Fw: Investor's Eye: Update - Lupin, Apollo Tyres, IRB Infrastructure Developers, Cadila Healthcare, Fertilisers

 

 

Investor's Eye [May 10, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Lupin Cluster: Apple Green Recommendation: Buy Price target: Rs597 Current market price: Rs521 Q4FY2012 results: First-cut analysis  Result highlights Better than expected revenue; bottom-line impacted by higher fixed costs and tax Lupin's net sales for Q4FY2012 rose by 23.8% year on year (YoY) to Rs1,883 crore, which is 8% higher than our estimates. The operating profit dropped to 17.6% in Q4FY2012 vs 18.3% in Q4FY2011. This is substantially lower than our estimate of 21.6%. A higher interest cost (56% YoY rise) and depreciation (52.5% YoY rise) impacted the profit before tax (PBT), which registered a 9.7% Y-o-Y rise to Rs296 crore. During the quarter, the effective tax rate (excluding a one time tax payment of Rs13.3 crore on unrealised gains on inventories of foreign subsidiaries) jumped to 41% (vs 11.5% in Q4FY2011). This resulted in a drop in reported profit by 31.5% YoY to Rs155.6 crore, which is 38% lower than our estimate of Rs242 crore.  Valuation The stock is currently trading at 20.5x and 15.8x FY2013E and FY2014E earnings. We have a Buy recommendation on the stock with a price target of Rs597.  We will revisit the numbers and target price after an interaction with the company's management. Apollo Tyres Cluster: Apple Green Recommendation: Buy Price target: Rs91 Current market price: Rs82 Rolling on a growth path  Result highlights Standalone margins recover Apollo Tyres Ltd (ATL)'s Q4FY2012 revenues grew 28.2% year on year (YoY) on the back of a 14% YoY volume growth and an equal contribution from the price and product mix. The operating margins recovered 160 basis points sequentially to 9.6% on account of lower material costs. Natural rubber prices reduced to Rs210/kg in Q4FY2012 as against Rs223/kg in Q3FY2012, giving a boost to contribution as well as operating margins. Higher tax rates impacted profitability which recorded a moderate growth of 9.2% YoY. The tax rate for Q4FY2012 was 31.5% as against 29.6% for FY2012. Changes in accounting norms led to higher costs under the interest head as earlier interest income was not netted off. The same got reported under the other income head. The company took a marginal price hike of 1% in the truck segment in the month of May 2012.  Europe continues to be the star performer Revenues from Europe grew 9% YoY in Q4FY2012 on the back of a 4% growth from volumes and the balance through price mix and currency. Europe continued to report strong margins (190 basis points improvement on a seasonally strong Q3FY2012). The margins were higher on account of renewed season end winter tyre sales in February 2012. The European operations also saw the impact of a Rs20 crore gain on actuarial valuation leading to lower employee costs. South African operations disappointed with a loss against our expectation of a turnaround ATL's South African operations declined 4% YoY in Q4FY2012, on the back of volume decline of 18% in the quarter. The company reported a loss for the second consecutive quarter at the earnings before interest and tax (EBIT) level. The operations were impacted by planned shutdowns and rising threat of imported tyres. However with a better volume growth expected, both in the original equipment manufacturer (OEM) and the replacement segment, ATL expects the plant to breakeven in FY2013. The company had taken a price increase of 3% each in February 2012 and May 2012. Valuation We believe Apollo Tyres is the best sustainable tyre play in the Indian context on account of its product and regional diversification. The lower prices of natural rubber are expected to help its margins. Of late, the most crucial truck tyre replacement market has shown signs of revival and this is expected to benefit the company. The company expects a turnaround in South Africa and has given a stable outlook for Europe.  We keep our FY2014 earnings per share (EPS) estimate of Rs15.0 and the target price of Rs91 per share unchanged. The near term overhang on the stock is CCI's penalty threat on tyre manufacturers. We see a high probability of cartelisation charge being slapped on all tyre companies including Apollo Tyres and the same would be a dampener on the stock. However, the event would also provide an attractive investment opportunity from a long term perspective. We retain our Buy recommendation on the stock. IRB Infrastructure Developers Cluster: Emerging Star Recommendation: Buy Price target: Rs175 Current market price: Rs121 Price target revised to Rs175  Result highlights Earnings above estimates, margins expand: For Q4FY2012 IRB Infrastructure Developers (IRB)'s earnings grew by 17% year on year (YoY) to Rs120.3 crore (above our estimate of Rs109 crore) led by a decent revenue growth and huge margin expansion. The consolidated revenues were up by 10.6% YoY and 14% quarter on quarter (QoQ) to Rs848 crore (much in line with our expectation of Rs828 crore) led by a strong execution in the construction segment (up 7% YoY and 20% QoQ) and consistent toll collection across projects (up 19% YoY and 2% QoQ). The operating profit margin (OPM) improved sharply to 44.9% (higher than our estimate of 42.2%) as against 41% in Q4FY2011 and 45.8% in Q3FY2012 resulting in a 21% Y-o-Y growth in EBITDA. Despite a robust growth at the operating level, the profit after tax (PAT) growth was restricted due to an increase of approximately 73% in depreciation mainly on account of the Surat - Dahisar project.  Strong execution and stable toll collection supported revenue growth: The consolidated revenue of IRB continued to grow consistently, clocking a 10.6% YoY and 14% QoQ growth to Rs848 crore in Q4FY2012. The momentum was led by a strong order execution in the construction segment, which registered a growth of 7.4% YoY, and consistent toll collection across projects where revenues were up by a good 19% YoY. The growth in the construction division was largely led by the Jaipur - Deoli, Talegaon - Amravati and Tumkur - Chitradurga projects where the execution continues to be on schedule. There was no major toll revision during the quarter. The traffic growth across projects was stable with weakness continuing in both Surat-Dahisar and Surat-Bharuch projects due to diversion of traffic from Nasik on account of construction of bridges in that area.  OPM witnesses huge expansion: The OPM for the quarter improved sharply to 44.9% as against 41% in Q4FY2011 and 45.8% in Q3FY2012 resulting in a 21% Y-o-Y growth in EBITDA. The expansion was on account of the construction segment witnessing an increase in margins to 26.9% vs 22.6% in Q4FY2011 (and 24.2% in Q3FY2012) since the newer under-construction build operate transfer (BOT) assets have higher margins. Further in the Tumkur-Chitradurg project, only earthwork is being carried out currently which involves less cost. Conversely though, the BOT margins came down a bit to 88.1% vs 90.5% in Q4FY2011 and 89.8% in Q3FY2012.  Net profit growth restricted due to sharp rise in depreciation: In spite of a good revenue growth and huge margin expansion the consolidated PAT growth was restricted to 17% YoY and was down 8.4% QoQ to Rs120.3 crore. This was due to a sharp rise in the depreciation charge (up 73% YoY) on account of depreciation for the Surat-Dahisar asset which completed construction during Q2FY2012 and was operational since December 15, 2011. The interest cost was up by only 7% YoY and 6% QoQ as of the portfolio of 16 projects, 6 projects are debt free and 4-5 projects are under construction where interest cost gets capitalised. The consolidated debt figure now stands at Rs7,121 crore vs Rs6,600 crore in Q3FY2012. The tax rate too came in higher for the quarter at 28%.  IRB acquires an operational project in Tamil Nadu: The company has acquired a 100% stake in MVR Infrastructure & Tollways which is implementing the two to four laning of the Omallur Salem -Namakkal BOT road project. The concession agreement for the project was executed on February 16, 2006 for a 20-year period, of which IRB will now inherit 14.5 years. The cost of the project was Rs308 crore. The toll collection started in August 2009 and is witnessing a daily toll collection of Rs16 lakhs (FY2012). IRB has acquired the project for Rs128 crore which works out to 2x its price to book value (P/BV). The management is seeking an internal rate of return (IRR) of 21% based on traffic growth assumption of approximately 7% for the initial seven years and later stabilising at 6% with a 6.5% tariff hike. However as per our calculation the IRR works out to be 16% thereby adding a value of Rs.1.1 per share. Earnings estimates revised downwards: We have reduced our revenue estimates for FY2013 and FY2014 by 5% and 4% respectively mainly to factor in the delay in start of the tolling of Kolhapur project and delay in the commencement of execution of the Ahmedabad- Vadodara project. The earnings estimates, on the other hand, have been reduced by 11% and 15% for FY2013E and FY2014E respectively to factor in higher depreciation than our estimate and higher interest cost due to higher debt than our assumption.  Price target revised to Rs175, maintain Buy: We continue to like IRB given its vast portfolio, rich experience, strong financials and the healthy cash flows from its operational toll-based projects, all of which provide comfort. With a strong pipeline of projects up for award from the National Highways Authority of India (NHAI) and the bidding process becoming less aggressive, the management is confident of securing projects at equity IRR of 18%. However, the recent legal trouble for the promoter will continue to be an overhang on the stock till it gets solved. Hence, we reduce our target price to Rs175 by roll forward of net asset value (NAV) of BOT projects to FY2013 and by reducing our multiple for the construction business to 5x from 6x (giving discount due to the legal trouble) on FY2013 earnings. Given the huge upside, we maintain our Buy recommendation on IRB. At the current market price, the stock is trading at 8.5x & 8.2x its FY2013E and FY2014E earnings respectively. Cadila Healthcare Cluster: Emerging Star Recommendation: Hold Price target: Rs768 Current market price: Rs757 Q4FY2012 results in line with expectations, except for higher tax provisioning  Result highlights Q4 revenue in line with expectations; higher fixed costs and tax impacts bottom-line: Cadila Healthcare (Cadila Health)'s net sales grew by 15.3% year on year (YoY) to Rs1,398 crore in Q4FY2012, which is in line with our expectations. However, the operating profit margin (OPM) at 20.2% (up 145bps YoY) stood lower than our expectation of 22.2%. Moreover, higher interest costs (up by 48% YoY), depreciation (up by 158% YoY) and higher tax provisioning (effective rate 19.5%) impacted the net profit to drop by 4.5% YoY to Rs171 crore. Adjusting for a foreign exchange (forex) loss (Rs9 crore), the net profit jumped by 10.7% YoY to Rs180 crore, which is 17% lower than our estimate of Rs218 crore.  Weaker base business sales in most geographies: During Q4FY2012, most of the export markets like Europe, Latin America, Japan and other emerging markets witnessed a single digit growth. Growth in the US market (by 26% YoY) was backed by additional revenue from the newly acquired Nesher Pharma. However, the domestic formulation business, coupled with the newly acquired Biochem Pharma, witnessed a sharp jump in base business (by 23% YoY). We maintain our estimates, recommendation and target price: We maintain our estimates for FY2013 and FY2014 and Hold rating on the stock with a target price of Rs768.   SECTOR UPDATE Fertilisers Production remained subdued, lean season played a role  Key points Decline in volume during April 2012: In April 2012, the aggregate sales of the domestically produced fertilisers (by 15 leading manufacturers) declined by 11% year on year (YoY). In April 2012 the import of fertilisers (urea, DAP, MOP and complex fertilisers) increased from 1.17 lakh tonne to 1.33 lakh tonne despite a decline in urea import. The import of DAP, MOP and complex fertilisers has grown by 72%, 52% and 48% respectively. The import of urea decreased from 33,847 tonne to 3,681 tonne during April 2012.  Fertiliser subsidy paid by government for FY2012: The subsidy paid by the Government of India for April 2011 to March 2012 is Rs74,170 crore, which is 16% higher compared with the previous year's. The amount of fertiliser subsidy released in the last three years. Currently, urea units are manufacturing urea as per the New Pricing Scheme (NPS), stage III. The policy for the existing urea units beyond NPS, stage III is still under consideration of the government.  Lower production of complex fertilisers drag the total fertiliser volume: A lower production of complex fertilisers due to a higher inventory level with retailers has forced companies to reduce the production of complex fertilisers. The volume of urea declined marginally while DAP volumes remained flat during month. The import of non-urea fertilisers increased in April 2012 due to a decline in the price of DAP, MOP and the other key inputs. Going ahead, we believe that the price of DAP, MOP and phosphoric acid (the key raw material for manufacturing DAP) in the international market will remain under pressure because of a decline in the demand across the world due to higher prices. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - Glenmark Pharmaceuticals, CESC, Information Technology

 

 

Investor's Eye [May 08, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Glenmark Pharmaceuticals Cluster: Apple Green Recommendation: Buy Price target: Rs400 Current market price: Rs329 Q4FY2012 results: First-cut analysis  Result highlights Strong Q4FY2012: Glenmark Pharmaceuticals (Glenmark Pharma) reported a 34.5% year-on-year (Y-o-Y) rise in revenue to Rs1,065.9 crore during Q4FY2012, which is 6% better than our estimate of Rs1,005 crore. The company has shown an all-round impressive performance during the quarter with revenue from the specialty business segment (branded formulation) growing by 33.5% to Rs594.4 crore and the generic formulation business recording a 69% Y-o-Y growth. Core operating margin jumped by 712bps YoY to 18% during the quarter on substantially lower other expenditure (26.3% of net sales in Q4FY2012 vs 34.7% in Q4FY2011). During the quarter the company paid a tax on minimum alternate tax (MAT) basis and therefore the effective tax rate stood at 4% (vs a tax credit in Q4FY2011). This led the net profit during the quarter to expand by 35% YoY to Rs150.4 crore, which is substantially higher than our estimates. Exceptional items impact annual performance: During FY2012 the revenue rose by 36.3% to Rs4,020.6 crore on the back of a 45% rise in the generic formulation business to Rs1, 213.7 crore and a 30.2% increase in the branded specialty business to Rs2,079.2 crore. During the year the company also received an out-licensing income of Rs253.5 crore. However, despite the 340bps expansion in the core operating margin to 21%, the net profit remained flat at Rs460.3 crore against Rs458 crore in FY2011 crore, mainly due to an exceptional item of Rs131.7 crore (vs exceptional gains of Rs65 crore in FY2011). Without these exceptional items, the profit would have grown by 51% to Rs592 crore.  Valuation The stock is currently trading at 17.6x FY2013E core earnings. We have a Buy rating on the stock with a target price of Rs400, which includes Rs64 from research pipelines and Rs336 (16x average earnings for FY2013-13E) from the core business.  We will revisit our estimates post the conference calls with the company's management (scheduled at 8.30 am on May 9, 2011).     CESC Cluster: Ugly Duckling Recommendation: Buy Price target: Rs405 Current market price: Rs262 Numbers reflect tariff hike impact as expected  Result highlights As expected, CESC has factored-in its approved tariff revision (by 13%) in Q4FY2012. As a result of the same, incremental tariff approved to the tune of Rs0.69 paisa/unit is being accounted for in the units sold during the first ten months of the year. Therefore, in Q4FY2012, the sales include an approximate tariff adjustment of Rs656 crore, which is as expected. However, power units sold during Q4FY2012 were lower than our estimate by 7%, at 1,811 million units. The revenue reported at Rs1,379 crore in Q4FY2012 is 13% lower than our estimate.  On account of a lower than estimated operating cost, the operating profit of the company, reported at Rs432 crore, is significantly higher than our estimates. A sharp rise in the operating profit on a year-on-year (Y-o-Y) and quarter-on-quarter (Q-o-Q) basis is attributed to the benefit of tariff hike adjustment, as most of the operating cost per unit (except other expenses) hovers around Q3FY2012 levels. Further, below EBITDA line cost items also remain flattish. Consequently, the tariff adjustment benefit percolated to the profit after tax (PAT) also during Q4FY2012.  Fine tune estimates with revised tariff and introduce FY2014 numbers: Considering the above operating costs reported by the company against our estimates, we have fine tuned our cost estimates and arrive at a PAT estimate of Rs582 crore in FY2013 with a marginal improvement in estimated sales. Further, we have introduced FY2014 estimates with a sale figure of Rs5,902 crore, operating profit of Rs1,227 crore and PAT of Rs615 crore.  Spencer's store level profitability sustained but signs of slowdown in Q4: The total number of Spencer's outlets by the end of FY2012 stood at 182 with a total trading area of 1,009,000 sq ft. The same store sales have increased from Rs1,000/sq ft in FY2011 to Rs1,147/sq ft in FY2012, which is a growth of 14.7%. Comparing with M9FY2012 numbers, there is apparently a marginal slowdown in same store sales in Q4FY2012, which was around Rs1,159/sq ft by the end of M9FY2012. The average sales have increased from Rs957/sq ft in FY2011 to Rs1,060/sq ft in FY2012, which is a growth of 9.7%.  Spencer`s retail has sustained store level profitability since last year. In M9FY2012, it recorded an EBITDA of Rs35/sq ft per month (against Rs31/sq ft in H1FY2012). By the end of FY2012, the store level EBITDA hovers around Rs32/sq ft per month. Currently the store level EBITDA margin is hovering around 3.2%, which the management aims to take it to 4% in FY2013; the same would be a key monitorable.  Better earning visibility post tariff revision; retain Buy: Though we have introduced our FY2014 standalone numbers, we await the audited results of the subsidiaries (primarily the retail business) before we revise our valuation and price target. Currently, the stock is trading at 0.6x its FY2012 and 0.5x its FY2013 standalone book value. Though we await the results of subsidiaries, we believe there should be progress in reducing losses. Hence, we continue to rate CESC as Buy and retain our target price of Rs405, based on the sum of the parts (SoTP) valuation method.     SECTOR UPDATE Information Technology Cognizant cuts full-year guidance Cognizant Technology Solutions (Cognizant) has cut its full-year revenue guidance by 300 basis points to 20% from 23% earlier citing slower than anticipated acceleration in demand in the banking and financial services (BFS) and pharmaceutical sectors. For Q1CY2012, the BFSI and healthcare verticals reported a soft growth of about 2.1% each quarter on quarter (QoQ).  The management has indicated a slower ramp-up in the discretionary projects from the larger clients in the banking sector. Cognizant's commentary was almost in sync with Infosys' management commentary regarding the softness in the BFS vertical. Both have cited lower than anticipated demand acceleration and slower ramp-up in the discretionary projects with the large North American clients.  The management has added that the pace of growth in the BFSI vertical in CY2012 will be lower than in CY2011; in CY2011 the BFSI vertical had clocked a growth of 29.4%.  For Q1CY2012, Cognizant has reported a 2.9% quarter-on-quarter (Q-o-Q) growth in revenues to $1,711.3 million, ahead of its own guidance of a 2.2% growth to $1,700 million and in line with the consensus expectation of a 2.8% sequential growth to $1,710 million.  For the June 2012 quarter, Cognizant has guided for revenues of $1,790 million, up 4.6% QoQ. In absolute terms, Cognizant's revenue guidance is marginally higher than the upper end of Infosys' June 2012 quarter guidance of $1,771-1,789 million. Increasing instances of performance divergence among the large IT companies: Cognizant's lowering of guidance and commentary on demand softness have further fuelled the debate on the increasing performance divergence among the large IT companies. For the March quarter, Tata Consultancy Services (TCS) and HCL Technologies' managements were broadly on the same page on upbeat demand outlook. But Infosys and Cognizant (though Cognizant still guides for a 20% growth, way ahead of the 8-10% growth guidance by Infosys) seem to be in sync on the issues related to demand, as both have cited a slower ramp-up in the discretionary projects and a lower than anticipated growth in the larger clients in the banking space as the main concerns.  We remain cautiously optimistic on the Indian information technology (IT) sector and our top picks in the sector remain TCS in the large-cap space and NIIT Technologies in the mid-cap space.. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: ValueGuide: Adrift but not for long

 

 

Sharekhan ValueGuide [May 07, 2012]  Sharekhan www.sharekhan.com

Summary of Contents  EQUITY FUNDAMENTALS THE STOCK IDEAS REPORT CARD FROM SHAREKHAN'S DESK Adrift but not for long  The market has been stuck in a narrow range for the past two months. Despite a slew of major events domestically (namely, the Union Budget with controversial tax amendments and GAAR provisions, an unexpected 50-basis-point rate cut in the annual monetary policy review, downgrade of India's outlook by Standard & Poor's (S&P) and rising trade deficit among others) and the flow of varied data from global economies, the market has been unable to break out of the range on either side. Though stock-specific volatility has increased lately, the benchmark indices haven't gone anywhere in the past couple of months. MARKET OUTLOOK The heat is on Macro concerns mount, government must clean up its act: The Reserve Bank of India (RBI) has kick-started the interest rate reversal cycle by a surprise reduction of 50 basis points in the policy rates, but macro challenges and policy blunders remain the key concerns for stock market investors. The rising twin deficits, the current account deficit and the fiscal deficit, are putting pressure on the rupee against the major other currencies as well as causing structural liquidity issues in the domestic banking system despite fund infusion by the RBI through CRR cuts and open market operations. In such an environment where inflation is also inching up again after softening for four consecutive months, the RBI has limited room to move ahead with further monetary easing initiatives and the ball is squarely in the government's court now.  S&P sounds the warning bell: The leading global rating agency, Standard and Poor's (S&P), has sounded the warning bell by downgrading India's rating outlook to negative from stable on macro concerns and the government's policy inaction. It has reaffirmed the "BBB-" rating but warned of one-in-three probability of a potential rating downgrade over the next 24 months if the situation does not improve. However, S&P's peer and another global rating agency, Moody's, has reaffirmed its "Baa3" rating for India which provides some solace to the bewildered policy makers of the country.  Global trends: weak macros but robust corporate results: Economic activity in the USA continues to point to a sluggish recovery but the scenario in Europe has deteriorated in the recent past. The UK has announced contraction in its economy for the second consecutive quarter and the other major European countries like France and Germany are also witnessing a drop in manufacturing activity. The peripheral East European countries continue to struggle and move from one crisis to another with each round of fund raising done at higher cost/yields. However, amid the weak economic environment, the corporate results globally have surprised positively and beaten consensus expectations especially in the USA. So far 75% of the S&P 500 companies have declared results for Q1 of 2012. Of these about 70% have reported earnings above expectations, 10% in line with expectations and 20% below estimates. The robust corporate results and easy liquidity are supporting the equity markets globally especially the US market as of now. India Inc: Q4 results a mixed bag; downgrades pick up again: In India corporate earnings have come under pressure due to high input cost, rising financing cost and uncertainty in the external environment.  In the past three quarters the earnings of the Sensex companies have grown in single digits, ie at 7% in Q1FY2012, 8.1% in Q2FY2012 and 4.1% in Q3FY2012. The Q4FY2012 results declared so far (of BSE 100 companies) follow the trend and earnings have grown by 7.2% (ex oil companies). But the earnings downgrades have picked up again after a lull of a couple of months. However, the Sensex' consensus earnings estimate for FY2013 has been downgraded substantially (by 15%) over the last 15 months and largely factors in most of the negatives. Thus, the downgrade cycle is close to peaking out and there could be scope for some positive surprises if the liquidity improves domestically and the government moves ahead with policy reforms. Market stuck in a range; but not for long: After the spurt in early 2012, the benchmark indices have been stuck in a narrow range for the past couple of months. There has been a flurry of negative news flow: the uncertainty related to foreign taxation laws (GARR), retrospective amendment to the Income Tax Act (Vodafone case), Spain debt crisis, confusing policy signals and the veiled threat by S&P of a possible rating downgrade in future. But the benchmark indices have neither breached the key support nor broken down. The market has not even gained on the back of the positive surprises such as the 50-basis-point rate cut by the RBI and the initial indication of a normal monsoon.  Valuations are supportive; see opportunity in adversity: The range-bound movement is in line with our expectation expressed in our last Market Outlook report, released on March 3, 2012. However, the macro challenges and policy blunders have turned the bias negative and a breakdown from the range looks imminent (as compared with the earlier expectations of an upmove post-consolidation) due to the mounting macro concerns and other tactical factors. However, if the benchmark indices manage to successfully navigate through the heated macro conditions this summer, the upside momentum could pick up in the second half of the year. For investors, any substantial correction in the near term would be a summer discount sale as the risk-reward ratio has turned quite attractive. SHAREKHAN TOP PICKS Sharekhan top picks  SWITCH IDEAS Automobiles: Closing M&M to Maruti Switch call SWITCH IDEAS UPDATE It's a hat trick   STOCK IDEAS Mcleod Russel India: Take a sip when it is hot STOCK UPDATES Axis Bank: Strong operating performance Bajaj Corp: Volume growth momentum sustained Bharat Electronics: Price target revised to Rs1,805  Godrej Consumer Products: Price target revised to Rs590 HCL Technologies: Price target revised to Rs550 HDFC Bank: In line performance ICICI Bank: Robust growth in profits; maintain Buy  IDBI Bank: Q4 earnings beat expectations, slippages decline India Cements: Price target revised to Rs110 Infosys: Price target revised to Rs2,440 Mahindra Lifespace Developers: A higher other income boosts Q4 PAT Maruti Suzuki India: 'Dziring' a 'Swift' recovery Polaris Financial Technology: Price target revised to Rs190 Reliance Industries: Earnings largely supported by other income Tata Consultancy Services: Price target revised to Rs1,364 UltraTech Cement: Impressive performance, earnings ahead of estimates Wipro: Price target revised to Rs450 Yes Bank: Earnings up by 34% YoY, CASA ratio inches up  SHAREKHAN SPECIAL Q4FY2012 IT earnings review  SPECIAL REPORTS Power: Power tariff hikes come as a relief Coal: Revised royalty on coal to have insignificant impact SECTOR UPDATES Transmission and distribution: PGCIL ordering picks up, but so does competition VIEWPOINT FAG Bearings: Savli factory to be the game changer SKF India: Slower growth comes with a buy-back rider  EQUITY TECHNICALS  Sensex: Bearish Triangle  EQUITY DERIVATIVES  Derivative view: Policy paralysis  COMMODITY FUNDAMENTALS  Macro-economy Crude oil: Can fall to $93 level on economy, inventories Precious metals: Supported by weak Indian Rupee; insipid performance Base metals: Likely to be volatile but can fall further Major economic events in May 2012   COMMODITY TECHNICALS  Gold: Bearish triangle Silver: Gliding down Light sweet crude oil: Reaching boiling point Copper: Next round of attack NG: Relief for bulls Nickel: Trend remains down  CURRENCY FUNDAMENTALS  Currency market: Rupee declines for second month in a row INR-USD CMP: Rs53.44 INR-GBP CMP: Rs86.43 INR-EUR CMP: Rs70.35 INR-JPY CMP: Rs66.34  CURRENCY TECHNICALS  USD-INR: Channelised rise GBP-INR: Higher territory EUR-INR: Marching north JPY-INR: Climbing up  PMS DESK Sharekhan PMS funds: Fund manager's view and product performance ProPrime - Top Equity ProPrime - Diversified Equity ProTech - Diversified ProTech - Nifty Thrifty ProTech - Trailing Stops  ADVISORY DESK  Monthly performance of Advisory products MID Trades Derivative Trades  MUTUAL FUNDS DESK  MF PICKS Sharekhan's top mutual fund picks (equity)  Sharekhan's top SIP fund picks  EARNINGS GUIDE Click here to read report: Sharekhan ValueGuide   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

 

Fw: Sharekhan Top Picks

 

 

Top Picks [May 05, 2012]  Sharekhan www.sharekhan.com

Summary of Contents SHAREKHAN TOP PICKS Despite drifting within a range during the better part of the last month, both the benchmark indices slipped in the past one week to close at more than a three-month low. Given the market conditions, the Top Picks basket also declined by 2.6% since our last update on March 30, 2012. However, it continues to outperform the benchmark indices and the CNX Mid-cap Index for the third consecutive month. In April this year, the Nifty and the Sensex declined by 3.9% and 3.3% respectively whereas the CNX Mid-cap Index fell by 7.4%. We are making some significant changes in the Top Picks basket this month. We are reducing the basket's exposure to certain sectors like tyres and cement due to media reports related to potential penalties by Competition Commission of India. Thus, Apollo Tyres and Madras Cement move out. Moreover, the weaker than expected Q4FY2012 results of Bharat Electronics, Marico and Bank of Baroda make us remove all three from the basket. At the same time, we are including ITC and Mcleod Russel in the Top Picks basket as part of the readjustment to increase the basket's exposure to the FMCG sector. The other two additions are Raymond and NIIT Technologies. Raymond is a domestic consumption story at attractive valuations even without considering the optional value of its land bank. NIIT Technologies is our preferred mid-cap pick in the information technology sector. It has a strong order book and would be among the beneficiaries of the weakening rupee. We are taking in only four stocks as compared with the five stocks that we are pulling out as part of our strategy to create some cash to exploit volatility-driven opportunities. Since the beginning of 2009, the Top Picks basket has handsomely outperformed the benchmark indices, Nifty and Sensex, which is quite evident from its performance graph. What's more, the outperformance is consistent with its record of doing better in 26 months out of the total 40 months under review. This implies a strike rate of 65% during the period. Click here to read report: Sharekhan Top Picks Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.