Sensex

Monday, July 19, 2010

**[investwise]** City Union Bank-12M Target Rs 60-Rs70 at 2.5XFY11 Book [1 Attachment]

 
[Attachment(s) from Maverick included below]

FYI

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
 
Nothing in this article is, or should be construed as, investment advice.
 
 
 

 
 

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Attachment(s) from Maverick

1 of 1 File(s)

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**[investwise]** CLSA Raises China Exposure; Breakout In Shanghai Will Signal Asia Decoupling

 

CLSA
A Break-Out Of The Shanghai Indices Will Signal Asia Is Well On It's Way To A Decoupling From The Western Markets...Overweight India and China

GREED & fear will increase the overweight in China in the relative-return portfolio by two
percentage points. The biggest reason for the move is that the CSI 300 Index is now getting close to GREED & fear's targeted low of 2,300.

The CSI 300 Index closed last quarter at 2,563, having fallen by 23% in 2Q10. This implies a potential downside of only 10%. GREED & fear repeats the view that it is too late to underweight China for relative-return investors. On that point China actually outperformed relatively last quarter with the MSCI China Index declining by 6.2% in US dollar terms compared with the 9.7% decline in the MSCI AC Asia Pacific ex-Japan Index.

The long-term performance of the Asia ex-Japan thematic portfolio remains for now
respectable. Since its inception at the end of 3Q02, the portfolio has risen by 527% in US dollar terms, compared with a 168% rise in the MSCI AC Asia ex-Japan Index and a 26.4% rise in the S&P500. The portfolio outperformed the regional indices last quarter, rising by 0.5%, compared with a 5.7% decline in the MSCI AC Asia ex-Japan Index and a 9.7% decline in the MSCI AC Asia-Pacific ex-Japan Index.

The country bets in the portfolio continue to be India and China, which currently represent 35% and 26% of the portfolio. The recommended hedge for the portfolio remains to short European financial stocks.

The five percentage point investment in the Japan thematic portfolio will be removed with the money added to the existing investment in the Asia ex-Japan thematic equity portfolio.  The main reason for this change, aside from the long-term bullish view on Asian domestic demand, is the growing risk of a further appreciation of the yen which would be negative for Japanese equities.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
 
Nothing in this article is, or should be construed as, investment advice.
 
 
 

 
 

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Fw: Investor's Eye: Update - HDFC Bank (First-cut analysis), Crompton Greaves (First-cut analysis), Zensar (PT revised to Rs394)

 

Sharekhan Investor's Eye
 
Investor's Eye
[July 19, 2010] 
Summary of Contents

STOCK UPDATE 

HDFC Bank
Cluster: Evergreen
Recommendation: Buy
Price target: Rs2,205
Current market price: Rs2,050

Q1FY2011 results: First-cut analysis 

Result highlights

  • HDFC Bank?s Q1FY2011 performance was in line with our projections. The bank?s quarterly net profit was up by 33.9% year on year (yoy) to Rs811.71 crore vis-?-vis our projection of Rs814 crore. The quarterly profit growth was driven mainly by a healthy growth in the net interest income (NII) and lower provisioning during the quarter.
  • The NII was up by a strong 29.4% yoy to Rs2,401.1 crore driven by an improved credit growth during the quarter. Meanwhile, the calculated net interest margin (NIM) deteriorated by 19 basis points sequentially due to a 34-basis-point sequential increase in the cost of funds, which in turn could be partly attributed to the move towards payment of interest on savings accounts based on daily balances. 
  • As expected, the non-interest income performance was weak, declining by 9.9% yoy to Rs939.9 crore led by a 91.6% year-on-year (y-o-y) fall in the treasury income for the quarter. However, the fee income was up by a fair 14.8% yoy. 
  • The operating expenses growth for the quarter was contained at 15.3% yoy. Consequently, the cost-to-income ratio stood at 47.7%, largely in line with that of the previous year. 
  • The asset quality of the bank improved on a sequential basis. The gross non-performing assets (GNPAs) declined by 1% quarter on quarter (qoq) to Rs1,791.2 crore, however the net NPAs (NNPAs) increased by 5.2% qoq. In relative terms, the GNPA (%GNPA) improved to 1.21% in the quarter from 1.43% in the last quarter (Q4FY2010). At the end of Q1FY2011, the restructured assets form 0.3% of the advances book, in line with that of the previous quarter.
  • As a result of improvement in the asset quality, the provisions during the quarter declined by 15.8% yoy to Rs555 crore. The provisioning coverage ratio however fell by 145 basis points sequentially to 77%.
  • The advances grew by a robust 40.9% yoy to Rs146,248 crore in the quarter. However the deposit growth was relatively slower at 25.6% yoy to Rs183,033 crore, though significantly higher than the industry average of around 14%. Importantly, the demand deposits grew by a strong 37.4% yoy leading to an improvement in the current account and savings account (CASA) ratio to 49.2% from 45% in the year-ago quarter. 
  • The capital adequacy ratio (CAR) of the bank as at the end of Q1FY2011 stood comfortable at 16.3%, though lower than 17.4% during the previous quarter. Tier 1 CAR at the end of Q1FY2011came in at 12.4%. 
  • At the current market price of Rs2,050, HDFC Bank trades at 18.4x FY2012E earnings per share, 10.1x FY2012E pre-provisioning profit and 3.3x FY2012E price-book value. We currently have a Buy rating on the stock and will come up with a detailed analysis of the bank?s Q1FY2011 performance shortly. 

 

Crompton Greaves
Cluster: Apple Green
Recommendation: Hold
Price target: Rs281
Current market price: Rs270

Q1FY2011 results: First-cut analysis 

Result highlights

  • Crompton Greaves Ltd (CGL)?s Q1FY2011 stand-alone performance was largely in keeping with our expectation. However, its consolidated performance was less than expected, mainly led by the continued sluggish sales of its subsidiaries. 
  • On a stand-alone basis, the company?s revenues grew by 14.4% year on year (yoy) to Rs1,342.9 crore, which was in line with our expectation of Rs1,345.1 crore. The revenue growth was mainly led by a spectacular 28.8% year-on-year (y-o-y) growth in the revenues of the consumer product division. The industrial systems division also performed well with a 22.6% y-o-y growth in the revenue. However, the power systems division was the biggest disappointment in the stand-alone results with a mere 0.3% y-o-y growth in the sales (as against our expectation of a 15% y-o-y growth). 
  • The company maintained a healthy operating profit margin (OPM) of 15.6% in the quarter as compared to 14.8% in Q1FY2010. This was mainly led by the containment of the other expenses. The net interest cost remained negative. Boosted by a robust operating performance and other income, the net profit surged by 23.9% yoy to Rs142.2crore, which is slightly above our expectation of Rs138.4 crore.
  • The net revenue of the consolidated entity rose by a mere 4.8% yoy to Rs2,302.2 crore (below our projection of Rs2,428.6 crore) mainly on account of a 6.3% y-o-y fall in the revenue from the subsidiaries. The revenue from the subsidiaries fell in the quarter, apparently on account of the appreciation in the rupee against the euro as well as a sluggish demand in the overseas markets.
  • The OPM expanded to 12.9% in Q1FY2011 from 11.3% in Q1FY2010 backed by better stand-alone performance and operating performance by the subsidiaries. The subsidiaries? OPM expanded to 9.2% in the quarter from 7.2% in the corresponding quarter of the last year. This margin expansion was aided by the containment of the other expenses as well as the raw material cost.
  • This robust overall operating performance helped the adjusted net profit of the group to rise by 19% yoy to Rs190.9 crore, which is below our estimate. 
  • We will come up with a detailed note on the company?s Q1FY2011 results after an interaction with the management and shall review our estimates and the price target. Currently, we have a Hold rating on the stock with a price target of Rs281. At the current market price, the stock trades at 19.2x and 17.3x on FY2011 and FY2012 estimates respectively.

 

Zensar Technologies
Cluster: Ugly Duckling
Recommendation: Hold
Price target: Rs394
Current market price: Rs358

Price target revised to Rs394

Result highlights

  • Zensar Technologies (Zensar)?s net sales increased by 3.9% quarter on quarter (qoq) to Rs241.9 crore in Q1FY2011. The growth was mainly driven by a 3% quarter-on-quarter (q-o-q) volume growth and a minor improvement in the pricing during the quarter. In terms of the segments, the enterprise application services (EAS) division?s revenues increased by 4.3% sequentially to Rs63.9 crore while the global transformation services (GTS) division?s revenues improved by 3.9% sequentially to Rs177.7 crore during the quarter. 
  • The operating profit margin (OPM) improved by 126 basis points qoq to 15.9% mainly on the back of the volume growth. Consequently, the company?s operating profit also grew by 12.8% sequentially to Rs38.4 crore.
  • Supported by the healthy revenue growth, margin expansion and higher other income, the company?s net income also grew strongly by 18.5% qoq to Rs32.5 crore. The net income growth was also supported by a foreign exchange (forex) gain of Rs6 crore included in the other income (Rs8.5 crore versus Rs3.5 crore in Q4FY2010). However, the company?s earnings were negatively affected by a higher effective income tax rate (18.3% in Q1FY2011 versus 11% in Q4FY2010). 
  • The company added 23 new clients during the quarter with six clients having the potential to become key accounts for the company going forward. Further, the company has highlighted strong gross hiring plans for FY2011 (400 freshers and 1,300 lateral hiring) and a net hiring target of 800 employees. We believe that with such a strong hiring target, the company would be able to achieve a double-digit growth. 
  • On the inorganic growth initiatives, the company has mentioned that it has short-listed some target companies based out of the USA. The company is targeting acquisitions aggregating USD80-100 million in the infrastructure management services (IMS) space.
  • We have revised upwards our revenue estimates for Zensar to factor the higher volume growth (based on the strong hiring target given by the company). We now assume a lower income tax rate of 18% for FY2011 and that of 20% for FY2012. Consequently, our revised earnings per share estimate stands at Rs68.7 for FY2011 and at Rs78.9 for FY2012. We maintain our Hold recommendation on the stock with a revised price target of Rs394. At the current market price, the stock is trading at 5.2x FY2011 earnings estimate and 4.5x FY2012 earnings estimate.

MUTUAL GAINS

Sharekhan's top equity fund picks

We have identified the best equity-oriented schemes available in the market today based on the following 5 parameters: the past performance as indicated by the one, two and three year returns, the Sharpe ratio and Information ratio.

Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.

Information Ratio is one of the most important tools in active fund management. It is the ratio of active return (the return over the index return) to active risk annualised. A higher Information Ratio indicates better fund manger.  


Click here to read report: Investor's Eye  


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Fw: Derivatives Info Kit

 

Sharekhan Investor's Eye
 
Derivatives Info Kit
[For July 20, 2010]
 Summary of Contents
 
DERIVATIVES INFO KIT



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**[investwise]** Cultured Diamonds Will Triple The Size Of The Indian Jewellery Market

 

The glint is the same; the twinkle in the eye of the giver is the same; the cost is a little less, but these are diamonds with a difference. They are not born deep in the bowels of the earth. Rather, they are created in laboratories like test-tube babies.


But that does not make them any less real. Unlike American Diamonds (made of plastic) or Cubic Zirconium (CZ) diamonds, these diamonds are just like the earth-mined diamonds. They are made of carbon, and each cultured diamond is grown individually with its own unique size, color and clarity characteristics.


Lab-grown diamonds are finding many takers among consumers and merchants alike. How would it affect the industry if they were to catch on in a big way in this jewelry-crazy nation? Foreign companies are eyeing India as a lucrative market. Apollo Diamonds and Gemesis, both headquartered in the U.S., announced in 2004 that they will sell cultured diamonds. Gemesis is now entering India.


The Big Tumble


The direct heat of the entry of cultured diamonds will be faced by big companies like De Beers. Much of the natural diamond trade is controlled by the 39 sight holders (companies with exclusive rights to purchase) of the South African diamond giant. Already, over the years, De Beers' hold has weakened. During the 1990s it controlled almost 95% of the supply of roughs. Today, that has slipped to 40% (some put it at 30%). The entry of lab-grown diamond dealers could reduce that market share even further and faster.


Consider the facts. In 2000, the Indian industry used to cut and polish eight out of 10 stones; this year, they still cut and polish 11 out of 12 stones, according to figures given by Gem & Jewellery Export Promotion Council (GJEPC).


Given that De Beers' market share is falling, it is obvious that Indians are taking on work from other companies. There is no reason why they wouldn't want to do this for Gemesis and Apollo.


Worried about the entry of cultured diamonds, no new diamond mines have opened up. Mines have cut their output to 70% of earlier levels. India has yet to commercialize its diamond mines, which Rio Tinto and De Beers are believed to have identified.


It is in this vacuum that Indian diamantaires hope to create a brand for their own diamond-studded jewelry. Since this will require deep pockets, one can expect some of the largest diamantaires in India to take the first leap. Gemesis can produce several thousand carats of cultured diamonds a year. Company sources talk of sales of a little under $100 million in 2009. But they claim growth of over 30% year on year. Market sources reckon that costs have now come down to well under 60% of the cost of earth-mined diamonds.


In fact, the industry expects De Beers itself to start producing lab-grown diamonds and to market them through its subsidiary, Element Six. While no word on this move has been forthcoming from De Beers, many believe that the lower cost of production and the absence of environment damage could persuade it to promote lab-grown diamonds very aggressively soon. "There is a vacuum in the diamond market today, and that spells a very big opportunity," says Shashikant D. Shah, a diamond-marketing consultant.


Market Dynamics


Martin DeRoy, vice president of marketing, Gemesis, talks about the way these cultured stones are now being marketed. "Both have the same brilliance, sparkle, fire and scintillation. In other words, both are diamonds." He believes that these diamonds will play a substantial role in the gems and jewelry business. "We think it will be like cultured pearls--which had to wait for almost 50 years before becoming acceptable. But in our case, we may have to wait for less than five years."


This is why Indian diamantaires have become increasingly willing to work with cultured diamonds. "They have begun to realize," explains Shah, "that they do not have to depend on De Beers for the supply of roughs, and then on U.S. retailers for purchasing the cut and polished stones."


It is at this stage that a $12 billion diamond market becomes a $140 billion jewelry retail business--where the actual value of precious metals may be just half the retail price. Considering that diamond studded jewelry is the largest segment of this industry--worth around $70 billion at the retail level (2005 estimates) and growing at a CAGR of 5% since 2000--that is a sizable market.


Even India's commerce ministry appears to have woken up to this new reality. It has cut import duty on cultured diamonds from 25% in 2004 to just 5% today. But the trade has been demanding 'zero duty' for such stones--just like roughs from De Beers--and there is talk that this should soon become a reality.


"Whether one likes it or not, lab-grown diamonds are here to stay," admits diamond businessman Sanjay Kothari, convener–business development, GJEPC. Moreover, as he says, "the stakes are high for India."



Myth & Reality

Myth: Cultured diamonds are not diamonds.
Reality: We are not talking of moissanite or cubic zirconia here. This is real diamond, the only difference being that it was cultured in a lab rather than being mined from the earth. It is like a test-tube baby. The same thing, made differently.


Myth: They are inferior.
Reality: Both lab-grown and earth mined diamonds are made of carbon/graphite. Both have the same brilliance, luster, fire, hardness, refractive index and specific gravity.


Myth: All cultured diamonds are identical.
Reality: As with earth-mined diamonds, each cultured diamond is grown individually with its own unique size, color, and clarity characteristics. While growth parameters can be controlled to some extent, the exact results of the growth process are not predictable.


Myth: Cultured diamonds are not rare.
Reality: Cultured diamonds represent less than 1/40th of one percent of the world's natural diamond production.


Myth: Gem-quality cultured diamonds are easy to grow.
Reality: Man has been growing industrial diamonds for over 50 years. It has only been in the last few years that gem-quality diamonds have become a commercial reality.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
 
Nothing in this article is, or should be construed as, investment advice.
 
 
 

 
 

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Stocks, mutual funds and the entire investment gamut.  Only financing/investment avenues in India will be discussed. 

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**[investwise]** PL Puts A BUY On Asian Paints

 

Asian Paints-BUY
Over the past 12 months while most fund managers have treaded a tortous path between growth and value, one sector that has stood out is the Paints industry. It is not only a defensive play as it grows on consumer growth, it is also an aggressive play on automobiles growth which again are in some measure a consumer play. The top four players in the industry Asian Paints, Kansai Nerolac, Akzo Nobel and Berger have done extremely well and there seems more to come.

Continued robust demand to drive healthy 18% earnings CAGR: Asian Paints is an undisputed leader in the Indian paints market (55% market share of the organized segment), with more than 2x the share of its next competitor. Pick-up in urban discretionary demand and continued healthy volume growth in semiurban and rural  markets will result in robust 18% earnings CAGR for FY10-12e, in our view.

Expect 80bps EBITDA contraction in FY11e: We model for 80bps contraction in FY11e EBITDA margin, given the high base (highest EBITDA margin of 18.4% in FY10) and sequential increase in input costs. We believe that Asian Paints has enough pricing power to pass on any adverse input cost hike (~4% price hike in May 2010).

Favourable macro catalysts: We believe that Asian Paints is a direct play on the growing economy and India consumption story. Apart from consumption and penetration-led opportunity, several favourable demographic catalysts viz. rising income levels, increasing urbanisation and nuclear families can act as structural growth drivers for decorative paints demand growth.

Valuation and Outlook: We value Asian Paints at a P/E of 23x (3 year average) to arrive at target price of Rs2,600, an upside of 9%. We expect the valuations to sustain, given our expectations of healthy earnings CAGR of 19% for FY10-12E, led by a pick-up in urban discretionary consumption. Asian Paints has the pricing power to pass on input cost inflation (price hike of 4.15% in May and 2.8% in July). We initiate with 'BUY'.



Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
 
Nothing in this article is, or should be construed as, investment advice.
 
 
 

 
 

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Recent Activity:
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INVESTMENTS IN INDIA
We are low-risk, long-term investors. 

Stocks, mutual funds and the entire investment gamut.  Only financing/investment avenues in India will be discussed. 

For any assistance, questions or improvement ideas, contact investwise-owner@yahoogroups.co.in

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Indian Stocks BSE

Indian Stocks BSE


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Posted: 19 Jul 2010 06:27 AM PDT

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