capex during the XIth Five Year Plan (FY08-12). (FY08 12). Management expects that capex during the next plan (XIIth Plan) could be as high as Rs1200bn. In 2QFY11, PGCIL received in-principle approval for the Kudankulam nuclear plant where transmission capacity was declared commercial in April 2009, despite generation capacity not being operational. This precedent will enable PGCIL to approach the regulator in other such instances and transmission returns being impacted due to delays instances, in generation projects will be minimized. VALUATIONS PGCIL stock currently trades at 2.1xFY11P/BV and 17.3xFY11P/E. Our target price of Rs.115 is based on 2.1x P/BV multiple which is ~12% discount to the historic average of 2.5x. 2 5x
CMP (Rs.) Target (Rs.) Upside %
ShareholdingPattern%(ason 30thJune,2011) 7.66 9.46 Promoters 13.46 69.42 69 42 FIIs DIIs Others Oth
9/15/2011
11
HINDUSTAN UNILEVER (HUL)
COMPANY PROFILE With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skincare, toothpastes, deodorants, cosmetics, tea, coffee, soaps detergents shampoos skincare toothpastes deodorants cosmetics tea coffee packaged foods, ice cream, and water purifiers, HUL is a part of the everyday life of millions of consumers across India. HULs portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and P it d Pureit. The Company has over 16,000 employees and has an annual turnover of around Rs.19,401 crores (financial year 2010 - 2011). HUL is a subsidiary of Unilever, one of the worlds leading suppliers of fast moving consumer goods. INVESTMENT RATIONALE Sustainable volume growth and steady performance of personal products and foods business renders us confidence on the companys growth prospects. Company is a market leader in most categories and has strong brands, wide product range across product categories, with presence at all price points. Decline in raw material prices would result in margin expansion. VALUATIONS At the CMP, the stock is trading at 31.5xFY11P/E and 25.8xFY11P/BV which looks attractive. We recommend a BUY rating on the stock with a target price of Rs.360 for a potential upside of 4%from the CMP.
Rating CMP (Rs.) Target (Rs.) Upside %
Buy 346 360 4
ShareholdingPattern%(ason 30thJune,2011)
17.34 11.79 52.52 18.35
Promoters FIIs DIIs Others
9/15/2011
12
ITC
COMPANY PROFILE ITC is one of India's foremost private sector companies with a market capitalisation of over US $ 33 billion and a turnover of US $ 7 billion. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. INVESTMENT RATIONALE ITC s ITC's cigarette volumes are likely to rebound strongly in FY12 owing to robust demand and flat excise duties. Non-cigarette businesses are also set to contribute to growth, with FMCG losses declining, and paper, agri and hotels businesses on a healthy growth path. VALUATIONS Given the limited capex requirements (INR10b 15b) and huge cash flow generation (INR10b-15b) (INR52b in FY11), dividend payout is likely to settle at a higher level. The stock trades at 31.3x FY11 EPS of Rs6.4. We recommend Buy with a target price of Rs.230, 16% upside.
ITC Rating CMP (Rs.) Target (Rs.) Upside %
Buy 198 230 16
ShareholdingPattern%(ason 30thJune,2011) 0 14.56 49.53 35.91 Promoters FIIs DIIs Others Oth
9/15/2011
13
GODREJ CONSUMER PROUCTS LTD (GCPIL)
COMPANY PROFILE GCPL is a leader among India's FMCG companies with leading Household and companies, Personal Care Products. Co brands, which include Good Knight, Cinthol, Godrej No. 1, Expert, Hit, Jet, Fairglow, Ezee, Protekt and Snuggy, among others, are household names across the country. It is one of the largest marketers of toilet soaps in the country and are also leaders in hair colours and household insecticides. Recent acquisitions include Keyline Brands in the UK, Rapidol and Kinky GroupSouth Africa d Godrej Global Mideast FZE T S th Af i and G d j Gl b l Mid t FZE, Tura - a l di medicated b d i W t leading di t d brand in West Africa, Megasari Group- a leading household care company in Indonesia and Issue Group and Argencos, two leading hair colorant companies in Argentina. INVESTMENT RATIONALE With various innovations (dual dispenser, low smoke coil, jumbo coil), together with first-mover advantage, GCPL is clearly the market leader across formats in household insecticides (HI). GCPLs international business is growing robustly, led by innovation, synergistic benefits and unmatched focus VALUATIONS We believe the company is doing well, following its 3X3 strategy, and will benefit further from likely fall in oil prices. Currently, the stock is trading at 28.3x FY11 EPS of Rs.14.9. We recommend BUY on the stock with a 25% potential upside.
Buy 425 530 25
ShareholdingPattern%(ason 30thJune,2011) 2.19 11.23 Promoters 19.3 6 8 67.28 FIIs DIIs Others Oth
9/15/2011
14
HCL TECHNOLOGIES
COMPANY PROFILE HCL is a $6 billion leading global technology and IT enterprise comprising two companies listed in India - HCL Technologies and HCL Infosystems. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals.
Buy 380 480 26
INVESTMENT RATIONALE Improvement in ratio of net profit conversion into cash flow from operations and higher than expected improvement in EBITDA margin. Strong deal pipeline and guidance of stable EBIT margin in FY12E will support stock re-rating i coming quarter. ti in i t
VALUATIONS Taking the same into account we recommend a BUY on the stock with a price target of Rs. 480. The stock is currently trading at 15.4xFY11P/E which is attractive in comparison to its peers.
ShareholdingPattern%(ason 30thJune,2011) 6.13 6 13 8.15 Promoters FIIs 21.35 64.37 DIIs Others Oth
9/15/2011
15
COAL INDIA
COMPANY PROFILE With a modest production of 79 Million Tonnes (MTs) at the year of its inception CIL today is the single largest coal producer in the world. Operating through 81 mining areas, CIL is an apex body with 7 wholly owned coal producing subsidiaries and 1 mine planning and consultancy company spread over 8 provincial states of India. CIL also fully owns a mining company in Mozambique christened as 'Coal India Africana Li it d ' Af i Limitada'. CIL also manages 200 other establishments lik l th t bli h t like workshops, hospitals etc. CIL having fulfilled the financial and other prerequisites was granted the Maharatna recognition in April 2011.
Buy 379 430 14
INVESTMENT RATIONALE Profit sharing concept needs clarification, however we believe if the MMDR Bill were to become operational, COAL would have the flexibility to pass on the costs to its customers We expect CIL to meet its offtake target of 454MT for FY12E through liquidation of inventory.
2.08 ShareholdingPattern%(ason 30thJune,2011) 1.55 6.37 Promoters FIIs DIIs Others 90
VALUATIONS We assign a BUY rating on the stock with a target price of Rs.430 on back of increased offtake and realization. The stock currently trades at 21.8xFY11P/E.
9/15/2011
16
INFOSYS
COMPANY PROFILE Infosys is the second largest IT company in India with 133,560 employees (including subsidiaries) as of March 2011. Infosys is ranked 28th globally in the list of IT services providing firms. It has offices in 33 countries and development centers in India, China, Australia, UK, Canada, Brazil and Japan. The company offers software products for the banking industry and business process management services also provides end-to-end business solutions. INVESTMENT RATIONALE So far, no budget cuts have been announced, corporate health is better than in 2008 and discretionary spends are lower (unlike in 2006/07) which augurs well for the Indian IT space. VALUATIONS U O S The stock currently trades at 18.5x FY11P/E. Infosys has corrected 20% over the past two months and valuations are undemanding at 17.5x FY12 (guidance).We recommend a BUY rating on the stock with a target price of Rs.2760. Further, its valuation premium to more cyclical peers (Accenture) has collapsed to only 10% now.
Buy 2226 2760 24
16.04 37.24
Promoters FIIs DIIs
36.88 9.84
Others Oth
9/15/2011
17
VOLTAS
COMPANY PROFILE Voltas offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, construction equipment, materials handling, water management, building management systems, indoor air quality and chemicals. Voltas, a part of the Tata Group provided the air-conditioning for the world's biggest air conditioning world s ocean liner, the RMS Queen Mary 2 and also the world's tallest building, the Buri Khalifa. INVESTMENT RATIONALE Voltass low cost operations and asset light model with significant outsourcing have resulted in high return ratios (RoCE >33%) Its net cash rich balance sheet provides >33%). ample funds to facilitate future inorganic growth through acquisitions. Voltas remains the preferred player in the MEP and HVAC space and would continue to be a key beneficiary of industrial capex. VALUATIONS At CMP of Rs.119, the stock is trading at 12.4x FY11P/E. We recommend a Buy rating and a price target of Rs.165 on relative return basis.
Buy 119 165 39
21.23
30.55
Promoters FIIs DIIs
29.8 29 8
18.42
Others Oth
9/15/2011
18
CIPLA
Buy 293 340 16
COMPANY PROFILE Cipla is best-known for manufacturing low-cost anti-AIDS drugs for HIV-positive patients in developing countries. Cipla makes drugs to treat cardiovascular disease, arthritis, diabetes, weight control, depression and many other health conditions, and its products are distributed in more than 180 countries worldwide. Cipla offers services like consulting, commissioning, engineering, project appraisal, quality control, k t l know-how t h transfer, support, and plant supply. f t d l t l Apart from its presence in the Indian market, Cipla also has an export market and regularly exports to more than 185 countries in all corners of the world. INVESTMENT RATIONALE We believe the expected turnaround in domestic business, sustainable licensing income and ramp up in Indore SEZ should drive earnings over FY11- 13E. Inhaler exports to European Union and Rest of the World markets will be long-term growth drivers. VALUATIONS g g gg We believe de-rating factors have now become re-rating triggers and, therefore recommend BUY with a price target of Rs.340.At the CMP the stock is trading at 23.7x FY11P/E which seems quite attractive.
29.38
Promoters 36.8 FIIs DIIs
19.09
Others Oth 14.73
9/15/2011
19
MAHINDRA & MAHINDRA (M&M)
COMPANY PROFILE M&M is the leader in the utility vehicle segment in India with its flagship UV Scorpio and enjoys a growing global market presence in both the automotive and tractor businesses. Over the past few years, M&M has expanded into new industries and geographies. Company entered into the two-wheeler segment by taking over Kinetic Motors in India. M&M also has controlling stake in REVA Electric Car Company and acquired South Korea's SsangYong Motor Company in 2011. INVESTMENT RATIONALE M&M's strategy of expanding its scope beyond tractors to farm mechanization gained momentum in FY11. Short-term headwinds notwithstanding we remain positive on M&M's M&M s prospects, driven by dominance in its core business of UVs and tractors, with favorable competitive dynamics and strong volume growth momentum. It would be one of the biggest beneficiaries of a normal monsoon, given its high dependence on the rural market. VALUATIONS The stock currently trades at attractive valuations of 16.7x FY11P/E. We recommend Buy with a target price of Rs.840.
Buy 785 840 7
28.92
24.86
Promoters FIIs DIIs
22.63
23.59 23 59
Others Oth
9/15/2011
20
MARUTI SUZUKI (MSIL)

Rating CMP (Rs.) Target (Rs.) Upside % Buy 1075 1280 19
COMPANY PROFILE MSIL, a subsidiary of Suzuki Motor Corporation, Japan has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability t produce over 1 2 million (1 200 000) vehicles annually. bi d bilit to d 1.2 illi (1,200,000) hi l ll The company plans to expand its manufacturing capacity to 1.75 million by 2013. INVESTMENT RATIONALE Series of monetary policy actions by RBI and higher interest rates led the automakers to face headwinds in the form of lower sales and in-line with this MSI reported 18% de-growth in Q Q1FY12 to 281526 units. S Short term outlook f MSI seems bleak on the back of mute for S f demand, higher discounts and JPY appreciation putting pressure on profitability. However, these factors are already factored in the current price which tanked ~12% in last one month. Company is aggressively looking to expand its Diesel portfolio as the difference between petrol and diesel prices widens on account of petrol price deregulation. Currently the contribution of Diesel portfolio stood at 21% in domestic sales. Maruti recently unveiled new swift at an introductory price of Rs 17 lakh or the base diesel variant which is competing with Toyotas Liva, Fords Figo and Hyundais Brio. In our view, MSI is placed on the best position in the form of brand loyalty, vast dealer and service network for which the customer is looking very closely. VALUATIONS We estimate gradual improvement in EBITDA margins driven by moderating RM costs, higher operating leverage, a reduction in imports and forex stability. Currently the stock trades at 13x FY11P/E. We recommend Buy with a target price of Rs.1280 for a potential upside of 19% from current levels.
ShareholdingPattern%(ason 30thJune,2011) 9.08 Promoters 18 54.21 18.71 18 71 FIIs DIIs Others Oth
9/15/2011
21
Company AUROBINDO PHARMA IRB INFRA CENTRAL BANK DCB TATA STEEL LTD HINDALCO INDS IDEA CELLULAR BHARTI AIRTEL UCO BANK BAJAJ ELECTRICAL M&M FINANCE & C KPIT CUMMINS ADHUNIK METALS AVERAGE
Market Cap (Rs. Cr) 3,832 5,305 6,505 937 44,257 27,817 32,637 147,646 4,405 1,768 6,812 1,312 684
Beta (6M) 1.0 1.0 1.0 1.4 14 1.2 1.2 0.7 0.8 1.1 0.6 0.9 0.9 0.8 0.97
Div Yield % 1.5 0.9 2.3 0.0 00 2.4 0.9 0.0 0.2 4.2 1.6 1.5 0.5 2.7 1.4
CMP (Rs) 131.7 156.4 98.9 45.8 45 8 460.0 145.0 98.4 390.0 69.4 176.0 649.0 146.5 55.3
Target Price (Rs) Potential Upside 165.0 190.0 130.0 65.0 65 0 560.0 185.0 120.0 480.0 95.0 240.0 720.0 195.0 105.0 25% 22% 31% 42% 22% 28% 22% 23% 37% 36% 11% % 33% 90%
9/15/2011
22
AUROBINDO PHRAMA
COMPANY PROFILE Over the years Aurobindo Pharma has evolved into a knowledge driven company years, company. Company is R&D focused, has a multi-product portfolio with multi-country manufacturing facilities, and is becoming a marketing conglomerate across the world. Aurobindo Pharma has created a name for itself in the manufacture of bulk actives, its area of core competence. The company has entered the high margin speciality generic formulations segment, with a global marketing network. INVESTMENT RATIONALE APLs top-line registered 20% CAGR over FY05-11 led by formulation CAGR of 55% in the same period. APL is among the top three Indian firms in ANDA/NDA filing with USFDA. Company has around Rs 250bn worth of product filings till FY11. Fueled by the rising growth opportunities led by strong US filings, acceleration by new product introduction and strong tie ups, we expect APL to post robust performance. VALUATIONS APL is currently trading far below its historical PE multiple of 9x (5 Yrs avg). We expect p valuations will remain subdued in short-term due to the import alert. However, APLs long term fundamentals are intact and therefore recent correction provides a good buying opportunity. At CMP of Rs132, APL is trading at 6.9x FY11P/E. We recommend BUY with a target price of Rs.165.
Buy 132 165 25
ShareholdingPattern%(ason 30thJune,2011) 13.38 13.05 54.36 19.21
9/15/2011
23
IRB INFRA
Buy 156 190 22
COMPANY PROFILE IRB Infrastructure which executed Indias first build-operate-transfer (BOT) road project, is one of the largest operators of such ventures. Currently it has about 3404.40 lane KM under operational and about 2330.4 lane KM under development. One of most notable project of the company is Mumbai Pune Expressway. INVESTMENT RATIONALE IRB has a robust business, construction order book of Rs.91 bn, 17 road BOT projects, strong operating cash flows, funding capabilities, and relatively lower risk to rising interest rates. Early mover advantage in road BOT segment is benefitting the company as its old portfolio has started generating good amount of cash flows, which is a distinguishing factor now and can be used for funding of new projects. VALUATIONS At the CMP, the stock is trading at 11.5xFY11 earnings. As the valuations are nearing historical lows and risk reward seems favorable from a long term perspective we risk-reward recommend a BUY rating on the stock with a target price of RS.190
ShareholdingPattern%(ason 30thJune,2011) 3.98 7.79 Promoters 13.43 FIIs DIIs 74.8 Others
9/15/2011
24
CENTRAL BANK
COMPANY PROFILE Among the Public Sector Banks, Central Bank of India(CBoI) can be truly described as g , ( ) y an All India Bank, due to distribution of its large network in 27 out of 29 States as also in 3 out of 7 Union Territories in India. Central Bank of India holds a very prominent place among the Public Sector Banks on account of its network of 3656 branches and 178 extension counters at various centres throughout the length and breadth of the country. INVESTMENT RATIONALE CBoI has opened 69 new branches in Q1FY12. Total presence increased to 3,797 branches with 62% of the branches servicing the rural & the semi-urban regions of the country. With CBoI effecting hikes in lending rates, we believe the Bank should be able to maintain its NIMs at current levels. levels Going ahead, the impact of change in savings rate which has already been factored in this quarter and leveraging of CD ratio can help the bank improve its margins. VALUATIONS At CMP the stock is currently trading at P/BV of 0 7x its FY11 BV of Rs 136 7 We CMP, 0.7x Rs.136.7 recommend a BUY at current levels with a target price of Rs130 for a potential upside of 31%
Buy 99 130 31
ShareholdingPattern%(ason 30thJune,2011) 2.78 8.51 8.5 Promoters FIIs DIIs 80.21 Others Oth
9/15/2011
25
DCB
COMPANY PROFILE DCB has deep roots in India since its inception in the 1930s. Its promoter the Aga p ( ) Khan Fund for Economic Development (AKFED) holds over 23% stake. AKFED is an international development agency dedicated to promoting entrepreneurship and building economically sound enterprises in the developing world. It had co-promoted HDFC in India in the late seventies. The Bank has recently launched several value added initiatives and intends to become one of the countrys preferred and profitable private sector banks, providing a country s comprehensive suite of best in class products for customers in Retail, SME and Corporate Banking market segments in chosen geographies. INVESTMENT RATIONALE DCBs near term focus is to ramp up its CASA franchise by increasing its CASA per branch. branch Continuing with its focus on liabilities strategy DCBs CASA deposits are likely strategy, DCB s to outpace overall deposits growth over FY11-13E. The banks exit from unsecured retail lending and focuses on secured credit lines like mortgages, MSME, etc. makes its loan portfolio less vulnerable to fresh slippages. VALUATIONS The stock which was historically trading at higher than 4x its one year forward BV till stock, January 2008 crashed to below 1.5x towards the end of FY 09. With the bank returning to profitability on the back of a revamped business mix, we believe the stock, should command a higher multiple. At CMP of Rs. 46, the stock is trading at 1.6x of its FY11BV.We recommend BUY on the stock with target price of Rs.65 indicating a potential upside of 42%.
23.07
Promoters FIIs
63.34
11.67
DIIs Others Oth
1.92
9/15/2011
26
TATA STEEL
COMPANY PROFILE Tata Steel is the world's seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. It is the largest private sector steel company in India in terms of domestic production. Tata Steel is the 8th most valuable brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010. INVESTMENT RATIONALE Tata Steels Indian operations have a robust business model, higher margin & domestic demand advantage. The upcoming new capacity is expected to add to revenue & profitability along with increasing the contribution from higher margin domestic business. The groups strategy to restructure long products business of European operations & target high value markets is expected to yield benefits in long run. Going forward this would help the company to have flexibility in its operations so as to focus on segments having higher growth rate & keep the costs under check. VALUATIONS We believe the stock could deliver decent absolute returns over the next 12 months and recommend BUY with a target price of Rs.560. The stock is currently trading at 5.6xFY11EV/EBIDTA.
Buy 460 560 22
25.88
30.6
Promoters FIIs DIIs
26.46
17.06
Others Oth
9/15/2011
27
HINDALCO
COMPANY PROFILE g p p y y p g g Flagship company of the Aditya Birla Group is the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia. Its copper smelter is the worlds largest custom smelter at a single location. The acquisition of Novelis Inc. in 2007 positioned it among the top five aluminium majors worldwide and the largest vertically integrated aluminium company in India. Today company is a metals powerhouse with high-end rolling capabilities and global footprint in 12 countries. INVESTMENT RATIONALE Hindalcos growth in earnings in the next 4-5 years will be driven by low cost, fully integrated aluminium capacity being set up in India and availability of captive coal for its Mahan project in FY14. Companys huge expansion plans of tripling its refining and smelting capacity Company s domestically to 4.5mtpa and 1.65mtpa is relatively on track. The additional capacity would result in higher profitability margins on a consolidated basis. We believe Hindalco is well placed to benefit from a) its aluminium expansion plans, b) low production cost at its new capacities and c) steady capacity expansion at Novelis. VALUATIONS Considering the huge potential we maintain a positive stance on the company and recommend BUY with a target price of Rs185. The stock is currently trading at 5.5xFY11 EV/EBITDA
Buy 145 185 28
24.26
32.06
12.85 30.83
9/15/2011
28
IDEA
COMPANY PROFILE Idea Cellular Limited (IDEA Cellular) is a global system for mobile communication (GSM) mobile services operator in India with 67 million subscribers under brand subscribers, IDEA,with total market cap of Rs.32951 cr & sales of Rs.15503 cr. With pan India integrated GSM operator covering the entire telephony landscape of the country, and has national long distance (NLD) and international long distance (ILD) operations. IDEA Cellular offers basic voice and short message service (SMS) services to high-end value added and general packet radio service (GPRS) services, such as Blackberry, Datacard, Blackberry Datacard Mobile TV and Games The Companys subsidiaries include Games. Company s Swinder Singh Satara and Co. Limited, Aditya Birla Telecom Limited, Idea Cellular Services Limited, Idea Cellular Infrastructure Services Limited, Idea Cellular Towers Infrastructure Limited and Carlos Towers Limited. INVESTMENT RATIONALE Idea j Id enjoys a strong i t incumbency advantage i eight established circles and spectrum b d t in i ht t bli h d i l d t allocation in the 900MHz band in nine circles. Company is a key beneficiary of tower sharing initiatives including formation of Indus Towers, a three way passive infrastructure JV between Bharti, Idea, and Vodafone. Idea won 3G Spectrum in 11 circles and has also increased its base tariffs in the most popular promotion plans from 1p/s to 1.2p/s in its six leadership circles, which contribute ~60% of Idea's revenue. VALUATIONS Currently the stock is trading at 13.8x FY11EV/EBIDTA. We recommend BUY on the stock with a target price of Rs120.
Promoters 35.84 46.03 FIIs DIIs 7.99 10.14 Others Oth
9/15/2011
29
BHARTI AIRTEL
COMPANY PROFILE Bharti Airtel is the fifth largest telecom operator in the world with over 207.8 million subscribers across 19 countries at the end of 2010. It is the largest cellular service provider in India, with over 169.18 million subscribers as of June 2011. Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobil and China Unicom. INVESTMENT RATIONALE Bhartis proactive move to initiate tariff hike would be visible in the coming quarters leading to better profitability, leaving scope for telcos to expand their 3G network aggressively. Increase in 3G penetration to ~15-20% to contribute to revenue and EBITDA growth; most of the fixed cost is already factored in. p g y p Revenue is expected to grow fastest in the industry on back of African operations with penetration level of ~33% versus ~67% for India. Company has secured a license to operate 2G and 3G services in Rwanda. With this license, the company's footprint across the African continent will expand to 17 countries, Rwanda being one of its fastest growing markets. The company plans to invest over $100 million in its operations in Rwanda over the next three years. VALUATIONS With stable competition and strong growth in India over the near term, coupled with improving visibility in Africa, we stay positive on the stock and recommend BUY with a target price of Rs.480. At CMP, stock trades at 10.2x EV/EBIDTA for FY11.
Buy 390 480 23
5.63
8.48 17.59 68.3 68 3
Promoters FIIs DIIs Others Oth
9/15/2011
30
UCO BANK
COMPANY PROFILE UCO Bank Ltd is a Kolkata-headquartered Public Sector Bank (PSB) with asset size of ~Rs1,373bn and network of 2,152 branches and 478 ATMs. The Bank has a pan-Indian presence with a strong foothold in eastern and northern India. UCO Banks total business touched Rs2.06bn, with deposits in excess of Rs1,224bn and advances of R 834b It credit-deposit ratio stood at 68 1% d d f Rs834bn. Its dit d it ti t d t 68.1%.
Buy 69 95 37
INVESTMENT RATIONALE Structurally, the bank has had relatively higher exposure to large corporates, low CASA of ~24% and low fee/assets. Going forward, we expect the banks earnings to find support from increasing exposure to the SME and retail segments, improving other income and moderating asset-quality pressures, aided by increasing recoveries.
VALUATIONS At the CMP, the stock is trading at 1.1x FY11 ABV, which we believe does not yet factor in the improvement expected in earnings quality. We recommend BUY with a target price of Rs.95.
16.44 10.33 68.13 5.1
9/15/2011
31
BAJAJ ELECTRICALS LIMITED (BEL)
COMPANY PROFILE , p ( , ) BEL with a turnover of Rs. 2763 cr, is a part of the US $ 7 bn (over Rs 38,000 crores) "Bajaj Group". It has six strategic business units Engineering & Projects, Appliances, Fans, Luminaires, Lighting and Morphy Richards. Bajaj Electricals has distribution arrangements with Trilux Lenze of Germany (for Luminaires), tie up with Delta Controls of Canada (for Building Management Systems) and Securiton of Switzerland (for security systems), Morphy Richards of UK and Nardi of Italy (for Appliances), Disney of USA & Midea of China (for Fans). The company has also invested in Starlite Lighting for manufacture of energy saving lamps (CFL). INVESTMENT RATIONALE BEL is strongly placed in CD and Lighting segments. E & P business saw some headwinds (Q1 is normally a weak quarter) which are expected to continue in Q2FY12 Q2FY12. The strong distribution networks, a powerful brand, wide product portfolio, large service infrastructure and excellent vendor base continue to be the major areas of strength for the Company. The company has delivered good growth in the past. Their 5 year (FY2005-11) net sales and PAT CAGR is 32% and 80% respectively. Next leg of revenue growth is expected to come from new products like water purifier gas stoves chimney cooker purifier, stoves, chimney, etc. VALUATIONS The stock is trading at attractive valuations of 11.5xFY11P/E. We recommend Buy with a target price of Rs240 which is a price appreciation of 36% from current levels.
Buy 176 240 36
14.98 11.2 9.04 64.78
9/15/2011
32
MAHINDRA & MAHINDRA FINANCIAL SERVICES (MMFSL)
Buy 649 720 11
COMPANY PROFILE MMFSL is one of Indias leading NBFC through a vast network of branches providing personalised finance for the widest range of utility vehicles, tractors and cars, focusing on the rural and semi-urban sector. INVESTMENT RATIONALE We expect MMFS to benefit from confluence of four factors: (1) lower rural penetration of consumer durables (own just 10% all Indias car penetration), (2) lower market share (just 2-8% across various products) (3) rising rural income levels and (4) improving latent wealth. MMFS is strategically positioned to take advantage of the financing gap between banks and the local money lenders through competitive pricing, speedier loan approvals and doorstep lending services. VALUATIONS We expect return ratios to sustain due to a strong growth outlook and improved fundamentals. The stock is currently trading at 2.7x FY11P/BV. Recommend Buy with a target price of Rs.720 for a potential upside of 11% from current levels.
4.52 3.55
Promoters FIIs 34.49 57.44 DIIs Others Oth
9/15/2011
33
KPIT CUMMINS
COMPANY PROFILE KPIT Cummins provides technology solutions partner for global Manufacturing corporations with special focus on Automotive, Energy & Utilities, Industrial Equipments, and Semiconductor industries. Highly focused approach has helped company to pioneer innovative solutions and file 37 patents in the Automotive and Semiconductor domains. INVESTMENT RATIONALE p g g y KPIT Cummins has been experiencing strong demand environment due to cyclical up-tick in its manufacturing vertical, positive structural changes in Automotive clients, emerging economies growth and ramp ups from newly acquired business (CPG, In2Soft and Sparta). We expect the robust growth to continue going ahead with strong Automotive engineering demand, sustained IT spending by manufacturing clients being the key growth drivers. KPIT has shown one of the strongest revenue growth performance within the mid-cap space with revenue growth of 46% (40% organically) due to strong demand up-tick in major verticals. KPIT acquired 50% stake in leading Oracle JDE enterprise service provider, Systime, for ~Rs1.03bn in Q1 FY12 thus strengthening its Oracle offering providing access to marquee clientele and un-penetrated geographies geographies. VALUATIONS The stock is currently trading at 13.4x FY11P/E. We assign BUY rating to the stock with a target price of Rs.195 indicating potential upside of 33% from current levels.
34.3
26.86
Promoters FIIs DIIs
21.64 21 64 17.2
Others Oth
9/15/2011
34
ADHUNIK METALIKS
COMPANY PROFILE Adhunik Metaliks Limited (AML) has emerged as one of the fastest growing y, p g p y alloy, special and construction steel manufacturing companies in the country with significant presence in the mining and power sectors through its subsidiaries. It has completed almost all major capital expenditure for both backward and forward integration and emerged as an integrated manufacturer of special steel with downstream utilisation of products. INVESTMENT RATIONALE The company's Rs4.6b capex, over the next two years, will increase sponge iron ore capacity by 100ktpa, start a 45MW CPP and start captive iron ore mines, which will fuel earnings growth. Orissa Managanese & Minerals (OMM) will ramp up production of iron and manganese ore. Recently it opened manganese mines and the Suleipat iron ore mine (80mt of reserves in a JV) which will drive volume growth An Rs4 4b capex to set up a JV), growth. Rs4.4b 1.2mtpa pellet plant by the 1HFY12 will expand margins. Commissioning of a 540MW IPP is due to be completed by 1HCY12, which will drive earnings. We believe that strong earnings in OMM would more than compensate for the weakness in steel biz as well as drive the growth in earnings in FY12. VALUATIONS Currently the Stock is trading at 3.8x FY11P/E. We recommend a BUY rating with a target price of Rs105 on the stock owing to attractive valuations and rich investment pipeline in power and merchant mining.
21.54 10.95 11.99
Promoters FIIs 55.52 DIIs Others Oth
9/15/2011
35
Company
Market Cap (Rs. Cr) 46,565 4,359 10,957 1,134 3,846 44,229 46,418 758 8,378 16,193 16 193 100,849 318
Beta (6M)
Div Yield %
CMP (Rs)
Target Price (Rs) 640.0 830.0 42.0 65.0 125.0 1350.0 181.0 95.0 350.0 160.0 160 0 1140.0 90.0
Potential Upside 22% 22% 52% 58% 32% 28% 23% 35% 19% 47% 31% 37%
JINDAL STEEL & P BATA INDIA LTD GMR INFRASTRUCTU IVRCL LTD REDINGTON INDIA AXIS BANK LTD TATA MOTORS LTD ESCORTS LTD COROMANDEL INT IDFC LTD ICICI BANK LTD SHASUN PHARMA AVERAGE
1.1 0.8 0.9 1.7 0.6 1.2 1.3 1.3 0.5 1.3 13 1.2 0.7 1.04 1 04
0.3 0.6 0.0 1.3 1.2 1.2 2.6 2.0 2.4 1.7 17 1.6 0.4 1.3 13
523.1 677.7 27.7 41.2 95.1 1057.4 147.5 70.4 294.7 109.1 109 1 871.3 65.7
9/15/2011
36
JINDAL STEEL
COMPANY PROFILE Jindal Steel and Power Limited (JSPL) is one of Indias major steel producers with a significant presence in sectors like Mining, Power Generation and Infrastructure. With an annual turnover of over US $2.9 billion, JSPL is a part of the about US $ 15 billion diversified O P Jindal Group and is consistently tapping new opportunities by O. P. increasing production capacity, diversifying investments, and leveraging its core capabilities to venture into new businesses. The company has committed investments exceeding US$ 30 billion in the future and has several business initiatives running simultaneously across continents. With coal reserves in Indonesia, JSPL has mines strewn across Australia and Africa. The company is also engaged in the mining of diamonds in the Democratic Republic of Congo in addition to exploration of the precious stone in the states of Chhattisgarh & Jharkhand in India INVESTMENT RATIONALE JSPL has one of the best iron ore and coal resources in India, with assets spread over various mineral-rich countries. B th it steel and merchant power b i i i l i h ti Both its t l d h t businesses are insulated from input prices. JSPL plans to increase its steel capacity 4x over the next four years and power capacity 10x in 10 years. The stock has underperformed over the last 18-20 months, due to anticipation of slower earnings growth over FY11-13. We expect the stock to get re-rated again, as the visibility of projects and earnings improves over the next 12 months. VALUATIONS The sock is currently trading at very attractive valuations of 12.8xFY11P/E. We recommend BUY with a target price of Rs620 which is a price appreciation of 22% from CMP.
ShareholdingPattern%(ason 30thJune,2011) 6.53 12.05 Promoters FIIs 23.03 58.39 DIIs Others Oth
9/15/2011
37
BATA INDIA
COMPANY PROFILE Bata India is the largest retailer and leading manufacturer of footwear in India and is a part of the Bata Shoe Organization Organization. Company also operates a large non retail distribution network through its urban wholesale division and caters to millions of customers through over 30,000 dealers. INVESTMENT RATIONALE Bata with its instant brand recall value and strong position in the footwear market will be amongst the retail companies that will show growth in the current economic scenario. Over the past five years, Bata India has completely repositioned its stores by opening large format stores, renovating all its stores and closing down small & unviable stores. The company has more than 1200 stores in India. The company has added 108 large format stores in CY10 and has added 29 large format Bata stores. With zero d bt on it b l debt its balance sheet and net cash of more th h t d t h f than 100 crores after th ft the recent stake sale in the real estate J/V, Bata has a strong Balance sheet and doesn't need debt for its expansion. VALUATIONS It has a strong brand recall and has its focus on profitable growth, with a historical ROCE in excess of 30% and a profit CAGR of more than 21% we recommend buying Bata with a long term perspective with a target price of Rs.830. The stock is currently trading at 46.3x of CY10 earnings.
18.23
Promoters FIIs
15.07 14.69
52.01
DIIs Others Oth
9/15/2011
38
GMR INFRA
COMPANY PROFILE The GMR Group is a leading global infrastructure major. The core businesses of the Group comprise of Airports, Energy, Highways and Urban Infrastructure (including SEZ). Having established its credentials as a leading infrastructure conglomerate in India, the Group has expanded its presence globally. INVESTMENT RATIONALE Amongst the airports, Hyderabad and Male are already generating operating cash, while management expects Sabiha to turn around in the next 3-4 quarters as traffic growth continues. Delhi is the only sore spot and clarity on profitability should emerge once regulatory clarity does. As of Mar-11 GMRs D/E stands at 1 9x With few expansion plans on the Mar-11, GMR s 1.9x. horizon, we expect leverage to be relatively in check. VALUATIONS We believe that GMRIs strong execution (e.g., timely project commissioning, high rank for Delhi airport on service quality), exit from Intergen (thus reducing debt), cash flow turnaround of Hyderabad airport and regulatory clarity to act as a stock catalyst and recommend BUY with a price target of Rs.42.The stock is currently trading at 20.7xFY11EV/EBIDTA.
GMR Infra Rating CMP (Rs.) Target (Rs.) Upside %
Buy 28 42 52
ShareholdingPattern%(ason 30thJune,2011) 8.18 8.08 12.35 71.39 71 39 Promoters FIIs DIIs Others Oth
9/15/2011
39
IVRCL LTD
Buy 41 65 58
COMPANY PROFILE IVRCL is a Hyderabad-based construction company and operates in niche area such as 'water' segment, under which it executes industrial projects, irrigation works,desalination projects and sewerage systems. In FY10, the company restructured the infrastructure ownership portfolio and merged it into IVRCL Assets (80.5% subsidiary). IVRCL also has 52.8% stake in Hindustan Dorr Oliver. Oli Order book as at end-1QFY12 stood at INR216b, while order intake during the quarter was INR9b. L1 orders were INR24b, including an INR12b order for an underground mining project. INVESTMENT RATIONALE Reported order backlog at the end of June 2011 is Rs210b, book-to-bill ratio of 3.7x TTM revenue provides revenue visibility for FY11 / FY12. Company has one of the largest BOT portfolios, with diversified presence in roads and desalination projects. VALUATIONS Going forward we believe fund infusion in BOTs and land sales could be some of the triggers for the stock and recommend BUY with a target price of Rs.65. The stock is currently trading at 6.3x of FY11EV/EBIDTA.
ShareholdingPattern%(ason 30thJune,2011) 9.52 Promoters 38.17 FIIs DIIs 48.3 48 3 4.01 Others Oth
9/15/2011
40
REDIGNTON INDIA
COMPANY PROFILE Redington (India) Ltd along with its subsidiaries is in the business of end-to-end supply chain management of IT and Non-IT products in various potential geographies of South Asia, Middle East and Africa. With a large distribution network and a market penetration of more than 18 countries, Redington is amongst the largest, supply chain solution providers to over 75 leading manufacturers of Information Technology, Telecom, Lifestyle and Consumer Electronics Products, worldwide. Commencing the Indian operations in 1993, Redingtons consolidated revenue for FY 2009-10 is Rs. 13,778.65 Crore and the consolidated net profit for the FY 2009-10 is Rs. 184.33 Crore. 184 33 Crore INVESTMENT RATIONALE Redington's strong results reiterate our idea on its ability to negotiate challenges such as the Middle East environment, rising interest rates and changes in HP's competitiveness better than the market expected. F From a b i business model perspective, R di t d l ti Redington h has managed th i t d the interest rate t t environment admirably by increasing its LIBOR linked borrowing and the primary worry would be a possible rise in LIBOR rates that would lead to greater increase in borrowing costs. Outlook for FY12 is particularly strong. Growth drivers remain e-Governance spending, benefits from the Dell (laptop & PC signups) and continuing corporate refresh cycle in the IT business. VALUATIONS Redington remains one of our conviction BUY ideas as a quality play on domestic consumption and IT/lifestyle product penetration themes. We recommend BUY with a g p y g y target price of Rs.125. Currently the stock is trading at 16.5x FY11P/E which is very attractive.
21.1 32.82
Promoters FIIs DIIs
8.95
37.13
Others
9/15/2011
41
AXIS BANK
COMPANY PROFILE The Bank was promoted jointly by the Administrator of the specified undertaking of ( ) the Unit Trust of India (UTI - I), LIC and GIC and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs as on 31st March, 2011. INVESTMENT RATIONALE Axis Bank has witnessed strong growth in its deposits and advances despite large base. Total deposits and advances have grown at a CAGR of 36% and 45% to Rs. 189238 cr and Rs 142408cr respectively in FY11. The bank's efforts to reduce wholesale deposits and improve its low-cost deposit ratio through retail savings augur well for its margins It has managed to reduce the margins. proportion of wholesale deposits from 41% in March 2011 to 39% in June 2011. The credit-deposit ratio at 71.8% is also low which can further improve as the credit off-take picks up. Additionally, recent hikes in lending rates are yet to reflect on the bank's margins. All these factors would help the bank maintain the NIM at current levels if not improve it in the coming quarters. VALUATIONS Axis is among our preferred picks in the banking sector due to its strong deposit franchise, healthy growth-return profile, and relative discount to peers We expect the relative valuation gap to narrow medium term as the macro (rates, inflation, and liquidity) turns easier. Currently the stock is trading at 2.3x FY11P/BV. We recommend BUY with a price t i target of R 1350 t f Rs.1350
Buy 1057 1350 28
21.67 37.15 5.73
35.45
9/15/2011
42
TATA MOTORS
COMPANY PROFILE Tata Motors Limited is Indias largest automobile company, with consolidated revenues of Rs.1,23,133 crores (USD 27 billion) in 2010-11. It is the leader in co commercial vehicles in each segment, and among the top three in passenger vehicles e c a e c es eac seg e , a d a o g e op ee passe ge e c es with winning products in the compact, midsize car and utility vehicle segments. The Company is the world's fourth largest truck manufacturer, and the world's third largest bus manufacturer. INVESTMENT RATIONALE TML remains a unique play in the auto segment which has strong diversification segment, benefits as its global presence helps revenues to remain less affected by any geographical/regional slowdown. JLR witnessed a complete turnaround which has led consolidated profits spiralling ~29x post the acquisition in FY08. JLR is aggressively working on product development and would have the most refreshed portfolio in comparison to peers like BMW,Diamler with ~40 new product launches in next 3 4 years 3-4 years. Domestically TML would gain from higher demand that would come through with the pick-up of the much needed capex cycle On the demand side we understand luxury market to be least sensitive to business cycles in automobiles providing belief in long term volume growth with rising affluent households driven by BRIC nations. VALUATIONS At CMP, the stock trades at PER of 5.5x and EV/EBIDTA of 4.1x for FY11.We assign a BUY rating on the stock with a target price of Rs.181 indicating a 23% potential upside.
28.16
Promoters 34.84 FIIs DIIs
14.02 14 02 22.98
Others Oth
9/15/2011
43
ESCORTS
COMPANY PROFILE The Escorts Group, is among India's leading engineering conglomerates operating in the high growth sectors of agri-machinery, construction & material handling agri machinery, equipment, railway equipment and auto components. Escorts offers a comprehensive range of tractors, more than 45 variants starting from 25 to 80 HP. Escort, Farmtrac and Powertrac are the widely accepted and preferred brands of tractors from the house of Escorts. Escorts i also a material h dli E t is l t i l handling and construction equipment manufacturer and d t ti i t f t d markets a diverse range of equipment like cranes, loaders, vibratory rollers and forklifts. Escorts today is the world's largest Pick 'n' Carry Hydraulic Mobile Crane manufacturer. INVESTMENT RATIONALE We expect better volume growth in the festive season with increasing distribution network in other regions. The management remains committed towards annual capex of ~|150 crore which would cater to de-bottlenecking exercises for improvement of utilizations levels and costs efficiencies in the coming periods. We believe that the current stock price has factored market share pressures emanating from increasing competition and slow operational turnaround. VALUATIONS Volumes and margins up tick will be the key triggers for the stock in the future. Stock looks attractive with P/E of 5.3x and net DE of 0.1x on SY*10 financials. We have a bullish stance on the stock and recommend BUY with a target price of Rs.95.
SY *SY- September Year end
Buy 70 95 35
27.72
26.77
Promoters FIIs DIIs
15.85 15 85
29.66
Others Oth
9/15/2011
44
COROMANDEL INTERNATIONAL
COMPANY PROFILE Coromandel International Ltd (CIL) is engaged in the business of Fertilisers, Speciality Nutrients, Crop Protection and Retail. Coromandel manufactures a wide range of fertilisers and markets around 2.9 mn tons making it a leader in its addressable markets and the second largest phosphatic fertiliser player in India. I it endeavour t b a complete plant nutrition solutions company, C In its d to be l t l t t iti l ti Coromandel h d l has also introduced a range of Speciality Nutrient products including Organic Fertilisers.The Crop Protection business produces insecticides, fungicides and herbicides and markets these products in India and across the globe. Coromandel is the second largest manufacturer of Malathion and only the second manufacturer of Phenthoate. Coromandel is a part of the Rs.17,051 crores (USD 3.8 billion as on March 31, 2011) Murugappa Group INVESTMENT RATIONALE CIL, Indias largest private sector phosphatic fertilizer manufacturer is poised to benefit the maximum from the governments changed Nutrient-Based Subsidy (NBS) scheme. With the new NBS scheme, non-urea companies like CIL can now pass on the prices to user industries. CIL has announced acquisition (~73% stake) of agrochemical player Sabero Organics with an investment of Rs4.7bn. Acquisition should incrementally add value to CIL's plant protection segment (currently ~6% of its topline) Phosphoric acid supplies of ~0.18mn MT from Tunisian JV is expected to begin from p p p j p y p p Sept11. Kakinada expansion project to increase capacity to 4mn MT p.a. is expected to get commissioned by Sept12. VALUATIONS We are positive on complex fertilizer space with govt.s focus on balanced usage of nutrients. The stock currently trades at 12x FY11P/E. We recommend BUY with a target price of Rs350
Buy 295 350 19
21.03 8.76 64.04 6.17
9/15/2011
45
INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LTD (IDFC)

COMPANY PROFILE g g p y p g IDFC is India's leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services. The company's main business is to provide finance for infrastructure projects including through ownership of infrastructure assets. They operate a full range of business lines, from project and corporate finance to asset management (mutual funds and alternatives) and investment banking. They are engaged in providing finance and advisory services for infrastructure projects, asset management and investment banking. INVESTMENT RATIONALE We believe IDFCs current valuations factor in slowdown in asset growth over the medium term and expect the outlook to improve on favourable policy actions from the government. However, government However the current pipeline of approvals would enable the company to deliver decent loan growth in the medium to long term. Considering IDFCs status as an infrastructure financing company, it should be able to leverage its balance sheet much better than it did in the past. IDFC delivered a 40% CAGR in loans over FY03-11. Growth in FY11 was even stronger at 50% YoY, following two years of consolidation, and it was driven by the power and transportation sectors sectors. VALUATIONS IDFC stock is currently trading at 1.5xFY11P/BV and we believe that the current valuations price in potential slowdown in growth. We recommend BUY with a target price of Rs.160 indicating a potential upside of 47% from the current levels.
ShareholdingPattern%(ason 30thJune,2011) 0 16.33 46.77 36.9 36 9 Promoters FIIs DIIs Others Oth
9/15/2011
46
ICICI BANK
COMPANY PROFILE ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,533 branches and 6,700 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life p g insurance, venture capital and asset management. INVESTMENT RATIONALE ICICI Bank reported a steady set of numbers for Q1FY2012 with an improvement in core income, margins and asset quality. Given the weak macro environment, the bank has given a loan growth guidance of 18%, diversified across corporate and retail segments. Continuous improving asset quality is vulnerable to any negative development in the macro environment. Since the 2008 crisis, ICICI Bank has changed itself with less risky asset and liability profile. The standalone loan book now comprises lower proportion of unsecured loans. Average CASA ratio at 40% levels is one of the largest amongst banks. Low NPLs, declining slippages and healthy provision coverage ratio at ~76% strengthen the balance sheet of the bank Capital adequacy ratios are healthy at 19 6% bank. 19.6% (Tier-1 ratio at 13.4%). VALUATIONS Currently the stock trade at 1./8x FY11P/BV. We assign BUY rating on the stock with a target price of rs.1140 for a potential upside of 31% from the current levels.
Promoters 36.25 38.61 FIIs DIIs Others Oth 25.14
9/15/2011
47
SHASUN PHARMA
COMPANY PROFILE SCDL is engaged in manufacturing active pharmaceutical ingredients (APIs) their (APIs), intermediates and enteric coating excipients with a significant presence in some key generics. Shasun has created a strong product portfolio, building on its R & D Expertise, regulatory capabilities and multi scale production capacities. Today, Shasun is one of the largest producers of Ibuprofen worldwide. The company offers derivatives of Ib d i ti f Ibuprofen lik Ib f like Ibuprofen S di f Sodium, Ib Ibuprofen L i t and S Ib f Lysinate d S+Ibuprofen. It i also f is l one of the major producers of Ranitidine and Nizatidine in the world. Its products are exported to countries across North America, Europe, Asia and Latin America. INVESTMENT RATIONALE We expect that Rhodias performance will improve significantly on back of incremental supplies to Vertex over the next few quarters as the volume ramp up starts for Incivek and batch supplies get replaced with bulk orders. Further the improvement in business fundamentals led by series of initiatives like expansion of capacities and launch of new products augur well for the future. We maintain a positive outlook on the stock due to supplies for telaprevir to vertex, increased g g p focus on high margin APIs and various expansion drives. VALUATIONS At the CMP the stock is trading at 12.0.x for FY11P/E . We recommend BUY with a target price of Rs. 90
Buy 66 90 37
Promoters 36.18 46.65 FIIs DIIs 8.82 8.35 Others Oth
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Stock Ratings BUY ACCUMULATE HOLD SELL NOT RATED The stock's total return is expected to exceed 15% over the next 12 months The stock's total return is expected to be within 10-15% over the next 12 months The stock's total return is expected to be within 0-10% over the next 12 months The stock's total return is expected to give negative returns over the next 12 months The Analyst has no recommendation on the stock under review
RESEARCH Name SharmilaJoshi PrakashPandey PreetiGupta P iG HiteshParekh HemenKapadia PervezDanish RinkuSaraf Rinku Saraf Designation HeadEquity VP Research&PMS Sr.ResearchAnalyst F d S R hA l Fundamental l ResearchAnalyst Fundamental TechnicalStrategist Sr.TechnicalAnalyst DerivativesAnalyst Derivatives Analyst EmailID sharmila.joshi@fairwealth.in prakash.pandey@fairwealth.in preeti.gupta@fairwealth.in i @f i lhi hitesh.parekh@fairwealth.in hemen.kapadia@fairwealth.in pervez.danish@fairwealth.in derivatives@fairwealth.in derivatives@fairwealth in INSTITUTIONALDESK Name LokeshhN.Gowda RajanBhatia j Designation SeniorManager Sales InstitutionalDealer EmailID lokeshh.g@fairwealtth.in rajan.bhatia@fairwealth.in j @ ContactNumber 02230720073 02230720057 09312873108 02230720073 022 30720073 ContactNumber 09320159211 09313337742 07428388302 02230720306
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Disclaimer: This publication has been solely prepared for the information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed reliable investors are advised to satisfy themselves before making any investments. Fairwealth Securities Ltd does not bear any responsibility for authentication of the information contained in the reports and consequently is not liable for any decision taken based on the same. Further Fairwealth Research report only provides information updates and analysis. All opinions for buying and selling are available to investors when they are registered clients of Fairwealth Investment advisory services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it is stated that, Fairwealth securities Ltd, and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while this report is in circulation.
FAIRWEALTH SECURITIES LTD. H.O.: Plot No. 651652, Udyog Vihar, Phase5, Gurgaon 122001 (Haryana) Phone: 01243024400, Fax: 01243024474 Website: www.Fairwealth.in . Email: info@fairwealth.in FAIRWEALTH INSTITUTIONAL DESK Unit No,12,2ndFloor, Sonawala, Apollo Building, Mumbai Samachar Marg, Opp BSE, Fort Mumbai Maharashtra 400001, Ph: 0223072005668, Fax: 022 30722787 Delhi: UG3, Somdutt Chambers II, Bhikaji Cama Place, New Delhi110066 , Ph : 01146091118 Chennai: Rahab Tower, First Floor, New No: 522, Old No: 706, P H Road, Aminjikarai, Chennai600029. Ph04442698796, 42698834, 32218508 Kolkatta: No.1&2, 3rd Floor, Tobacco Jouse, Old Court House Street, Kolkatta, WB 700001. Ph 033401195000203 Bangalore : Shop No 54, 1st floor, 12th Main Road, 27Th Cross Road, 04th Block Jayanagar, Banglore, Karnataka 560011, Ph g p , f , , , y g , g , , 08041172604/605 Hyderabad : Shop No.8, Ground Floor, Meridian Plaza, besides Lal Bunglow , Green Lands, Road Ameerpet, Hyderabad 500016, Ph040 40037218. Ahmedabad: 108, H.J.House, Opp IGP Petrol Pump, near Rambagh Police Station, Mani Nagar, Ahmedabad, Gujarat380009. Ph 07940304461, 62636465.
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9/15/2011

Low Risk Low Return

Medium Rrisk - Medium Return

High Risk - High Return

BANKS& BANKS & NBFC,25

Target Price (Rs)

STATE BANK OF INDIA

Buy 1880 2480 32

CMP (Rs.) Target (Rs.) Upside U id %

CMP (Rs.) Target (Rs.) Upside % p

POWER GRID CORPORATION OF INDIA LTD (PGCIL)

CMP (Rs.) Target (Rs.) Upside %

HINDUSTAN UNILEVER (HUL)

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 346 360 4

17.34 11.79 52.52 18.35

Promoters FIIs DIIs Others

ITC Rating CMP (Rs.) Target (Rs.) Upside %

Buy 198 230 16

GODREJ CONSUMER PROUCTS LTD (GCPIL)

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 425 530 25

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 380 480 26

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 379 430 14

2.08 ShareholdingPattern%(ason 30thJune,2011) 1.55 6.37 Promoters FIIs DIIs Others 90

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 2226 2760 24

Promoters FIIs DIIs

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 119 165 39

Promoters FIIs DIIs

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 293 340 16

Promoters 36.8 FIIs DIIs

Others Oth 14.73

MAHINDRA & MAHINDRA (M&M)

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 785 840 7

Promoters FIIs DIIs

MARUTI SUZUKI (MSIL)

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 132 165 25

ShareholdingPattern%(ason 30thJune,2011) 13.38 13.05 54.36 19.21

Promoters FIIs DIIs Others

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 156 190 22

Rating CMP (Rs.) Target (Rs.) Upside %

DIIs Others Oth

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 460 560 22

Promoters FIIs DIIs

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 145 185 28

Promoters FIIs DIIs Others

Promoters 35.84 46.03 FIIs DIIs 7.99 10.14 Others Oth

Rating CMP (Rs.) Target (Rs.) Upside %

Buy 390 480 23

8.48 17.59 68.3 68 3

Promoters FIIs DIIs Others Oth

Rating CMP (Rs.) Target (Rs.) Upside %

16.44 10.33 68.13 5.1