ValueGuide Jun13

Value Guide
June 2013 For Private Circulation only www.sharekhan.com
Withdrawal symptoms
Intelligent Investing Stock Ideas Stock Updates Sector Updates Sharekhan Special Viewpoints Regular Features Report Card Earnings Guide Products & Services PMS Top Equity Picks MF Picks Advisory Traders Edge Technical view Commodities and Currencies F&O Insights
June 2013
Sharekhan ValueGuide
CONTENTS
From Sharekhans Desk

Withdrawal symptoms
In the aftermath of the debt crisis in 2008, central banks across the world have put the financial markets globally on a heady dose of an extremely low-interest rate regime and easy money. No wonder, even the subtle mention or thought of a possible slowdown of the bond-buying quantitative easing by the Federal Reserve (Fed) in the USA is enough to spook the equity markets globally.
EQUITY FUNDAMENTALS Stock Ideas Stock Updates Sharekhan Special Sector Updates Sector Notes TECHNICALS Sensex ADVISORY DESK MID Trades COMMODITY 07 FUNDAMENTALS Crude Oil Gold Silver TECHNICALS Gold Silver Crude Oil CURRENCY FUNDAMENTALS INR-USD INR-EUR 36 36 INR-GBP INR-JPY 36 36 37 37 31 Copper 32 Lead 32 Zinc 34 Copper 34 Nickel 34 Turmeric 32 32 33 35 35 35 43 Derivative Ideas 43 11 13 25 26 27 Viewpoint REGULAR FEATURES Report Card Earnings Guide 28
4 I
DERIVATIVES 29 View
30
06 RESEARCH BASED EQUITY PRODUCTS Top Picks basket
PMS DESK ProPrime - Top Equity ProPrime - Diversified Equity ProTech - Diversified ProTech - Nifty Thrifty ProTech - Trailing Stops MUTUAL FUNDS DESK 38 39 40 41 42
Top MF Picks (equity) Top SIP Fund Picks
45 46
TECHNICALS USD-INR EUR-INR
37 GBP-INR 37 JPY-INR
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disclaimer
June 2013
REPORT CARD
STOCK IDEAS STANDING (AS ON JUNE 05, 2013)
COMPANY CURRENT PRICE AS ON PRICE RECO 05-JUN-13 TARGET Hold Hold Hold Buy Buy 91.0 24.0 1756.0 987.0 1568.0 11048.0 124.0 88.0 1382.0 662.0 660.0 290.0 145.0 156.0 381.0 459.0 844.0 688.0 1134.0 79.0 765.0 2032.0 217.0 500.0 14059.2 279.0 5856.0 885.0 590.0 334.0 205.0 234.0 309.0 150.0 617.0 6735.0 1208.0 727.0 2461.0 260.0 518.0 1468.0 325.0 6053.0 195.0 335.0 90.0 68.0 73.0 58.0 581.0 481.0 1747.0 9416.0 101.0 ** 2028.0 1112.0 1950.0 52 WEEK HIGH LOW 102.5 29.0 2229.0 1026.5 1777.0 11868.6 73.8 18.8 1423.1 650.0 1062.1 8762.4
EQUITY
FUNDAMENTALS
ABSOLUTE PERFORMANCE 1M 3M 6M 12M -7.6 5.3 -2.9 2.7 -5.8 2.0 -5.9 -4.0 -6.3 -9.3 -5.7 -11.4 -5.6 -4.6 6.4 2.6 -1.3 1.0 2.1 -12.1 2.8 -6.4 -9.7 1.7 -0.2 10.2 44.0 5.4 3.1 2.6 14.6 7.9 -3.0 1.9 39.5 3.3 -10.0 -3.2 7.9 0.9 1.0 3.5 -8.5 3.4 1.5 12.8 -4.6 -3.8 -8.8 -2.1 0.4 -4.6 -1.3 -5.5 3.7 2.6 -11.0 9.9 9.6 3.1 -11.9 -7.7 -1.5 -18.0 -7.3 -8.0 -1.3 5.8 -0.1 -6.4 9.2 8.7 5.5 -12.4 -3.1 -2.7 -4.7 5.4 4.7 24.8 40.0 21.5 31.2 15.9 28.4 7.5 -16.6 13.7 32.9 19.6 -9.7 -2.3 -14.8 -0.8 -6.9 -4.7 -15.9 -11.2 -2.2 16.3 -5.0 -4.8 -3.6 -8.6 -1.1 1.5 -0.4 1.3 5.6 -13.4 -9.0 6.1 6.2 2.4 -20.5 -22.6 3.6 -25.9 -15.7 0.0 -2.2 -29.5 -6.7 -4.7 0.7 -0.7 3.0 -28.1 -6.1 -8.8 -12.4 12.3 0.5 28.4 56.0 21.7 11.0 13.8 8.7 7.5 -13.7 -9.3 32.7 12.4 6.5 14.4 4.5 -6.4 7.0 13.3 -3.9 5.5 -17.3 4.9 -24.9 -10.5 -15.3 -22.7 -3.3 -9.2 -11.9 -15.5 17.5 -2.1 21.1 53.3 46.3 28.8 -4.8 -15.2 41.9 5.8 -2.5 -12.1 45.7 2.7 2.5 13.0 33.3 38.3 45.6 -6.8 4.8 -0.5 16.1 58.3 31.0 143.3 116.1 55.1 49.7 53.0 93.8 39.4 9.1 44.9 60.7 54.8 41.6 49.0 4.9 -6.1 54.0 22.1 -7.2 10.8 -4.8 29.3 -18.7 0.7 -6.2 5.7 34.1 126.2 0.0 7.1
1M
RELATIVE TO SENSEX 3M 6M 12M 0.8 -0.3 -13.5 6.8 6.5 0.2 -14.4 -10.3 -4.3 -20.3 -9.9 -10.5 -4.0 2.8 -2.9 -9.0 6.1 5.6 2.5 -14.9 -5.9 -5.4 -7.4 2.4 1.7 21.3 36.1 18.1 27.5 12.7 24.8 4.5 -19.0 10.6 29.2 16.3 -12.2 -5.0 -17.2 -3.5 -9.5 -7.4 -18.2 -13.7 -4.9 13.0 -7.6 -7.4 -6.3 -11.2 -3.9 -1.3 -3.2 -1.5 3.8 -14.9 -10.5 4.3 4.4 0.7 -21.8 -23.9 1.8 -27.2 -17.1 -1.7 -3.8 -30.7 -8.3 -6.3 -1.0 -2.3 1.3 -29.3 -7.7 -10.4 -13.9 10.4 -1.2 26.3 53.4 19.7 9.1 11.9 6.8 5.7 -15.1 -10.8 30.5 10.5 4.7 12.4 2.7 -7.9 5.2 11.4 -5.5 3.7 -18.7 3.1 -26.1 -12.0 -16.7 -24.0 -4.9 -10.8 -13.3 -17.0 -5.6 -21.3 -2.7 23.2 17.5 3.5 -23.5 -31.9 14.0 -15.0 -21.7 -29.4 17.0 -17.5 -17.7 -9.2 7.1 11.1 17.0 -25.1 -15.8 -20.1 -6.7 27.2 5.2 95.5 73.7 24.6 20.3 22.9 55.7 12.0 -12.3 16.4 29.1 24.4 13.8 19.7 -15.7 -24.6 23.8 -1.9 -25.4 -10.9 -23.5 3.9 -34.7 -19.1 -24.6 -15.0 7.8 81.8 -19.7 -13.9
AUTOMOBILES
Apollo Tyres Ashok Leyland Bajaj Auto M&M Maruti Suzuki BSE Auto Index BANKS & FINANCE Allahabad Bank Andhra Bank Axis (UTI) Bank Bajaj Finserv Bank of Baroda Bank of India W CanFin Homes NE Capital First NEW Corp Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank Punjab National Bank SBI Union Bank of India Yes Bank BSE Bank Index CONSUMER GOODS Bajaj Corp GSK Consumers Godrej Consumer Products Hindustan Unilever ITC Jyothy Laboratories NEW Marico Mcleod Russel India TGBL (Tata Tea) Zydus Wellness BSE FMCG Index IT / IT SERVICES CMC NEW HCL Technologies Infosys NIIT Technologies Persistent Systems NEW Tata Consultancy Services Wipro BSE IT Index CAPITAL GOODS / POWER Bharat Heavy Electricals CESC Crompton Greaves Greaves Cotton Kalpataru Power Transmission PTC India Thermax V-Guard Industries BSE Power Index BSE Capital Goods Index -8.1 4.7 -3.4 2.1 -6.3 1.5 -6.4 -4.5 -6.8 -9.7 -6.2 -11.9 -6.0 -5.1 5.8 2.1 -1.8 0.5 1.6 -12.6 2.3 -6.9 -10.2 1.1 -0.7 9.6 43.3 4.8 2.6 2.0 14.0 7.3 -3.5 1.4 38.8 2.7 -10.5 -3.7 7.3 0.3 0.5 2.9 -9.0 2.9 0.9 12.2 -5.0 -4.3 -9.3 -2.6 -0.1 -5.1 -1.8 -6.0
Hold Hold Buy Hold Hold Hold Buy Buy Buy Buy Hold Hold Buy Hold Buy Buy Buy Buy
155.0 112.0 1650.0 826.0 820.0 376.0 220.0 230.0 500.0 545.0 910.0 712.0 1320.0 105.0 998.0 2540.0 295.0 600.0
191.1 103.0 130.0 85.2 1549.9 926.9 984.0 623.9 899.7 605.6 393.0 253.3 187.9 99.0 235.0 129.2 495.3 360.0 571.0 392.0 931.4 630.0 727.3 503.5 1238.4 796.2 118.4 77.2 922.1 659.0 2551.7 1815.2 288.0 150.1 547.7 285.0 15335.9 11004.4 284.0 6347.8 965.0 598.0 355.9 211.3 251.7 387.0 181.7 706.0 6942.0 1523.0 810.0 3010.0 324.9 591.0 1598.0 418.3 7069.4 272.5 348.5 143.6 87.6 106.9 81.3 691.0 590.5 2113.7 11408.6 116.7 2179.0 465.0 401.3 220.3 103.5 165.4 265.6 104.2 336.0 4507.9 824.0 453.3 2060.6 238.6 340.0 1055.0 263.1 5134.1 174.3 252.5 87.2 59.8 64.0 53.0 436.0 210.1 1622.1 8736.4
Buy Hold Hold Hold Buy Buy Hold Buy Hold Hold
303.0 ** ** 600.0 340.0 254.0 241.0 405.0 168.0 741.0
Buy Hold Hold Hold Buy Buy Reduce
1650.0 830.0 ** 305.0 600.0 1650.0 **
Hold Hold Hold Buy Buy Buy Reduce Hold
240.0 385.0 105.0 95.0 115.0 88.0 553.0 508.0
June 2013
EQUITY
FUNDAMENTALS
REPORT CARD
STOCK IDEAS STANDING (AS ON JUNE 05, 2013)

COMPANY INFRASTRUCTURE / REAL ESTATE Gayatri Projects ITNL IRB Infra Jaiprakash Associates Larsen & Toubro Mahindra Lifespace Orbit Corporation Pratibha Industries Punj Lloyd Unity Infraprojects CNX Infra Index BSE Real Estate Index OIL & GAS GAIL Oil India Reliance Ind Selan Exploration Technology BSE Oil and gas Index PHARMACEUTICALS Aurobindo Pharma NEW Cipla NEW Cadila Healthcare W Dishman Pharma NE Divi's Labs Glenmark Pharmaceuticals Ipca Laboratories Lupin Sun Pharma Torrent Pharma BSE Health Care Index AGRI-INPUTS Tata Chemicals United Phosphorus BUILDING MATERIALS Grasim India Cements Madras Cements Shree Cement UltraTech Cement DISCRETIONARY CONSUMPTION Eros International Media Indian Hotel Company KKCL Raymond Relaxo Footwear Speciality Restaurants NEW W Zee Entertainment NE DIVERSIFIED / MISCELLANEOUS Aditya Birla Nuvo Bajaj Holdings Bharti Airtel Bharat Electronics Gateway Distriparks Max India Ratnamani Metals and Tubes Sintex Industries BSE500 Index CNX500 Index CNXMCAP Index
In Top Picks basket
CURRENT PRICE AS ON PRICE RECO 05-JUN-13 TARGET Buy Buy Buy Buy Buy Buy Buy Buy Hold Buy 74.0 175.0 116.0 67.0 1420.0 390.0 17.0 37.0 45.0 29.0 2358.0 1699.0 315.0 580.0 802.0 262.0 8627.0 187.0 376.0 776.0 71.0 972.0 600.0 604.0 766.0 1037.0 817.0 9003.0 305.0 166.0 2772.0 65.0 230.0 4701.0 1854.0 165.0 51.0 892.0 281.0 677.0 173.0 233.0 1046.0 927.0 303.0 1338.0 120.0 206.0 148.0 49.0 7403.0 4657.0 7873.0 275.0 302.0 175.0 95.0 1790.0 460.0 48.0 65.0 53.0 57.0
52 WEEK HIGH LOW 130.6 228.9 161.4 106.8 1720.0 453.8 65.8 59.0 64.1 53.4 2684.7 2326.8 397.2 629.9 955.0 351.0 9890.9 204.9 435.0 975.0 124.5 1234.4 610.0 634.8 811.0 1085.4 872.4 9223.1 381.5 167.5 3511.0 104.7 273.5 5384.4 2154.2 235.1 71.8 898.9 488.9 918.0 227.0 255.2 1191.0 1058.3 370.6 1399.5 150.7 273.0 162.1 75.6 7792.7 4877.7 8859.4 64.0 156.6 104.2 61.0 1213.3 305.4 15.5 35.6 39.0 25.5 2155.0 1483.8 300.3 432.0 682.4 197.4 7575.5 99.7 300.0 710.1 51.7 902.5 352.7 332.1 496.4 555.2 570.0 6487.2 298.0 101.6 2261.4 64.2 136.1 2342.0 1363.6 153.0 50.5 485.4 244.8 375.0 141.3 125.7 710.0 730.0 215.8 1105.3 114.0 173.1 98.0 42.0 6240.0 3875.6 6803.1
ABSOLUTE PERFORMANCE 1M 3M 6M 12M -7.5 -2.5 0.5 -10.9 -9.6 -6.6 -26.6 -9.7 -14.9 -4.7 -4.7 -10.6 -6.0 3.9 1.3 6.1 -0.4 -4.9 -0.1 0.8 -9.2 20.1 10.7 8.6 5.3 20.6 2.8 -6.3 14.9 -5.9 -23.7 -5.1 0.7 -1.7 -4.7 -9.5 22.9 -5.0 14.8 -6.5 -1.6 1.2 2.5 -4.5 11.4 -1.4 -7.7 20.1 1.4 0.2 0.3 -0.3 -8.0 -11.9 1.5 -5.1 1.7 -3.3 -48.2 -12.8 11.1 -6.4 1.6 -12.6 -6.5 9.0 -1.9 -7.5 -0.6 13.2 2.1 0.7 -7.6 21.4 24.7 28.3 29.8 19.4 13.9 -6.2 38.7 -7.9 -23.1 -5.5 11.9 -2.5 -3.2 -9.3 26.0 -12.2 9.8 11.0 6.3 0.0 -1.6 -5.8 7.7 -4.8 -12.0 16.1 -9.4 2.6 3.1 3.3 -37.4 -10.2 -14.4 -33.5 -14.8 -6.2 -72.2 -28.9 -22.4 -37.0 -10.3 -19.0 -9.9 34.8 -2.6 -10.9 3.1 -3.6 -8.5 -41.9 -16.7 41.8 30.8 28.5 47.6 21.3 13.0 -11.7 34.6 -15.8 -26.2 11.1 9.5 -5.1 -23.8 -21.3 23.8 -39.0 -13.9 -4.0 10.8 -5.5 3.7 -8.2 11.3 -6.2 -17.3 12.2 -23.7 -1.1 -0.6 -4.9 -19.6 4.7 4.8 5.8 18.6 27.3 -60.6 -2.4 3.3 -26.7 10.1 10.3 0.5 35.1 15.4 -1.6 16.3 78.8 7.2 39.1 4.8 69.9 80.5 42.6 86.6 32.3 38.7 3.3 48.3 20.8 -8.6 69.4 100.2 34.7 1.2 -5.3 61.2 -21.6 48.9 0.2 86.7 42.1 24.8 6.1 12.6 -4.3 12.7 52.4 -5.3 21.6 22.6 17.7
1M
RELATIVE TO SENSEX 3M 6M 12M -10.6 -14.4 -1.4 -7.8 -1.1 -6.0 -49.7 -15.2 8.0 -9.0 -1.2 -15.1 -9.2 6.0 -4.6 -10.1 -3.4 10.1 -0.8 -2.1 -10.2 18.0 21.2 24.7 26.2 16.1 10.7 -8.8 34.8 -10.5 -25.2 -8.2 8.8 -5.2 -5.9 -11.8 22.5 -14.6 6.8 7.9 3.4 -2.8 -4.3 -8.4 4.7 -7.5 -14.4 12.8 -12.0 -0.3 0.2 0.4 -38.5 -11.7 -15.9 -34.6 -16.3 -7.8 -72.6 -30.1 -23.7 -38.1 -11.8 -20.3 -11.5 32.5 -4.3 -12.4 1.4 -5.2 -10.0 -42.9 -18.1 39.5 28.6 26.3 45.1 19.3 11.1 -13.2 32.3 -17.3 -27.5 9.3 7.7 -6.7 -25.1 -22.6 21.7 -40.0 -15.4 -5.6 9.0 -7.1 2.0 -9.7 9.4 -7.8 -18.7 10.3 -25.0 -2.8 -2.3 -6.5 -35.4 -15.9 -15.8 -15.0 -4.7 2.3 -68.3 -21.6 -17.0 -41.1 -11.5 -11.3 -19.2 8.5 -7.3 -21.0 -6.6 43.7 -13.9 11.8 -15.8 36.5 45.1 14.6 50.0 6.3 11.5 -17.0 19.2 -2.9 -26.5 36.1 60.8 8.2 -18.7 -23.9 29.5 -37.0 19.6 -19.5 50.0 14.2 0.3 -14.8 -9.5 -23.1 -9.5 22.4 -23.9 -2.3 -1.4 -5.4
-8.0 -3.0 0.0 -11.4 -10.1 -7.1 -27.0 -10.2 -15.3 -5.2 -5.2 -11.0 -6.5 3.3 0.8 5.5 -0.9 -5.4 -0.6 0.3 -9.6 19.5 10.1 8.0 4.8 20.0 2.2 -6.8 14.3 -6.4 -24.1 -5.6 0.2 -2.2 -5.2 -10.0 22.3 -5.5 14.2 -7.0 -2.1 0.7 2.0 -5.0 10.8 -1.9 -8.2 19.5 0.9 -0.3 -0.2 -0.8
Hold Buy Buy Buy
390.0 650.0 1010.0 365.0
Buy Buy Buy Buy Buy Buy Hold Buy Hold Hold
267.0 490.0 906.0 130.0 1262.0 ** 615.0 810.0 1150.0 890.0
Buy Buy Hold Hold Hold Hold Hold Buy Hold Buy Buy Buy Buy Buy Buy Buy Hold Hold Buy Buy Hold Buy
380.0 180.0 3300.0 95.0 250.0 4775.0 2100.0 240.0 61.0 ** 477.0 845.0 230.0 280.0 1254.0 1334.0 340.0 1485.0 163.0 296.0 170.0 89.0
** Price target under review
June 2013
FROM SHAREKHANS DESK
from sharekhans desk

June 2013
Withdrawal symptoms
In the aftermath of the debt crisis in 2008, central banks across the world have put the financial markets globally on a heady dose of an extremely low-interest rate regime and easy money. No wonder, even the subtle mention or thought of a possible slowdown of the bond-buying quantitative easing by the Federal Reserve (Fed) in the USA is enough to spook the equity markets globally. Despite the extensive monetary easing programme unleashed by Japan recently, the equity markets are witnessing an upsurge in volatility something akin to the withdrawal symptoms experienced by an alcoholic. The bond markets globally are also going through an upheaval. In the past one month, the 10year US Treasury-bond yield has moved up sharply from 1.674% in early May to a 13-month high of 2.160%. A similar move has been witnessed in German bond yields (which have moved from 1.16% to over 1.4%). An increase in the bond yields indicates money is shifting from bonds. Mind you, the money had flown into the US and German bonds even at low-interest rate yields as these were earlier seen as safe havens. Along with this, the price of gold has also corrected considerably reinforcing the theory that money is flowing out of safe-haven assets. So is the money moving to riskier assets like equities in general and the emerging market equities in particular? There are no concrete answers. Media and research reports are buzzing with the taper off effect (a term used for the potential slower bond-buying by the Fed) and its fall-out on the financial markets globally; and there are contradictory views. Many experts believe that the end of quantitative easing would result in a risk-off sentiment and thus means trouble for the equity markets. On the other hand, a section of experts opines that the end of the rally in the bond markets (and perhaps also in commodities including gold) would compel investors to look for better returns in equities and high-growth emerging markets. In the meanwhile, the foreign institutional inflows in the Indian equity market remain healthy. This year in the seasonally weak month of May, the foreign institutional investors did not sell (save that one day), nor did they go away. Instead, they pumped in close to $4 billion into Indian equities, helping the stock market to close the month with gains. Investors were more aggressive in the other global stock markets and pushed the market indices in the USA, Germany, Japan and the UK to record highs in May this year before the taper-off worries nipped the rally. At home there are positive signs on the macro-economic front despite the announcement of a tepid sub-5% gross domestic product (GDP) growth rate for Q4 of FY2013. However, the good part is that the core inflation has moderated considerably and the Consumer Price Index is also likely to ease with the timely onset of the monsoon. Moreover, the GDP growth is also expected to pick up. Three factors largely contributed to the economys slowdown: the global slump, the Reserve Bank of India (RBI)s monetary tightening and the resulting slowdown in investments. The global picture appears to be improving in certain pockets and we expect the RBI to continue with its rate-cut exercise now that inflation has fallen to the central banks comfort level. Whats more, in its fight against inflation the RBI may get help from the monsoon, which has made a timely entry this year and is expected to be 98% normal as per the India Meteorological Department. Investments, the third factor, will continue to track the global business cycle and take time to pick up. The government is also looking at ways to restart the stalled infrastructure/industrial projects. The recent resolution of NTPCs power project that was stuck in litigation with Coal India for almost a decade is a case in point. The one area of concern is the weakness in the rupee which reflects all is not well yet. However, one should note that the depreciation in the rupee is partly due to the appreciation in the dollar against all the other currencies globally. As compared with these other currencies the performance of the rupee has been much better. But the loss of faith in the stability of the rupee can be a big risk to foreign inflows into the country. Already there has been outflow to the tune of Rs11,000 crore from the Indian debt market in the past few days and this could rub off onto the equity market also. We believe the stock market will continue to take its cue from the global markets, the RBI and the monsoon, and consequently see increased volatility in the days ahead.
6 Sharekhan ValueGuide
SHAREKHAN TOP PICKS
EQUITY
FUNDAMENTALS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

The benchmark indices ended May of 2013 with a marginal gain of around 1% despite the battering received on the last day of the month. The Top Picks basket of stocks outperformed the benchmark indices once again by gaining 2.5% in the same period. The star performers among the Top Picks basket were Oil India, Sun Pharmaceutical Industries and Bajaj Corp. This month too we are making only one change. To take advantage of the sharp decline in the public sector banking stocks in the past one week, we are introducing State Bank of India in the Top Picks basket and reducing exposure to the private sector banks by exiting Federal Bank.
ABSOLUTE OUTPERFORMANCE
180.0% 160.0% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0%
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

280.0% 260.0% 240.0% 220.0% 200.0% 180.0% 160.0% 140.0%
Feb-10
Feb-11
Feb-12
May-09
May-10
May-11
May-12
Feb-13
Sharekhan (Top Picks)
Sensex
Nif ty
Sharekhan
Sens ex
Nif ty
NAME Bajaj Corp HCL Technologies HDFC Bank ICICI Bank Larsen & Toubro NIIT Technologies Oil India Reliance Industries SBI Sun Pharma Zee Entertainment Enterprises
* CMP as on May 31, 2013
CMP* (RS) 273 747 701 1,154 1,402 264 593 807 2,048 1,046 227
FY13 24.2 13.4 24.8 16.0 18.4 7.5 9.9 12.5 9.9 36.0 30.5
PER FY14E 19.8 12.2 19.8 14.2 16.7 6.4 9.4 12.5 8.6 28.4 27.2
FY15E 15.4 11.2 15.7 11.9 14.6 5.7 8.2 10.9 7.5 23.6 21.4
FY13 37.0 35.0 20.0 13.0 17.2 21.0 19.0 11.0 15.0 21.0 19.0
ROE (%) FY14E 39.0 30.0 22.0 14.0 16.5 21.0 19.0 10.0 15.0 20.0 19.0
FY15E 42.0 26.0 23.0 15.0 16.6 20.0 19.0 10.0 16.0 20.0 21.0
PRICE TARGET 303 830 712 1,320 1,790 305 650 1,010 2,540 1,150 280
UPSIDE (%) 11 11 14 28 16 10 25 24 10 23
June 2013
May-13
Nov-09
Nov-10
Nov-11
Aug-09
Aug-10
Aug-11
Aug-12
Nov-12
Y TD CY 2012 CY 2011 CY 2010 CY 2009 CY 2013
Since Jan 2009
120.0% 100.0%
EQUITY
NAME
FUNDAMENTALS
CMP (RS) PER FY14E ROE (%) FY14E
SHAREKHAN TOP PICKS

PRICE TARGET UPSIDE (%)
FY13
FY15E
FY13
FY15E
BAJAJ CORP Remarks:
273
24.2
19.8
15.4
37.0
39.0
42.0
303
11
Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in the premium light hair oil (LHO) category with its Almond Drops hair oil. With consumers upgrading to the LHO category, we expect the strong volume growth momentum to continue in the coming quarters. With the prices of the key inputs stabilising, we expect the GPM to improve in the coming quarters. The companys thrust on enhancing the distribution reach in rural India and improving the market share every year has helped it clock a good sales volume growth for the past few quarters. Any initiative to expand its limited product portfolio or strengthen its core business would be the key upside trigger for the stock. At the current market price, the stock is trading at 19.8x its FY2014E EPS of Rs13.8 and 15.4x its FY2014E EPS of Rs17.7.
HCL TECHNOLOGIES Remarks:
747
13.4
12.2
11.2
35.0
30.0
26.0
830
11
HCL Technologies Ltd (HCL Tech) is an information technology (IT) services company providing software-led IT solutions, remote infrastructure management services and BPO services. The company has a leading position in remote infrastructure management services which has helped it win large IT outsourcing contracts. Through the Axon PLC acquisition, the company has gained a strong SAP consulting footing. In the current environment, we believe that HCL Tech is well placed in terms of its business strategy of consciously targeting the rebid market. The results are evident in the consistent outperformance in terms of volume and revenue growth. The company has overcome any apprehensions on the margin front by consistently improving margins despite headwinds. Going forward, given the better earnings predictability than the peers coupled with stable margins and sustainable momentum in the IMS vertical, we maintain our price target for the stock at Rs830.
HDFC BANK Remarks:
701
24.8
19.8
15.7
20.0
22.0
23.0
712
HDFC Bank is expected to continue to see a strong growth in advances due to a strong presence in the retail segments. While the credit demand has moderated in corporate segment, it remains reasonably strong in retail which will benefit the bank. The bank has the highest current and savings account (CASA) ratio in the sector with a stable net interest margin (NIM; 4.5% levels). Any reduction in the policy rates by RBI will improve the credit demand and be positive from the margin perspective. HDFC Banks asset quality is among the best in the sector and is expected to sustain due to strong its credit origination practices and marginal exposure to the troubled segment. Further, the higher provisions provide comfort on asset quality. We expect HDFC Bank to deliver earnings CAGR of 25.9% over FY2013-15 leading to return on equity (RoE) and return on assets (RoA) of 23.3% and 1.8% respectively. We believe the bank will continue to command premium over peers due to a strong and consistent growth. We have a price target of Rs712 for the stock.
ICICI BANK Remarks:
1,154
16.0
14.2
11.9
13.0
14.0
15.0
1,320
14
ICICI Bank continues to report a strong growth in earnings led by the advances growth and expansion in the margins (2.9% in FY2013). We expect the advances of the bank to grow by 19.5% CAGR over FY2013-15. This should lead to an 18% CAGR growth in the net interest income in the same period. ICICI Banks asset quality has shown a turnaround as its NPAs have continued to decline over the last eleven quarters led by contraction in slippages. This has led to a sharp reduction in the provisions and an increase in the profitability. Going forward, we expect the NPAs to decline further which will lead to lower NPA provisions and hence aid the profit growth. Led by a pick-up in the business growth and an improvement in the margins, the RoE is likely to expand to about 14.8% by FY2015 while the RoA would improve to 1.7%. This would be driven by a 16% CAGR in profits over FY2013-15. The stock trades at 1.7x FY2015E BV. Moreover, given the improvement in the profitability led by lower NPA provisions, a healthy growth in the core income and improved operating metrics we recommend Buy with a price target of Rs1,320.
June 2013
SHAREKHAN TOP PICKS

NAME CMP (RS) PER FY14E ROE (%) FY14E
EQUITY
FUNDAMENTALS
FY13
FY15E
FY13
FY15E
LARSEN & TOUBRO Remarks:
1,402
18.4
16.7
14.6
17.2
16.5
16.6
1,790
28
Larsen & Toubro (L&T), the largest engineering and construction company in India, is a direct beneficiary of the strong domestic infrastructure development and industrial capex boom. L&T continues to impress us with its good execution skills, reporting decent numbers throughout the year despite a slowdown in the industrial capex cycle. Also, we have seen order inflow traction in recent quarters which enhances the revenue visibility. Despite challenges like deferral of award decisions and stiff competition, the company has given a robust guidance of about 15% growth in the future. Its sound execution track record, healthy order book and the strong performance of its subsidiaries reinforce our faith in L&T. At the current market price, the stock is trading at 15x its FY2015E stand-alone earnings.
NIIT TECHNOLOGIES Remarks:
264
7.5
6.4
5.7
21.0
21.0
20.0
305
16
NIIT Technologies Ltd (NTL), a mid-sized IT services company, has built a strong domain of expertise in the niche industry verticals like insurance and travels. The company has a balanced mix of revenues and also a base of diversified geographies (USA, Europe and India). The company has a strong order book of $252 million, which is executable over the next 12 months giving it decent revenue visibility going ahead. The company is a well entrenched participant in the Indian government IT deal space and it has recently won two contracts in this space worth Rs530 crore, which is executable over the coming years. With a strong executable order book and increasing success in deal conversion, NTL has got predictable business visibility for the coming quarters. Further, a gradual margin improvement is likely with the help of an improvement in its GIS and insurance businesses. NTL trades at attractive valuations of 6.4x and 5.7x on FY2014E and FY2015E earnings respectively. At the current levels, NTL is available at around 21% discount to three-year average one-year forward multiple, which, we believe, will catch up with a gradual improvement in the earnings predictability.
OIL INDIA Remarks:
593
9.9
9.4
8.2
19.0
19.0
19.0
650
10
Oil India Ltd (OIL) has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. The total 1P (proven) and 2P (proven and probable) reserves of the company stood at 473 million barrels (mmbbls) and 941mmbbls as on March 2012. In addition to the huge oil reserves, the companys reserve-replacement ratio (RRR) is quite healthy at 1.23x which implies a comfortable level of accretion of oil reserves through new discoveries. Recent move by the oil ministry to partially deregulate diesel and a proposal by the Rangarajan committee to increase the gas price augurs well for the company and will significantly increase earnings of the company going ahead. The key risks remain any adverse movement in the price of crude oil and failure in proper utilisation of the huge cash. We remain bullish on OIL because its huge reserves and healthy RRR would provide a reasonably stable revenue growth outlook and its stock is available at an attractive valuation and likely rerating of the company on account of partial deregulation of diesel. The fair value works out to Rs650 per share (based on the average fair value arrived at using the DCF, PE and EV/EBIDTA valuation methods).
RELIANCE INDUSTRIES Remarks:
807
12.5
12.5
10.9
11.0
10.0
10.0
1,010
25
Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration business. The refining division of the company is the highest contributor to the companys earnings and is operating efficiently with a better gross refining margin (GRM) compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. However, the gas production from the Krishna-Godavari-D6 field has fallen significantly in the past one year. With the government approval for additional capital expenditure (capex), we believe production will improve going ahead. In case of the upstream exploration business, the company has got the nod for further investments in exploration at the KrishnaGodavari basin, which augurs well for the company and could address the issue of falling gas output. Further, the new gas pricing formula recommended by the Rangarajan panel augurs well for the company and could provide further upside to the earnings. The key concern remains in terms of a lower than expected GRM, profitability of the petrochemical division and the companys inability to address the issue of falling gas output in the near term. At the current market price the stock is trading at price earnings (PE) of 10.9x its FY2015E earnings per share.
June 2013
EQUITY
NAME
FUNDAMENTALS
CMP (RS) PER FY14E ROE (%) FY14E
SHAREKHAN TOP PICKS

FY13
FY15E
FY13
FY15E
SBI Remarks:
2,048
9.9
8.6
7.5
15.0
15.0
16.0
2,540
24
SBI stands to benefit the most in case of a recovery in the economy which will boost its advances and improve its asset quality. The banks operational performance has improved led by a strong focus on the NIM, asset quality etc. The NIM came off in Q4FY2013 (due to expansion in low-risk segments) but remained at healthy levels (3.34%). The proportion of low-cost deposits (CASA ratio at 46.5%) is among the highest in the sector and remains the key strength of the bank. Given its strong presences across the length and breadth of the country (14,816 branches), we expect the bank to maintain its strong liability base which will support its margins. The bank has recognised its asset quality problems upfront compared with the other banks and resorted to limited restructuring. Therefore, we expect the asset quality pressures to come off in the coming quarters which will boost its earnings. The capital adequacy ratio of the bank is healthy (tier-I CAR at 12.9%) which will support the growth in the business. The bank is expected to maintain its RoE and RoA of 15.7% and 0.8% respectively in FY2015. We have a positive outlook on SBI with a price target of Rs2,540.
SUN PHARMA Remarks:
1,046
36.0
28.4
23.6
21.0
20.0
20.0
1,150
10
The combination of Sun Pharma, Taro, Dusa Pharma and the generic business of URL Pharma offers an excellent business model for Sun Pharma, as has been reflected in the 40% Y-o-Y revenue and 39% Y-o-Y profit growth in FY2013. Though Taro may not show a similar performance in the next quarter, but we expect a better performance from Sun Pharma going forward mainly driven by (1) the resumption of sales from the US based subsidiary Caraco Pharma post USFDA clearance, (2) contribution from newly acquired Dusa Pharma and URL Pharma in US and (3) launch of key products in US and emerging markets including India. We expect 18% and 21% revenue and PAT CAGR respectively over FY2012-15E on organic basis. With a strong cash balance, Sun Pharma is well positioned to capitalise on the growth opportunities and inorganic initiatives. Its debt-free balance sheet insulates it from the negative impact of volatile currency. At the current market price, Sun Pharma is trading at 28.3x and 23.6x FY2014E and FY2015E estimated EPS respectively. We maintain our Buy recommendation on the stock, with a price target of Rs1,150, which implies 26x FY2015E earnings per share.
ZEE ENTERTAINMENT Remarks:
227
30.5
27.2
21.4
19.0
19.0
21.0
280
23
Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatory digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incremental capex as the subscriber declaration improves in the cable industry. On completion of 20 years of operations, the company has issued bonus redeemable preference shares (RPS) aggregating Rs2,000 crore (6% preference dividend) for eight years. The RPS will be issued at a ratio of 21 RPS for every equity share. The RPS will be redeemable from the fourth year till the eighth year. We believes ZEEL will be the major beneficiary of digitisation in the years to come which coupled with its strong balance sheet and high return ratios makes it a compelling long-term growth story. We maintain our Buy rating on ZEEL with a price target of Rs280.
June 2013
10
EQUITY
FUNDAMENTALS
STOCK IDEA
BUY
CMP: RS411
CIPLA
MAY 16, 2013
On growth pill
COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs490 Rs33,903 cr Rs435/301 12.6 lakh 500087 CIPLA CIPLA 50.7 cr
KEY POINTS
Shifting gear: Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on technology intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the key markets like the USA (a shift from the traditional partnership based model); (3) developed an appetite for inorganic expansions (the acquisition of Cipla Medpro); (4) decided to tap the first-to-file (FTF) opportunities through collaboration with major generic players in the regulated markets (eg it supplied active pharmaceutical ingredients [APIs] for generic Lexapro to Teva in FY2013); and (5) invested in future growth areas like biosimilars. Optimisation of facilities, acquisition and niche product launches are mid-term triggers: In addition to its aggressive strategy, Ciplas base business growth would be fast-tracked in the quarters ahead because of (1) the optimisation of the Indore formulation plant, which is expected to generate Rs600 crore in FY2013; (2) its focus on inhalation devices and difficult-to-make generics (we are especially looking at the opportunity emanating from inhalers like Dymista [an opportunity of $6070 million of revenues in FY2014 and $15 million worth of milestone payments]; Seretide [brand size $2 billion]; and Symbicort [brand size $1.4 billion]); and (3) the acquisition of Cipla Medpro, which would be earnings accretive from the second year of the acquisition. Base business margin to improve on better capacity utilisation and a favourable product mix: We expect the OPM of the company to improve from 20.2% in FY2012 to 25% in FY2013, taking into account the profit from the supply of generic Lexapro to Teva (a one-off opportunity). Excluding the one-off, the OPM is likely to improve to 21.5% in FY2013 and further expand to 22% in FY2014 and to 22.5% in FY2015, thanks to higher capacity utilisation at the Indore SEZ facility and the supply of high-margin products in the international market. Acquisition to affect cash flows: The acquisition of Cipla Medpro (which cost Rs2,600 crore) is set to affect the cash flow in FY2014-15. We have not factored in the impact of the acquisition on our earnings model as the acquisition is pending regulatory clearances. Recommend Buy with a price target of Rs490: Currently, Cipla is trading at a 10% discount to its historical valuation (five-year average P/E on a one-year forward basis). Compared with peers it is trading at a 27% discount to Sun Pharmaceutical Industries (Sun Pharma) and an 8% discount to Lupin. Our price target for Cipla is set at Rs490, which implies nearly 20x FY2015E earnings (over 15% discount to Sun Pharmas target multiple). Notably, we have not factored in the following: (a) the upside from the acquisition of Cipla Medpro and (b) the two FTF opportunities in the USA that are likely to be realised during FY2015. We recommend Buy on Cipla.
VALUATIONS
Particulars Net sales (Rs cr) PAT (Rs cr) Shares in issue (cr) EPS (Rs) Y-o-Y change (%) PER (x) Cash EPS (Rs) Cash PER (x) EV/EBIDTA (x) Book value (Rs/share) P/BV (x) MCap/sales RoCE (%) RoNW (%) FY2010 5,625.0 1,081.4 80.3 12.3 22.9 32.2 14.3 27.5 29.7 73.7 5.4 5.9 21.7 19.2 FY2011 6,331.1 960.4 80.3 12.0 -2.6 33.0 15.1 26.2 29.0 82.4 4.8 5.2 17.4 15.3 FY2012 6,977.6 1,124.0 80.3 14.0 17.0 28.2 17.5 22.6 22.4 94.0 4.2 4.7 19.2 15.9 FY2013E 8,150.9 1,582.0 80.3 19.7 40.7 20.0 23.5 16.8 15.5 111.6 3.5 4.0 24.9 19.2 FY2014E 9,283.5 1,668.8 80.3 20.8 5.5 19.0 24.6 16.1 15.2 129.9 3.0 3.5 22.0 17.2 FY2015E 10,492.2 1,950.8 80.3 24.3 16.9 16.3 28.5 13.9 12.9 152.0 2.6 3.1 22.1 17.2
SHAREHOLDING PATTERN
FII 28%
Promoters 36%
Public & others 20%
Non Promoter Corporate 6%
Institutions 10%
PRICE CHART
450 425 400 375 350 325 300 275 Jul-12 May-12 Mar-13
6m 5.7 -3.7
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 3.6 -6.0 3m 7.7 3.5 12m 27.3 1.0
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
May-13
Nov-12
Sep-12
Jan-13
For detailed report, please visit the Research section of our website, sharekhan.com.
11
June 2013
STOCK IDEA
EQUITY
FUNDAMENTALS
BUY
JYOTHY LABORATORIES
CMP: RS180
MAY 28, 2013
Shining bright
COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs254 Rs2,903 cr Rs208/104 1.23 lakh 532926 JYOTHYLAB JYOTHYLAB 5.6 cr
KEY POINTS
Chip off the old block: With the successful integration of Henkel, which it had acquired in early FY2012, and the induction of a new management team led by a professional chief executive office (CEO; S Raghunanadan, who successfully built brands like Moov among other notable achievements) Jyothy Laboratories Ltd (JLL) is transforming itself from a one-brand wonder to an aggressive fast moving consumer goods (FMCG) player focused on gaining market share in a wide range of categories (including premium detergents, household insecticides, dishwash and deodorants). The new team has taken bold decisions including the restructuring of the distribution network and the margins for the channel partners, the implementation of technological solutions to modernise the supply chain and the adoption of better manufacturing practices. Set to grow exponentially: Given the companys highly focused strategy to leverage on its strong brand portfolio, the management is confident of surpassing the industry growth rates and gaining significant market share in categories like detergents (Henko and Ujala) dishwash (Exo and Pril), household insecticides (Maxo coils and liquids) and personal care (Fa deodorants and talc; and Margo soap). We estimate JLLs top line would grow at a compounded annual growth rate (CAGR) of close to 25% over the next three years (FY2013-16). Whats more, the strong revenue growth is likely to be accompanied by a considerable improvement in the operating profit margin (OPM; resulting from lower distribution margins and efficiency gains; margin improvement of over 300 basis points expected over the next three years) and a declining interest burden (through the repayment of the debt taken to acquire Henkel using internal accruals). This would result in an exponential growth in its earnings. Focus on improving balance sheet: JLL has taken steps to reduce its working capital requirements by revamping its supply chain network. It also plans to reduce the debt on the consolidated books by improving its profitability and selling some of its non-core assets. The company targets to achieve a debt/equity ratio of 0.5x by FY2015 as against 0.9x at present. With an improvement in the margin, the return ratios of the company are expected to get back in double digits by FY2014 and cross 20% by FY2016. Recommend Buy; price target of Rs254: For the company FY2013 was a year of integration and implementation of several initiatives that would reflect in its financial performance from FY2014. With a close to 25% growth in revenues and a potential for substantial improvement in the OPM, we expect JLLs consolidated bottom line to grow exponentially over the next three years. Hence, we are initiating coverage on the stock with a Buy recommendation. Our price target for the stock is Rs254 (we have valued the stock at a 25% discount to the average multiple of some of the large FMCG companies). Our price target is based on an investment horizon of 18 months. At the current market price the stock is trading at 21.7x FY2015E earnings per share (EPS) of Rs8.3 and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 12.8x.
Others 8% FIIs 17%
Promoters 65% Domestic institutions 10%
PRICE CHART
200 180 160 140 120 100 May-12 Nov-12 Feb-13 May-13 Aug-12
VALUATIONS
Particulars Net sales (Rs cr) Operating profit (Rs cr) Adjusted PAT (Rs cr) EPS (Rs) OPM (%) PE (x) EV/EBIDTA (x) RoE (%) RoCE (%) FY2011 626.4 79.4 65.9 4.3 12.7 42.1 33.9 12.9 14.8 FY2012 913 84.1 38.4 2.8 9.2 65.1 40.4 6.2 8.6 FY2013 1106 129.7 16.1 1.2 11.7 147.7 26.3 2.6 5.8 FY2014E 1372.5 196.8 69.3 4.2 14.3 43.1 17.3 10.8 10.8 FY2015E 1691.5 252.9 138 8.3 15 21.7 12.8 20.3 17 FY2016E 2048.8 306.2 203.4 12.3 14.9 14.7 10 26.3 22.5
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.7 -1.2 3m 14.4 9.2 6m 1.1 -5.2 12m 70.0 35.3
June 2013
12
EQUITY
FUNDAMENTALS
STOCK UPDATE
ANDHRA BANK
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs112 Rs5,089 cr Rs89/130 11.6 lakh 532418 ANDHRABANK ANDHRABANK 23.5 cr
CMP: RS91 MAY 6, 2013 Price target revised to Rs112

RESULT HIGHLIGHTS
Andhra Banks Q4FY2013 profit came in at Rs344.6 crore, which was higher than our estimate. However, the higher than expected growth in the profit was mainly due to a lower tax rate and a higher treasury profit. The operating performance was subdued as the NII grew by merely 4.3% YoY to Rs953.4 crore. The lower than estimated growth in the NII was on account of a sequential dip of about 30 basis points in the NIM partly contributed by an interest reversal of Rs35 crore. The growth in advances improved in Q4FY2013 as the same grew by 17.6% YoY. The CASA ratio was largely stable at 25.7% as compared with 26.0% in Q3FY2013.
Public & others 14% MF & FI 15% Foreign 13% Promoter 58%
The asset quality deteriorated as slippages increased sharply. The bank restructured loans worth Rs1,135.7 crore in Q4FY2013, taking the total restructured advances to about 10% of the total advances. Valuations: We remain cautious on the asset quality of the bank due to its higher exposure to troubled segments (power, textile, iron, steel etc) and a higher proportion of restructured advances at about 10% of its book (restructuring pipeline of Rs2,700 crore including Andhra Pradesh State Electricity Board). We have revised our earnings estimates for FY2014 and FY2015 downwards which has resulted in a downward revision in our price target to Rs112. Currently, the stock is trading at 0.5x FY2015E book value which reflects the asset quality concerns. We maintain our Hold rating on the stock.
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -5.6 -9.3 3m -17.3 -16.5 6m -14.6 -18.3 12m -17.5 -28.9
APOLLO TYRES
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs101 Rs4,757 cr Rs102/74 16.5 lakh 500877 APOLLOTYRE APOLLOTYRE 26.7 cr

RESULT HIGHLIGHTS
Revenues below expectation: Apollo Tyres Ltd (ATL)s Q4FY2013 revenues at Rs3,037.8 crore were below our estimate. The revenues were affected by a sluggish demand in the domestic market. The revenues also declined in the South African operations. Softening raw material prices improve margin, but higher other expenditure limits the benefit: ATLs margin improved by 50 basis points YoY on account of softening of commodity prices. However, an increase in the other expenditure limited the overall margin improvement. Though the margin of the stand-alone operations was better than our estimate, the margins of the European and the South African operations were below our estimates. The raw material prices are expected to remain stable in the near term, thereby supporting the margin. Demand to remain subdued : The demand in the domestic market is expected to remain sluggish in the near term, given the weak OEM volumes. The OEM industry, particularly the medium and heavy commercial vehicle segment, is facing pressure with a double-digit decline. Though the replacement segment is growing in single digits, but the overall demand is subdued. Further, the demand in the European market is expected to remain sluggish. Valuation: We have reduced our FY2014 and FY2015 revenue estimates in view of the subdued demand scenario. However, we have raised our margin assumptions, given the better than expected margin and stable raw material prices. We have marginally raised our FY2014 and FY2015 earnings estimates by 3.6% and 2% respectively to Rs14.5 and Rs15.6 per share respectively. We have maintained our Hold recommendation with a revised price target of Rs101.
Public & Others 14% Non promoter corp 8% Govt 2% Institutions 5% Promoters 42%
Foreign 29%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 14.3 4.5 3m 9.8 7.2 6m 18.5 10.7 12m 12.9 -8.3
13
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
BAJAJ CORP
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs303 Rs3,747 cr Rs264/114 68,985 533229 BAJAJCORP BAJAJCORP 2.2 cr
CMP: RS254 MAY 6, 2013 Stellar performance continues

RESULT HIGHLIGHTS
Revenues grew by about 25% YoY: The total revenues of Bajaj Corp grew by 25.3% YoY to Rs184.2 crore in Q4FY2013. The company clocked a volume growth of 19.1% YoY in Q4FY2013 on the back of a sustained strong growth of about 20.6% YoY in the sales volume of the flagship product, ADHO. Profitability improved substantially: The lower input prices along with a higher sales realisation resulted in a 477-basis-point Y-o-Y improvement in the GPM to 57.9%. With the advertisement and promotional spending remaining flat YoY and the other expenses as a percentage of sales falling by about 70 basis points YoY, the OPM saw a sharp improvement of 507 basis points YoY to 28.2% during the quarter. The strong growth in the top line and the significant improvement in the OPM helped the PAT to grow by 44.3% YoY to Rs49.1 crore during the quarter. Outlook and valuation: We broadly maintain our earnings estimates for FY2014 and FY2015. With the volume growth likely to sustain in the range of 16-18% in the coming years, we expect Bajaj Corps top line and bottom line to grow at CAGR of 23.0% and 25% respectively over FY2013-15. The strong earnings visibility and robust cash generation ability of the company make Bajaj Corp one of the better picks in the FMCG space. Acquisition of any brand in the personal care space can act as a key positive trigger for the company. Hence, in view of the companys strong earnings visibility and strong cash on books, we maintain our Buy recommendation on the stock with the existing price target of Rs303. At the current market price the stock trades at 18.4x its FY2014E EPS of Rs13.8 and 14.4x its FY2015E EPS of Rs17.7.
FIIs 10.1% Domestic institutions 0.2% Promoters 84.8% Others 5.0%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 4.4 0.3 3m 3.8 4.8 6m 39.1 33.0 12m 111.9 82.5
BAJAJ FINSERV
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs826 Rs12,015 cr Rs979/619 0.9 lakh 532978 BAJAJFINSV BAJAJFINSV 6.5 cr
CMP: RS755
RESULT HIGHLIGHTS
MAY 15, 2013
Price target revised to Rs826

During Q4FY2013, Bajaj FinServ reported a consolidated net profit of Rs812.9 crore led by a strong growth in the lending business and the general insurance business. The total income grew by 15.2% YoY to Rs2,018.1 crore, though the higher interest expense and tax outgo resulted in a sluggish earnings growth. General insurancestrong growth in profitability: The general insurance business reported a profit of Rs62 crore in Q4FY2013 as against a loss of Rs39 crore in Q4FY2012. The gross premiums increased by 25.5% YoY during the quarter while the combined ratio stood at 105.2%. Bajaj Financestrong growth continues: Bajaj Finance showed a strong growth in profit in Q4FY2013. The growth in the profit was driven by a strong uptick in the NII and other income. The deployments of the company grew by 21.6% YoY to Rs5,106 crore during the quarter while its AUMs expanded by 33.6% YoY to Rs17,515 crore. Valuation: Bajaj FinServs earnings showed a marginal growth YoY due to a Y-o-Y decline in the life insurance business earnings, though the other two segments continued to report a strong growth. Going ahead, the growth in the insurance segment will remain subdued due to a change in the regulations and thr companys focus on rationalising the cost structure. We have reduced our growth assumptions for the life insurance business, resulting in a reduction in our SOTP-based price target to Rs826. We maintain our Hold rating on the stock.
Public & others 26%
MF & FI 4% Foreign 11%
Promoter 59%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 1.7 -6.1 3m 0.8 -0.6 6m -9.9 -15.0 12m 8.7 -12.2
June 2013
14
EQUITY
FUNDAMENTALS
STOCK UPDATE
BAJAJ HOLDINGS & INVESTMENT

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,334 Rs10,154 cr Rs1,058/730 4.1 lakh 500490 BAJAJHLDNG BAJAJHLDNG 6.6 cr
CMP: RS912 MAY 20, 2013 Price target revised to Rs1,334

RESULT HIGHLIGHTS
The consolidated income of Bajaj Holdings and Investment Ltd (BHIL) grew by 27.3% YoY to Rs81.2 crore in Q4FY2013. In the fourth quarter of FY2013 the companys income declined 12% on a sequential basis. The income from the companys associates grew by 3.2% YoY in Q4FY2013. This led to a 5.6% Y-o-Y increase in the PAT to Rs664.4 crore. During Q4FY2013, the total market value of its investments declined 13.7% sequentially whereas the cost of its investments grew 1.2% due to an increased exposure to fixed deposits. The company reduced its exposure to equities marginally during the quarter. The market value of its equity investment in the core associate companies (an 80% contribution) declined by 15.3% sequentially while the value of the other equity investments declined by 10.9% QoQ. Valuation: Bajaj Auto is the key investment of BHIL and has been valued at 14x FY2015E EPS. Though the company reported quarterly results slightly ahead of expectations (largely due to a higher other income), but there are concerns over the slowdown in the domestic motorcycle demand and increasing competition from Honda Motorcycle & Scooter India. Our price target for Bajaj FinServ is based on the SOTP valuation method. Given the strategic nature of BHILs investments, we have given a holding company discount of 50% to BHILs equity investments. The liquid investments have been valued at cost. Our price target of Rs1,334 implies a 46% upside for the stock. We maintain our Buy recommendation on BHIL.
Public and Others 23% Promoters 40% Foreign 13% Non promoter corporate Holding 12% Institutions 12%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.7 -5.2 3m -4.7 -8.8 6m 7.4 -3.4 12m 17.0 -9.0
BHARTI AIRTEL
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs340 Rs120,382 cr Rs371/239 51.8 lakh 532454 BHARTIARTL BHARTIARTL 119.4 cr
CMP: RS317 MAY 2, 2013 India exceeds expectation, Africa disappoints; maintain Hold
Bharti Airtel (Bharti)s overall results were in line with expectations while the African business disappointed on all grounds, viz volume, pricing and margin.
RESULT HIGHLIGHTS
Subdued top line performance, due to Africa: The consolidated revenues grew by 1% on a sequential basis, largely due to a decline in revenues from the African business. The revenues of the domestic mobile business grew strongly at 3.2% QoQ, led by a 5.1% traffic growth and flat realisation. Operating profit grew at 4.9%: The consolidated margin surprised positively (+117 basis points QoQ), despite a setback from the Africa front (margin declined by 110 basis points QoQ). Consequently, the operating profit grew by 4.9% on a sequential basis. Reported PAT misses expectation: The reported PAT missed expectations, largely owing to a foreign exchange (forex) loss booked in the interest expense coupled with increased provision of deferred tax liability. Outlook and valuation: In light of this environment, wherein the positive tick from the India business gets negated by a lacklustre performance from the African business, we largely maintain our consolidated estimate for the company. The subdued African performance coupled with the regulatory overhang that Bharti faces compels us to maintain our Hold recommendation on the stock with a price target of Rs340. We believe that the performance of the African business would become a key monitorable for Bhartis rerating going forward and any positive development there should augur well for the stock.
Public & Others Foreign 17% 2% Institutions 9% Non-promoter corporate 4%
Promoters 68%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 9.3 5.5 3m -6.1 -4.4 6m 18.2 11.8 12m 3.1 -10.1
15
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
CAPITAL FIRST
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs230 Rs1,046 cr Rs235/130 0.6 lakh 532938 CAPF CAPF 2.1 cr

RESULT HIGHLIGHTS
Capital First reported a net profit of Rs15 crore (stand-alone) for Q4FY2013. While the NII growth was slightly lower than estimated, the tepid growth in the non-interest income impacted profit. The NII was up by 90% YoY to Rs699.7 crore, which is slightly lower than our estimate, mainly due to a 20-basis-point Q-o-Q decline in the NIM. The management expects an NIM of 5.2-5.3% in FY2014. The loan growth remained strong (up 15% YoY) led by the retail segment, which grew by 86% YoY, while the corporate book declined by 34.2% YoY. The retail loans constitute 66% of the loan book and 74% of the AUM. The non-interest growth remained weak, mainly due to a decline in the securitisation income and a dip in the fee income largely due to a change in accounting since Q2FY2013. On the positive side, the opex has continued to decline in the past two quarters. Valuation: The earnings during the quarter were supported by a tax write-back, decline in the opex and routing of debt issue expenses from the balance sheet. While the transition of loan book towards retail is notable, the earnings momentum has weakened. However, the company has invested significantly in building several businesses, which should drive the growth going ahead. We have revised our earnings estimate downwards to factor the slower pick-up in the non-interest income and higher provisions, leading to a revision in our price target to Rs230. We maintain our Buy rating on the stock.
Public & others 28.3%
MF & FI 0.2% Foreign 0.9% Promoter 70.6%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -3.1 -6.9 3m 1.6 -5.2 6m -27.2 -31.0 12m 7.5 -13.8
CESC
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs385 Rs4,207 cr Rs346/253 3.9 lakh 500084 CESC CESC 6.2 cr
CMP: RS335
RESULT HIGHLIGHTS
MAY 29, 2013
Price target revised upwards to Rs385

Tariff adjustment reflected in Q4FY2013 numbers: In Q4FY2013, CESC reported significantly (34%) higher than expected revenues at Rs1,513 crore, which included around Rs400 crore of tariff adjustment for the prior period. Adjusting for the priorperiod adjustment, the revenues came at Rs1,113 crore, which is in line with our estimate. The revised tariff for CESC stood at Rs6.17/unit. The tariff adjustment impacted the bottom line positively by around Rs100 crore. There was also a tariff revision-related adjustment in Q4FY2012; hence, the quarterly comparison is not fair, rather an annual financial comparison would be right. Positive developments in retail business: During FY2013, there were positive developments in the retail business of the company as the loss at the profit before interest and tax (PBIT) level came down from Rs220 crore in FY2012 to Rs80 crore in FY2013. The management expects Spencers to break even at the operating level in FY2015. Eventually, the hangover of the loss-making retail business will reduce. Also, the management has shared that the company is planning to demerge Spencers into a separate retail entity.
12m 26.1 0.9
Others 14%
Institutions 18%
Promoters 53%
Foreign 15%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 15.7 10.5 3m 20.3 12.2 6m 14.6 6.7
Fine-tuned stand-alone estimates and revised price target to Rs385: We have revised upwards our stand-alone sales and earnings estimates for FY2014 and FY2015 by 56% each. Also, we have rolled over the valuation base to FY2013 book value to value the stand-alone business. Hence, we have revised upwards our price target by 8% to Rs385 (based on SOTP method) but continue to retain our Hold rating.
June 2013
16
EQUITY
FUNDAMENTALS
STOCK UPDATE
CROMPTON GREAVES
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs105 Rs6,030 cr Rs142/87 23.3 lakh 500093 CROMPGREAVE CROMPGREAVE 37.4 cr

RESULT HIGHLIGHTS
Restructuring pain and margin pressure kept results below expectations: In Q4FY2013 Crompton Greaves Ltd (CGL) reported a net profit of Rs25 crore, which is significantly lower than our estimate. Though the sales numbers reported by the company were in line with our estimate, a slower than expected recovery in the international business and a weak margin in the power system segment kept the profit below expectations. Sequentially, there was an improvement as the business turned from loss-making to profit-making, since in Q3FY2013 it had borne the brunt of restructuring-related huge one-off expenses. The Hungarian plant will be completely operational after restructuring from Q1FY2014. Steady order backlog growth to reflect on sales, but profitability and pace of recovery would be key monitorables: The consolidated order book grew by 9% YoY to Rs9,126 crore at the end of FY2013. The management expects the sales to grow at 8-10% in FY2014 while the profitability could be unpredictable, given the possible negatives from the liquidation damages of the European operations. View and valuation: Earnings estimates downgraded; price target revised down to Rs105: We have lowered our earnings estimates for FY2014 and FY2015 by 35% and 11% respectively to build in the slower than expected recovery post-restructuring and the mounting pressure on the margin of the domestic power system business. Based on the revision, we have downgraded our price target to Rs105 (12x its FY2015E earnings).We believe the restructuring is behind us and the company should stabilise gradually. Hence, we have maintained our Hold recommendation on the stock.
Others 19% Promoters 42%
Institutions 24%
Foreign 15%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.1 -0.8 3m -0.4 -2.6 6m -16.0 -21.4 12m -10.5 -27.5
DISHMAN PHARMACEUTICALS & CHEMICALS

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs130 Rs558 cr Rs124/48 3.5 lakh 532526 DISHMAN DISHMAN 3.1 cr
CMP: RS69
MAY 28, 2013 Margin improves
RESULT HIGHLIGHTS
Q4FY2013 results in line with expectations: Dishman Pharmaceuticals & Chemicals (Dishman) reported a nearly flat Y-o-Y growth to Rs345.5 crore in Q4FY2013. the growth is 2% lower than our estimate. However, the OPM expanded by 270 basis points YoY to 26.2% (better than our estimate of 18.5%). On account of a 45% Y-oY jump in the other income to Rs13.7 crore and lower than expected interest cost of Rs17.2 crore (a Y-o-Y decline of 20.8%), the profit before tax (PBT) recorded a decline of 17.1% YoY to Rs61 crore (before forex loss). However, the net profit dropped by 40.6% YoY to Rs18.6 crore on account of a higher effective tax rate of 43.9% (vs 40% in Q4FY2013) and a forex loss of Rs15.6 crore. However, the adjusted net profit jumped by 9.5% YoY to Rs34.2 crore, which is better than our estimate. The company has a gross outstanding debt of nearly Rs818 crore (Rs21 crore of cash in hand), of which nearly Rs105 crore is payable in FY2014. We maintain our estimates, price target and recommendation: We broadly maintain our estimates for FY2014 and FY2015, given that the results for Q4FY2013 are in line with our expectations and the managements guidance is falling in line with our estimate. We believe the traction in Carbogen Amcis and the vitamin D3 business would be a major growth driver going forward. We maintain our Buy rating on the stock with a price target of Rs130, which implies 7x average earnings for FY2014 and FY2015. The stock is currently trading at 3.7x average earnings for FY2014 and FY2015.
Public and others 13% Nonpromoter corporate 9% Institutions 6% Foreign 10% Promoters 62%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 1.8 -2.1 3m -0.3 -4.9 6m -39.3 -43.1 12m 37.5 9.5
17
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
GLENMARK PHARMACEUTICALS
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs600 Rs14,227 cr Rs552/307 5.3 lakh 532296 GLENMARK GLENMARK 14.0 cr
CMP: RS525 MAY 8, 2013 An all-round impressive performance

RESULT HIGHLIGHTS
Q4FY2013 results better than expected: Glenmark Pharmaceuticals (Glenmark Pharma) reported a 25.3% Y-o-Y rise in its net sales to Rs1,335.5 crore (vs our estimate of Rs1,330 crore) in Q4FY2013. The core OPM (ie excluding licencing income) jumped by 448 basis points YoY to 19% on account of a sharp reduction in the raw material cost. This led the profit before tax to increase by 40% YoY to Rs31.8 crore. Moreover, a lower effective tax rate (2.6% in Q4FY2013 vs 5.8% in Q4FY2012) helped the company to report a 44.9% Y-o-Y rise in the adjusted net profit to Rs167.2 crore (adjusted for forex loss or gains) during the quarter. However, due to a forex loss during the quarter vs a forex gain (Rs35 crore in Q4FY2012), the reported net profit jumped by 11.2% YoY to Rs167.2 crore. We maintain estimate, price target and recommendation: The management has guided for a 20% Y-o-Y rise in revenues in FY2014, with the EBIDTA remaining flat at Rs1,225 crore, which is similar to our earlier estimate. We have broadly maintained our earnings estimates for FY2014 and FY2015. The stock is currently trading near 17.8x and 13.5x core earnings for FY2014 and FY2015. We maintain our Buy recommendation on the stock with a price target of Rs600, which includes a base business value of Rs510 (15x average earnings for FY2014 and FY2015) and Rs90 for its research and development pipeline.
Institutions 8% Public and others 9% Non-promoter corporate 1% Foreign 33%
Promoters 49%
PRICE PERFORMANCE
HOUSING DEVELOPMENT FINANCE CORPORATION

HOLD
COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs910 Rs136,667 cr Rs895/611 24.7 lakh 500010 HDFC HDFC 154.6 cr
CMP: RS886
RESULT HIGHLIGHTS
MAY 8, 2013

Housing Development Finance Corporation (HDFC)s Q4FY2013 results were in line with our estimates as its net profit grew by 17.3% YoY (up 36.4% sequentially) to Rs1,555 crore driven by a healthy growth in the operating profit (up 14.6% YoY). The net interest income (NII) growth was largely in line with our estimate as it increased by 11.9% YoY (up 26.8% QoQ) to Rs1,950.8 crore. A strong growth in the advances and stable spreads contributed to the NII growth. Overall, the loan book expanded strongly by 20.7% YoY (up 24% YoY, including the loans sold). The individual loans were up 25.4% YoY (up 31% YoY, including the loans sold), thereby leading to an increase in the proportion of individual loans to 66.0%. The loan approvals saw a growth of 14.5% YoY whereas the disbursements grew by 15.9% during the quarter. The borrowings increased by 32.1% YoY. The asset quality improved as the gross non-performing asset was at 0.7% vs 0.75% in Q3FY2012. The outstanding provisions including the standard asset provisions on the balance sheet were higher by Rs286 crore as against the regulatory requirement of Rs1,506 crore. Valuations: HDFCs strategy of reaching out to newer geographies is bearing fruits as the loan book continues to expand at a healthy rate despite competition. The companys strong distribution network (both metro and non-metro regions) and competitive pricing of products are likely to contribute to a strong growth. We have marginally tweaked the estimates for FY2014 and FY2015, and revised the SOTP based price target to Rs910. However, we maintain Hold rating on the stock due to its premium valuation.
Public & others 13% MF & FI 13%
Foreign 74%
PRICE PERFORMANCE
June 2013
18
EQUITY
FUNDAMENTALS
STOCK UPDATE
IL&FS TRANSPORTATION NETWORKS

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs302 Rs3,411 cr Rs277/157 72,527 533177 IL&FSTRANS IL&FSTRANS 5.4 cr

RESULT HIGHLIGHTS
Revenues lower than expected due to slower execution: In Q4FY2013, the consolidated revenues of IL&FS Transportation Networks Ltd (ITNL) declined by 3% YoY to Rs1,931 crore. The construction revenues declined by 4% YoY to Rs1,388 crore. However, the revenues from the operational build-operate-transfer (BOT) assets grew at a healthy rate of 27% to Rs230 crore. Increase in margin due to higher contribution from BOT segment: However, the OPM improved by 145 basis points YoY to 24.4%, which was in line with our estimate. The expansion in the margin was mainly on account a lower contribution of revenues from the low-margin construction income. Decline in PBT on account of surge in interest, depreciation and lower other income: Though the company reported a marginal increase in the OPM, but the huge surge in interest charges (up 31% YoY) and depreciation (up 10% YoY) coupled with a decrease in the other income (down 29% YoY) led to a decline in the PBT by 30% YoY to Rs 171 crore. However, the reversal of the deferred tax liability led to a 0.6% Y-o-Y growth in the consolidated net profit to Rs178 crore.
6m -5.4 12m 3.7 -13.3
FII 4% Institutions 4% Public & others 20% Promoters 72%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -3.0 -10.0 3m -9.5 -11.1
-10.3
Maintain Buy with a revised price target of Rs302: On account of an increase in the cost of a few projects and a reduction in the margin, we have revised our SOTP based price target to Rs302 and maintained our Buy rating on the stock.
IRB INFRASTRUCTURE DEVELOPERS

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs175 Rs4,131 cr Rs161/104 21.9 lakh 532947 IRB IRB 12.3 cr
CMP: RS124 MAY 15, 2013 Strong performance continues

RESULT HIGHLIGHTS
Operating performance meets estimate, earnings surprise positively: In Q4FY2013 IRB Infrastructure Developers (IRB)s consolidated revenues grew by 11.4% YoY to Rs948 crore (in line with our estimate) led by a strong execution in the construction segment and a consistent toll collection across projects. The OPM declined to 44.6% from 45.1% in Q4FY2012. The depreciation for the quarter increased by 7.8% YoY and interest expenses grew by just 3.0% YoY coupled with a lower effective tax rate for the quarter at 17.9%. Consequently, the consolidated net profit grew by 25.5% to Rs151 crore, which was higher than our estimate. Strong performance by the construction segment: The construction vertical posted a growth of about 12% YoY in revenues to Rs672 crore. Further, the quarter also witnessed a margin expansion to 27.8% vis-a-vis 26.9% in Q4FY2012. BOT division continues its stable performance: The BOT division continued to put up a stable performance with revenues up 12% YoY to Rs277 crore. However, at the operating level, the segment witnessed a margin decline of about 434 basis points YoY to 84.1%. Earnings estimate revised upwards: We have revised our earnings estimates upwards by 9% and 11% for FY2014 and FY2015 respectively to factor in the reduction in the interest cost due to partial refinance of debt. Maintain Buy with price target of Rs175: We maintain our Buy recommendation on the stock with a price target of Rs175.
FII 22% Institutions 4% Promoters 63% Public & others 11%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.0 -5.7 3m 2.3 0.9 6m -6.1 -11.4 12m 9.9 -11.3
19
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
ITC
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs342 Rs264,710 cr Rs355/225 70.4 lakh 500875 ITC ITC 790.2 cr
CMP: RS335
RESULT HIGHLIGHTS
MAY 17, 2013
Downgraded to Hold with a revised price target of Rs342

Maintained the growth momentum: ITC posted a strong set of numbers in Q4FY2013 with the revenues and PAT growing by close to 20% during the quarter. The highlight of the quarter was the break-even of the non-cigarette FMCG business. The sales volume growth of the cigarette business improved sequentially to above 2.5% in Q4FY2013. As anticipated, the performance of the hotel business was muted with a sharp decline in the profitability as the business continued to get impacted by a subdued macro environment. Quarterly performance snapshot: The income from operations grew strongly by 18.8% YoY to Rs8,257.4 crore in Q4FY2013, which is slightly ahead of our expectation of Rs8,156.8 crore. The strong revenue growth is attributable to an 18% Y-o-Y growth in the gross revenues of the cigarette business, a 26% Y-o-Y growth in the non-cigarette FMCG business, and a 31% Y-o-Y growth in the agri business during the quarter. The OPM stood flat at 32.8% and the operating profit grew by 18.9% YoY to Rs2,706.3 crore. The strong operating performance along with a higher other income led to a 19.4% Y-o-Y growth in the reported PAT to Rs1,928.0 crore. Outlook and valuation: We have marginally tweaked our earnings estimates for FY2014 and FY2015 to factor in a little higher than expected revenues and other income in Q4FY2013. Overall, we believe ITC is well poised to achieve top line and bottom line CAGR growth of 17% and 20% over FY2013-15. At the current market price, the stock trades at 29.5x its FY2014E EPS of Rs11.4 and 24.5x its FY2015E EPS of Rs13.7. Our price target stands revised to Rs342 with tweaking of the earnings estimate. Due to a limited upside from the current level, we have downgraded our recommendation on the stock from Buy to Hold.
Others 16% Domestic Institutions 33%
FIIs 51%
PRICE PERFORMANCE
JAIPRAKASH ASSOCIATES
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs95 Rs16,179 cr Rs107/58 1.8 lakh 532532 JPASSOCIAT JPASSOCIAT 117.3 cr
CMP: RS76
RESULT HIGHLIGHTS
MAY 7, 2013

In Q4FY2013, Jaiprakash Associates (JP Associates) posted a net profit of Rs123.5 crore (a decline of 56.5% YoY), which was below our estimate of Rs131 crore. The decline was on account of lower than expected revenues and profitability in the construction division. Further, the effective tax rate of 32.5% came higher compared with our estimate of 25%. The revenues from the real estate division increased by 14.3% YoY to Rs641 crore (better than our estimate) supported by a volume growth in the sale of residential properties and land parcel. However, the cement division registered a revenue decline of 3% YoY on account of a drop in the volume. Further, the revenues from the construction division also declined by 13.4% YoY on account of a slower than expected execution of projects. Hence, the overall revenues of the company declined by 4% YoY to Rs3,864 crore. The OPM contracted by 241 basis points YoY to 22% on account of a decrease in the profitability of the construction and real estate divisions. However, the cement division displayed a 107-basis-point improvement in its EBIT margin on account of a 4.4% increase in the average blended realisation YoY. We are downgrading our earnings estimates for FY2014 and FY2015 mainly to factor in the lower than expected revenue growth and profitability in the construction division. Also, we have lowered our volume growth estimate for the cement division. We continue to like JP Associates due to its diversified business model and aggressive expansion plan. Hence, we maintain our Buy recommendation on the stock with a revised price target of Rs95.
Institutions 14% Foreign 23% Public & others 19% Promoters 44%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 17.9 10.6 3m 3.2 2.9 6m -14.8 -18.7 12m 7.0 -10.0
June 2013
20
EQUITY
FUNDAMENTALS
STOCK UPDATE
KEWAL KIRAN CLOTHING

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs810 Rs937 cr Rs779/490 2,273 532732 KKCL KKCL 1.2 cr
CMP: RS760 MAY 13, 2013 In line revenue growth; margin surprises positively
Kewal Kiran Clothing Ltd (KKCL)s results were in line with our estimates on the top line front while the operating performance surprised positively, with the OPM improving by almost 187 basis points to 28.2% for the quarter. A strong operating performance translated into a healthy bottom line growth of 32.9% YoY. Encouraging top line performance: The companys top line grew by 14.8% YoY to Rs77.1 crore, mainly on account of a realisation growth. The companys realisation per unit improved by 13.8% YoY. Strong operating performance: A favourable GPM impact translated into a robust operating performance. The OPM increased by 187 basis points to 28.2% YoY. Consequently, the operating profit increased by 22.9% YoY.
Public and Foreign others 12% 6% Institutions 7%
Non-promoter corporate 2% Promoters 73%
Lower tax incidence aids bottom line: The companys PAT benefited from a lower incidence of tax (effective tax rate stood at 28.6% for the quarter) and higher other income to a certain extent. Consequently, the companys bottom line grew by 32.9% to Rs16.5 crore for Q4FY2013. A resilient performance during tough times led by a robust portfolio of brands, a strong discipline towards capital allocation (firm control on inventory), a high margin of safety (Rs166 crore in the form of current investment and cash, constituting 18% of market cap) and a transparent management make us continue with our bullish stance on the company. Thus, we maintain our Buy rating on the stock with a price target of Rs810.
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 3.7 -5.0 3m 1.5 -1.8 6m 5.9 -1.8 12m 23.4 -1.0
LARSEN & TOUBRO

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,790 Rs93,356 cr Rs1,720/1,106 13.4 lakh 500510 LT LT 55.4 cr
CMP: RS1,517 MAY 22, 2013 Optimism persists, aiming for higher returns ratio
RESULT HIGHLIGHTS
Results largely in line but OPM missed: Larsen and Toubro (L&T)s Q4FY2013 results were largely in line with our expectation with sales as well as PAT 6-7% lower than our estimates. However, the operating profit slipped 12% below our estimate on account of a 61-basis-point lower OPM earned by L&T in Q4FY2013. The OPM was reported at 12.1%, which is 179 basis points lower YoY but 252 basis points higher QoQ. Effectively, the adjusted PAT declined by 6% YoY but grew by 59% QoQ in Q4FY2013. The company declared a dividend of Rs18.50/share and bonus issue in the ratio of 1:2. Order inflow momentum continues: The order inflow momentum remained healthy with the addition of orders worth Rs27,929 crore, showing a 32% growth YoY and 43% growth QoQ. The order backlog at FY2013 end stood at Rs153,600 crore, a growth of 5% YoY.
Foreign 17%
Others 47% DIIs 36%
Analyst meet highlights

The management believes that the order inflow momentum would remain healthy (it expects inflow to grow at 20% in FY2014) as it sees international order inflow to double again in FY2014. Given the current environment coupled with an increasing share of the international orders (which earn lower margin compared with the domestic orders), we believe the company would face a challenge to maintain the margin in the next one to two years. The management aims to improve the RoCE in the next two to three years to 20% from the current level of 17%, as it has no significant capex plan ahead. We have revised down our earnings estimates by 5% for FY2014 and FY2015. However, we retain our Buy recommendation on L&T with a price target of Rs1,790.
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 8.8 2.8 3m 12.6 7.9 6m 2.5 -6.2 12m 36.2 7.6
21
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
LUPIN
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs810 Rs32,457 cr Rs720/496 8.8 lakh 500257 LUPIN LUPIN 23.7 cr

RESULT HIGHLIGHTS
A bumper Q4: For Q4FY2013 Lupin reported an impressive rise of 34.7% YoY in net sales to Rs2,537.4 crore (vs our estimate of Rs2,313 crore). The sales growth was mainly driven by an overall good performance in the key geographies. During the quarter, the company achieved an OPM of 24.1%, which is 641 basis points higher than the OPM in Q4FY2012. The profit before tax jumped by 101.5% YoY to Rs596.3 crore. However, a lower effective tax rate (20.7% in Q4FY2013 vs 41% in Q4FY2012) led the adjusted net profit to record a growth of 185% YoY to Rs481.7 crore, which is substantially higher than our estimate. During the quarter, Lupin charged off Rs73.6 crore as amortisation of value of the Antara brand in the USA, which led the reported profit to jump by 162% to Rs408.1 crore. Management aspires for 25% revenue CAGR: The management of Lupin is confident of achieving a 25% compounded annual growth rate (CAGR) in revenues over the next couple of years, mainly driven by the US and Indian businesses. Also, India, Japan and the emerging markets are going to maintain a high growth momentum.
6m 12m 34.4 9.3
Non-promoter corporate 1% Institutions Public and others 14% 9%
Promoters 47%
Foreign 29%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 18.0 8.8 3m 22.3 19.1 25.2 17.7
We revise estimates and price target, maintain Buy recommendation: Taking into account the bumper FY2013 results and the improved visibility of growth, we have revised our earnings estimates for FY2014 and FY2015 up by 9% and 12% respectively. Accordingly, our price target has also been revised to Rs810, which implies 20x average earnings of FY2014 and FY2015. We maintain our Buy recommendation on the stock.
NIIT TECHNOLOGIES
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs305 Rs1,548 cr Rs324/240 1.0 lakh 532541 NIITTECH NIITTECH 4.1 cr
CMP: RS257
RESULT HIGHLIGHTS
MAY 20, 2013
Margin improvement remain key for re-rating

Performance in line with estimates: The Q4FY2013 results of NIIT Technologies (NIIT) were broadly in line with our expectations, with a net income of Rs56.6 crore (our estimate was Rs56.2 crore). The revenues grew by 4.4% sequentially to Rs537 crore (our estimate was Rs529.8 crore). On a Y-o-Y basis, the revenues rose by 21.1%. The net income for the quarter was flat sequentially and up by 22.5% YoY to Rs56.6 crore (our estimate was Rs56.2 crore) in the quarter. Management sees green shoots in margin improvement: The margin performance for the quarter was ahead of our estimate at 16.5% (a 66-basis-point sequential improvement). The growth in the margin could largely be attributed to the improvement in the margin of the GIS business (from -7% to 9%). Going forward, the management foresees margin improvement in FY2014 with a gradual improvement in the margin of the government contracts (almost $90 million including deals from the Airport Authority of India and the Andhra Pradesh state government). Valuation: At the current market price of Rs260, the stock trades at 6.3x and 5.6x FY2014 and FY2015 earnings estimates. We believe an improvement in the margin trajectory and consistency in the earnings performance remain the two key events that may lead to the re-rating of NIIT from the current levels. We maintain our Hold rating on the stock with the existing price target of Rs305.
Public & Others 15%
Foreign 29%
Promoters 30% Nonpromoter corporate 6% Institutions 20%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -3.7 -11.2 3m 3.4 -1.1 6m -6.7 -16.1 12m -7.8 -28.3
June 2013
22
EQUITY
FUNDAMENTALS
STOCK UPDATE
OIL INDIA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs650 Rs35,269 cr Rs617/431 4.3 lakh 533106 OIL OIL 13.0 cr

RESULT HIGHLIGHTS
In Q4FY2013 Oil India Ltd (OIL) posted a net profit of Rs764.5 crore (a growth of 71.9% YoY), which was better than our estimate on account of lower than expected subsidy burden and effective tax rate. The revenues grew by 37.2% YoY due to a better net realisation as the subsidy burden decreased. However, the company continued to disappoint with a decline in the production of crude oil and a muted growth in the production of natural gas. During the quarter, the production of crude oil and natural gas was adversely affected due to an external environmental issue and hence was unable to support the revenue growth of the company. The crude oil production declined by 8.8% YoY. On the natural gas front, the company posted a muted production growth of 1.4% YoY. Going ahead, in FY2013-15 we expect the companys oil and gas production to grow at a CAGR of 3% and 4% respectively. The gross realisation of the company declined by 6.9% YoY to $111.4/barrel. However, with the decrease in the subsidy burden to Rs1,850 crore as compared with Rs2,874 crore in Q4FY2012, the companys net realisation improved by 42.4% to $55.4/barrel. We are marginally downgrading our earnings estimates for FY2014 and FY2014 mainly to incorporate the lower than expected production of crude oil and gas. We continue to be bullish on OIL because of its huge reserves and healthy reserve/ replacement ratio, which would provide a reasonably stable revenue growth outlook. Hence, we maintain our Buy recommendation on OIL with a revised price target of Rs650 (rolled forward on FY2015E earnings).
Foreign 8% Public & others 16% Promoters 68% Institutions 8%
PRICE PERFORMANCE
PTC INDIA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs88 Rs1,701 cr Rs81/53 9.2 lakh 532524 PTC PTC 49.1cr
CMP: RS58
RESULT HIGHLIGHTS
MAY 28, 2013
Q4 results surprise positively; price target retained at Rs88

Volume drove earnings growth in Q4FY2013: Driven by a significant volume growth (54% YoY) the sales of PTC India (PTC) grew by 52% YoY in Q4FY2013. The benefit of higher volume percolated to the operating and net profit levels as well. However, on account of a lower other income, the PAT grew by 23% YoY despite a 59% growth at the operating level. Power trading business set to see a healthy volume growth: The management of PTC expects the power trading volume to increase to 32BU and 38BU in FY2014 and FY2015. This volume growth would be driven by an improving volume from short-term trading, incremental tolling capacity and incremental supply from the upcoming projects in long-term arrangement. Higher share of tolling and long-term volume to improve margin: Currently, the tolling business of PTC is the key margin kicker due to lower prices of imported coal and a healthy merchant price rate. PTC expects a healthy volume growth for the next two to three years. The share of long-term volume and tolling volume should also move up which will help the margin to expand. Positive development in sticky receivable issue: Pending receivables, which it received late in the year, were a major hangover for the company. The management expects the dues from the SEBs to be negligible in the next couple of months. Viewretain Buy with price target of Rs88: We expect PTC to have a healthy growth trajectory driven by volume growth, with incremental capacities arising from both tolling and long-term arrangements. We retain our Buy rating on the stock with the target of Rs88.
Others 20% Promoters 16%
Foreign 16%
Institutions 48%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -5.2 -8.8 3m -18.5 -22.2 6m -18.6 -23.7 12m 8.5 -13.6
23
June 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
STATE BANK OF INDIA

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs2,540 Rs148,859 cr Rs2,550/1,816 19.2 lakh 500112 SBIN SBIN 25.8 cr
CMP: RS2,176
RESULT HIGHLIGHTS
MAY 23, 2013 A mixed bag
SBIs Q4FY2013 performance was below our estimate as its net earnings declined by 18.5% YoY to Rs3,299.2 crore. Though the decline in the NII and the higher provisions dented the profitability, but the lower tax outgo cushioned the earnings to an extent. The NII was largely in line with our estimate as it declined by 5.3% YoY on account of a sequential dip of 6 basis points in the NIM. In Q4FY2013, the business growth was strong as advances grew by 20.5% YoY and the deposits grew by 15.2% YoY. The incremental credit growth was primarily driven by a 40.3% Y-o-Y growth in the large corporate advances and an 18.2% Y-o-Y growth in the loans to the mid-corporate segment. The CASA ratio of the bank increased to 46.5% from 45.5% in Q3FY2013.
Public & others 11% MF & FI 16% Foreign 11% Promoter 62%
The asset quality displayed a mixed trend as the gross and net NPAs declined to 4.75% and 2.10% respectively on account of lower slippages and higher upgradations, recoveries and write-offs. But fresh restructuring was higher at Rs8,668 crore.
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 1.5 -3.1 3m 7.6 3.4 6m 12.6 3.6 12m 24.1 -2.7
Valuation and outlook

In Q4FY2013, though SBIs earnings were lower than our estimate but its fresh slippages were the lowest in eight quarters. Going ahead, the asset quality will be the area of focus. We have largely retained our estimates for FY2014 and FY2015 as we are hopeful of an improvement in the asset quality of the bank. We maintain our SOTP based price target of Rs2,540 and Buy recommendation on SBI.
ZYDUS WELLNESS
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs671 Rs2,117.6 cr Rs581/322 27,214 531335 ZYDUSWELL ZYDUSWELL 1.0 cr
CMP: RS542
RESULT HIGHLIGHTS
MAY 21, 2013

Q4FY2013 resultsstrong revenue growth momentum sustained: Zydus Wellness net sales grew by 25.3% YoY to Rs103 crore during Q4FY2013 driven by a strong double-digit growth in the pillar brands, such as Everyuth and Sugarfree. Despite a strong Y-o-Y improvement in the GPM by 176 basis points, the OPM was down by 79 basis points due to higher other expenses during the quarter. The operating profit grew by 22.0% YoY to Rs30.1 crore. This along with a higher other income helped the profit before tax to grow by 24.7% YoY to Rs33.1 crore. The company received a MAT credit amounting to Rs11.5 crore during the quarter, resulting in a net tax credit of Rs5.1 crore. This resulted in the reported PAT growing by 59.3% YoY to Rs37.4 crore during the quarter. Upgrading earnings estimates: In view of the strong growth in the pillar brands, such as Everyuth and Sugarfree, and the change in the effective tax rate to 8.5% from 20.0% earlier, we revise upwards our earnings estimates for FY2014 and FY2015 by 13.6% and 18.2% respectively. Outlook and valuation: We expect Zydus Wellness revenues to grow at a CAGR of 18% over FY2013-15. We believe the incremental benefits from the lower input prices would be utilised to carry out higher media spending and promotional activities. Hence, we expect the OPM to sustain in the range of 24-25% over the next two years. We expect Zydus Wellness bottom line to grow at a CAGR of 18% over FY2013-15. At the current market price the stock trades at 18.9x FY2014E EPS of Rs28.7 and 15.3x FY2015E EPS of Rs35.3. With an upward revision in the earnings estimates our price target also stands revised to Rs671. We maintain our Buy recommendation on the stock.
FIIs 5% Domestic institutions 12% Promoters 72% Others 11%
PRICE PERFORMANCE
June 2013
24
EQUITY
FUNDAMENTALS
SHAREKHAN SPECIAL
SHAREKHAN SPECIAL Monthly economy review

Economy: inflation levels reach RBIs comfort zone
In March 2013 the Index of Industrial Production (IIP) grew by 2.5%, in line with the markets estimate. The growth was contributed by a sustained growth momentum in both the manufacturing and the capital goods segment. A 247.3% yearon-year (Y-o-Y) spurt in the rubber insulated product segment lifted the growth in the capital goods segment. Based on the three-monthly moving average, the IIP growth for March 2013 stands at 1.8% as against 0.8% in March 2012. In FY2013 the IIP grew at 1.0% as compared with the 2.9% growth seen in FY2012. The Wholesale Price Index (WPI)-based inflation for April 2013 surprised positively as it came in below estimate and slipped to a 41-month low of 4.89% (5.96% in March 2013). The monthon-month (M-o-M) decline of 107 basis points in inflation can be attributed to a decline in all the three major constituents of the WPI but largely to the drop in the primary articles and the fuel group category. However, the inflation rate for February 2013 was revised upwards to 7.28% from 6.84% as per the provisional estimate. Indias trade deficit worsened to $17.8 billion in April 2013 from $10.3 billion in March 2013. The trade deficit rose by 26.7% year on year (YoY) and 72.4% month on month (MoM) in April 2013 largely driven by 138.0% Y-o-Y surge in gold and silver imports. Exports increased by 1.7% YoY (up 7.0% in March 2013) to $24.2 billion while imports increased by 11.0% YoY (down 2.9% in March 2013) to $42.0 billion. In its FY2013-14 policy review (on May 3), the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points to 7.25% but kept the cash reserve ratio (CRR) unchanged at 4%. However, the central bank seemed more worried about the current account deficit (CAD), which is expected at about 5% of the gross domestic product (GDP) in FY2014 (significantly above its comfort level of 2.5%). The financing of CAD will turn more challenging in case the global liquidity tightens. Overall, the RBI expects the economy to show a modest recovery in FY2014, though several other factors are leading to a slower pick-up. Given the cautious stance taken by the RBI with regard to monetary easing, we expect a 50-basis-point repo rate cut in the remaining part of the fiscal, unless the declining inflation is supported by a revival in the macro-economic aspects and government actions.
MAY 22, 2013

The deposits grew by 13.5% YoY (as of May 3, 2013). The growth in the deposits remained subdued due to the competitive returns offered by the other instruments. The RBI has targeted the FY2014 deposit growth at 14.0%. A slower growth in the deposits compared with the advances remains a concern for banks. The credit/deposit ratio for the banks remains high as it has increased to 77.6% (on May 3, 2013) from 76.6% (on May 4, 2012). The yield on the government securities (G-Secs; of ten-year maturity) stood at 7.35% on May 21, 2013 and was lower than the average of 7.84% maintained in April 2013. Moreover, the five-year and ten-year G-Sec yields declined by 37 and 40 basis points respectively on an M-o-M basis.
Equity market: FIIs remain net buyers

During the month-to-date (MTD) period of May 2013 (May 2-20, 2013), the foreign institutional investors (FIIs) were net buyers of equities and the domestic mutual funds were net sellers of equities. For the MTD period the FIIs bought equities worth Rs1,299.2 crore while the mutual funds sold equities worth Rs249.5 crore.
Banking stocks outperform in May 2013

In the last one month, the BSE Bankex has appreciated by 6.3% as compared with an uptick of 5.9% in the Sensex. The improved macro-economic numbers, viz a decline in core inflation to 2.8% and increase in IIP, have increased the expectations of another rate cut by the RBI in the coming monetary policy review meeting on June 17, 2013. This has led to the outperformance of the banking stocks.
BANKING SECTORS PERFORMANCE (AS ON DATE)
Company 1M Kotak Mahindra Indusind Bank ICICI Bank Punjab Natl. Bank Bank of Baroda Axis Bank HDFC Bank Yes Bank Canara Bank IDBI Bank Federal Bank State Bank of India Union Bank of India Bank of India Bankex Sensex M - month 14.6 10.3 7.8 7.0 6.7 6.3 5.1 4.9 4.7 4.2 3.6 2.9 -0.6 -1.7 6.3 5.9 Absolute 3M 15.9 15.9 12.2 -2.5 -1.5 8.6 6.3 5.8 0.9 -6.7 -5.2 6.8 3.7 -4.5 8.0 4.3 Relative 1M 8.2 4.2 1.8 1.1 0.8 0.4 -0.7 -0.9 -1.1 -1.6 -2.2 -2.8 -6.1 -7.1 0.4 0.0 3M 11.1 11.1 7.6 -6.6 -5.5 4.1 1.9 1.5 -3.2 -10.6 -9.1 2.4 -0.6 -8.4 3.6 0.0
Banking: slowdown in deposit growth to limit transmission of monetary easing

The credit offtake increased by 15.0% YoY (as of May 3, 2013), which was higher than the 13.9% Y-o-Y growth recorded in the previous month (on April 5, 2013). However, it was in line with the RBIs projection of 15.0% for FY2014.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
25
June 2013
EQUITY
FUNDAMENTALS
SHAREKHAN SPECIAL
SHAREKHAN SPECIAL Q4FY2013 Banking earnings review

KEY POINTS
Earnings growth below estimate: During Q4FY2013, the earnings of Sharekhans banking universe declined by 6.7% year on year (YoY) and was lower than estimated. The earnings of the public sector banks (PSBs) continued to disappoint (down 21.2% YoY) despite a helping hand from a higher treasury profit and a lower tax rate. The sluggish growth in the net interest income (NII) and higher provisions affected the overall earnings of the PSBs. However, the private banks continued to report a strong growth in their earnings (up 23.2% YoY). Operating performance weakens: The NII of our banking universe grew by 6.1%, slightly lower than estimated, mainly contributed by the private banks (up 21.8% YoY). The operating profit grew by merely 2.0% YoY as a strong growth posted by the private banks (up 22.3% YoY) was offset by a decline in the operating profit (down 5.8% YoY) of the PSBs. The margin continued to decline (YoY) which affected the NII growth. The higher treasury gains cushioned the profit though. Mixed trend in asset quality: The slippages remained high, even as the gross non-performing assets (NPAs) declined sequentially for the Sharekhan banking universe aided by increased writeoffs and recoveries. Also, the fresh restructured loan additions remained high in Q4FY2013 but were helped by the Reserve
JUNE 03, 2013
Bank of India (RBI) guidelines, thereby keeping the restructured book stable on a Q-o-Q basis.
Outlook
The Q4FY2013 results reflect the challenges at the operating level for banks as a slower economic growth has affected the credit growth and asset quality of banks. In addition, the regulatory prescriptions (higher provisions for restructured loans, dynamic provisioning), wage hikes etc will affect the earnings growth. However, the bond yields have declined significantly (by 75 basis points in the year till date [YTD]) which will provide some cushion against the rise in provisions. Going ahead, further easing of the key rates by the Reserve Bank of India (RBI) and the pace of recovery in the economy will shape the outlook for the sector. We, therefore, maintain our positive bias for the private banks and remain selective on the PSBs. We prefer ICICI Bank (a strong growth and improved asset quality) and Federal Bank (attractive valuations) among the private banks. We also prefer State Bank of India (SBI) and Punjab National Bank (PNB) as these will benefit from any recovery in the economy and are trading at reasonable valuations.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
FERTILISERS
MAY 2, 2013 Subsidy cut again; negative for fertiliser players
Key points
Sales decline marginally in April 2013: During April 2013, the aggregate sales of fertilisers (by 15 leading manufacturers) saw a marginal decline of 11% as compared with the same period of the last year. The sales of fertilisers were lower mainly because of the poor sales of non-urea fertilisers. In April 2013, the production and import of diammonium phosphate (DAP), NPK (nitrogen, phosphorus and potash) and muriate of potash (MOP) fertilisers declined drastically due to a lower demand because of a drought and poor agriculture activity during the period. The production of DAP and complex fertilisers also declined drastically on account of a low rainfall and high prices. The demand for urea witnessed some turnaround. Normal monsoon and price reduction to drive sales ahead: The India Meteorological Department (IMD) has issued the first stage of long-range forecast for the south-west monsoon, which would be normal. The south-west monsoon seasonal rainfall for the country as a whole is most likely to be normal (96-104% of long-period average [LPA]), with the highest probability of 46%. However, the probability for the seasonal rainfall to be deficient (below 90% of LPA) is 10% whereas the chance of excess rainfall (above 110% of LPA) is 3%. The LPA of the seasonal rain-
fall over the country as a whole for the period of 1951-2000 is 89cm. The IMD will issue the second stage forecast in June 2013. A recent reduction in the maximum retail price (MRP) of the non-urea fertilisers will also help in reviving the demand for fertilisers in the upcoming sowing season. Outlook: We believe that going ahead the demand for the fertilisers is likely to increase from the current level on account of a normal monsoon and a recent price cut in the non-urea fertilisers (in range of 5%). However, in the near term (next two quarters), the fertiliser manufacturers may witness a muted to negative growth in revenues on account of lower trading and the margin may remain under pressure due to liquidation of the high-cost inventory. But going ahead, a normal monsoon and the recent decline in the prices of non-urea fertilisers will drive the demand. From a long-term perspective, we have a positive view on the sector. We prefer stocks like Chambal Fertilisers, Coromandel International and Rama Phosphates, which are attractively valued after the recent price correction.
For detailed report, please visit the Research section of our website, sharekhan.com. Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
June 2013
26
EQUITY
FUNDAMENTALS
SECTOR NOTE
BASMATI RICE Aroma is in the air

The demand for basmati rice has been consistently growing at a compounded annual growth rate (CAGR) of 20% driven by a robust growth in its exports as well as domestic consumption. A 5% lower output in 2012-13 has resulted in a demand-supply mismatch for the commodity, thereby pushing the prices higher by almost 50% in the last few months. With buoyancy in basmati rice prices over the past year, we believe manufacturers stand to gain as they improve their financial profiles. Basmati rice players will witness a quantum jump in profits in the current year on the back of the increasing basmati rice prices coupled with a lower purchase price for paddy that was procured in the last year. We have a positive view on KRBL, and Lakshmi Energy and Foods. We believe both the companies are attractively placed on the risk-reward spectrum and should witness a substantial improvement in their fortunes in the current year.
MAY 16, 2013
paddy purchase price for basmati rice manufacturers is substantially lower in the current season, in line with the lower prices of basmati rice during the harvesting season gone by. This paddy will be matured, processed and sold in the current year. Thus, basmati rice manufacturers are likely to witness a quantum jump in their profits in FY2014. KRBL CMP: Rs25
KRBLs industry leadership, stable operating cash flows and superior return ratios position it among the better basmati rice players. The stock is currently trading at a PE of 5.0x its TTM EPS as against its historical average of 7.0x. The stock is trading below its -1 standard deviation of 5.3x which gives us greater comfort. On the P/BV front as well, the stock is trading at 0.7x, below its historical average of 0.9x. Thus, we believe the stock could provide a good upside in the coming months. Lakshmi Energy and Foods CMP: Rs32
INDUSTRY SCENARIO
Decline in basmati rice production has pushed prices higher...
In 2012-13, the production of basmati rice declined by 5% whereas the demand from both export and domestic markets remained buoyant. Hence, the average price of basmati increased by almost 50% in FY2013 over the previous year.
...thus improving the prospects for basmati manufacturers

With buoyancy in basmati rice prices, we believe the manufacturers stand to gain as they improve their financial profiles. We expect the manufacturers to continue to scale up operations and improve profitability, supported by a consistently rising demand.
Basmati players to witness quantum jump in profits in FY2014

Our interaction with basmati rice manufacturers indicates that the prices of basmati rice are likely to sustain at the current elevated levels at least till the start of the harvesting season in October 2013. As basmati rice undergoes a maturing phase of 12-14 months, the
BASMATI EXPORTS 2011-12 (3.2MN TONNE)
Others 26% UAE 23%
Basmati rice prices have been on an uptrend which should result in significant gains in the coming quarters as the company benefits from its low-cost inventory. A substantial reduction of the debt in the current year would strengthen the balance sheet as well as reduce the interest outgo which would act as a catalyst for profit growth. The companys energy division has entered into a long-term PPA with the Punjab state government which should add to the companys profitability from the current year. A confluence of the above factors would result in an exponential growth in the profits in the current as well as the next year and lead to a substantial improvement in the companys financial profile. Lakshmi Energy and Foods currently trades at trailing PE and P/BV of 3.6x and 0.3x, indicating a significant discount to the long-term historical averages of 11.5x and 2.3x respectively. Thus, we believe that the stock is well placed on the risk-reward spectrum with limited risk and a good upside potential.
BASMATI PRODUCTION
Basmati Production 9.5 mn tonne (2012) India 75% Pakistan 25% Exports 45% Domestic 60% Exports 40%
Iraq 4% Kuw ait 5% Saudi Arabia 23%
Domestic 55% West Asia: 75% Others: 25%

Source: APEDA
Iran 19%
27
June 2013
VIEWPOINT
EQUITY
FUNDAMENTALS
EICHER MOTORS
VIEWPOINT
Result highlights
Stand-alone Q1CY2013 results: Reports record high margin Eicher Motors Ltd (EML)s stand-alone revenues grew by 50.8% year on year (YoY) in Q1CY2013 on account of a 45.3% yearon-year (Y-o-Y) growth in the volumes. The realisation per vehicle improved by 3.7% YoY and 3.5% sequentially. The contribution per vehicle grew by 8.7% YoY and 6.9% on a sequential basis on account of price hikes taken in February 2013. The operating profit margin (OPM) at 17.7% was at record levels, mainly benefited by the operating leverage. The margin improved by 380 basis points YoY and 620 basis points on a sequential basis. The higher other income further boosted the profit. The profit after tax (PAT) at Rs97.2 more than doubled on a Y-o-Y basis. VECV Q1CY2013 results: Margin impacted by weakness in the CV industry Volvo Eicher Commercial Vehicles (VECV) revenues declined by 3.9% YoY on account of a 12.3% Y-o-Y drop in the volumes. The realisation per vehicle grew by 9.6% YoY on account of price increases and improved product mix. The contribution per vehicle improved by 14.2% YoY giving a boost to the margin. However, an increase in the other expenditure negated the benefits of the lower material prices. The OPM declined by 230 basis points YoY. The higher taxation and minority interest provision impacted the profit. The PAT declined to Rs0.7 crore.
CMP: RS3,263
MAY 14, 2013
Two-wheelers in high growth trajectory; CV sales subdued
Valuation
We have reduced our revenue assumptions for CY2013 and CY2014 given the sluggish CV demand. However, we have raised our margin assumption given the strong operating performance both in the twowheeler and the CV space. Our revised earnings per share (EPS) estimates for CY2013 and CY2014 stand at Rs162.6/share and Rs227.6/share respectively. The stock can trade at 14x one-year forward earnings. Additionally, we assign Rs100/share book value for the engine business. Given the recent run-up in the stock price, we have a neutral view on the company.
TITAN INDUSTRIES
VIEWPOINT
Key result highlights
Subdued top line performance: The overall top line of Titan Industries (Titan) grew by merely 14.5% owing to the subdued performance of the watches business, which grew by 1% in Q4FY2013 and witnessed a 10% volume decline. The jewellery business reported a 16.3% revenue growth aided by a strong 9% volume growth and a 7% realisation growth. Robust growth in operating profit: Despite the lacklustre performance on the revenue front, the operating profit grew strongly by 28.5% YoY, mainly due to margin expansion in the jewellery segment. The EBIT margin in the jewellery segment expanded by 180 basis points YoY (to a certain extent this expansion is not sustainable as it also included gains on account of the reversal in the custom duty paid in the earlier period). The advertisement expenditure declined by 100 basis points YoY (as a percentage of sales) which also boosted the overall margins. Watches continued to reel under pressure: The performance of the watches segment was under pressure on account of the depreciating rupee and slowing consumer spending (10% volume decline). Thus, this segment posted a dismal performance with merely 1.43% top line growth (led by realisation growth) and a 200-basis-point compression in the margin.
CMP: RS274
Valuation and view
MAY 6, 2013
Long-term trend bullish; regulatory overhang restricts growth

We continue to believe that Titan (owing to its strong brand equity and penetration-led strategy) is very well placed and is one of the best proxy to play the shift from the unbranded to branded jewellery. Thus, we continue to hold our long-term positive view on the business. However, the current situation, wherein the government is taking numerous steps towards curbing gold imports (to narrow the current account deficit) coupled with pressure on the discretionary spending category (leading to relatively lower share of high-margin studded jewellery business) should result in the company growing at a slower rate than it has seen in the past. Thus, we maintain our neutral stance on the stock with a positive bias. Clearance of the regulatory hangover and sustenance of the jewellery demand will be the key variables to watch out for a rerating of the stock. At the current price of Rs274, the stock is ruling at 28x its FY2014 and 23x its FY2015 EPS of Rs9.7 and Rs12.1 respectively.
June 2013
28
EQUITY
TECHNICALS
TREND & VIEW
Wave Z in progress
Sensex: Daily view
The Sensex has been trading in the 19380-20250 range but closed below the 20-daily moving average, ie 19960, which will be a very crucial resistance going forward. The momentum indicator is trading in negative zone, below the zero line. The key support would be around 19380 and 19000 while resistance would be around 19900. In the short term, the index is expected to head lower till 19380, which is also the 20-weekly moving average (WMA), ie 19380.
KST (-1.66839) 20600 20500 20400 20300 20200 20100 20000 19900 19800 19700 19600 19500 19400 19300 19200 19100 19000 18900 18800 18700 18600 18500 18400 18300 18200 18100 18000 4 3 2 1 0 -1 -2 -3 29 May 6 13 20 27 3 June 10 17
Short term Trend Down Trend reversal 19900 Support 19300 Resistance 19900 Target 19300
25 4 March 11 18 25 1 April 8 15 22
Sensex: Weekly view

Y
21500
Z?
21000 20500 20000 19500 19000 18500 18000 17500
The Sensex is trading above the 20-WMA, ie 19380, which is a bullish sign for the market in the medium term. The leg on the upside as wave Z is in progress and is expected to move up till 21110. On the weekly charts, the momentum indicator has given a positive crossover and is trading above the zero line. As the index has been trending up, it is expected to continue the positive momentum and the strategy should be to buy on declines with reversal around 18760. The key support would be around 19380 and 18760 while resistance would be around 19860.
W
W X
17000
16500
16000
Y Z
KST (2.26545)
15500
15000
10 5 0 -5 -10 Aug Sep Oct Nov Dec 2011 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 Mar Apr May Jun Jul Aug
Sensex: Monthly view

According to the Elliott Wave theory the index has completed a pull-back as W-X-Y-X and a new move on the upside has started as wave Z, which can move up till 21110. The Sensex is expected to form a triple top around the all-time high, ie 21207, which is a crucial resistance going forward. The Sensex has been forming higher tops and higher bottoms trading above the 20-monthly moving average (MMA), ie 18101, which will act as a very crucial support going forward. But if the index closes below this level then the previous swing low can be retested, ie 15135. The Sensex is trading above the 20-MMA, ie18101, and is expected to form a positive close on the quarterly charts.
Medium term Trend Up Trend reversal 18760 Support 18760 Resistance 21110 Target 21110
2007 A M J J A S O N D 2008 A M J J A S O N 2009 A M J AS ON
23000 22000 21000 20000 19000 18000 17000 16000 15000 14000 13000 12000 11000
10000
9000
8000
KST (8.24087)
40 30 20 10 0 -10 -20 -30 -40 J AS ON 2014 A M
2010 A M J J A S O
D 2011 A M J J A S O N D 2012 A M J J A S O N D 2013 A M
29
June 2013
MONTHLY VIEW
EQUITY
DERIVATIVES
Derivative view: Monsoon, events to direct markets

Multiple positive developments such as strong inflow of foreign funds, better than expected results from top notch Indian companies and a cut of 25 basis points in the repo rate and the reverse repo rate by the Reserve Bank of India (RBI) helped bulls to stretch the gains of the April series. A stable rupee, a decisive win by the Congress Party in the Karnataka assembly election, better Index of Industrial Production (IIP) numbers and easing of both the Wholesale Price Index and the Consumer Price Index inflation further pushed the Nifty above a two-year high. Also, this time the general belief of the market that Sell in May and go away was proved wrong as the Nifty managed to close with a gain of almost 1%, though the market cooled off from the two-year high due to the RBIs cautious stance on inflation and profit booking across the board.
MARKET WIDE VS NIFTY ROLL-OVER
90.0% 80.0% 70.0% 60.0% 64.37% 82.90% 56.94% 79.67% 40.0% 30.0% 20.0% 10.0% 0.0% December March June May February January April 53.26% 78.26% 54.46% 79.89% 61.58% 82.21% 66.78% 80.77% 72.07% 84.23% 50.0% Nifty Market Wide
Top five stock futures with the highest OI in the current series
STOCK FUTURES (SHAREKHAN SCRIP CODE) MCDOWELL-N SBIN TCS RELIANCE ITC STOCK OPTIONS (SHAREKHAN SCRIP CODE) SBIN INFY HINDUNILVR RELIANCE DLF OPEN INTEREST (RS CR) 2091.27 1157.52 944.63 944.52 751.95 OPEN INTEREST (RS CR) 1151.73 606.65 573.24 534.12 368.41
Top five stock options with the highest OI in the current series
View
The timely arrival of the monsoon has raised hopes of better rains this year. The unfolding of domestic macro-economic events and the Federal Reserves meet in the coming days would provide a base to our stance that the volatility index, India VIX, would see an uptick from the existing levels. On a closing basis, the Nifty has managed to take support around the lower break-even point (5896) of the current months straddle and we feel that the index would continue to do so. In view of the above data we recommend forming a Bull Call Spread strategy as the Nifty enjoys a favourable risk: reward ratio at the current juncture.
Strategy for the month: Bull Call Spread

A bull call spread is created when a stock is expected to move in an upward direction. The bull call spread is created by buying slightly out-of-the-money call options and selling higher out-of-the-money call options of the same scrip and expiry. It is a limited profit, limited loss strategy with a favourable risk: reward ratio.
TYPE CE CE BUY/SELL Buy Sell FORMATION STRIKE 6000 6100 PREMIUM 65.00 34.00 OUTFLOW 31.00
The Bank of Japans move to revive the Japanese economy had a nerve-wrecking effect on the Asian indices which along with the depreciation in the rupee above the mark of 57 led to a weak start to the monsoon month of June. The June series started the month with Rs11,371 crore in Nifty futures (vs Rs9,355 crore in the previous month); Rs28,534 crore in stocks futures (vs Rs23,976 crore in the previous month); Rs58,886 crore in index options (vs Rs60,110 crore in the previous month); and Rs3,306 crore in stock options (vs Rs3,300 crore in the previous month). The roll-over in the Nifty for June stood at 56.94% compared with 66.78% for May. Due to huge variations in the roll-over cost till the last day of the expiry it was tough to draw a clear conclusion about the roll-over activity for the current series. But a drastic drop in the roll-over cost on the very last day followed by an increase in the roll-over activity since the start of the expiry week suggested that a majority of the positions had been rolled on the short side. As the neck-to-neck fight continues, the rollover in both the market and the Nifty stands below the three-month and six-month average roll-over. On the options front, the strikes of 6100 and 6200 calls have a combined open interest (OI) of 1.14 crore shares whereas on the put side, the strikes of 5900 and 5800 have a combined OI of 1.22 crore shares. The implied volatility (IV) has eased from 19-20 levels. The above data clearly suggests that the strong and weak hands of the market have placed themselves very strategically and cautiously, keeping an eye on the Federal Reserves moves in the coming days.
Strategy note
The strategy has an initial outflow of 31 points in the Nifty, which amounts to Rs3,100 (31*100), whereas the maximum profit potential for the strategy is of 69.00 points, which amounts to Rs6,900 (69*100). There is only one break-even point in the strategy, which is at 6031 (lower strike price [6000] + gross outflow [31.00 points]).
PAY-OFF DIAGRAM
80 60
PROFIT/L OSS
40 20 0 5500 5600 5700 5800 5900 6000 6100 6200 6300 6400 6500 -20 -40
June 2013
30
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
CommoditiesDownside risk amid US stimulus debate and weak global macros Macro-economy
Key points US May ADP employment change increase to 135K vs 113K in April; forecast of 170k Stiglitz says too soon to cut US stimulus as growth not normal Citi sees Death Bells for commodities super-cycle in 2013 OECD forecasts global economic recovery next year OECD annual inflation hits record low of 1.3% in April EU Q1 GDP sa (QoQ): -0.2%; -1.1%(YoY) Lagarde sees signs of slowing momentum in some emerging markets Euro-area services, factory gauge rises more than estimated; composite gauge contracts for 16th month EMU: ZEW surveyeconomic sentiment rises less than expected in May Unemployment rate reached new high (12.2%) in euro zone in April UK still a long way from recovery: IMF UK services expand more than forecast in May (54.90, forecast 53.10, prior 53.1) US: ISM non-manufacturing PMI climbs more than expected in May US factory orders up 1% in April Consumer spending in the USA unexpectedly declined in April US GDP dragged down by government spending slump (2.4%, forecast 2.5%) US durable goods new orders up 3.3% in April New US home sales rose to second-highest level since 2008 Japan fails to plough yen profits back into capital spending Chinese manufacturing gauge unexpectedly rises in May (50.8 vs forecast 50) China growth trends more stable, fundamentals sound: Chinas finance ministry China starts to diversify reserves from US debt, WSJ says Chinas April home sales fall 13% MoM as property curbs take toll Chinas April industrial production (YoY) up to 9.3% vs 8.9%; forecast 9.5%
COMMODITY PRICES IN MAY 2013 (IN $) Commodity Copper Zinc Lead Gold Silver Crude oil High 7533.0 1933.0 2202.0 1488.1 24.6 97.4 Low 6780.0 1811.8 1938.0 1338.4 20.3 90.3 Close 7309.0 1927.0 2201.0 1387.8 22.3 92.0 Mon chg % 3.6 3.2 8.6 -6.0 -8.5 -1.6
MONTHLY CHANGE IN DOE CRUDE STOCKS (APR-MAY 2013) Crude oil Change in (000' bbls) 26-April-13 Change in (%) 2268 395284 0.57 Dist. 4911 115752 4.24 Gasoline 3179 215984 1.47
Refinary utlisation rate was at 86.40% in the last week of May.
MONTHLY CHANGE IN SHFE STOCKS (APR-MAY 2013) Copper Change (in tonne) 25-April-13 Change (in %) -37863 217180 -17.43 Lead -12266 133206 -9.21 Zinc -10651 303192 -3.51
MONTHLY CHANGE IN LME STOCKS (APR-MAY 2013) Copper Change (in tonne) 30-April-13 Change (in %) -10150 618600 -1.64 Lead -35700 255175 -13.99 Zinc 18350 1068475 1.72
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil bulls pinning hopes on US driving season demand

Key points OPEC to study US shale oil bonanza as export concern rises OPEC crude production rises to 30.41m b/d in May 2013 China's crude oil output up 3.3% in April 2013 IEA: US supply, non-OECD demand to spur big shifts in global oil economy Chinas oil refining falls to 8-month low; power output gains Seaway pipeline wont reach 335,000bpd before January 2014 US production reaches 7.37mbpd, the most since February 1992 IEA: Comfortable supply and equation despite geopolitical risks Chinas apparent oil demand weakest since August last US crude production exceeds imports for first time in 16 years
WTI NYMEX crude oil
CMP: $94
Crude oil traded in the $90-98 range in May and ended the month lower on the US stimulus debate and a rise in crude oil and fuel stockpiles. The US crude oil inventories remain highly elevated at 82-year high. US crude oil production exceeded the imports for the first time in 16 years as production stood at a 21-year high. The USA will extend waivers from sanctions for nine nations that import Iranian oil. Sanction exemptions for China, India, Malaysia, South Korea, Singapore, South Africa, Sri Lanka, Turkey and Taiwan will continue. Weaker than expected global macro-economic indicators and ample inventories are likely to keep the upside limited. Crude oil bulls are looking forward to the US driving season demand for gasoline. The peak-demand summer driving season when Americans usually take vacations began with the May 27 Memorial Day holiday and shall end in early September with Labor Day. However, the reported gasoline demand is weak. We suggest selling into rallies for a possible target of $88.
31
June 2013
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Lacklustre trading in bullions

Key points Chinas April gold imports from Hong Kong fall on quota backlog Roubini sees gold falling to $1,000 by 2015 on global recovery Gold premiums tumble from India to Hong Kong as demand wanes Russia, Kazakhstan, Azerbaijan extend gold purchases as prices tumble Mexico, Canada reduce their gold holdings Silverthe second largest surplus on record in 2013 Indias curbs won't crimp gold demand: World Gold Council Gold demand in Q1 slid 13% to three-year low on investor ETP sales Used gold supply heads for 2008 low as sellers balk at commodities India increases import tax on gold by 2% to 8% RBI imposes restriction on gold import
Gold
CMP: $1,404 (spot)
Gold tumbled nearly 7% in May this year due to strong equities and the dollars strength coming from the possibility of sooner than expected tapering of the US Federal Reserves stimulus. ETP outflows and subdued inflation continue to weigh on the yellow metal. The Reserve Bank of India (RBI) has beefed up gold import restrictions. Gold imports on a consignment basis by both nominated agencies and banks are only allowed to meet the needs of gold jewellery exporters and financing for bullion imports will now be on a 100% cash margin basis. India hiked the import duty on gold from 6% to 8% to discourage gold demand in order to address the deficit issue. A weaker than expected US data and the wobbling equities could lend some support to the metal in the near term. However the upside is likely to be limited. Physical buying is looking weak with prices above $1,400. We look for a range of $1,350-1,450 in the near term. The metal is likely to fall to $1,050 in the medium term to long term.
Silver
CMP: $22.60 (spot)
Silver is under pressure on account of a weak industrial demand and the growing surplus that is likely to hit the second highest level on record. China's silver imports for April 2013 were down 28% year on year at 172 tonne. The metal is likely to face supply pressure above $25. It will move in the $20-25 range in the near term.
Base metals likely to be on defensive

Key points Freeport operations stay shut in Indonesia, threatening copper supplies Operations located in Papua province produce 220,000 tonne of ore a day European copper premium said to increase on limited supply Lead backwardation widest in six months as stockpiles fall South Korea's Public Procurement Service stocks base metals, sees demand for copper Minmetals Unit MMG sees solid zinc demand in medium to long term Chinas April copper imports dropped to 22-month low Copper buying by Chinas SRB possible, case not strong: Goldman SHFE lead rally lagging LME lead rally China's refined copper output down 0.6% MoM in April 2013, up 11.27% YoY Zinc seen by Bank of America as possibly the new copper
Copper
CMP: Rs420 (June contract)
Base metals rallied in May this year following an aggressive sell-off at the start of the month. Supply issues and a possibility of production cuts due to lower prices supported the complex. Copper is likely to draw support from supply disruptions at Freeports operations in Indonesia. A tunnel collapse killed 28 people at the complex on May 15th. The halt may reduce output by about 680 metric tonne a day. Macro-economic issues and the talks of the US stimulus tapering could pressurise the counter. The premium in Europe climbed in the past month amid limited availability of the metal. We look for a range of Rs408-430.
Lead
Lead was the best performer in May on tightening London Metal Exchange (LME) cash-to-3-month spread as the LME and Shanghai Futures Exchange (SHFE) inventories are in a declining mode. However, Chinas lead prices lagged gains on the LME. The global refined lead market was in a deficit of 16,000 metric tonne in the first three months of 2013, compared with a 13,000-tonne surplus in the same period last year. We look for a correction to Rs121 level. The upside is likely to be capped at Rs129.
June 2013
32
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Zinc
The global refined zinc market was in surplus by 43,000 metric tonne in the first three months of 2013, the International Lead and Zinc Study Group said, falling from a year-earlier surplus of 141,000 tonne. The metal is likely to trade between Rs106 and Rs111 with a downward bias in the near term.
CMP as on June 05, 2013
Major economic events in June 2013

Date Region 01/06/2013 China 03/06/2013 Germany Event Manufacturing PMI PMI Manufacturing Forecast 50 49 47.8 50.5 -$41.0B 53.1 47.5 -0.20% 1.50% -1.00% 0.50% 375B 0.50% 165K 7.50% $20.90B 2.50% 9.20% ---------------------Actual 50.8 49.4 48.3 49 54.9 47.2 -0.20% 1% -2.30% 0.50% 375B ---Prior 50.6 49 47.8 50.7 52.9 47.5 -0.20% -4.00% 2.20% 0.50% 375B 0.50% 165K 7.50% Impact Unexpectedly accelerated in May, supportive for industrial commodities Better than expected, still not enough to support industrials Better than expected, still not enough to support industrials, supportive for euro though Bearish for dollar and industrials, stimulus tapering could be delayed Somewhat supportive for the dollar Supportive for pound and industrials Negative for euro In line with estimate Trailed the forecast; bearish for dollar and industrials Bearish for the industrials and euro No change No further addition to stimulus; for pound bullish development Refrained from cutting rates, no clues to further rate cuts; supportive for euro Less than expected number would be bearish for dollar and industrials, bullish for bullions Only statistically important as job seekers' pool contracts, still lower rate could weigh on gold Very important for industrial commodities and currencies; data trailing the estimate would be bearish for the base metals, crude oil and rupee Lower than expected number would be positive for industrial commodities on increased possibility of further easing Important as markets talk about a slowdown in China Important for yen and industrial commodities Important for base metals and crude oil Decline in the index would be gold negative Important for industrial commodities Declining inflation would be negative for gold and euro Important for industrial commodities ; bullish data would be bearish for gold Higher than expected data would weigh on gold Larger surplus would be positive for euro Important for euro and industrial commodities Decline in inflation is bearish for gold Bullish data would support base metals and crude oil, would be bearish for gold Shows investors confidence in the market; higher than forecast supportive for euro Data trailing the forecast would be bearish for euro and industrials Better than expected data to be bearish for gold and bullish for dollar Bearish data would be negative for industrial commodities; supportive for gold Key for industrial metals, especially for copper and aluminium Important for euro Bullish data would be bearish for gold and bullish for dollar and industrials Higher than the forecast will be supportive for industrial commodities Crucial for pound Crucial for euro Lower than forecast bearish for industrial commodities and bullish for gold
03/06/2013 Euro zone PMI Manufacturing 03/06/2013 USA 04/06/2013 USA 05/06/2013 UK ISM Manufacturing Trade balance PMI Services
-40.3 -$38.8B
05/06/2013 Euro zone PMI Services 05/06/2013 Euro zone Euro zone GDP s.a. (QoQ) 05/06/2013 USA 06/06/2013 Germany 06/06/2013 UK 06/06/2013 UK 07/06/2013 USA 07/06/2013 USA 08/06/2013 China 09/06/2013 China 09/06/2013 China 10/06/2013 Japan 11/06/2013 Japan 13/06/2013 USA 13/06/2013 USA 14/06/2013 USA 14/06/2013 USA Factory orders Factory orders MoM (sa) BoE announces rates BoE asset purchase target Change in non-farm payrolls Unemployment rate Trade balance (USD) Consumer Price Index (YoY) Industrial production (YoY) GDP (QoQ) Machine tool orders Import Price Index (MoM) Retail sales ex auto & gas Industrial production U. of Michigan Confidence
06/06/2013 Euro zone ECB announces rates
-- $18.16B -----------------------2.40% 9.30% 0.90% -23.60% -0.50% 0.60% --0.50% 84.5 22.9B 27.6 0.10% 853K -21.9 105.7 1.30% 76.2 2.30% 6.5 2.40% 11.40% 0.30% -0.76 -0.20%
14/06/2013 Euro zone Euro zone CPI (YoY)
17/06/2013 Euro zone Euro zone trade balance 18/06/2013 Euro zone ZEW Survey (econ. sentiment) 18/06/2013 USA 18/06/2013 USA 24/06/2013 Germany 25/06/2013 USA 25/06/2013 USA 25/06/2013 USA 26/06/2013 Germany 26/06/2013 USA 27/06/2013 China 27/06/2013 UK 27/06/2013 USA CPI ex food & energy (MoM) Housing starts IFO - business climate Durables ex transportation Consumer confidence New home sales MoM GFK Consumer Confidence Survey GDP QoQ (Annualized) Industrial profits YTD YoY GDP (QoQ) Personal spending
20/06/2013 Euro zone Euro zone Consumer Confidence
27/06/2013 Euro zone Business climate indicator
33
June 2013
TREND & VIEW
COMMODITY
TECHNICALS
Accumulation phase in gold

After a near vertical fall, gold has taken support near the longterm rising trendline. For the last few sessions it has been consolidating near the trendline as well as near the daily and weekly lower Bollinger Bands. It can form a triangular pattern, which has a high probability of turning out an accumulation triangle. The daily momentum indicator is showing a positive divergence and is in bullish mode. Unless the swing low of $1,321.35 is broken the yellow metal can move up to test the swing high of $1,487 and beyond that can move up till $1,525.
Trend Up Trend reversal $1,321.35 Supports $1,365/1,339 Resistances $1,436/1,500 Target
June July Augus t Septem ber Novem ber 2013 February April May June July KST (0.00699) 0 -5 -10 1850
1800
1750
1700
1650
1600
1550
1525
1500
1487
1450
1400
1350
1321.35
1300
$1,487/ $1,525
A bounce looks imminent in silver

Silver had broken down from a bearish triangle and resumed the overall downtrend. On the downside, the white metal cracked through multiple previous lows and reached the lower end of the medium-term falling channel. It has achieved the medium-term equality target on the downside, ie $21.00. On the weekly chart the white metal has formed a Doji pattern, which shows a loss of momentum on the downside. Thus, unless the recent low of $20.84 breaks a decent bounce is likely. The key level on the upside is $24.82.
Trend Up Trend reversal $20.84 Supports $21.73/21.50 Resistances $23.30/23.75 Target
20.84
KST (-1.11921) 0 -5 -10 SILVER [CASH] (22.4500, 22.7400, 22.3100, 22.5200, +0.07000) 36.5 36.0 35.5 35.0 34.5 34.0 33.5 33.0 32.5 32.0 31.5 31.0 30.5 30.0 29.5 29.0 28.5 28.0 27.5 27.0 26.5 26.0 25.5 25.0
24.82
24.5 24.0 23.5 23.0 22.5 22.0 21.5 21.0 20.5
$24.82
20.0 Novem ber Decem ber 2013 February March April May June July A
Distribution looks complete in crude oil

Crude oil continues to oscillate between its crucial weekly moving averages. The oscillations are taking place in between two converging trendlines. In terms of price pattern the oil has formed a large distribution triangle. The oil has moved up to complete the last leg of the pattern. Thus, the last leg of the pattern looks complete at $97.22. From there the oil has started a fresh move down and fallen near its key weekly moving averages. Overall, the oil is expected to fall towards $85.61-77.28. The swing high of $97.22 will act as a key hurdle on a closing basis.
Trend Down Trend reversal $97.22 Supports $89.16/84.05 Resistances $95.92/97.00 Target
D 2011 M A M J J A S O N D 2012 M A M J J A S O N D 2013 M A M J J A S O KST (-0.07384) 20 15 10 5 0 -5 -10 -15
LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] (91.7300, 94.4800, 91.2600, 93.7400, +1.77000) 120
115
110
105
100
97.22
95
90
85.61
85
80
77.28
75
$85.61/ $77.28
June 2013
34
COMMODITY
TECHNICALS
TREND & VIEW
Copper retested neckline

Copper formed a large triangle where the last leg made a throwover pattern. The triangle has been formed in the right shoulder of a larger head-and-shoulders (H&S) pattern. Thus, the red metal is in for a significant decline. Copper has broken the lower end of the triangular pattern as well as the neckline of the H&S pattern and moved up to retest the neckline. Thus, this is an opportunity to initiate fresh short positions. The targets on the downside are the previous low of $2.994 and the equality target, ie $2.58. On the flip side, the 40-daily exponential moving average (DEMA), ie $3.48, will act as a strong resistance on a closing basis.
Trend Down Trend reversal $3.48 Supports $3.22/2.80 Resistances $3.42/3.45 Target $2.994/ $2.58
KST (-3.55752) 25 20 15 10 5 0 -5 -10 -15 -20 5.0 4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4.0 3.9 3.8 3.7 3.6
HG COPPER CONTINUOUS 25000 LBS [COMEX] (3.28100, 3.39800, 3.28100, 3.37150, +0.07900)
3.48
3.5 3.4 3.3 3.2 3.1
2.994
3.0 2.9 2.8 2.7
2.58
2.6 2.5 2.4 2.3
A S O N D 2010
MJ J
A S O N D 2011
MJ J
A S
O N D
2012
A MJ
J A S O N
D 2013
A M J J
A S O
Opportunity for bears in nickel

MCX nickel has formed a large H&S pattern. Earlier it had broken out on the downside from the neckline. On the way down it had broken down from a bearish flag pattern and achieved the conservative as well as aggressive flag targets. Since then it has done a channelised pull-back and retested the neckline. Thus, this is an opportunity to initiate fresh short positions. The base metal is set for a significant decline. The conservative H&S target is Rs690. The reversal of the bearish view can be placed above the 40weekly exponential moving average (WEMA), ie Rs900, on a closing basis.
Trend Down Trend reversal Rs900 Supports Rs787/750 Resistances Rs880/890 Target
e J u ly Aug u s t S e p te m b e r N o ve m b e r D e c e m b e r 2 0 1 3 F e b ru a ry M a r ch A p ri l Ma y K S T ( 2 .9 7 9 2 2 ) 5 0 -5 N IC K E L 1 K G - 1 M O N T H ( 8 6 2 . 5 0 0 , 8 7 8 .5 0 0 , 8 6 2 .5 0 0 , 8 6 6 . 0 0 0 , + 2 .5 9 9 9 8 ) 1 05 0 1 04 0 1 03 0 1 02 0 1 01 0 1 00 0 9 90 9 80 9 70 9 60 9 50 9 40 9 30 9 20 9 10 9 00 8 90 8 80 8 70 8 60 8 50 8 40 8 30 8 20 8 10 8 00 7 90 7 80 7 70 7 60 7 50 7 40 7 30 7 20 7 10 7 00
900
690
6 90 6 80 6 70
June
J u ly
Rs690
Turmeric tumbling down

NCDEX turmeric has formed a multi-month wedge pattern. Near the top of the pattern increased volume activity suggests that distribution has taken place. Thus, turmeric has tumbled down from there. It has broken out on the downside from the wedge pattern and even fallen below the crucial short-term moving averages. It recently formed a short-term bounce and resumed the downtrend. The short-term and medium-term momentum indicators are in line with the bearish expectations. The targets on the downside are Rs5,230 and Rs4,856. The reversal can be tightened to Rs6,018 on a closing basis.
Trend Down Trend reversal Rs6,018 Supports Rs5,142/5,000 Resistances Rs5,800/5,870 Target
40000 20000 10000 MACD (-129.440) 500 400 300 200 100 0 -100 -200
TURMERIC QUINTAL - 1 MONTH (5,660.00, 5,714.00, 5,456.00, 5,550.00, -132.000) 7500 % 7000 6500 %
6018
%
6000
5500 %
5230 4856
5000
4500
4000
3500 %
Rs5,230/ Rs4,856
June
July
Augus t
Septem ber
Novem ber
2013
February March
April
May
June
Ju
35
June 2013
MONTHLY VIEW
CURRENCY
FUNDAMENTALS
Fears of Feds QE exit spooks currency markets

Key points Rupee falls along with other Asian currencies on fears of Feds QE exit Indias WPI inflation fell to a 3-year low at 4.89 in April 2013 ECBs negative rates dilemma hurts euro EU in recession for six consecutive quarters Timing of the US stimulus roll-back being debated; possible in September/December Bank of Japan faces herculean task with rising bond yields and falling inflation
May 2013 contract price movement
USDINR 57 JPYINR 56
73
CURRENCY LEVELS IN MAY 2013 (IN RS) Currency INR-USD INR-EUR INR-GBP INR-JPY High 56.26 72.44 84.70 56.03 Low 53.73 70.48 83.37 53.52 Close 56.25 72.29 84.55 55.05 Monthly chg (%) -1.96 -1.60 -0.70 -0.05
May 2013 contract price movement

EURINR GBPINR 85
56 55 55 54 54
71 83 72 84
53 10-May-13 12-May-13 14-May-13 16-May-13 18-May-13 20-May-13 22-May-13 24-May-13 26-May-13 28-May-13 2-May-13 4-May-13 6-May-13 8-May-13
53
70 10-May-13 12-May-13 14-May-13 16-May-13 18-May-13 20-May-13 22-May-13 24-May-13 26-May-13 28-May-13 2-May-13 4-May-13 6-May-13 8-May-13
82
INR-USD
CMP: Rs56.85 (SPOT)
The rupee fell by 4.8% against the dollar in May this year as the currency markets reacted to the possibility of the US Federal Reserve (Fed) reducing the size of its $85-billion monthly quantitative easing (QE) programme. Shaky equities markets are adding to the downside pressure. Since the onset of the financial crisis, the emerging market currencies including the rupee have benefited more from at least $2.5 trillion of cash that the US central bank has pumped into the financial system. The other Asian currencies fell to multi-month lows against the dollar on similar grounds. Weaker than expected US macro-indicators, like factory orders, consumer spending, gross domestic product and manufacturing, could delay the US stimulus tapering, which could support the domestic currency to some extent. However, the concerns over the current account deficit and the weakness in the domestic equities will cap the gains in the rupee. The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) in India continued to fall in April while the March Index of Industrial Production data rose to 2.5%. We see the USD-INR in the 55.30-57.30 range.
INR-GBP
CMP: Rs87.81 (SPOT)
The pound fell 3.39% against the dollar, in line with the broad-based dollar strength and increased pressure from the International Monetary Fund to implement monetary stimulus measures amid falling output and easing inflationary pressures. The UK CPI fell to 2.4% in April which also triggered speculation that the incoming governor Mike Carney will have more scope for conducting monetary easing. On a positive note, the manufacturing and service sector activities continued to expand in the UK. We expect the pound to remain under pressure as the markets expect Mr Carney to adopt a dovish stance after taking charge in July. Though the overall UK economy is far from being out of woods, the pound may witness some strength on recent economic data and a possibility of delay in the US stimulus roll-back. The GBP-USD is likely to be in the range of 1.53 to 1.57 in the near term. We see the GBP-INR in the 86-89 range.
INR-EUR
CMP: Rs74.56 (SPOT)
The single currency has been remarkably resilient against the greenback which pushed the EUR-INR to a life-time high in May. Despite the concerns of an early end to the US Feds QE and talks of negative deposit rates being considered as policy option by the European Central Bank (ECB), the euro held its ground against the dollar. The macro picture remains disappointing as growth remains weak and unemployment rate continues to hit new highs every passing month. In our opinion, the euro has managed to stay strong as yields in periphery remained suppressed on account of excess liquidity in global markets. Our outlook on the euro stays bearish as the liquiditydriven strength will not last for long. ECB is likely to cut rates further as pressures for a weak euro have been on the rise from the corporate lobby. We see the EUR-USD in the 1.32-1.27 range. We see the EUR-INR in the 73.20-76.00 range.
INR-JPY
CMP: Rs57.35 (SPOT)
The USD-JPY surged 3% in May clocking a high of 103.73 after the US Treasury-bond yields rose on fears of an early end to the Feds open ended QE. However, since mid May, the pair has been on the verge of reversal as Japans policy gamble has begun to explode. The Japanese economic minister voiced concerns over the excessive weakness of the yen. The Japanese 10-year bond yields rose sharply which reduced the demand for the dollar. Moreover, the rising yields are counterproductive as the nations debt-servicing costs will rise by 100 billion yens ($982 million) for each 10-basis-point increase in the yields. We expect the USD-JPY to fall to 93 levels in the coming months due to the unwinding of short yen trades and nervousness in global equity markets. The yen will also gain strength as the economic output is on the rise while the economy still battles deflation. We see the JPY-INR in the 56.20-61.00 range.
CMP as on June 05, 2013
June 2013
36
CURRENCY
TECHNICALS
TREND & VIEW
USD-INR: Up, up and away

From a high of 55.88 the USD-INR tumbled in a three-wave manner in the last month. It retraced 61.8% of the previous rally. From there the USD-INR has started moving towards north. However, the entire complex correction looks complete at the low of 53.63. The USD-INR has formed an ending diagonal and broken out on the upside. The daily momentum indicator has started a new cycle on the upside. On the way up, the price has crossed a medium-term falling trendline as well as the previous high of 55.88. The subsequent levels on the upside are 57.325 (an all-time high) and 58.30 (the channel target). A minor-degree dip till 55.88 is possible which will be a fresh buying opportunity. The reversal can be pegged at 55.10 on a closing basis.
MAC D (0 .5 4 8 3 2 ) 0 .5 0 .0 -0 .5 U SD IN R - IN D IAN R U PEE (5 6 .6 5 0 0 , 5 6 .7 3 5 0 , 5 6 .4 0 0 0 , 5 6 .4 8 0 0 , -0 .1 8 0 0 0 ) 5 9 .0
GBP-INR: Wait and attack

Last month the GBP-INR faced resistance at a level where it had faced resistance multiple times in the recent past. Consequently, it broke down from the medium-term rising channel and reached a long-term rising trendline. From there the price has seen a decent bounce and retraced 61.8% of the previous fall. The bounce can extend further to achieve the equality target, which coincides with the 78.6% retracement mark (87.83). Once that is achieved one can initiate fresh short positions. From there the GBP-INR can fall back to 83.70-82.50 levels. The reversal for the bearish view is 89.82.
R e la tive Stre n g th In d e x (6 9 .7 6 0 9 ) 80 70 60 50 40 30 9 1 .0 9 0 .5 9 0 .0 8 9 .5 8 9 .0 8 8 .5 7 8 .6 %
58.30 57.325
5 8 .5 5 8 .0 5 7 .5
1 0 0 .0 % GBPIN R (8 6 .8 0 3 0 , 8 6 .9 1 2 0 , 8 6 .1 9 0 0 , 8 6 .4 8 2 0 , -0 .3 2 1 0 0 )
5 7 .0 5 6 .5 0 .0 % 5 6 .0 5 5 .5 2 3 .6 % 3 8 .2 % 5 0 .0 % 6 1 .8 %
87.83
8 8 .0 8 7 .5 8 7 .0
55.10
5 5 .0
6 1 .8 %
8 6 .5 8 6 .0 8 5 .5
5 4 .5 5 4 .0 5 3 .5
3 8 .2 % 5 0 .0 %
8 5 .0 8 4 .5 8 4 .0
5 3 .0 5 2 .5 5 2 .0
83.70
2 3 .6 %
8 3 .5 8 3 .0 8 2 .5
82.50
8 2 .0 8 1 .5 8 1 .0
1 0 0 .0 %
5 1 .5 5 1 .0
0 .0 %
8 0 .5 8 0 .0 7 9 .5
5 0 .5 Ma y Ju n Ju l Au g Se p Oct Nov Dec 2013 Fe b Ma r Ap r Ma y Ju n Ju l

Ma y Ju n Ju l Au g Se p Oct Nov D ec 2013 Fe b Ma r Ap r Ma y Ju n Ju l
EUR-INR: Poised for a nosedive

The EUR-INR crossed the previous high of 73.44 indicating that a larger Wedge pattern is in formation. Currently the last leg of the pattern is unfolding on the upside. It has reached the upper end of the pattern; thus the move is expected to subside here. If it attempts a throw-over it can touch the the upper end of the long-term rising channel, ie 75.00. Thus, one can start building up short positions with reversal above 76.00 on a closing basis. The targets on the downside will be 71.50 and 70.50.
R e la tive Stre n g th In d e x (7 3 .9 3 9 9 ) 70 60 50 40 30 EU R IN R (7 4 .0 8 3 0 , 7 4 .1 4 0 0 , 7 3 .6 0 3 0 , 7 3 .8 6 5 0 , -0 .2 1 8 0 0 ) 7 5 .5
JPY-INR: In recovery mode

The JPY-INR on the way down has broken the rising trendline and suffered a sharp sell-off. The larger picture shows that the JPY-INR was trading in a medium-term rising channel (shown in light blue); however, that has been broken on the downside. It has achieved the equality target on the downside. Recently the JPY-INR formed an ending diagonal, which marks the end of the fall. It has broken out of the bullish pattern as well as the medium-term falling channel. The price can dip to retest the channel break-out line, ie 0.5520, where one can initiate fresh long positions. The key levels on the upside will be 0.5884 and 0.5940. The reversal can be placed at 0.5447.
KST (3 .5 9 2 1 0 ) 0
JPYIN R (0 .5 6 9 2 0 , 0 .5 7 0 3 0 , 0 .5 6 2 1 0 , 0 .5 6 4 5 0 , -0 .0 0 4 6 0 )
-5 0 .7 4 0 .7 3 0 .7 2 0 .7 1 0 .7 0 0 .6 9 0 .6 8 0 .6 7 0 .6 6 0 .6 5 0 .6 4 0 .6 3 0 .6 2 0 .6 1
75.00
7 5 .0 7 4 .5 7 4 .0 7 3 .5 7 3 .0 7 2 .5 7 2 .0
71.50
7 1 .5 7 1 .0 7 0 .5
0.5940 0.5884
0 .6 0 0 .5 9 0 .5 8 0 .5 7 0 .5 6 0 .5 5
70.50
7 0 .0 6 9 .5 6 9 .0 6 8 .5 6 8 .0 6 7 .5 6 7 .0 6 6 .5
0.5447
0 .5 4 0 .5 3 0 .5 2 0 .5 1
u ly
Au g u s t
Se p te m b e r
N o ve m b e r
2013
Fe b ru a ry
Ap ril
Ma y
Ju n e
Ju ly
Ju n
Ju l
Au g
Se p
Oct
N ov
Dec
2013
Fe b
Ma r
Ap r
Ma y
Ju n
Ju l
Currency USD-INR GBP-INR EUR-INR JPY-INR
View Up Down Down Up
Reversal 55.10 89.82 76.00 0.5447
Supports 55.88/55.50 85.50/84.45 72.72/71.00 0.5527/0.5500
Resistances 57.00/58.00 87.11/87.50 74.50/75.00 0.5800/0.5900
Target 57.325-58.30 83.70-82.50 71.50-70.50 0.5884-0.5940
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June 2013
PMS FUNDS
PMS
DESK
Portfolio Management Service

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

OVERVIEW
The ProPrimeTop Equity PMS strategy is suitable for the long-term investors looking to create an equity portfolio through disciplined investments that will lead to a growth in the portfolios value with low to medium risk.
(In %) 1 month 3 month Since inception*
Product performance as on May 31, 2013

Scheme -1.4 1.3 -4.2 11.8 -10.6 12.7 -12.9 Sensex 1.3 4.8 9.9 11.2 -8.9 12.6 -12.7 Nifty 0.9 5.1 10.9 12.4 -9.3 14.5 -12.5
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough fundamental research. Investments are made primarily in the Nifty Fifty or the BSE 100 scrips. Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and that of minimum of 90% in the BSE 100 stocks. Endeavours to create a core portfolio of blue-chip companies with a proven track record and have partial exposure to quality companies in the mid-cap space.
Best month Worst month Best quarter Worst quarter

*16-June-11
Disclaimer: Returns are based on a clients returns since inception and may be different from those depicted in the risk disclosure document.
PRICING
Minimum investment of Rs25 lakh Charges 2% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 12% hurdle is crossed at the end of every fiscal
Top 10 stocks
Bank of Baroda BHEL Cipla HDFC Bank Larsen & Toubro Oil India Reliance Communications Reliance Industries State Bank of India
Fund Manager: Gaurav Dua

FUND OBJECTIVE
Zee Entertainment Enterprises
A good return on money through long-term investing in quality companies
June 2013
38
PMS
DESK
PMS FUNDS
PROPRIME - DIVERSIFIED EQUITY

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

Scheme -4.4 -7.3 176.4 50.9 -23.2 71.1 -28.5 S&P CNX 500 0.9 4.6 245.9 34.4 -27.2 51.2 -28.6
Since inception* Best month Worst month Best quarter Worst quarter
*27-Aug-04
PRICING
Minimum investment of Rs25 lakh Charges 2.5% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 15% hurdle is crossed at the end of every fiscal
FUND MANAGERS VIEW

The market remained choppy throughout the last month. It moved in the 5900-6100 range while a majority of the stocks traded at their yearly lows. The markets valuation remains intact. Rather, the market has become more attractive, given the recent developments at the macro-economic level. A fall in the commodity prices and the declining interest rates will certainly play an important role in improving the margins of Indian corporates in the second quarter of FY2014. We are convinced the market will soon start to take note of the gap between the valuations of the large-cap and mid-cap stocks, resulting in a substantial upside to ProPrime Diversified Equity. Even globally, the receding worries regarding the euro zone and the improving economy of the USA have boosted investor sentiment. Hence, precious metals are cooling off, thereby helping India to control its current account deficit to a large extent. We booked a healthy profit in Britannia Industries and Torrent Pharmaceuticals in the last month and concentrated on Cipla, the banking stocks, such as Bank of Baroda and Allahabad Bank, and Power Finance Corporation. We are looking forward to the next meeting of the Reserve Bank of India as we expect another round of downward revision in the interest rates then.
Top 10 stocks
Bank of Baroda BHEL Cipla Federal Bank ITNL Power Finance Corporation Reliance Industries Reliance Infrastructure Southern Petrochemicals Sterlite Industries
Fund Manager: Suhas Samant
FUND OBJECTIVE
A good return on money through long-term investing regardless of short-term volatility
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June 2013
PMS FUNDS
PMS
DESK
PROTECH - DIVERSIFIED
OVERVIEW
The ProTechDiversified PMS strategy is suitable for long-term investors who desire to profit from both bullish and bearish market conditions. The strategy involves going long (buying) or going short (selling without holding) on certain investment classes by predicting the market direction based on a back-tested automated model.
INVESTMENT STRATEGY
This strategy has the potential to generate profits irrespective of the market direction by going long or short on specific indices and stocks. It invests in the Nifty and the Bank Nifty indices (via futures) and 10 stock futures. An automated basic back-testing model is used to predict the market direction for each of the indices and stocks which then decides the strategy to be deployed in terms of going long or short. The portfolio is not leveraged, ie its exposure will never exceed its value.
(In %) 1 month 3 month FY12-13 FY11-12 FY10-11 FY09-10

Scheme -0.5 3.4 2.3 8.8 9.8 25.9 11.4 -8.1 6.3 -3.5 Sensex 1.3 4.8 8.2 -10.5 14.8 17.4 11.2 -10.6 12.6 -12.7 Nifty 0.9 5.1 7.3 -9.2 14.7 18.3 12.4 -10.3 14.5 -12.5
PRICING
Minimum investment of Rs25 lakh Charges AMC fees: Brokerage: Profit sharing: 0% 0.05% Flat 20% charged on a quarterly basis
Since inception* Best month Worst month Best quarter Worst quarter
*16-May-2010
FUND MANAGERS VIEW

The market started May on an optimistic note and rallied sharply in the first half of the month only to give away some of the gains in the later half on account of profit booking. The Nifty finally closed the month with a gain of 0.9%. Retail participation, which was on the short side throughout the month, saw some short closures. On the other hand, the foreign institutional investors closed their long positions with aggressive call writing and long put option build-up in the June series. This indicates the overall bias for the market continues to be negative and selling pressure is likely to be seen at higher levels. June has started on a negative note as the roll-over into the June series has been relatively low which coupled with a low roll-over cost indicates a lack of conviction among the bulls above 6100. This puts a major hurdle for the market at around 6100, which can be considered as a trend reversal for the current downtrend. India VIX, which had bottomed out at around 14% in late April, continued to rise in May in spite of the market being positive in May. This indicates market participants are not convinced by the rally seen in the last month and have taken protection for their portfolios. For June the upside seems to be capped at around 6000-6100 levels whereas on the downside the first support will come at around 5880. If the market falls below this level we might drift down to 5700. The net asset value of ProTech Diversified decreased by 0.46% in May 2013. In our endeavour to ensure superior risk-adjusted returns we have made a few changes in the scheme based on the performance of the constituents in the last couple of months. The changes are listed below: DLF has been replaced by Century Textiles as the former has been stuck in range for the last couple of months and is not delivering the desired returns; Ranbaxy Laboratories has been replaced by Apollo Tyres as the former has not been performing for the last couple of months.
Investments in*
Apollo Tyres Bank Nifty Century Textiles IDBI Bank JP Associates LIC Housing Finance Nifty Punjl Loyd Reliance Capital Tata Motors Tata Steel Yes Bank
*Traded stocks
Fund Manager: Abhinay Jain

FUND OBJECTIVE
Absolute returns irrespective of market conditions through a long-short strategy followed in multiple investments
June 2013
40
PMS
DESK
PMS FUNDS
PROTECH - NIFTY THRIFTY

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

(In %) 1 month 3 month FY12-13 FY11-12 FY10-11 FY09-10 Since inception* Scheme -4.0 -6.2 3.7 13.1 9.2 14.7 147.1 28.9 -17.1 33.3 -11.7 Sensex 1.3 4.8 8.2 -10.5 10.9 80.5 95.2 28.3 -23.9 49.3 -25.0 Nifty 0.9 5.1 7.3 -9.2 11.1 73.8 98.1 28.1 -26.4 42.0 -24.5
INVESTMENT STRATEGY
The strategy has the potential to generate profits irrespective of the market direction by going long or short on Nifty futures. An automated basic back-testing model is used to predict the market direction for the Nifty which then decides the strategy to be deployed in terms of going long or short. The portfolio is not leveraged, ie its exposure never exceeds its value.
PRICING
Best month Worst month Best quarter Worst quarter
*01-Feb-2006
FUND MANAGERS VIEW

This May was one of the worst months for us in recent times, as the moves on both sides did not follow up with a larger trend and led the ProTech Nifty Thrifty to deliver a negative return of 3.96% for the month. The negative return gives back the returns of the previous month. We were expecting a more trending market in the months ahead and still do. The new high made by the market in May might turn out to be a blip. The Nifty has spent too much time in a 10-15% range quarter after quarter and that is not normal compared with the previous decades. We maintain our view of a market downturn and increasing volatility. As and when that plays out the Niftys range should expand to 20%+ and give the ProTech Nifty Thrifty ample opportunities to profit and expand its returns.
Investments in
Nifty Index
Fund Manager: Rohit Shrivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
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June 2013
PMS FUNDS
PMS
DESK
PROTECH - TRAILING STOPS

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

Scheme -0.5 -1.7 14.9 29.0 48.2 9.1 -4.4 9.9 -1.0 Sensex 1.3 4.8 8.2 -6.1 6.7 11.3 -8.9 12.6 -12.7 Nifty 0.9 5.1 7.3 -4.6 7.8 12.4 -9.3 14.5 -12.5
INVESTMENT STRATEGY
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls. A risk model has been developed for stock portfolio allocation that reduces the risk and portfolio volatility through staggered building of positions. It is non-leveragedthe exposure will never exceed the value of the portfolio.
3 month FY12-13 FY11-12 FY10-11 FY09-10 Since Inception* Best month
PRICING
Worst month Best quarter Worst quarter

*09th May 2011
FUND MANAGERS VIEW

We have managed the net asset value of ProTech Trailing Stops in a 5% range for several months amidst volatility. The level of rotation in stocks was very high and thus many trades stopped out. We won some and lost some but maintained our defensive stance by taking small exposures to avoid a drawdown. As the market takes a clear shape, we hope to match the higher returns we have delivered in the past. But we dont want to lose focus on risk management and having lost nothing is an achievement for us. We maintain our view of a market downturn and increasing volatility. As and when that plays out the Niftys range should expand to 20%+ and give the ProTech Trailing Stops ample opportunities to profit and expand its returns.
Investments in
Nifty Index Stock futures
Fund Manager: Rohit Shrivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
June 2013
42
ADVISORY
DESK
MONTHLY PERFORMANCE
Advisory Products & Services

The Advisory Desk is a central desk consisting of a Mumbai-based expert team that runs various sample model portfolios (for illustrative purposes only) for clients of all profiles, be they traders or investors. For investors, it has the Portfolio Doctor service under which it reviews an existing portfolio on various parameters and suggests changes to improve its performance. For traders, it has four products in all: MID Intraday, MID Swing, MID Option and MID Delivery. All MID products are different from Sharekhans research-based technical and fundamental offerings as these essentially try to capture trading opportunities in liquid stocks where momentum is expected before or after some event including the announcement of results or where some news/event is probable. These calls are rolled out by the Advisory Desk based on the market pulse and before generating an MID call, all market news on the stock as well as its technical and derivative indicators are thoroughly checked. Advisory products are ideal for those who do not have time to either monitor the market tick by tick or shift through pages of research for data or pour over complex charts to catch a trend. However, all these products require perfect discipline and money management.
FOR TRADERS MID TRADES

W NE
There are four different types of MID calls. MID Swing: These are positional long/short ideas based on fundamental rationales/events/news as well as technical checks. These ideas come with proper stop losses and probable targets. MID Delivery: This is a long-only cash market delivery product where ideas are generated based on the market pulse (and not fundamental research). These ideas come with proper stop losses and probable targets for a maximum period of one month. MID performance# Product Month No. of calls Profit booked Stop loss hit Strike rate (%) MID Intraday May 2013 YTD FY14 58 38 20 66 110 63 47 57 MID Swing
MID Options: These are directional calls in the options segment based on the analysis of the open interest and the put-call ratio in the market. These too come with proper stop losses and probable targets. MID Intraday: These are long/short ideas based on fund flow and technical levels. As is apparent from the name, these calls are meant for intra-day trading. All MID Intraday calls are accompanied by proper stop losses and probable targets.
MID Delivery May 2013 35 19 16 54 YTD FY14 49 27 22 55 20 10 10 50
MID Option May 2013 YTD FY14 19 11 8 58 47 24 23 51
May 2013 YTD FY14 13 4 9 31
DERIVATIVE IDEA
Derivative Idea is generated by the Sharekhan Derivatives Research Desk based on the analysis of open interest, implied volatility and put-call ratio. It is a leveraged product and ideal for aggressive traders. Calls in Derivative Idea are accompanied by proper stop loss, targets, time frame and quantity to execute.
Derivative Ideas performance# Ticket size (Rs) Month No. of calls Profit and loss (Rs) Returns (%) May 2013 18 2,528 0.84 300,000 YTD FY14 47 1,429 0.48
FOR INVESTORS
PORTFOLIO DOCTOR Portfolio Doctor evaluates an existing portfolio on various parameters and suggests recommendations on a
regular basis to improve its performance. It is targeted at long-term investors with a portfolio value of more than Rs10 lakh. The Portfolio Doctor service involves three simple steps: analysis of an existing portfolio, realignment of the portfolio with Sharekhans creation of a Model Portfolio. recommendations
#Please note there may be some deviation in the actual performance reported in TradeTiger due to a difference in the method of closure of an idea in a particular month.
For more details on any of the Advisory Desk products write to us at info@sharekhan.com READY FOR ROARING ADVICE
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June 2013
June 2013
44
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)

Scheme name Star rating NAV (Rs) Absolute 6 months 18.6 22.1 25.9 237.4 31.5 19,889.0 57.2 17.9 20.6 33.3 15.7 6,504.9 32.1 63.0 247.7 62.7 123.0 7,533.4 15.2 237.6 29.4 22.0 15.1 4,737.6 37.6 16.2 19.5 13.4 9.9 6,043.6 56.6 62.5 70.5 350.6 55.4 -5.0 -4.3 5.0 5.3 1.1 5.2 4.1 1.0 -0.7 -2.2 -4.9 -3.2 2.2 3.9 3.5 2.3 4.7 3.3 5.5 3.5 2.9 3.3 3.6 3.9 6.2 6.9 6.8 5.1 2.5 4.9 5.8 0.6 2.2 5.3 5.7 4.6
MAY 9, 2013
Data as on May 07, 2013
Returns (%) Compounded annualised 1 year 3 years 5 years 18.4 7.0 20.2 16.4 17.3 17.6 23.8 11.6 11.6 10.5 8.5 6.1 16.3 18.7 16.3 16.3 16.8 15.3 21.4 14.9 16.0 20.9 18.4 16.3 31.4 26.0 22.2 21.3 17.5 18.2 18.3 8.3 13.3 17.6 15.2 14.9 10.5 9.8 9.2 8.1 7.1 5.8 17.5 10.7 7.7 4.4 3.1 -1.6 11.2 10.4 8.4 8.1 4.1 3.9 12.6 9.3 7.8 7.4 6.7 4.2 12.5 11.8 6.8 5.7 1.4 6.4 11.8 9.7 8.3 8.2 7.5 7.0 --7.0 8.4 3.3 2.8 9.9 12.0 16.5 6.7 4.7 -2.0 11.6 9.1 7.5 9.8 6.1 1.8 8.4 3.2 2.4 5.2 1.7 0.7 3.3 7.6 11.3 9.3 9.7 6.6 5.5
Since inception 13.4 19.8 13.4 24.5 11.6 16.6 22.4 10.5 15.0 15.3 7.3 21.6 16.1 11.1 18.8 21.0 17.1 15.2 13.3 25.2 28.8 19.8 6.4 8.7 16.6 14.2 9.4 8.2 -0.2 14.4 13.7 15.6 10.3 21.5 13.6 13.1
Large-cap funds ICICI Prudential Focused Bluechip Equity Fund - Ret UTI Wealth Builder Fund - Series II Birla Sun Life Top 100 Fund Franklin India Bluechip UTI Top 100 Fund Indices BSE Sensex Mid-cap funds SBI Emerg Buss Fund HDFC Mid-Cap Opportunities Fund IDFC Sterling Equity Fund - Reg UTI Mid Cap Fund Reliance Long Term Equity Fund Indices BSE MID CAP Multi-cap funds UTI Opportunities Fund UTI Equity Fund Franklin India Prima Plus Canara Robeco Equity Diversified Templeton India Growth Fund Indices BSE 500 Tax saving funds Axis Long Term Equity Fund Franklin India Taxshield Canara Robeco Equity Taxsaver IDFC Tax Advantage (ELSS) Fund - Reg Birla Sun Life Tax Plan Indices CNX500 Thematic funds Reliance Media & Entet Fund Canara Robeco FORCE Fund - Reg ICICI Prudential Service Industries Fund Franklin Build India Fund Birla Sun Life Special Situations Fund Indices S&P Nifty (CNX Nifty) Balanced funds ICICI Prudential Balanced HDFC Balanced Fund Canara Robeco Balance Birla Sun Life 95 FT India Balanced Fund Indices Crisil Balanced Fund Index
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
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June 2013
MF PICKS
MUTUAL FUNDS
DESK
SHAREKHANS TOP SIP FUND PICKS

Investment period Total amount invested (Rs) Funds would have grown to (Rs) Large-cap funds Birla Sun Life Top 100 Fund ICICI Prudential Focused Bluechip Equity Fund - Ret Franklin India Bluechip UTI Top 100 Fund DSP BlackRock Top 100 Equity Fund - Reg BSE Sensex Multi-cap funds UTI Opportunities Fund UTI Equity Fund Canara Robeco Equity Diversified Franklin India Prima Plus Templeton India Growth Fund BSE 500 Mid-cap funds SBI Emerg Buss Fund Franklin India Prima Fund HDFC Mid-Cap Opportunities Fund IDFC Sterling Equity Fund - Reg Sundaram Select Midcap - Reg BSE Midcap Tax saving funds HSBC Tax Saver Equity Fund Franklin India Taxshield Birla Sun Life Tax Plan Tata Tax Saving Fund - Plan A Birla Sun Life Tax Relief 96 CNX Nifty 16.6 237.6 15.1 45.5 11.7 6,043.6 12,892.8 12,593.5 12,812.4 12,633.7 12,874.8 12,948.3 8.2 5.4 7.4 5.8 8.0 8.6 41,187.6 40,382.7 40,087.4 39,643.0 38,965.3 39,779.3 4.7 4.0 3.8 3.4 2.7 3.5 57.2 318.7 17.9 20.6 162.2 6,504.9 12,762.2 12,717.2 12,421.8 12,256.7 12,256.8 12,060.6 7.0 6.5 3.8 2.3 2.3 0.55 45,468.6 40,868.6 40,364.7 39,597.2 38,389.4 35,202.3 8.3 4.4 4.0 3.3 2.2 -0.8 32.1 63.0 62.7 247.7 123.0 7,533.4 12,734.7 12,820.2 12,626.0 12,654.2 12,718.9 12,739.6 6.7 7.5 5.7 6.0 6.6 6.73 41,385.5 41,213.2 40,479.2 40,221.0 38,710.5 38,519.5 4.9 4.7 4.1 3.9 2.5 2.3 25.9 19.4 237.4 31.5 109.2 19,889.0 12,914.6 12,837.1 12,722.6 12,688.6 12,646.2 12,915.9 8.3 7.6 6.6 6.3 5.9 8.34 41,183.9 40,947.8 39,995.1 39,741.7 39,463.1 39,477.6 4.7 4.5 3.7 3.4 3.2 3.2 NAV 1 year 12,000 Present Avg. annual value (Rs) return (%) 3 years 36,000 Present value (Rs) Avg. annual return (%)
MAY 9, 2013
Data as on May 07, 2013
5 years 60,000 Present Avg. annual value (Rs) return (%)
81,556.0 86,420.4 81,747.2 76,072.5 77,958.0 75,460.7
6.4 7.7 6.5 5.0 5.5 4.8
87,169.5 84,318.4 85,473.3 81,133.5 78,013.8 74,510.9
7.9 7.2 7.5 6.3 5.5 4.5
106,092.7 86,142.7 90,649.8 88,461.2 82,226.4 68,544.2
12.3 7.6 8.7 8.2 6.6 2.7
81,465.1 83,414.5 77,200.9 78,797.4 75,908.4 76,065.3
6.4 6.9 5.3 5.7 4.9 4.9
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
June 2013
46
EARNINGS GUIDE
EQUITY
FUNDAMENTALS
Prices as on June 05, 2013
Sharekhan Earnings Guide

Company CMP (Rs) FY13 Sales FY14E FY15E FY13 Net profit FY14E FY15E FY13 EPS FY14E (%) EPS growth FY15E FY15/FY13 PE (x) RoCE (%)
RoNW (%) FY15E
DPS
FY13 FY14E FY15E FY14E FY15E FY14E
Div yield (Rs) (%)
AUTOMOBILES
Apollo Tyres Ashok Leyland Bajaj Auto M&M Maruti Suzuki 91.0 24.0 1,756.0 987.0 1,568.0 12,794.6 12,438.2 19,997.3 40,441.2 42,850.5 14,104.3 13,661.8 22,927.6 46,828.1 50,086.4 15,417.6 16,144.0 26,854.9 54,635.8 58,777.2 596.9 148.2 3,043.6 3,262.2 2,300.0 732.1 198.9 3,626.6 3,338.9 3,533.2 786.3 603.0 4,190.1 3,790.8 3,936.9 11.9 0.6 105.2 53.1 79.6 14.5 0.7 125.4 54.4 117.0 15.6 2.3 144.9 61.7 130.3 14% 96% 17% 8% 28% 7.7 39.8 16.7 18.6 19.7 6.3 34.1 14.0 18.1 13.4 5.8 10.4 12.1 16.0 12.0 19.0 5.9 45.9 24.0 20.6 18.2 11.2 43.8 24.1 20.5 18.0 4.5 36.3 19.8 16.6 16.3 12.9 33.6 19.4 16.3 0.5 0.6 45.0 13.0 7.5 0.5 2.5 2.6 1.3 0.5
BANKS & FINANCE

Allahabad Bank Andhra Bank Axis (UTI) Bank Bajaj Finserv Bank of Baroda Bank of India CanFin Homes Capital First Corp Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank PNB SBI Union Bank of India Yes Bank 124.0 88.0 1,382.0 662.0 660.0 290.0 145.0 156.0 381.0 459.0 844.0 688.0 1,134.0 79.0 765.0 2,032.0 217.0 500.0 279.0 5,856.0 885.0 590.0 334.0 205.0 234.0 309.0 150.0 617.0 1,208.0 727.0 2,461.0 260.0 518.0 1,468.0 325.0 195.0 335.0 90.0 68.0 73.0 58.0 581.0 481.0 6,343.6 4,804.3 16,217.4 5,072.4 14,945.9 12,790.1 109.5 253.7 5,033.8 2,639.1 5,927.5 22,663.7 22,212.1 8,592.6 19,072.4 60,366.1 10,094.9 3,476.2 606.7 3,079.4 6,390.8 26,317.2 29,901.3 1,106.0 4,596.2 1,629.5 7,351.0 388.0 1,927.6 25,339.1 40,352.0 2,021.4 1,294.5 62,989.5 37,425.6 47,617.7 5,317.0 12,094.4 1,873.3 6,085.0 8,857.0 4,690.9 1,360.2 7,621.0 5,281.3 19,608.2 17,012.2 14,222.1 137.7 352.8 5,886.7 3,136.4 7,281.7 27,607.9 26,576.5 8,960.6 21,984.5 71,243.1 11,514.8 4,516.6 749.1 3,638.4 7,867.9 30,866.8 34,719.9 1,372.5 5,278.8 1,876.2 8,318.3 456.8 2,311.2 28.177.4 43,323.8 2,338.6 1,485.9 71,978.0 40,222.3 39,196.7 5,850.1 13,407.1 2,135.6 7,013.9 10,927.0 5,138.0 1,699.4 9,068.6 6,172.3 22,750.0 19,940.7 16,656.4 162.4 468.3 6,899.9 3,711.9 8,882.2 33,606.4 30,973.0 10,336.3 25,785.7 13,444.7 5,778.7 919.2 4,244.8 9,641.9 35,455.3 40,863.8 1,691.5 6,168.2 2,128.8 9,411.3 539.8 2,812.0 31,207.4 47,166.5 2,648.0 1,653.5 43,289.3 39,027.8 6,234.4 15,040.1 2,413.2 7,804.6 12,952.0 5,600.5 2,079.0 1,185.5 1,289.2 5,179.4 1,573.6 4,480.7 2,749.4 54.1 63.1 1,434.7 838.2 4,848.3 6,726.3 8,325.5 1,882.1 4,747.7 2,157.9 1,300.7 172.9 436.8 742.3 3,232.7 7,418.4 129.7 370.3 274.2 391.5 99.1 230.3 3,906.3 9,421.0 213.2 187.7 6,136.2 6,614.7 618.0 84.6 155.6 129.5 129.0 349.9 62.9 1,751.2 1,281.2 6,267.7 5,011.8 3,189.1 68.2 89.2 1,607.0 910.4 5,851.5 8,439.6 9,374.0 2,140.5 5,528.8 16,222.3 2,497.1 1,564.4 226.3 524.4 949.2 3,599.8 8,917.0 196.8 451.8 370.0 452.6 112.1 289.7 4,298.0 9,889.1 249.9 206.4 15,680.6 6,516.6 4,664.8 645.1 301.3 168.3 177.0 153.0 367.7 83.8 2,208.7 1,506.2 7,294.7 5,683.1 3,778.1 81.7 125.3 1,889.0 1,099.5 6,926.0 10,653.7 11,197.4 2,553.1 6,687.4 18,561.6 3,042.8 2,018.2 289.6 602.6 1,208.8 3,970.1 10,744.6 252.9 554.3 440.9 518.7 138.0 358.7 4,675.1 11,041.2 278.7 238.0 17,699.5 6,839.4 4,849.3 666.6 565.6 193.8 206.3 171.0 411.7 104.6 23.7 23.0 110.7 103.0 106.0 46.1 26.4 9.0 93.8 49.0 31.3 28.3 72.2 14.1 134.3 206.2 36.2 36.3 11.3 103.9 20.4 14.9 9.4 1.2 5.7 25.1 6.3 25.4 76.0 55.8 164.7 35.4 46.9 71.2 24.9 27.0 49.2 1.3 6.4 8.4 4.3 29.4 21.1 35.0 22.9 133.9 118.6 53.5 33.3 12.7 108.5 53.2 38.0 35.5 81.4 16.7 156.6 237.2 41.9 39.7 13.8 124.7 25.7 16.6 11.4 4.2 7.0 33.8 7.3 28.7 95.6 61.4 172.9 41.5 51.6 80.1 26.5 19.1 51.4 4.7 6.9 11.5 5.2 30.9 28.1 44.2 26.9 155.9 134.5 63.3 39.9 17.8 127.5 64.3 45.0 44.8 97.3 20.0 189.4 271.4 51.0 51.2 17.7 143.3 32.5 18.4 13.7 8.3 8.6 40.3 8.4 35.3 118.5 66.8 193.0 46.3 59.5 90.4 27.8 19.8 53.1 8.8 7.9 13.4 5.8 34.6 35.0 18% 8% 19% 13% 17% 23% 41% 17% 15% 20% 26% 16% 19% 19% 15% 19% 19% 25% 17% 26% 11% 21% 163% 23% 27% 15% 18% 25% 9% 8% 14% 13% 13% 6% -14% 4% 160% 11% 26% 16% 8% 29% 5.2 3.8 12.5 6.4 6.2 6.3 5.5 17.4 4.1 9.4 26.9 24.3 15.7 5.6 5.7 9.9 6.0 13.8 24.7 56.4 43.4 39.6 35.5 41.0 12.3 23.8 24.3 15.9 13.0 14.9 7.4 11.0 20.6 13.1 7.2 6.8 69.4 10.6 8.6 13.4 19.8 22.8 3.5 3.8 10.3 5.6 5.4 4.3 12.3 3.5 8.6 22.2 19.4 13.9 4.7 4.9 8.6 5.2 12.6 20.2 47.0 34.4 35.6 29.3 48.8 33.4 9.1 20.6 21.5 12.6 11.8 14.2 6.3 10.0 18.3 12.3 10.2 6.5 19.2 9.8 6.3 11.1 18.8 17.1 2.8 3.3 8.9 4.9 4.6 3.6 8.8 3.0 7.1 18.8 15.4 11.7 3.9 4.0 7.5 4.2 9.8 15.8 40.9 27.2 32.1 24.4 24.7 27.2 7.7 17.9 17.5 10.2 10.9 12.8 5.6 8.7 16.2 11.7 9.8 6.3 10.3 8.6 5.4 10.0 16.8 13.7 48.7 53.9 22.0 132.0 45.7 10.8 22.1 20.7 10.8 40.5 35.1 34.6 31.8 28.7 26.9 38.6 17.8 20.0 8.6 10.2 28.6 11.3 8.9 26.2 29.4 52.2 52.5 26.4 102.7 45.5 17.0 24.1 21.4 11.9 38.0 34.7 30.9 30.2 27.3 26.4 35.9 17.5 19.8 8.3 16.1 28.0 11.1 9.4 25.7 30.5 14.6 14.4 17.6 14.8 12.7 16.2 8.9 15.8 13.6 20.8 21.7 13.5 9.7 15.8 15.4 13.8 21.2 38.7 35.3 26.0 98.6 36.7 10.8 20.7 17.6 9.1 37.6 27.3 29.9 23.8 20.8 19.1 30.1 20.4 13.8 9.6 7.9 19.6 8.6 6.3 17.2 30.1 16.3 15.1 17.7 14.9 13.6 17.0 11.5 16.4 14.7 19.9 23.3 14.8 10.7 16.7 15.7 14.9 20.8 41.6 34.4 27.2 73.3 36.7 20.3 21.1 18.5 9.8 35.1 27.0 26.3 22.5 20.0 18.8 28.0 19.0 12.9 9.2 13.5 19.5 9.1 6.7 16.9 31.1 6.0 5.0 18.0 1.5 21.5 10.0 4.0 1.8 19.0 9.0 12.5 5.5 20.0 3.5 27.0 41.5 8.0 6.0 6.5 45.0 5.0 6.0 5.3 2.5 1.0 7.0 2.2 6.0 17.5 12.0 42.0 8.5 9.0 22.0 6.0 5.4 7.0 0.4 1.6 1.5 1.6 7.0 3.5 4.9 5.6 1.3 0.2 3.3 3.5 2.7 1.2 5.0 2.0 1.5 0.8 1.8 4.5 3.5 2.0 3.7 1.2 2.3 0.8 0.6 1.0 1.6 1.2 0.4 2.3 1.4 1.0 1.4 1.7 1.7 3.3 1.7 1.5 1.8 2.8 2.1 0.4 2.4 2.1 2.8 1.2 0.7
81,720.2 14,105.0
CONSUMER GOODS
Bajaj Corp GSK Consumers GCPL Hindustan Unilever ITC Jyothy Laboratories Marico Mcleod Russel India TGBL (Tata Tea) Zydus Wellness
IT / IT SERVICES
CMC HCL Technologies** Infosys NIIT Technologies Persistent Systems TCS Wipro
81,993.3 13,941.4
CAPITAL GOODS / POWER

BHEL CESC Crompton Greaves Greaves Cotton Kalpataru Power PTC India Thermax V-Guard Industries
@Stand-alone financials
**June ending company
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
47
June 2013
EQUITY
Company CMP (Rs)
FUNDAMENTALS
Sales FY13 FY14E FY15E FY13 Net profit FY14E FY15E FY13 EPS FY14E (%) EPS growth FY15E FY15/FY13 PE (x) RoCE (%)
EARNINGS GUIDE
RoNW (%) FY15E DPS Div yield (Rs) (%)
FY13 FY14E FY15E FY14E FY15E FY14E
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects ITNL IRB Infra Jaiprakash Associates Larsen & Toubro Mahindra Lifespace@ Orbit Corporation Pratibha Industries Punj Lloyd Unity Infraprojects 74.0 175.0 116.3 67.0 1,420.0 390.0 17.0 37.0 45.0 29.0 315.0 580.0 802.0 262.0 187.0 376.0 776.0 71.0 972.0 600.0 604.0 766.0 1,037.0 817.0 305.0 166.0 2,772.0 65.0 230.0 4,701.0 1,854.0 165.0 51.0 892.0 281.0 677.0 233.0 1,046.0 927.0 303.0 1,338.0 120.0 206.0 148.0 49.0 2,022.2 6,644.9 3,687.2 13,208.7 72,810.0 351.5 299.0 2,157.5 11,408.2 2,039.8 47,522.7 9,948.0 397,062.0 97.1 5,855.3 8,279.3 6,358.1 1,267.6 2,139.9 5,012.4 2,738.8 9,461.6 11,238.9 3,054.0 14,718.6 9,194.5 27,640.0 4,597.0 3,789.0 5,735.0 20,174.9 1,067.9 3,743.4 303.0 4,087.0 1,009.8 226.9 3,699.6 9,595.2 336.9 80,459.0 6,103.9 925.0 10,624.0 1,201.0 5,107.6 2,310.3 7,333.9 4,642.6 15,209.5 80,079.4 361.1 406.7 2,816.7 12,615.5 2,206.4 49,515.7 10,360.0 370,779.6 128.6 6,965.0 9,306.8 7,280.3 1,392.2 2,568.7 6,041.3 3,220.7 11,639.2 13,364.3 3,709.5 15,288.1 10,416.3 31,127.0 4,893.0 4,114.0 6,138.0 22,773.7 1,265.1 3,968.1 358.3 4,792.0 1,196.8 293.8 4,283.8 10,490.5 85,457.0 6,126.7 1,156.0 1,286.0 5,926.7 2,958.4 7,819.7 5,454.5 17,420.5 89,405.6 519.5 785.2 3,366.8 14,064.3 2,396.8 53,491.7 11,858.0 166.5 7,950.6 10,514.6 8,711.5 1,576.7 3,205.5 7,048.3 3,729.8 13,745.7 15,685.9 4,351.3 16,329.9 11,126.8 34,535.0 5,243.0 4,450.0 6,839.0 25,227.4 1,455.7 4,449.8 413.6 5,437.0 1,420.9 387.3 5,166.3 11,366.1 93,831.0 6,527.0 1,355.0 1,388.0 6,817.8 73.3 520.2 556.7 501.0 6,033.6 97.5 7.5 82.7 (7.2) 92.6 4,022.2 3,588.0 45.8 457.3 1,544.9 655.2 100.3 590.6 614.8 394.7 1,314.2 3,008.1 470.0 652.5 777.5 2,500.0 184.0 404.0 902.0 2,655.4 154.6 0.2 53.0 40.7 44.8 23.4 713.0 423.1 1,856.4 2,516.0 889.9 126.0 784.1 136.0 389.0 106.0 571.2 601.2 717.0 6,447.4 97.4 24.0 114.9 93.9 93.2 3,819.2 3,773.0 20,789.3 60.0 569.7 1,663.0 919.9 116.1 743.1 807.3 500.4 1,616.0 3,813.9 593.4 778.3 819.1 3,040.0 232.0 409.0 915.0 3,005.7 178.9 19.5 62.5 92.0 52.2 33.4 799.0 571.5 4,359.0 862.4 148.0 137.0 425.4 128.4 616.1 673.3 921.0 7,406.9 116.6 106.8 151.4 175.4 114.7 4,428.3 4,368.0 23,861.1 77.2 727.7 1,946.9 1,262.2 171.1 882.7 1,045.9 607.9 2,008.1 4,581.6 684.7 852.6 874.8 3,353.0 289.0 481.0 1,059.0 3,220.0 212.2 75.5 72.3 156.6 64.1 53.9 1,017.9 620.3 5,918.0 988.6 180.0 158.0 493.5 24.3 26.8 16.7 2.4 98.3 23.9 0.7 8.2 -7.4 12.5 31.7 60.0 64.7 27.2 15.7 18.7 32.0 12.4 44.5 21.0 31.3 29.4 29.0 55.6 25.6 17.5 272.7 6.0 17.0 258.9 96.9 16.8 0.0 43.0 6.6 37.3 5.0 7.4 32.5 166.8 6.6 111.2 11.6 29.5 29.3 11.9 35.1 29.4 18.1 3.4 105.0 23.9 2.1 10.1 2.8 12.6 30.1 62.8 64.4 35.7 19.6 20.7 44.9 14.4 56.0 29.3 39.7 36.1 36.8 70.1 30.5 18.7 331.6 7.5 17.2 262.6 109.7 19.5 0.2 50.7 15.0 43.5 7.1 8.3 44.0 11.5 107.9 13.6 29.5 13.0 42.5 31.7 20.3 4.3 120.7 28.5 9.4 13.3 5.3 15.5 34.9 72.7 73.9 45.9 25.0 24.2 61.6 21.2 66.5 38.6 48.2 44.9 44.2 80.9 33.5 20.0 365.7 9.4 20.2 304.1 117.5 23.1 0.9 58.7 25.5 53.4 11.5 10.6 47.7 15.6 123.6 16.6 34.0 15.1 32% 9% 10% 34% 11% 9% 277% 28% 11% 5% 10% 7% 30% 26% 39% 31% 22% 36% 24% 24% 23% 21% 14% 7% 16% 25% 9% 8% 10% 17% 17% 97% 20% 52% 20% 21% 54% 5% 20% 8% 13% 3.0 6.5 6.9 27.9 14.4 16.3 25.5 4.5 -6.0 2.3 9.9 9.7 12.4 9.6 11.9 24.3 5.7 21.9 28.6 19.3 26.1 35.7 14.7 11.9 9.5 10.2 10.9 13.5 18.2 19.1 9.8 20.7 42.6 18.2 34.6 31.5 32.2 5.6 45.8 12.0 10.4 5.1 4.1 2.1 6.0 6.4 19.7 13.5 16.3 8.0 3.6 15.9 2.3 10.5 9.2 12.5 7.3 9.6 17.3 4.9 17.4 20.5 15.2 21.2 28.2 11.7 10.0 8.9 8.4 8.7 13.4 17.9 16.9 8.4 17.6 18.7 15.6 24.4 28.1 23.8 26.3 12.4 8.8 5.0 3.8 1.7 5.5 5.7 15.6 11.8 13.7 1.8 2.8 8.5 1.9 9.0 8.0 10.9 5.7 7.5 12.6 3.3 14.6 15.5 12.5 17.1 23.4 10.1 9.1 8.3 7.6 6.9 11.4 15.5 15.8 7.1 57.1 15.2 11.0 12.7 15.0 22.0 21.9 19.4 10.8 7.2 4.4 3.3 14.5 10.5 12.8 10.4 10.9 9.3 8.6 16.2 10.3 15.5 14.1 25.5 9.8 28.7 13.6 20.8 20.1 11.5 32.3 22.0 29.0 31.6 28.8 35.2 13.2 16.0 19.0 6.0 9.0 22.0 22.5 16.6 2.7 30.5 10.5 23.7 15.4 27.7 9.7 8.6 14.6 17.8 23.4 11.7 14.6 10.7 12.8 11.2 10.8 11.1 16.0 17.8 11.6 15.5 14.6 26.7 10.3 30.6 16.0 22.1 24.0 14.5 32.1 25.6 28.4 32.9 28.4 33.3 13.7 15.5 18.4 7.0 10.0 22.0 21.4 17.5 2.6 31.9 12.8 25.2 22.3 30.2 9.5 9.8 14.5 20.0 22.2 12.4 15.3 14.8 17.3 7.0 16.3 8.0 2.3 16.0 2.7 10.6 15.1 18.5 9.6 22.5 20.0 17.1 23.9 10.2 26.2 23.1 28.1 24.5 20.3 35.2 10.5 15.6 12.6 5.0 16.0 23.0 16.6 16.6 0.9 23.4 6.5 17.8 11.0 19.3 7.9 7.8 11.1 18.6 19.5 12.2 16.1 13.9 17.0 8.4 16.2 9.0 9.6 17.4 5.3 11.8 16.0 18.9 10.0 23.6 21.2 17.3 25.3 13.3 25.9 23.4 26.7 23.9 20.0 30.2 10.7 14.6 11.9 7.0 16.0 21.0 15.3 16.9 3.8 24.5 10.2 19.7 15.7 21.2 7.9 9.4 11.0 21.3 19.2 12.4 3.0 4.0 4.0 1.8 12.3 6.0 0.0 0.6 0.0 0.2 5.6 19.0 8.5 5.0 1.5 2.0 7.5 1.2 15.0 2.0 2.0 4.0 5.0 23.0 10.0 2.5 22.5 2.0 2.5 8.0 8.0 1.5 0.8 17.5 1.0 2.0 1.0 2.0 6.5 25.0 1.0 22.3 6.0 12.2 4.0 0.7 4.1 2.3 3.4 2.7 0.9 1.5 0.0 1.6 0.0 0.7 1.8 3.3 1.1 1.9 0.8 0.5 1.0 1.7 1.5 0.3 0.3 0.5 0.5 2.8 3.3 1.5 0.8 3.1 1.1 0.2 0.4 0.9 1.6 2.0 0.4 0.3 0.6 0.9 0.6 2.7 0.3 1.7 5.0 5.9 2.7 1.4
OIL & GAS

GAIL Oil India Reliance Ind Selan Exploration
395,722.9 20,879.0
PHARMACEUTICALS
Aurobindo Pharma Cipla Cadila Healthcare Dishman Pharma Divi's Labs Glenmark Pharma Ipca Laboratories Lupin Sun Pharma Torrent Pharma
AGRI-INPUTS
Tata Chemicals United Phosphorus
BUILDING MATERIALS
Grasim India Cements Madras Cements Shree Cement* UltraTech Cement# Eros Intnl Media Indian Hotel Co KKCL Raymond Relaxo Footwear Zee Entertainment Aditya Birla Nuvo Bajaj Holdings Bharti Airtel Bharat Electronics Gateway Distriparks Max India Ratnamani Metals Sintex Industries
DISCRETIONARY CONSUMPTION
Speciality Restaurants 173.0
DIVERSIFIED / MISCELLANEOUS
#UltraTech numbers are post merger of Samruddhi Cement.
*FY2012 is of 15 months, ending June 2012 as company has changed reporting year from FY to June end
48
June 2013
EARNINGS GUIDE
Remarks
EQUITY
FUNDAMENTALS
Automobiles Apollo Tyres Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. The demand is expected to remain subdued in the near term, given the sluggishness in the domestic OEM and the European operations. The margins may improve due to softening of raw material prices. We maintain Hold with a revised price target of Rs101. Ashok Leyland, the second largest commercial vehicle (CV) manufacturer in India, is a pure CV play. The new greenfield facility in Pantnagar in Uttaranchal has provided strategic cost and diversification benefits. The company has ventured into LCV space with the launch of Dost together with Nissan and is witnessing significant ramp-up in volumes. It has also entered into construction equipment space in JV with John Deere. Bajaj Auto is a leading two-wheeler maker. It is moving up the value chain by concentrating on the executive and premium motorcycle segments. The launch of the new Pulsar and the KTM range would help it maintain its leadership in the premium bike segment as well as its domestic volume growth. Exports remain the key for the company to drive the overall volumes. M&M is a leading maker of tractors and utility vehicles in India. Though the automotive demand may moderate due to moderation in the UV demand and increasing competition, but the tractor demand would recover on the back of a normal monsoon and better crop realisation. Associating with world majors in passenger cars and commercial vehicles has helped it diversify into various automobile segments. The value of its subsidiaries adds to its sum-of-the-parts valuation. Higher farm incomes, strong rural positioning, lower vulnerability to interest rates make M&M a proxy play on food inflation. Maruti Suzuki is Indias largest small carmaker. Though the diesel demand is witnessing pressure due to a hike in diesel prices, but the petrol segment is witnessing recovery due to narrowing differential between petrol and diesel prices. Recently the company successfully diversified into the MPV segment with the launch of Ertiga. Suzuki of Japan has also identified India as a manufacturing hub for small cars for its worldwide markets. With the merger of SPIL, the diesel engine manufacturing arm of the Suzuki group, we expect synergistic benefits for Maruti. Banks & Finance Allahabad Bank With a wide network of over 2,200 branches spread across India, Allahabad Bank enjoys a strong hold in north and east India. However, the bank has been recently plagued with severe asset quality issues and has the highest amount of stressed loans among its public peers. Andhra Bank, with a wide network of over 1,800 branches across the country, has a strong presence in south India especially in Andhra Pradesh. Though it is trading at an attractive valuation, the concerns on asset quality front and political situation within the state could affect its operations. Axis bank continues to grow faster than the industry rate and is diversifying its book in favour of retail. Notably, the bank has maintained a delicate balance between balance sheet growth and profitability. Besides the core banking business, the bank has forayed into the asset management business and acquired the securities and investment banking business of Enam Securities. We expect the earnings growth to remain strong driven by a healthy operating performance. Bajaj Finserv is actively present in businesses such as vehicle finance, consumer finance, distribution etc, with insurance being the dominant contributor to its revenues. It is one of the few top players in the fast-growing life insurance segment and also has a sizeable presence in the general insurance segment. Its consumer finance business (Bajaj Finance) has shown a robust performance and is likely to boost the earning of Bajaj Finserv. Bank of Baroda is among the top public sector undertaking (PSU) banks having a sizeable overseas presence (100 offices in 24 countries) and a strong domestic network of over 4,200 branches across the country. It has a stronghold in the western and eastern parts of India. The banks performance metrics remain superior to other PSU banks though recent deterioration in asset quality raises concern. Bank of India has a network of over 4,000 branches, spread across the country and abroad, along with a diversified product and services portfolio, and steadily growing assets. The operating performance has weakened due to margin deteriorations. Further, the rising stress on asset quality and cautious growth outlook could impact the earnings growth. CanFin Homes is a housing finance company sponsored by Canara Bank. It was set up in 1987. It offers a range of products on housing, such as loans for home purchase, home construction, home improvement/extension and site purchase as well as non-housing finance. The company has 69 branches of which 65% are based in south India. The company has a loan book of over Rs4,000 crore. The companys renewed focus on growth and the recent aggressive expansion of its branch network have put it on a high growth path for the next few years. We believe the operational performance and return ratios of CanFin are improving, which should lead to a re-rating of the stock.
Ashok Leyland
Bajaj Auto
M&M
Maruti Suzuki
Andhra Bank
Axis Bank
Bajaj Finserv
Bank of Baroda
Bank of India
CanFin Homes
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Capital First
Capital First (the erstwhile Future Capital Holdings) has been acquired by the global private equity firm Warburg Pincus (70.3% stake). The present management has taken several initiatives to tap the high-growth retail product segments like gold loans, loan against property, and loan against shares. It has a strong capital adequacy ratio and a sound asset quality. Its loan book is expected to more than double to over Rs10,000 crore in the next three years. We believe the change in the ownership, the capital infusion and the ability to aggressively grow its loan book in the retail and the small and medium enterprise segments could result in the re-rating of the stock. Corporation Bank is a mid-sized PSU bank having a relatively higher presence in South India. The bank is predominantly exposed to the corporate segment constituting ~50% of its book. Due to a higher dependence on wholesale business and low current and savings account ratio, the margins operational performance lags to its peers. Federal Bank is the fifth largest private sector bank in India in terms of asset size and has traditionally been a strong player in south India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve the quality of earnings and asset book. HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are growing faster than HDFC, the value contributed by them would be significantly higher going forward. HDFC Bank was established in 1994 as part of the liberalisation of the Indian banking industry by the Reserve Bank of India (RBI). It was one of the first banks to receive an in-principle approval from the RBI to set up a private sector bank. Its relatively high margins (compared with its peers), strong branch network and better asset quality make HDFC Bank a safe bet. ICICI Bank is Indias largest private sector bank with a network of over 3,000 branches in India and a presence in around 18 countries. The bank has once again entered an expansionary mode after making a conscious effort to contract its advances book due to asset quality concerns. The bank offers substantial value unlocking opportunities from the insurance and securities businesses. IDBI Bank is one of leading public sector banks of India. The bank is gradually working towards improving its liability base and expanding the retail book, which is likely to reflect in the form of better margins and return ratios. Due to rising asset quality risks and slower business growth, the stock is likely to underperform in the near term. Punjab National Bank has one of the best deposit mixes in the banking space, with low-cost deposits constituting around 38% of its total deposits. This helps it to maintain one of the highest margins in the sector. A strong liability franchise and technology focus will help the bank to increase its core lending operations and fee income related-businesses. In view of the weakness in economy and relatively higher exposure to troubled sectors, the asset quality has come under stress. State Bank of India is the largest bank of India with loan assets of over Rs10 lakh crore. The loan growth for FY2013 was above industry average while the core operating performance was largely stable. The successful merger of the associate banks and value unlocking from insurance business could provide further upside for the parent bank. The asset quality of the bank would remain a key monitorable in the near term. Union Bank has a strong branch network and an all-India presence. The bank aspires to become the largest retail bank. Hence, it has ramped up its manpower and infrastructure. Though the earnings growth has come under pressure but the asset quality has shown some improvement in the recent quarters which is positive for the bank. Yes Bank, a new generation private bank, started its operations in November 2004 and is the only greenfield bank approved by the RBI in the last decade. The bank is promoted by Rana Kapoor and Ashok Kapur. Yes Bank follows a unique business model based on knowledge banking, which offers product depth and a sustainable competitive edge over established banking players. Despite the adverse environment, the Bank has maintained a strong growth and impeccable asset quality. Consumer goods
Corp Bank
Federal Bank
HDFC
HDFC Bank
ICICI Bank
IDBI Bank
PNB
SBI
UBI
Yes Bank
Bajaj Corp
Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in the premium light hair oil (LHO) category with its Almond Drops hair oil. With its strong brand positioning, distribution strength and healthy balance sheet, it is well poised to ride on the strong consumer demand emerging due to the rising disposable income and growing aspirations of the Indians. Any initiative to expand its limited product portfolio or strengthen its core business would be the key upside trigger for the stock. GSK is a leading player in the MFD segment with a close to 70% share in the domestic market. Judicious new launches and brand extensions, and the expansion of its distribution reach have helped GSK to stay ahead of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, GSK has expanded its product portfolio by entering into new categories such as biscuits, noodles, energy bars, sports drinks and oats in the recent years. With cash balance of close to Rs1,500 crore the company can invest in growth initiatives as well as reward its investors with a healthy dividend payment. The recent open offer by the promoter acted as an additional trigger for the stock, which remained firm on the bourses. We maintain a Hold recommendation on the stock.
GSK Consumers
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GCPL
Godrej Consumer Products Ltd (GCPL) is a major player in personal wash, hair colour and household insecticide market segments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies have helped the company to expand its geographic footprint. We believe the decent sales volume growth in the domestic business coupled with a strong growth in the Indonesian, African and Argentine businesses would help GCPL to achieve an above 20% CAGR top line and bottom line growth over FY2013-15. HUL is Indias largest FMCG company. It would achieve around 17% Y-o-Y top line growth driven by a mix of sales volume and a price-led growth. However, the subdued volume growth is likely to sustain the pressure on the profitability in the near term. Overall, we expect HULs bottom line to grow at a CAGR of 10% over FY2013-15. In the long term, HUL will be one of the key beneficiaries of the Indian consumerism story. ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some of which are at a nascent stage. Thus, we believe the company will deliver a sustained and steady growth in coming years. Jyothy Laboratories Ltd (JLL) is the market leader in the fabric whitener segment in India. With the successful integration of Henkel and the induction of a new management team led by Mr S Raghunanadan, JLL is transforming itself from a one-brand wonder to an aggressive FMCG player. We expect JLLs top line to grow at a CAGR of close to 25% and a strong improvement in the OPM would help the company to achieve an exponential growth in bottom line over FY2013-16. We have Buy rating on the stock with a price target of Rs 254. Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic product portfolio is likely to achieve a steady growth in volumes, the international business is expected to post a robust growth on the back of an increase in distribution to neighbouring countries and extension of its international product portfolio over the long run. Mcleod Russel is the worlds largest tea producer with an annual tea production of close to 100 million kg. With tea estates in India and Africa, it is well poised to take advantage of the current favourable global demand-supply scenario. With the expectations of a substantial improvement in its sales realisation and a volume growth in mid to high single digits (in the domestic market and the international subsidiaries), the companys consolidated top line and earnings are expected to grow at CAGR of 14.3% and 27.0% respectively over FY2013-15. Over the past few years, TGBL (formerly Tata Tea) has transformed its focus from being a mere tea and coffee company to a complete beverage maker. The recent addition of Mount Everest mineral water to its product portfolio and its tie-up with Pepsico Inc to make a mark in the non-carbonated beverage space are likely to be the new growth drivers in the long run. Also, its JV with Starbucks would help it to explore opportunities in the coffee retailing space. Its intention to acquire companies in the USA, Europe and Russia also augurs well and will enhance its geographical footprint. Zydus Wellness owns three high-growth brands, Nutralite, Sugar Free and Ever Yuth, in the niche health and wellness segment. The company focuses on rampant growth by increasing the distribution of the existing products, scaling up the existing product portfolio through variants and new product launches leveraging the three brands. We expect the top line and bottom line of Zydus Wellness to grow at a CAGR of 18% each over FY2013-15. IT/IT services Over the years, CMC has gradually transformed itself from a low-margin equipment provider into a well-diversified IT services and solutions provider. Its joint-go-to-market strategy with TCS is also playing a big role in the business transformation, with CMC gaining a strong traction in the international markets. We believe CMC has already set the stage for the next level of growth and is likely to witness a much stronger growth in the coming years. HCL Tech is one of the leading Indian IT service vendors. It has performed better than its peers in terms of financial performance in the past few quarters on the back of a ramp-up in business from the large deals bagged earlier and strong momentum in the IMS space. It continues to demonstrate a strong growth visibility with a robust backlog of deals and successful execution with market share gain strategy through vendor churns/ consolidation. We remain positive on the company in view of its order wins and superior earnings visibility. Infosys is India's premier IT and IT-enabled Services Company. The March 2013 quarterly results highlight Infosys structural issues. The companys margins and earnings quality has deteriorated significantly in the last couple of years. We remain skeptical of the secular revival in growth in the near term and given the weak outlook given by the management and discretionary services heavy business model.
HUL
ITC
Jyothy Labs
Marico
Mcleod Russel
TGBL
Zydus Wellness
CMC
HCL Tech
Infosys
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NIIT Tech
With its strong domain expertise in a few niche verticals and competitive advantage in terms of significant contribution from its non-linear initiatives, NIIT Tech is well placed to benefit from the overall improvement in the demand environment. The two significant pain points for the company, the GIS business and the insurance business, showed some green shoots in the March 2013 quarter. NIIT Tech has a robust deal pipeline led by its government vertical which comforts us on the revenue visibility front. Improvement in the margin trajectory remains the key to re-rating of the stock. Persistent Systems has proven expertise in the OPD space, a strong presence in the newer technologies, strength to improve its IP base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. The IP-led revenue strategy of the company has started to bear fruits. Going forward, the management is aiming to earn 25% of its revenues from the non-linear space in FY2014E. This, we believe, will differentiate the company from the rest and help improve its margin in the coming years. TCS pioneered the IT services outsourcing business in India and is the largest IT service firm in the country. It is a leader in most service offerings and has further consolidated its leadership through the inorganic route. TCS with a strong base is well placed to garner incremental deals across sectors. Its consistent quarterly performance (better than peers) coupled with the higher predictability of its earnings would keep it the Streets favourite counter in the IT space. Wipro is one of the leading Indian IT service companies. It has lagged the other IT biggies in terms of performance. In the medium term we expect Wipro to demonstrate a relatively weaker earnings growth as it gets back on its feet post-organisational restructuring. Post the de-merger of the non-core business Wipro is now a pure IT products and services play. Capital goods/Power
Persistent
TCS
Wipro
BHEL
BHEL, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multi-fold increase in the investments made in the domestic power sector over the last few years. However, the order inflow has been showing signs of slowing down which would remain a major concern for the company. The key challenge before the company now would be to maintain a robust order inflow and maintain margin amid rising competition and lower order inflow. The current order book of Rs115,000 crore stands at around 2.3x FY2013 sales. CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which is a strong cash generating business. Further, it is adding 1,200MW of generation capacity which would be on stream by FY2015. Moreover, CESC has a high degree of integrated status among peers. Despite that, the stock is currently one of the cheapest in the Indian utility space, trading at significant discount to its book value primarily on account of the concerns related to the losses from its retail business, Spencers. However, the retail business has started exhibiting a store-level profit since FY2011, which is a sign of revival as per the management. Again, the acquisition of a majority stake in First Source by CESC is an unrelated diversification (also BPO is not a highgrowth area in our view) in a time where the company itself needs large cash to fund projects in the core area (power). Therefore, we recommend a Hold on it with a price target of Rs385. Crompton Greaves key businessesindustrial and power systemshold a high potential in view of the investment opportunities in the power transmission and distribution sector. Its consumer products segment is expected to witness a high growth. Though the domestic operations remain relatively stable, the international operations went through a restructuring. This has been the major disappointment in the last few quarters adding to the woes of investors. On a positive note, the restructuring in Belgium is over.Now, the key thing to watch out for is the stabilisation of its Hungarian operations. Nevertheless, the stock should remain under pressure for some time. Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrol engines, power gensets, agro engines and pumpsets (engine segment) and construction equipment (infrastructure equipment segment). The engine business accounts for ~85% of its revenue while the rest comes from infrastructure equipment. GCL is witnessing improved revenues and margins on the back of a better outlook for the key user industries. The foray in the mini tractor segment and international markets would open new growth avenues for GCL. We maintain our Buy recommendation on the stock. Our price target remains unchanged at Rs95. Kalpataru Power is a leading EPC player in the transmission & distribution space in India. Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility (also current order book is 2x its FY2013 sales). The OPM of the stand-alone business is likely to remain around 10%. JMC Projects (subsidiary) is experiencing margin pressure which would affect the overall margin and return ratios of the company. However, on low valuation, we retain our Buy rating with a price target of Rs115. PTC India is a leading power trading company in India with a market share of 39% in FY2013 in the short-term trading market. In the last few years, the company has made substantial investments in areas like power project financing, coal trading and power tolling which have growth potential in the future. While the poor financial health of the state electricity boards (SEBs) has elongated its working capital cycle, the recent policy push for the SEB debt restructuring programme has eased the payment delay concerns to some extent. Its valuations continue to look attractive on a sum-of-the-parts basis.
CESC
Crompton Greaves
Greaves Cotton
Kalpataru
PTC India
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Thermax
The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs capex. Thermax group book stands at Rs4878 crore, which is 1x its FY2013 consolidated revenues. However, given the current environment and the cautious tone of the management on the margin and outlook, we have lowered our price target to Rs553 and downgraded the rating to Reduce. V-Guard is an established brand in the electrical and household goods space, particularly in South India. Over the years, it has successfully ramped up its operation and network to become a multi-product company. It has recently also forayed into non-south India and is particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products. We expect a CAGR of 29% in its earnings over FY2013-15. Infrastructure/Real estate
V Guard Ind
Gayatri Proj
Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and industrial construction businesses. The order book stands at Rs8,036 crore, which is 4.0x its FY2013 revenues. It is also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private equity. The company has potential to transform itself into a bigger player and we expect its net profit to grow at a CAGR of 32% over FY2013-15. ITNL is Indias largest player in the BOT road segment with a pan-India presence and a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the geographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, a strong pedigree along with the outsourcing of civil construction activity helps ITNL to scale up its portfolio faster. Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector. IRB is the largest toll road BOT player in India and the second largest BOT operator in the country with all its projects being toll based. It has an integrated business model with an in-house construction arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free and it has presence in high-growth corridors which provides healthy cash flow. Thus, IRB is well poised to benefit from the huge opportunity in the road development projects on the back of its proven execution capability and the scale of its operations. Jaiprakash Associates, Indias leading cement and construction company, is all set to reap the benefits of Indias infrastructure spending. The company has also monetised very well on the real estate properties of Yamuna Expressway. The marked improvement in the macro environment has improved accessibility to capital and thus eased the concerns of liquidity to some extent. However, higher leverage could act as drag on the valuation. Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the domestic infrastructure capex cycle. Strong potential from its international business, its sound execution track record, bulging order book and strong performance of subsidiaries further reinforce our faith in it. There also lies a great growth potential in some of its new initiatives. Mahindra Lifespace is the first in India to own two integrated business cities (IBC; a combination of SEZ and domestic area): one in Chennai and the other in Jaipur. Both have become operational. It has acquired land at Pune and Chennai to come up with two more IBCs. Apart from this, it has 4.42mn sq ft of residential and commercial projects under construction across various cities and an additional land bank of 18.52mn sq ft for future development. Consequently, its stand-alone net profit should grow at a CAGR of 9% over FY2013-15. Given its unique business model, Orbit is expected to cash on in the massive re-development opportunities in southern and central Mumbai. Given its presence in the luxury segment, which is less price sensitive, it will be able to revive faster once the real estate industry recovers. Pratibha Industries is a dominant player in water & irrigation and urban infrastructure segments. It has also diversified into other high-margin areas like road BOT, power and oil & gas. The current order book stands at Rs6,899 crore, which is 3.2x its FY2013 revenues. Given the governments thrust on developing these segments, we expect the net profit to grow at a CAGR of 35% over FY2013-15. The company is looking at expanding into the structural manufacturing business instead of the HSAW pipe manufacturing business (which has been an overhang for the past one year). This will improve the balance sheet and profitability. Punj Lloyd is the second largest EPC player in the country (first being Larsen & Toubro) with a global presence. However, since FY2009, the profitability has come under severe pressure due to cost overruns/ liquidated damages in some of Simon Carves (subsidiary) projects. Thus it has put Simon Carves under administration. Further Libyan projects will take another few quarters to begin execution. Therefore, the successful execution of its projects along with debt reduction and working capital management will drive its growth as it enjoys a robust order book.
IL&FS Trans
IRB Infra
Jaiprakash Asso
L&T
Mahindra Lifespace
Orbit Corp
Pratibha Ind
Punj Lloyd
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Unity Infra
With a well-diversified order book, Unity Infrastructure is expected to be the key beneficiary of the governments thrust on infrastructure spending. The order book remains strong at Rs3,838 crore, which is 1.9x its FY2013 revenues. We expect its net profit to post a CAGR of 11% on the back of a strong order book during FY2013-15. Further, it has recently forayed into the road BOT segment and has three BOT projects under its kitty. Oil & gas GAIL India, a leading gas transmission company, is aggressively expanding its pipeline network and plans to invest more than Rs11,000 crore over FY2014-16 in a phased manner to expand its gas pipeline and expand the trading business. On account of lower domestic gas production, we expect a subdued performance from its core gas transmission business in the next couple of years. However, the LNG trading business is likely to see an uptick in the same period. Though the long-term outlook is positive, currently the stock is facing pressure as expected administered price mechanism (APM) gas price revision would impact the margin of its petchem business. Hence, we maintain a Hold rating on the stock. Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. The total 1P (proven) and 2P (proven and probable) reserves of the company stood at 473 million barrels (mmbbls) and 941mmbbls respectively as on March 2012. In addition to the huge oil reserves, the companys reservereplacement ratio is quite healthy at 1.23x, which implies a comfortable level of accretion of oil reserves through new discoveries. Further, it has cash of around Rs10,935 crore (Rs182 per share) as on March 2012 and offers healthy dividend pay-out (dividend yield of 4.3%), which provides comfort to investors. Further, the recent policy reforms in terms of a partial de-regulation of diesel and a likely revision in gas prices augurs well for the company. RIL holds a great promise in E&P business with gas production from the KG basin. Further, a likely revision in the natural gas prices will be a positive trigger for the company. In the refining space, we expect RILs GRM to pick up with a likely improvement in the light-heavy crude oil price differential. The company is likely to fetch a premium over Singapore Complex GRM due to its superior refinery complexity and captive use of KG-D6 gas. We expect the petrochem margins to be maintained in the medium term on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighing on the stock price. Selan is an oil exploration & production company with five oil fields in the oil-rich Cambay Basin of Gujarat. The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production. Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based on this, we expect it to ramp up production significantly, subject to approval for the new wells. We expect production ramp-up in FY2014 and hence we expect the earnings estimates to grow by 23% (CAGR over FY201315). Therefore, we retain our Buy rating on the stock with price target of Rs365. Pharmaceuticals
GAIL
Oil India
Reliance Ind
Selan Exploration
Aurobindo Pharma
Cadila
Cipla
Dishman Pharma
Aurobindo Pharma is set to rebound on the back of the US Food and Drug Administration (USFDA) clearing two of its manufacturing facilities (including one greenfield facility) and removing import-alert on Unit-VI facility, which will help Aurobindo Pharma to ramp-up its product list in the USA, thanks to a strong product pipeline built over a period. With the expected increase in the export-led business after resolution of the USFDA issues, the favourable tilt in the revenue mix is likely to boost the margin, resulting in a relatively much better growth in earnings as compared with revenues. We expect the revenues and net profit to grow at a CAGR of 17% and 26% over FY2013-15 respectively. Cadilas improving performance in the US generic vertical and emerging markets along with steady progress in the CRAMS space (through JVs) will help it achieve its target of generating revenues of $3 billion by 2015. It acquired three entities in FY2012, namely Nesher Pharma (USA), Bremer Pharma (Germany) and Biochem Pharma (India) which should supplement the growth. It has got USFDAs clearance for its Moraiya plant, which removes one of the vital concerns for the company. Recently, it got DCGI approval for its first new chemical entity called Lipaglyn to treat type-II diabetes; this will add value to its R&D pipeline. Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on technology intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the key markets like the USA and Europe; (3) developed an appetite for inorganic expansions; (4) decided to tap the FTF opportunities through collaboration with major generic players in the regulated markets and (5) invested in future growth areas like biosimilars. Besides, Ciplas base business growth would be fast-tracked in the quarters ahead because of (1) the optimisation of the Indore formulation plants and consolidation of Cipla Medpro in Q4FY2014. We expect 13% and 12% revenue and profit CAGR respectively over FY2013-15. We initiate coverage on Cipla with Buy rating and a price target of Rs490. Dishman Pharmaceutical and Chemicals is a key player engaged in CRAMS and specialty chemical businesses. The company has invested heavily over the past four years (over Rs1,000 crore capex during FY08-11) to establish a strong foothold in the CRAMS, API and vitamin-D businesses. After witnessing four years of sluggish performance due to a global slowdown (that affected the CRAMS business) and heavy capex (that resulted in a sharp rise in the fixed costs), the company is all set to record a strong operating performance on the back of enhanced capacities, the up cycle in the CRAMS business and a substantial reduction in the debt/equity ratio due to stronger free cash flow.
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FUNDAMENTALS
Divis Labs
Despite a weaker performance in Q4FY2013, we are confident of Divis Laboratories growth potential. The new DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for the company as it would improve economies of scale and lead to tax benefits. A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit the growth opportunities in niche segments, like oncology and steroids for contraceptives. Glenmark exhibited an impressive operating performance during FY2013 in the core business on key generic launches, but for higher research and development expenses and tax payments, which restricted profit growth. Through the successful development and out-licencing of six molecules in a short span of eight years, Glenmark has become Indias best play on research-led innovation. It has built a pipeline of 14 molecules and clinched six out-licencing deals worth $1,672 million (active deals worth $938). It has received $200 million as initial milestone payment. Its core business has seen stupendous success due to its focus on niche specialties. Ipca has successfully capitalised on its inherent strength in producing low-cost drugs to tap the export markets. Its ongoing efforts in the branded formulations business in the emerging economies, the revival in the UK operations, the pan-European initiatives, the likely approval of one additional product under institutional business and a significant scale-up in the US business will drive its formulation exports. It has received USFDAs approval for the Indore SEZ (US supplies expected in H2FY2014) which would help ramp up the sales in the USA. The expected ramp-up in the launch of oral contraceptives, ophthalmic products and a robust pipeline of new launches in the domestic and overseas markets provide strong growth visibility for Lupin. Further, with an expanded field force and therapy focused marketing division, its formulation business in the domestic market has been performing better than the industry. The deal with Eli-Lilly to distribute human insulin would open an incremental revenue stream for Lupin in the Indian market. The combination of Sun Pharma, Taro, Dusa Pharma and generic business of URL Pharma offers an excellent business model for Sun Pharma, as has been reflected in the 40% Y-o-Y revenue and 39% profit growth in FY2013. Though Taro may not show a similar performance in the next quarter, but we expect a better performance from Sun Pharma going forward mainly driven by (1) the resumption of sales from the US-based subsidiary Caraco Pharma post-USFDA clearance, (2) contribution from the newly acquired Dusa Pharma and URL Pharma in the USA and (3) launch of key products in the USA and emerging markets including India. We expect 18% and 21% revenue and PAT CAGR respectively over FY2012-15 on an organic basis. With a strong cash balance, Sun Pharma is well positioned to capitalise on the growth opportunities and inorganic initiatives. Its debt-free balance sheet insulates it from the negative impact of volatile currency. A well-known name in the domestic formulation market, Torrent has been investing in expanding its international presence. With the investment phase now over, Torrent should start gaining from its international operations in USA, Russia and Brazil. The impending turnaround of its German acquisition, Heumann, will also drive its profitability. However, the imposition of new tax (Budget 2013) on partnership-based units in Sikkim would be a drag on earnings. Agri-Inputs With a total capacity of 5.5mmtpa Tata Chemicals is the second largest soda ash producer in the world. It has purchased 25% stake in a urea-ammonia greenfield project at Goban with investment of $290 million. Further changes in urea policy are likely to benefit it further. Soda prices are likely to improve from the current levels because lower cost Chinese players are also finding it tough to break even at current price. So the company believes that the price of soda may improve from here. Demand for soda ash in India and North America remains strong. A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its revenues are likely to grow at 12-15% in FY2014 and EBIDTA margin is expected to remain at 18-20%. It has also started to focus on premium products in agro-chemicals and will slowly stop selling commodities and lowmargin products. Building materials
Glenmark Pharma
Ipca Lab
Lupin
Sun Pharma
Torrent Pharma
Tata Chemicals
United Phos
Grasim
Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable debt/equity ratio (0.33x FY2012), attractive valuation and diversified business. The demand for VSF products remains strong in the global market and Grasim being a leading domestic player is well placed to capture the incremental demand. The company is in the process of adding another 120,000 tonne capacity in VSF by FY2013 at an investment of Rs1,690 crore.
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June 2013
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FUNDAMENTALS
Remarks
EARNINGS GUIDE
India Cements
India Cements installed capacity has got enhanced to 16MTPA which will result in volume growth and drive the earnings of the company. The company is also setting up a 100MW captive power plant, which is expected to come on stream by FY2013 and benefit the company in terms of coast saving. Further we believe avg. cement realisation of the company in FY2014 to remain higher as compared to average realisation of FY2013. Madras Cement, one of the most cost-efficient cement producers in India, will benefit from the capacity addition carried out ahead of its peers in the southern region. The 3mtpa expansion will provide the much-needed volume growth in the future. The regional demand remains lacklustre but on account of the improvement in the realisation due to supply discipline and a likely change in the market mix its profitability will improve (marginally) in FY2014. Shree Cements cement grinding capacity has grown to 13.5mtpa which will support its volume growth in the coming years. It has set up 300MW power plant entirely for merchant sale which is expected to support its revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue accruing from the sale of surplus power will drive the earnings of the company. UltraTech is Indias largest cement company with approximately 52 million tonne cement capacity. It has benefited from an improvement in its market mix. Further, the ramping-up of the new capacity and savings accruing from the new captive power plants will improve the companys cost efficiency. Discretionary consumption
Madras Cement
Shree Cement
UltraTech Cement
Eros Intl Media
Eros is one of the largest integrated film studios in India with multi-platform revenue streams and a well-established distribution network across the globe. With its proven track record, an impressive movie slate and its HBO alliance coming into foray, we believe Eros is well poised to gain from the rising discretionary spending on film entertainment driven by the countrys favourable demographics. Thus, EIML is a compelling value play on the Indian media and entertainment industry. Indian Hotels is the largest hotelier in India with a vast portfolio of hotel properties around the globe. Over the long term the company would benefit from the increase in tourism and corporate travel in India. Also, a turnaround in profitability of its overseas properties would boost its earnings.
Indian Hotels Co
KKCL
Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with a robust balance sheet position put it in a sweet spot. Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. With the growing income, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable demographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond with its brands and superior distribution set-up is very well geared to encash the same. Any development with regard to the Thane land in the form of either joint development or disposal would lead to value unlocking and provide significant cash to the company. Relaxo is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-themind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment opportunity due to its growing scale, strong brand positioning and healthy financial performance. Currently we have a BUY with a price target of Rs845. Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands such as Mainland China and Oh! Calcutta in its kitty. The company is a good proxy on the Indian consumption story as several factors such as demographics, increasing disposable income and the trend of nuclear families are playing in its favour. Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment companies. It has a bouquet of 32 channels across Hindi, regional, sports and lifestyle genres. It is best placed to benefit from the digital addressable system regime rolled out by the government. Diversified/Miscellaneous
Raymond
Relaxo Footwear
Speciality Rest.
Zee Entertainment
Aditya Birla Nuvo
We like the strong positioning that ABNs businesses enjoy in their respective fields. ABN is amongst the top five players in the insurance, asset management and telecom (Idea Cellular is the fastest growing telecom company, third in ranking) segments. Madura Garments, with its marquee brands, and consistent and resilient growth, is a profitable set-up. We believe in the improving macro environment ABN would be well placed to grow.
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Remarks
EQUITY
FUNDAMENTALS
Bajaj Holdings
Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead for the sector and hence the company. The African business is facing headwinds and thus its performance remains a key monitorable.Overall, we maintain a cautiously optimistic view on the company. Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead for the sector and hence the company. The African business is facing headwinds and thus its performance remains a key monitorable.Overall, we maintain a cautiously optimistic view on the company. Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, is benefiting from the enhanced budgetary outlay for strengthening and modernising the countrys security. The growth in revenue is also expected to be aided by the civilian and export orders. The companys current order book of around Rs25,000 crore provides revenue visibility for the next three to four years. The huge cash reserve would also support the stock. With its dominant presence in the container freight station segment and recent forays into the rail freight and cold chain businesses, GDL has evolved as an integrated logistic player. Its CFS business is a cash cow while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold storage business. The proposed capex for all the three segments will strengthen its presence in each of the segments and increase its panIndia presence. We expect GDLs revenue and net profit to grow at 17% and 6% CAGR respectively over FY2012-14. Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insurance and healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sector players, has gained the critical mass and enjoys some of the best operating parameters in the industry. With insurance penetration picking up in India and with the company entering into a tie-up with Axis Bank, we expect to see a healthy growth in the companys annual premium equivalent going ahead. As the company has turned profitable on a consolidated basis and has a treasury corpus of Rs409 crore, it has announced a dividend of 610% in FY13 and will continue to pay dividends in the future. Ratnamani Metals is the largest stainless steel tube and pipe maker in India. In spite of the challenging business environment due to increasing competition, the stock is attractively valued. The management has maintained a strong outlook on the potential opportunities in the oil & gas sector. We expect a subdued revenue performance in FY2013. However, we expect the EBITDA margin to inch up by close to 400 basis points which should result in a healthy growth in profits in FY2013. A key player in the plastic specialties space, Sintex Industries has a diverse business model with presence in construction, prefabs, custom moulding and textile businesses. However, a challenging economic environment has slowed down the growth of its monolithic business leading to a low order book.
Bharti Airtel
BEL
GDL
Max India
Ratnamani Metals
Sintex Industries
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ValueGuide Jun13

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June 2013 For Private Circulation only www.sharekhan.com

From Sharekhans Desk

06 RESEARCH BASED EQUITY PRODUCTS Top Picks basket

Top MF Picks (equity) Top SIP Fund Picks

TECHNICALS USD-INR EUR-INR

303.0 ** ** 600.0 340.0 254.0 241.0 405.0 168.0 741.0

Buy Hold Hold Hold Buy Buy Reduce

1650.0 830.0 ** 305.0 600.0 1650.0 **

Hold Hold Hold Buy Buy Buy Reduce Hold

240.0 385.0 105.0 95.0 115.0 88.0 553.0 508.0

STOCK IDEAS STANDING (AS ON JUNE 05, 2013)

Hold Buy Buy Buy

390.0 650.0 1010.0 365.0

267.0 490.0 906.0 130.0 1262.0 ** 615.0 810.0 1150.0 890.0

** Price target under review

FROM SHAREKHANS DESK

from sharekhans desk

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

Sharekhan (Top Picks)

Y TD CY 2012 CY 2011 CY 2010 CY 2009 CY 2013

Since Jan 2009

SHAREKHAN TOP PICKS

BAJAJ CORP Remarks:

HCL TECHNOLOGIES Remarks:

HDFC BANK Remarks:

ICICI BANK Remarks:

SHAREKHAN TOP PICKS

LARSEN & TOUBRO Remarks:

NIIT TECHNOLOGIES Remarks:

OIL INDIA Remarks:

RELIANCE INDUSTRIES Remarks:

SHAREKHAN TOP PICKS

SUN PHARMA Remarks:

ZEE ENTERTAINMENT Remarks:

MAY 16, 2013

Public & others 20%

Non Promoter Corporate 6%

MAY 28, 2013

Promoters 65% Domestic institutions 10%

CMP: RS91 MAY 6, 2013 Price target revised to Rs112

CMP: RS94 MAY 10, 2013 Price target revised to Rs101

CMP: RS254 MAY 6, 2013 Stellar performance continues

MAY 15, 2013

Price target revised to Rs826

MF & FI 4% Foreign 11%

BAJAJ HOLDINGS & INVESTMENT

CMP: RS912 MAY 20, 2013 Price target revised to Rs1,334

CMP: RS154 MAY 30, 2013 Price target revised to Rs230

MF & FI 0.2% Foreign 0.9% Promoter 70.6%

MAY 29, 2013

Price target revised upwards to Rs385

CMP: RS94 MAY 27, 2013 Price target revised to Rs105

DISHMAN PHARMACEUTICALS & CHEMICALS

MAY 28, 2013 Margin improves

CMP: RS525 MAY 8, 2013 An all-round impressive performance

HOUSING DEVELOPMENT FINANCE CORPORATION

Price target revised to Rs910

IL&FS TRANSPORTATION NETWORKS

CMP: RS176 MAY 8, 2013 Price target revised to Rs302

303.0 600.0 340.0 254.0 241.0 405.0 168.0 741.0

1650.0 830.0 305.0 600.0 1650.0