2QFY2013ResultPreview-031012[1]

1

2QFY2013 Results Preview | | | | | October 3, 2012

Refer to important Disclosures at the end of the report

Note: Stock prices as on September 28, 2012

Table of Contents

StrategyStrategyStrategyStrategyStrategy 2-72-72-72-72-7

2QFY2013 Sectoral Outlook2QFY2013 Sectoral Outlook2QFY2013 Sectoral Outlook2QFY2013 Sectoral Outlook2QFY2013 Sectoral Outlook

Automobile 9

Banking 12

Capital Goods 17

Cement 19

FMCG 21

Infrastructure 23

Information Technology 26

Media 29

Metals 30

Oil & Gas 34

Pharmaceutical 37

Power 40

Real Estate 42

Telecom 44

Stock WStock WStock WStock WStock Watchatchatchatchatch 4747474747

Refer to important Disclosures at the end of the report 2


Strategy

Reforms fuel market sentiments

The risk-on trade rally in Indian markets following an increasein global liquidity gained further momentum after thegovernment shook off its policy inertia and announced a flurryof big-ticket reform measures. The government has so farremained resolute on no rollback of reforms in the backdrop ofpolitical opposition and also maintained the thrust on drivingfurther reforms.

The reform measures taken by the government are expected tohave a positive impact on investor sentiments and businessconfidence. We believe that a resultant improvement in thegrowth outlook for the economy is likely to be experienced inthe medium term. However growth concerns emanating fromstubborn inflation and slowing capex activity continue to persistin the near-term.

2QFY2013 earnings performance

The continued trend of slowing growth and elevated inflation isexpected to impede corporate earnings performance to someextent in 2QFY2013 as well. Owing to the steep de-growth inearnings for ONGC, Sensex companies are expected to reportmoderate earnings growth of 7.7% yoy during 2QFY2013compared to growth of 15.5% yoy in earnings registered during1QFY2013. For our coverage companies, we expect earningsto grow at 13.3% yoy as against 16.1% yoy growth in earningswitnessed in the previous quarter.

Excluding ONGC, to remove distortions, earnings for Sensexas well as coverage companies are expected to improve during2QFY2013 at 17.7% yoy and 20.3% yoy vis-a-vis 12% yoy and14% yoy during 1QFY2013 respectively (aided by low base forsome of the large companies such as SBI and Tata Steel).

On the revenue front, we expect Sensex companies to reportreasonable growth of 14.3% yoy during 2QFY2013 as againstgrowth of 17.9% yoy registered in 1QFY2013. Our coveragecompanies are expected to report revenue growth of 14.0%yoy as against growth of 17.2% yoy witnessed in 1QFY2013.

Margins for Sensex companies are expected to be lower by180bp yoy during 2QFY2013 (coverage by 120bps yoy).However, on a sequential basis, pressure on margins duringthe quarter has eased to some extent and operating marginsare expected to be flat for Sensex and lower by 30bps qoq forcoverage companies.

We expect sectors such as banking, IT, mining and metals tocontribute considerably towards Sensex earnings growth for thequarter while oil and gas and telecom sector are likely to weighdown on overall earnings of Sensex companies.

Currently we are factoring in an improvement in the Sensex'EPS at a CAGR of 9.8% over FY2012-14E. We arrive at our12 month Sensex target of 20,300, maintaining our targetmultiple at 15x FY2014E earnings implying an upside of 8.2%.

SectorSectorSectorSectorSector W W W W Weight (%)eight (%)eight (%)eight (%)eight (%) 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2012 2QFY2012 2QFY2012 2QFY2012 2QFY2012 % chg % chg % chg % chg % chg 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2012 2QFY2012 2QFY2012 2QFY2012 2QFY2012 % chg % chg % chg % chg % chg

Auto (5) 9.8 72,662 61,614 17.9 4,915 4,312 14.0

Capital Goods (1) 1.3 11,967 10,299 16.2 1,487 1,412 5.3

Finance (4) 26.3 27,390 23,730 15.4 8,312 6,484 28.2

FMCG (2) 13.1 13,004 11,496 13.1 2,383 2,158 10.4

Infrastructure (1) 5.5 12,634 11,245 12.3 891 798 11.6

IT (3) 14.0 36,472 28,824 26.5 7,131 5,643 26.4

Metals (4) 4.8 55,749 51,975 7.3 2,860 2,296 24.5

Mining (1) 1.4 15,832 13,148 20.4 4,013 2,588 55.1

Oil & Gas (3) 14.3 125,305 111,193 12.7 11,804 15,439 (23.5)

Pharma (3) 4.4 7,270 5,894 23.3 1,511 1,213 24.5

Power (2) 2.9 23,446 21,660 8.2 2,744 2,028 35.3

Telecom (1) 2.2 19,382 17,276 12.2 862 1,027 (16.1)

Sensex Sensex Sensex Sensex Sensex 100.0 100.0 100.0 100.0 100.0 421,111421,111421,111421,111421,111 368,353368,353368,353368,353368,353 14.314.314.314.314.3 48,91248,91248,91248,91248,912 45,39945,39945,39945,39945,399 7.77.77.77.77.7

Sensex # Sensex # Sensex # Sensex # Sensex # 15.715.715.715.715.7 8.88.88.88.88.8

Exhibit 1: Sensex earnings summaryNet PNet PNet PNet PNet Profit (rofit (rofit (rofit (rofit (`̀̀̀̀ cr) cr) cr) cr) cr)Net Sales (Net Sales (Net Sales (Net Sales (Net Sales (`̀̀̀̀ cr) cr) cr) cr) cr)

Source: Company, Angel Research; Note: # on free-float adjusted basis

3



Strategy

Exhibit 2: Angel coverage earnings summary

Source: Company, Angel Research; Note: Only for coverage companies for which results are estimated

Sectoral Analysis

Automobile -Two wheeler auto companies to dragdown earnings performance

For 2QFY2013, demand in the automobile sector is expectedto be weak excluding volume growth in light commercial vehiclesand utility vehicles segments.

On the earnings front, we expect Sensex auto companies toreport a growth of 14% yoy supported by the performance ofTata Motors and Mahindra & Mahindra. Sensex two-wheelercompanies on the other hand are expected to post an earningsde-growth of 20.5% yoy.

Banking - Large private banks expected to post healthyearnings performance

Sensex BFSI companies are expected to report a robust earnings

growth of 28.2%. Overall amongst our coverage, we expectprivate banks to post a strong 23.5% yoy growth in their netinterest income (NII), while public sector (PSU) banks excludingState Bank of India (SBI) are expected to register a moderate9.5% yoy growth.

A moderate NII growth and a flat performance on the otherincome front are expected to result in a modest 7.5% yoy growthin pre-provisioning profits for PSU banks; while private banksare expected to report healthy performances on thepre-provisioning profit front, with growth of 24.1% yoy.

Both large private banks and large PSU banks are expectedto post healthy performances at the net profit after tax level(25.8% yoy and 21.6% yoy, respectively) on account of lowerincreases in provisioning expenses.

SectorSectorSectorSectorSector 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2012 2QFY2012 2QFY2012 2QFY2012 2QFY2012 % chg % chg % chg % chg % chg 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2012 2QFY2012 2QFY2012 2QFY2012 2QFY2012 % chg% chg% chg% chg% chg

Auto (7) 77,584 66,660 16.4 5,075 4,543 11.7

Auto Anc. (6) 14,261 9,518 49.8 845 668 26.5

Cap Goods (7) 21,161 18,718 13.1 1,843 1,750 5.3

Cement (7) 12,844 10,984 16.9 1,437 845 70.1

Banks - large Pvt (3) 14,170 11,644 21.7 4,557 3,623 25.8

Banks - small Pvt (3) 1,781 1,503 18.5 586 521 12.5

Banks- Large PSU (7) 33,642 30,791 9.3 8,993 7,393 21.6

Banks- Mid PSU (14) 17,092 16,144 5.9 4,202 3,669 14.5

Banks-Hsg. Fin. (2) 2,174 1,870 16.3 1,367 1,069 27.8

FMCG (12) 28,724 25,207 14.0 3,845 3,475 10.6

Infrastructure (12) 24,561 22,325 10.0 1,208 1,173 3.0

IT (13) 50,284 39,842 26.2 9,054 7,050 28.4

Media (5) 1,850 1,737 6.5 346 324 6.7

Metals (10) 79,852 75,896 5.2 7,939 7,193 10.4

Midcap (29) 10,303 9,274 11.1 436 679 (35.8)

Mining (1) 15,832 13,148 20.4 4,013 2,588 55.1

Oil & Gas (4) 129,723 113,845 13.9 14,611 15,671 (6.8)

Agri (2) 1,842 2,151 (14.4) 151 127 19.1

Pharma-large (7) 14,989 11,953 25.4 2,354 1,379 70.7

Pharma-mid (7) 3,174 2,808 13.0 424 351 20.6

Power (3) 17,927 16,900 6.1 2,530 2,566 (1.4)

Telecom (3) 30,124 26,936 11.8 1,281 1,385 (7.5)

Coverage (164)Coverage (164)Coverage (164)Coverage (164)Coverage (164) 603,896 603,896 603,896 603,896 603,896 529,856 529,856 529,856 529,856 529,856 14.014.014.014.014.0 77,096 77,096 77,096 77,096 77,096 68,041 68,041 68,041 68,041 68,041 13.313.313.313.313.3

Net PNet PNet PNet PNet Profit (rofit (rofit (rofit (rofit (`̀̀̀̀ cr) cr) cr) cr) cr)Net Sales (Net Sales (Net Sales (Net Sales (Net Sales (`̀̀̀̀ cr) cr) cr) cr) cr)



Cement - Higher realizations to drive robust earningsperformance

Despite weak cement dispatches due to cyclical factors, owingto considerable improvement in realization, our coveragecement companies are expected to report an improvement intheir top-line and bottom-line performances.

Our coverage cement companies are expected to post strongearnings growth of 70.1% yoy mainly aided by earningsperformance of J K Lakshmi, Shree Cement and UltratechCement on account of a low base effect.

FMCG - Pressure on volume growth but top-line growthto remain healthy

Sensex FMCG companies are expected to report earningsgrowth of 10.4% yoy (10.6% for coverage universe). Thedouble-digit top-line growth expected by almost all FMCGcompanies in our coverage is likely to be value-driven ratherthan volume-driven.

Infrastructure and Capital goods - Challenging growthenvironment expected to result in subdued earningsgrowth

Slowing growth in capex and a high-interest-rate environmentare likely to weigh on growth of companies in the capital goodsand infrastructure space. Thus we expect a muted performanceon the earnings front.

We expect Larsen & Toubro (L&T), the only infrastructurecompany in the Sensex, to report a modest earnings growth of11.6%. Amongst our coverage companies, excluding L&T, weexpect a decline in earnings by 15.2% due to challengingeconomic environment of high interest cost coupled withdeclining order inflows.

BHEL, the only Sensex capital goods company, is expected topost a subdued earnings growth of 5.3% owing to pressure onmargins.

IT - Healthy growth on the earnings front

Overall, the IT sector is expected to report a healthy growth onthe sales and earnings front. We expect Sensex IT companies towitness a top-line and bottom-line growth of 26.5% yoy and26.4% yoy respectively. Our coverage companies are alsoexpected to report a similar top-line and bottom-line growth of26.2% yoy and 28.4% yoy respectively. In spite of headwindsfacing the sector due to uncertain global demand environment,the sector is expected to benefit from INR depreciation on a yoybasis.

Metals and mining - Tata Steel to drive earnings growth

We expect the earnings performance of steel companies toimprove aided by decreasing prices of key inputs, mainly cokingcoal, while non-ferrous players are expected to be adverselyimpacted by declining product prices and higher input costs.

For Sensex metal companies, we estimate a robust earningsgrowth of 24.5% yoy, owing to stellar earnings growth of TataSteel aided by a low base effect, while our coverage metalcompanies are expected to post an earnings growth of 10.4%yoy. Coal India, the only mining company in the Sensex, is likelyto report a robust earnings growth aided by a low base.

Oil and gas - Earnings to decelerate since ONGC islikely to underperform

Sensex oil and gas companies are expected to report earningsde-growth of 23.5% yoy weighed down by deceleration inearnings performance of ONGC. Excluding ONGC, we expectearnings of Sensex oil and gas companies to decline by 9.6%yoy in spite of healthy top-line performance due to pressure onmargins.

Pharmaceuticals - Earnings growth healthy for Sensexcompanies, large-cap pharma companies to outperform

We expect Sensex pharma companies to witness healthy salesand earnings growth of 23.3% yoy and 24.5% yoy respectively.Among our coverage pharma companies, large caps areexpected to report a robust earnings performance supportedby earnings growth of Dr. Reddy's and Cadila.

Power - Negative headwinds facing the sector toadversely impact performance

Owing to exceptional earnings performance of Tata Powerlargely due to a low base effect, we expect Sensex powercompanies to report strong earnings growth of 35.3% yoy. Onthe other hand, our coverage power companies are expectedto post an earnings de-growth by 1.4% yoy.

Telecom - Margins to remain under pressure

Our coverage telecom companies are expected to report adecline in earnings by 7.5% yoy as margins continue to remainstressed due to excessive competition in the sector and lowersubscriber additions.

Strategy

5



Strategy

FFFFFree floatree floatree floatree floatree float % Contribution% Contribution% Contribution% Contribution% Contribution

CompanyCompanyCompanyCompanyCompany 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY2013E 2QFY20122QFY20122QFY20122QFY20122QFY2012 % chg% chg% chg% chg% chg 2QFY2013E2QFY2013E2QFY2013E2QFY2013E2QFY2013E 2QFY20122QFY20122QFY20122QFY20122QFY2012 % chg% chg% chg% chg% chg WWWWWeightage (%)eightage (%)eightage (%)eightage (%)eightage (%) to Sensex growth to Sensex growth to Sensex growth to Sensex growth to Sensex growth#####

Bajaj Auto 4,699 5,046 (6.9) 671 821 (18.3) 1.7 (2.8)

Bharti Airtel 19,382 17,276 12.2 862 1,027 (16.1) 2.3 (2.2)

BHEL 11,967 10,299 16.2 1,487 1,412 5.3 1.3 1.0

Cipla 1,987 1,731 14.8 339 309 9.7 1.2 0.7

Coal India 15,832 13,148 20.4 4,013 2,588 55.1 1.5 5.4

Dr. Reddy 2,800 2,268 23.5 507 307 65.3 1.3 5.7

HDFC 1,743 1,479 17.9 1,118 971 15.2 7.3 5.6

HDFC Bank 5,144 4,156 23.8 1,562 1,199 30.2 7.6 11.0

Hero Moto Corp 5,110 5,784 (11.7) 462 604 (23.5) 1.2 (2.7)

Hindalco 6,423 6,221 3.2 364 503 (27.7) 1.0 (3.7)

HUL 6,155 5,522 11.5 718 644 11.5 3.5 1.4

ICICI Bank 5,336 4,246 25.7 1,868 1,503 24.2 7.8 13.9

Infosys 9,940 8,099 22.7 2,314 1,906 21.4 8.0 13.2

ITC 6,849 5,974 14.6 1,665 1,514 10.0 8.9 4.0

Jindal Steel 3,707 2,822 31.4 454 553 (17.9) 1.2 (1.7)

Gail India 12,196 9,699 25.7 1,129 1,094 3.2 1.2 0.5

L&T 12,634 11,245 12.3 891 798 11.6 5.5 3.2

M&M 9,711 7,307 32.9 907 769 17.9 2.4 3.9

Maruti Suzuki 8,362 7,537 10.9 284 240 18.0 1.2 0.8

NTPC 16,126 15,378 4.9 2,365 2,424 (2.5) 1.7 (0.5)

ONGC 19,175 22,925 (16.4) 5,662 8,642 (34.5) 3.9 (28.3)

RIL 93,934 78,569 19.6 5,013 5,703 (12.1) 9.4 (14.4)

SBI 15,168 13,849 9.5 3,764 2,810 33.9 3.7 14.5

Sterlite 11,121 10,134 9.7 1,299 1,028 26.4 1.0 4.6

Sun Pharma 2,482 1,895 31.0 665 598 11.3 1.8 1.0

Tata Motors 44,781 35,938 24.6 2,591 1,877 38.0 3.3 19.0

Tata Power 7,320 6,282 16.5 379 (396) 195.7 1.1 20.6

Tata Steel 34,498 32,798 5.2 743 212 250.5 1.7 14.1

TCS 15,542 11,631 33.6 3,372 2,436 38.4 4.8 10.7

Wipro 10,990 9,095 20.8 1,446 1,301 11.1 1.5 1.4

SensexSensexSensexSensexSensex 421,111 421,111 421,111 421,111 421,111 368,353 368,353 368,353 368,353 368,353 14.3 14.3 14.3 14.3 14.3 48,912 48,912 48,912 48,912 48,912 45,399 45,399 45,399 45,399 45,399 7.7 7.7 7.7 7.7 7.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sensex#Sensex#Sensex#Sensex#Sensex# 15.715.715.715.715.7 8.8 8.8 8.8 8.8 8.8

Exhibit 3: Earnings estimates for Sensex companies

Source: Angel Research; Note: #based on free-float weightages

Net Sales (Net Sales (Net Sales (Net Sales (Net Sales (`̀̀̀̀ cr) cr) cr) cr) cr) Net PNet PNet PNet PNet Profit (rofit (rofit (rofit (rofit (`̀̀̀̀ cr) cr) cr) cr) cr)



Strategy

Reform measures fuel market sentiments

The government recently announced major policy reform

measures with an objective of corrective actions towards fiscal

consolidation, boosting foreign investment in the economy,

deepening capital markets and improving business sentiment.

The key reforms include:

Hike in diesel prices and a cap on subsidized LPG cylinders

per household.

Amending deterrent norms for FDI in single-brand retail.

Increasing the limit of foreign investment in multi-brand

retail, civil aviation, broadcasting and power exchanges.

Approval of divestment of government's stake in four PSUs

viz. NALCO, MMTC, Hindustan Copper and Oil India.

Reduction in withholding tax for local companies on

overseas borrowings from 20% to 5%.

Approval of the Rajiv Gandhi Equity Savings Scheme

(RGESS), granting tax benefits to new investors, with annual

income below ̀ 10lakh and investment of up to ̀ 50,000 in

the stock markets.

Financial restructuring of state electricity boards.

Proposal of a National Investment Board to provide

single-window fast-track clearances for investment projects

over `1,000cr.

The momentum on reforms continued with the Union Cabinet’s

approval on key policy issues. The Cabinet approved the

12th Five Year Plan (2012-17), foreign investment in insurance

with a ceiling of 49% and opened up the pension sector to

FDI with a limit of 26%. Further, it also approved amendments

in Companies Bill, 2011; Competition Act, 2002 and Forward

Contracts (Regulation) Amendment Bill, 2010. In order to take

effect, these bills parliamentary approval and hence are likely

to face challenges in their implementation. Nevertheless, the

Sensex regained the 19,000 mark in anticipation of positive

action on the reform agenda.

In addition, positive macroeconomic cues such as corrective

actions towards fiscal adjustment, the government's indication

to stick to its budgeted borrowing program for the fiscal, and

moderation in the current account deficit (CAD) to 3.9% of

GDP are likely to bolster the improving business confidence

in the economy.

The reform measures taken by the government are expected to

have a positive impact on investor sentiments and business

confidence. We believe that a resultant improvement in the

growth outlook for the economy is likely to be experienced in

the medium term. However growth concerns emanating from

stubborn inflation and slowing capex activity continue to persist

in the near-term.

The Reserve Bank of India (RBI), too, in its Mid Quarter Review

of the Monetary Policy reiterated that inflation management

remains its priority and maintained its key policy rates at the

same level, while reducing the CRR by 25bps. We believe that

there is a slight shift in the central bank's tone with some concerns

being expressed about growth on the back of policy reforms

and fiscal consolidation measures taken by the government.

However, the scale is still tilted in favor of inflation control rather

than growth, at least in the near term.

FIIs remain bullish on Indian equity markets

On the global front, market sentiments have been spurred by

a) the European Central Bank (ECB)'s agreement to purchase

unlimited government bonds to lower borrowing costs for

struggling euro zone countries, b) ratification by German

constitutional court on unlimited financial liability for Germany

towards the euro zone bailout fund (though with conditions)

and c) the Federal Reserve's decision to launch a third-round of

quantitative easing (QE3) measures that are aimed at reviving

growth and boosting employment in the US economy. We believe

that with an increase in global liquidity, the resultant rise

in appetite for risky assets is likely to be favorable for the

Indian markets.

Since a lot of the potential negatives have already been factored

in the current valuations, with incremental positive news the

domestic equity market is likely to continue attracting buoyant

FII inflows. Indian equity markets outperformed other emerging

market peers and FIIs poured in almost US$8 bn in the Indian

equity market since June 2012. We expect capital inflows to

improve following the policy measures taken by the government

to boost investor sentiment.

7



Source: MOSPI, Angel Research

Exhibit 4: Slowdown in investment activity

(10)

(5)

0

5

10

15

250

350

450

550

650

1Q

FY2

01

0

2Q

FY2

01

0

3Q

FY2

01

0

4Q

FY2

01

0

1Q

FY2

01

1

2Q

FY2

01

1

3Q

FY2

01

1

4Q

FY2

01

1

1Q

FY2

01

2

2Q

FY2

01

2

3Q

FY2

01

2

4Q

FY2

01

2

1Q

FY2

01

3

(%)( cr)`

Gross fixed capital formation GFCF growth (RHS)

Source: Bloomberg, Angel Research

Exhibit 6: Sensex on the up-move

17000

17400

17800

18200

18600

19000

3-Sep 8-Sep 13-Sep 18-Sep 23-Sep 28-Sep

ECB's OMTprogram

Fed's QE3

Hike in diesel prices &opening up of FDI

political protestagainst reforms

Strategy

Source: RBI, OEA, Angel Research

Exhibit 5: Inflation remains a key concern

WPI Inflation CPI inflation

7.6

10.0

5

6

7

8

9

10

11

12

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12

(%)


Exhibit 7: Indian equities outperform EM peers

60

70

80

90

100

110

Apr-11 Aug-11 Dec-11 Apr-12 Aug-12

MSCI Emerging markets MSCI Developed Markets

MSCI India MSCI China

Outlook and Valuation

We believe that an improvement in the growth outlook for

FY2014 also rests on a reversal in the slowing investment cycle.

The external global environment for growth remains challenging

and therefore positive domestic catalysts such as easing inflation

and interest rates, policy reforms supporting removal of supply-

side bottlenecks, expediting mining clearances, land acquisition,

power sector reforms and increasing infrastructure spending

are key to reviving growth of the economy.


Exhibit 8: Sensex one year forward P/E

6.0

9.0

12.0

15.0

18.0

21.0

24.0

27.0

Mar-97 Nov-98 Aug-00 May-02 Jan-04 Oct-05 Jul-07 Mar-09 Dec-10 Sep-12

Sensex 1 year forward P/E 15 year Avg 5 year Avg

Source: Angel Research

Exhibit 9: Sensex EPS growth over FY2014E

1,124.01,202.5

1,355.5

300

500

700

900

1,100

1,300

1,500

FY2012 FY2013E FY2014E

(`)

7% growth 12.7% growth

Currently we are factoring in an improvement in the Sensex'EPS at a CAGR of 9.8% over FY2012-14E. We arrive at our 12month Sensex target of 20,300, maintaining our target multipleat 15x FY2014E earnings implying an upside of 8.2%.

We believe that high inflation and sluggish growth in capexactivity will continue to affect stocks in cyclical sectors. Hence,we maintain a stock-specific and value-buying approach to yieldbetter returns. We prefer private banks and select infrastructureand real estate stocks amongst rate-sensitives and also qualitystocks in export-oriented sectors like IT.



2QFY2013 Sectoral Outlook

9



Automobile

CV growth continues to struggle on weak MHCV sales

The CV segment continues to witness a challenging environment(growth of 5% YTD in FY2013) as MHCV demand has fallensharply on account of slowdown in transportation demand fromkey sectors such as infrastructure, mining and construction. Asa result, MHCV volumes have plunged by 12.9% YTD in FY2013.Further, the steep hike in diesel prices by `5/litre in September2012 will impact fleet operators significantly as it will increasetheir ownership cost. This in turn is expected to further pressurizeMHCV demand going ahead. We expect the MHCV segmentto witness a 7-8% volume CAGR over the next two years.Demand for LCVs on the other hand continues to remain strong(17.8% yoy growth YTD in FY2013), led by preference for lowpayload vehicles and structural factors such as proliferation ofthe hub and spoke model and new launches. Going ahead, weexpect the LCV segment to sustain its strong performance andpost a volume CAGR of 14-15% over the next two years.

For 2QFY2013, we expect TTMT's consolidated revenues toregister a robust growth of 24.6% yoy (3.7% qoq) boosted by a17.4% yoy growth in Jaguar Land Rover (JLR; GBP terms) and18.2% yoy depreciation of INR versus GBP. We expect thebottom-line to post a strong 38% yoy (15.4% qoq) growth aswe expect operating margins to improve ~40bp yoy (down40bp qoq) during the quarter. We expect AL to register a revenuegrowth of 7.5% yoy (10.6% qoq) despite a strong volume growthof 26.3% yoy (8.2% qoq) largely on account of higher discountsand increasing contribution of the lower priced vehicle Dost(~30% of total volumes vs ~25% in 1QFY2013). We estimateEBITDA margins to decline by ~140bp yoy due to adverseproduct-mix and sharp spike in discounts leading to 24.3% yoydecline in the bottom-line.

The domestic automotive industry which witnessed initial signsof weakness in 1QFY2013, slowed down considerably in2QFY2013. Total industry volumes registered a growth of 4.7%YTD in FY2013 (8.2% in 1QFY2013) with almost all thesegments of the industry except light commercial vehicles(LCV, up 17.8% yoy) and utility vehicles (UV, up 56.7% yoy)seeing significant moderation in demand. While three-wheelers(3W, down 15.5% yoy), medium and heavy commercial vehicles(MHCV, down 12.9% yoy), tractors and passenger cars(PC, flat yoy) are amongst the worst impacted segments;two-wheeler (2W, up 5.6% yoy) sales have also slowed down inrecent times. Going ahead, we expect the demand environmentto remain weak in 2HFY2013 as well; however, festival seasonbuying may lead to slight improvement in volumes.

Sector earnings growth to be driven by Tata Motors

We expect companies in our coverage universe to post a strong16.3% yoy (down 1% qoq) growth in revenues during2QFY2013. Top-line performance is expected to be driven bygrowth in net average realization which would come on theback of superior product-mix at Maruti Suzuki (MSIL) andMahindra and Mahindra (MM) and favorable currencymovement (INR depreciated by 18.2% vs. GBP). Volumes onthe other hand registered a decline of 10.6% yoy (10.1% qoq)primarily due to decline in 2W volumes of all the players andalso due to volume loss at MSIL because of the month longstrike at its Manesar plant. While Tata Motors (TTMT) and MMare likely to drive the sector growth; 2W majors, Bajaj Auto (BJAUT)and Hero MotoCorp (HMCL) are expected to post a7-12% decline in top-line during the quarter. Ex TTMT, the top-linegrowth of our coverage universe is expected to slow down to 7%yoy (down 7% qoq). We estimate EBITDA margins to decline by20-30bp yoy to 12.3% due to higher discounts in the commercialvehicles (CV) and PC segments and negative operating leverage.However, we expect net profit to register a healthy growth of11.7% yoy (4.7% qoq) for the quarter. We expect TTMT to drive thesector growth with a strong 38% yoy earnings growth driven by24.6% yoy growth in revenues. Ex TTMT the bottom-line of ourcoverage space is likely to decline by 6.8% yoy (4.5% qoq).

Auto index outperforms the Sensex

The BSE Auto index outperformed the Sensex during 2QFY2013,registering absolute gains of 10.1%. The outperformance wasled by index heavyweights, MM, BJAUT and MSIL; however,HMCL, Ashok Leyland (AL) and Bosch (BOS) underperformedthe index during the quarter. While, MM was the top gainer inthe index with absolute returns of 22.3% led by strong volumegrowth; BJAUT (revival in export markets) and MSIL (resumption


Exhibit 1: 2QFY2013 - Stock price performance

(3.6)

(3.3)

16.6

1.8

11.5

12.3

(12.3)

22.3

15.4

10.5

(13.7)

(13.4)

6.5

(8.3)

1.4

2.2(22.4)

12.2

5.3

0.4

(30.0) (20.0) (10.0) 0.0 10.0 20.0 30.0

Ashok Leyland

Bosch

Bajaj Auto

Bharat Forge

Cummins India

Exide Industries

Hero MotoCorp

MM

Maruti Suzuki

Tata Motors

Relative to Auto index (%) Absolute

of production at Manesar) too registered strong outperformancedriven by reducing uncertainty on the volume front. HMCL wasthe major loser amongst the heavyweights as it witnessed sharpdecline in volumes leading to inventory pile-up at the dealer end.



Automobile

Weak demand for PCs impacts overall PV sales

The passenger vehicle (PV) industry registered a subdued6.3% yoy growth YTD in FY2013 due to weak demand for PCs(flat yoy) which offset the strong growth witnessed in the UVsegment (a strong 56.7% yoy growth). PC demand continues tobe impacted by weak economic environment, high interest ratesand rising fuel prices (petrol and diesel prices hiked by`4.5/liter and `7.2/liter YTD in FY2013, respectively). Thesehave weighed on consumers sentiments, resulting inpostponement of purchases. Industry demand continued to bedriven by demand for diesel vehicles whereas sales of petrolvariants continued to struggle despite higher levels of discounts.During 2QFY2013, the government hiked the diesel prices by`5/litre; however, we do not see any major impact of it oncustomer preference for diesel cars going into the festival seasonas the running cost benefit of diesel cars is still significantcompared to petrol cars. Going ahead, we expect overall salesto remain subdued; however, we believe consumer sentimentswill improve during the festival season. We expect the domesticPC segment to report a 4-5% yoy volume growth in FY2013,driven by increased diesel engine capacity and the likelypick-up in demand for petrol cars in 2HFY2013.

For 2QFY2013, we expect MSIL's volume to decline by8.7% yoy (down 22.1% qoq) on the back of a month long plantshutdown at Manesar which impacted domestic as well as exportvolumes. Net average realization is likely to increase by2% qoq (21.5% yoy), led by selective price increases in the dieselportfolio and improvement in product mix (higher proportionof diesel sales). We expect EBITDA margin to contract by30bp qoq (up 70bp yoy) due to lag impact of relatively strongINR in 1QFY2013 and negative operating leverage.

Two-wheeler majors to post extremely weak results

The domestic 2W industry which registered a healthy volumegrowth of 10.5% in 1QFY2013, witnessed a sharp fall indemand in 2QFY2013 leading to a moderate growth of 5.6%YTD in FY2013. Noticeably, the overall growth in the sector hasbeen driven entirely by Honda Motorcycle and Scooters India(HMSI) which has recorded an impressive growth of 51.4% YTDin FY2013. While the scooter segment (strong growth of 23%yoy) continues to drive the overall growth in the 2W sector;motorcycle sales have slowed down considerably (volumes up3.3% yoy) largely due to poor consumer sentiments which haveresulted in a high level of inventory (5-6 weeks at HMCL and4-5 weeks at BJAUT) at the dealer end. Further, a weak economicenvironment and sharp increases in fuel prices have resulted inconsumers down-trading within the motorcycle segments.For instance, the share of greater than 125cc segment hasdeclined from 19% to 16% over the same period. Going ahead,for FY2013, we have lowered our growth assumption for the2W industry to 5-6% from 8-10% earlier. We expect thenear-term environment to remain challenging as demandremains extremely weak due to weak economic environmentand sharp increase in fuel prices.

During the quarter, 2W majors (HMCL and BJAUT) recorded a10-14% yoy decline in total volumes led by a slowdown in bothdomestic and exports markets, with the product mix shifting toadverse territory. Hence, we expect HMCL and BJAUT to postdisappointing set of results for the quarter. We expect lowervolumes and adverse product-mix to negatively impact theoperating performance of HMCL and BJAUT in 2QFY2013which will lead to decline in net profits by 23.5% and 18.3%yoy respectively.

Source: Company; Angel Research

Exhibit 2: TTMT and AL – Quarterly volumes

SegmentSegmentSegmentSegmentSegment 2QFY20132QFY20132QFY20132QFY20132QFY2013 2QFY20122QFY20122QFY20122QFY20122QFY2012 % chg% chg% chg% chg% chg 1HFY20131HFY20131HFY20131HFY20131HFY2013 1HFY20121HFY20121HFY20121HFY20121HFY2012 % chg% chg% chg% chg% chg

TTMTTTMTTTMTTTMTTTMT 221,090221,090221,090221,090221,090 206,622206,622206,622206,622206,622 7.07.07.07.07.0 409,864409,864409,864409,864409,864 399,470399,470399,470399,470399,470 2.62.62.62.62.6

Total CV 148,667 144,482 2.9 275,301 270,440 1.8

Total PV 72,423 62,140 16.5 134,563 129,030 4.3

Exports (incl. above) 14,678 16,192 (9.4) 27,749 31,078 (10.7)

ALALALALAL 29,84029,84029,84029,84029,840 23,62823,62823,62823,62823,628 26.326.326.326.326.3 57,41857,41857,41857,41857,418 42,90542,90542,90542,90542,905 33.833.833.833.833.8

Exhibit 4: BJAUT, HMCL and TVSL – Quarterly volumes


BJABJABJABJABJAUTUTUTUTUT 1,049,2081,049,2081,049,2081,049,2081,049,208 1,164,1371,164,1371,164,1371,164,1371,164,137 (9.9)(9.9)(9.9)(9.9)(9.9) 2,128,1792,128,1792,128,1792,128,1792,128,179 2,256,9792,256,9792,256,9792,256,9792,256,979 (5.7)(5.7)(5.7)(5.7)(5.7)

Motorcycles 928,524 1,027,357 (9.6) 1,911,147 1,990,408 (4.0)

Three-wheelers 120,684 136,780 (11.8) 217,032 266,544 (18.6)


HMCLHMCLHMCLHMCLHMCL 1,332,8051,332,8051,332,8051,332,8051,332,805 1,544,3151,544,3151,544,3151,544,3151,544,315 (13.7)(13.7)(13.7)(13.7)(13.7) 2,973,0952,973,0952,973,0952,973,0952,973,095 3,073,8923,073,8923,073,8923,073,8923,073,892 (3.3)(3.3)(3.3)(3.3)(3.3)

TVSLTVSLTVSLTVSLTVSL 485,999485,999485,999485,999485,999 604,229604,229604,229604,229604,229 (19.6)(19.6)(19.6)(19.6)(19.6) 1,005,1591,005,1591,005,1591,005,1591,005,159 1,140,3601,140,3601,140,3601,140,3601,140,360 (11.9)(11.9)(11.9)(11.9)(11.9)

Two-wheelers 473,786 592,546 (20.0) 983,867 1,117,253 (11.9)

Three-wheelers 12,213 11,683 4.5 21,292 23,107 (7.9)



Exhibit 3: MSIL and MM – Quarterly volumes


MSILMSILMSILMSILMSIL 230,376230,376230,376230,376230,376 252,307252,307252,307252,307252,307 (8.7)(8.7)(8.7)(8.7)(8.7) 526,272526,272526,272526,272526,272 533,833533,833533,833533,833533,833 (1.4)(1.4)(1.4)(1.4)(1.4)

Domestic 209,954 222,406 (5.6) 473,218 473,089 0.0

Exports 20,422 29,901 (31.7) 53,054 60,744 (12.7)

MMMMMMMMMM 191,077191,077191,077191,077191,077 178,822178,822178,822178,822178,822 6.96.96.96.96.9 308,257308,257308,257308,257308,257 272,161272,161272,161272,161272,161 13.313.313.313.313.3

Auto - domestic 130,888 114,215 14.6 203,813 169,359 20.3

Auto - exports 10,349 7,239 43.0 15,111 9,955 51.8

Tractor - domestic 46,797 54,266 (13.8) 84,450 88,002 (4.0)

Tractor - exports 3,043 3,102 (1.9) 4,883 4,845 0.8


Auto ancillaries

We expect 2QFY2013 to be extremely challenging for the autoancillary companies as we expect profitability of companies inour coverage universe (ex. Apollo Tyres and Exide Industries) tobe severely impacted by the slowdown in demand in the originalequipment manufacturer (OEM) as well replacement markets.

11



Automobile

Analyst - YAnalyst - YAnalyst - YAnalyst - YAnalyst - Yaresh Karesh Karesh Karesh Karesh Kothariothariothariothariothari

While OEM demand continued to remain weak on account ofmacro concerns such as high interest rates and negativeconsumer sentiments, replacement sales also witnessedlower-than-expected off-take due to weak economic activity andhigher inflation. Nonetheless, we expect Apollo Tyres (APTY) tooutperform the overall sector's earnings growth in 2QFY2013as well, driven by receding cost pressures.

We expect APTY's consolidated top-line to register a healthygrowth of 12% yoy driven by strong growth in South Africa andhealthy growth in India and Europe. EBITDA margin is estimatedto improve by ~330bp yoy (30bp qoq) to 11.4% benefittingfrom a 14.3% yoy (6.5 qoq) decline in natural rubber prices. Asa result, the adjusted net profit is expected to increasesubstantially by 84.3% yoy (3.8% qoq).

On a standalone basis, we expect Bharat Forge (BHFC) to reportmodest revenue growth of 2.4% yoy, driven by 10% yoy growthin net average realization. The company is expected to benefitfrom higher share of machining component. We expect thecompany's volumes to decline by 7% yoy following a 12.9% yoydecline in MHCV volumes. The operating margin is expected toimprove by 117bp yoy led by stable commodity prices and asuperior product-mix. However, we expect the bottom-line todecline by 3.1% primarily due to an increase in interest expense.

For the quarter, we expect Bosch (BOS) to post a moderaterevenue growth of 5% yoy on account of poor volume growthin the CV and tractor segments which are the primary drivers ofthe company's revenues. Meanwhile, Bosch has also announcedtemporary production cuts at its plants in Nashik, Jaipur andBangalore to avoid unnecessary buildup of inventory amidst

slowdown in the industry. We expect operating margins tocontract sharply by 260bp yoy on account of raw-material costpressures (due to INR depreciation) and lower operatingleverage benefits. As a result, the net profit is expected to declineby 22.8% yoy (10.1% qoq) during the quarter.

We expect Exide Industries (EXID) to witness a strong revenuegrowth of 16.1% yoy (down 12% sequentially due to lower OEMvolumes) driven by growth in four-wheeler replacement andinverter batteries. While we expect EBITDA margins to improveby 30bp sequentially; net profit is expected to decline by 11.7%qoq mainly on account of a sequential decline expected in thetop-line. On a y-o-y basis, the net profit is expected to jumpsignificantly by 162.4% due to the base effect.

We expect Motherson Sumi Systems (MSS) to report improvement inits operating performance driven by pick-up in order execution atthe new plant in Hungary. However, lower operating efficiency atPeguform facilities may pose margin pressures. Led by consolidationof Peguform operations, the top-line and bottom-line are expectedto post a 177.1% and 102.6% yoy growth, respectively.

Outlook: We believe long-term structural growth drivers ofthe domestic automotive industry such as GDP growth (leadingto increasing affluence of rural and urban consumers), favorabledemographics, low penetration levels, entry of global playersand easy availability of finance are intact, which should supporta 10-12% CAGR in auto volumes over FY2012-14E. As such,we prefer stocks that have strong fundamentals, high exposureto rural and exports markets and commanding superior pricingpower. WWWWWe remain positive on Ashok Le remain positive on Ashok Le remain positive on Ashok Le remain positive on Ashok Le remain positive on Ashok Leyland, Hero MotoCorp,eyland, Hero MotoCorp,eyland, Hero MotoCorp,eyland, Hero MotoCorp,eyland, Hero MotoCorp,Mahindra and Mahindra and TMahindra and Mahindra and TMahindra and Mahindra and TMahindra and Mahindra and TMahindra and Mahindra and Tata Motors.ata Motors.ata Motors.ata Motors.ata Motors.

Exhibit 5: Quarterly estimates – Automobile (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012, * Consolidated numbers

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) T T T T Targetargetargetargetarget Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E chg bpchg bpchg bpchg bpchg bp 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E ( ( ( ( ( `̀̀̀̀)))))

AL 24 3,326 7.5 9.3 (137) 117 (24.3) 0.4 (24.3) 2.1 2.2 2.7 11.4 11.0 8.8 30 Buy

BJAUT 1,833 4,699 (6.9) 18.2 (187) 671 (18.3) 23.2 (18.3) 106.5 108.5 121.3 17.2 16.9 15.1 - Neutral

HMCL 1,879 5,110 (11.7) 14.8 (93) 462 (23.5) 23.1 (23.5) 108.3 122.5 134.0 17.3 15.3 14.0 2,077 Accum.

MSIL 1,350 8,362 10.9 7.0 70 284 18.0 9.8 18.0 50.6 66.6 92.6 26.7 20.3 14.6 - Neutral

MM 865 9,711 32.9 12.0 (35) 907 17.9 15.4 17.9 46.7 50.4 56.3 18.5 17.2 15.4 944 Accum.

TTMT* 267 44,781 24.6 12.9 41 2,591 38.0 8.2 38.0 36.1 39.0 44.9 7.4 6.9 6.0 316 Buy

TVSL 42 1,677 (14.1) 5.9 (104) 44 (42.8) 0.9 (42.8) 5.2 4.7 5.4 8.1 9.0 7.8 49 Buy

Exhibit 6: Quarterly estimates – Auto Ancillary (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012, * Consolidated numbers; # December year ending; & Full year EPS is consolidated

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) T T T T Targetargetargetargetarget Reco.Reco.Reco.Reco.Reco.


Apollo Tyres* 92 3,215 12.0 11.4 332 143 84.3 2.8 84.3 8.1 12.1 14.1 11.3 7.6 6.5 99 Accum.

Bharat Forge& 305 902 2.4 24.8 117 103 (3.1) 4.4 (3.1) 17.6 20.3 25.1 17.3 15.0 12.2 351 Buy

Bosch# 8,804 2,069 5.0 16.7 (260) 222 (22.8) 70.8 (22.8) 339.6 348.3 435.8 25.9 25.3 20.2 - Neutral

Exide Industries 153 1,365 16.1 15.3 762 134 162.4 1.6 162.4 5.4 7.4 9.2 28.3 20.8 16.7 - Neutral

FAG Bearings# 1,760 365 10.4 16.5 (333) 42 (7.3) 25.3 (7.3) 105.9 111.2 132.7 16.6 15.8 13.3 - Neutral

Motherson Sumi* 149 6,346 177.1 7.5 (120) 200 102.6 5.1 100.2 4.3 8.0 10.6 34.3 18.5 14.1 159 Accum.



Banking

Banking stocks remained under stress on increasedasset quality concerns

Banking stocks remained under stress during 2QFY2013 onincreased asset quality concerns. However, on a sequential basis,the recent liquidity driven rally aided 15 out of the 27 bankingstocks under our coverage to end the quarter with positivereturns. The economic growth environment has remainedchallenging; however, persistent inflation levels have restrainedthe RBI from undertaking a policy rate cut, which also weighedon banking stocks. Short-term liquidity improved aided by openmarket operations (OMOs) and a cut in the CRR, leading toeasier and cheaper access to funds at the shorter end of theinterest rate curve. Even at the longer end of the yield curve,cost of deposits is expected to ease as modest depositmobilization amid weak incremental credit growth has allowedbanks to reduce deposit rates.

On a yoy basis, the bottom-line performance is expected to be healthyat 21% levels, driven by strong growth on the operating front forprivate banks. However, dissecting the coverage universe intosub-groups, large private banks (25.8% yoy) are expected to

Source: RBI, Angel Research

Exhibit 2: Deposits growth decelerates

Credit growth (%) Deposit growth (%)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Aug

-08

Nov-

08

Feb

-09

May-

09

Aug

-09

Nov-

09

Feb

-10

May-

10

Aug

-10

Nov-

10

Feb

-11

May-

11

Aug

-11

Nov-

11

Feb

-12

May-

12

Aug

-12

(%)

Source: RBI, Angel Research

Exhibit 3: Liquidity eased further in 2QFY2013

(250,000)

(200,000)

(150,000)

(100,000)

(50,000)

-

Oct

-11

Nov-

11

Dec-1

1

Jan

-12

Feb

-12

Mar-

12

Apr-

12

May-1

2

Jun

-12

Jul-

12

Aug

-12

Sep

-12

(` cr)

outperform large public sector (PSU) banks excluding SBI(14.1% yoy) and mid PSU banks (14.5% yoy) comfortably.

Deposit and Credit growth remain moderate

The credit growth for the banking system as of September 7,2012 stood at a moderate 16.5% yoy, however comparing onan incremental basis, the FY2013 YTD net credit off-take (freshcredit minus repayments) has been only ~`45,000cr comparedto ~`1.33lakh cr over the same period in the last year (ie netcredit off-take is lower by 66.1% on an yoy basis). A challengingeconomic growth environment resulted in weak incrementalcredit growth. Even the pipeline for banks, as indicated by theirmanagements, remains thin, largely comprising of existingsanctions and accordingly in our view, credit growth by the yearend could fall even lower to 14-15%.

Deposit growth, on the other hand, has also been low(14.4% yoy growth as of September 7, 2012), howevercomparing on an incremental basis, the FY2013 YTDincremental deposit mobilization stands at comfortable ̀ 4.1lakhcr compared to ~`3.2lakh cr over the same period in the lastyear. Going ahead, deposit growth is likely to remain moderateas real interest rates for depositors continue to remain negative(considering CPI inflation levels of ~10%). The recent dieseland LPG price revisions, proposed hike in electricity tariffs,impact of elevated global commodity prices, agriculturalbottlenecks and increase in MSP are yet to reflect in generalizedinflation and therefore pose significant upside risks to overallinflation expectation and resultant threat to savings and depositmobilization.

Exhibit 1: 2QFY2013 stock performance(%)(%)(%)(%)(%) Returns (qoq)Returns (qoq)Returns (qoq)Returns (qoq)Returns (qoq) Returns (yoy)Returns (yoy)Returns (yoy)Returns (yoy)Returns (yoy)

Oriental Bank of Commerce (OBC) 19.3 3.3

HDFC Ltd (HDFC) 18.6 20.8

ICICI Bank Ltd (ICICIBK) 17.7 21.0

Yes Bank Ltd (YESBK) 12.6 40.2

Axis Bank Ltd (AXSB) 11.8 11.5

HDFC Bank Ltd (HDFCBK) 11.6 34.5

BSE India Bank Index 10.3 21.1

Indian Bank (INDBK) 9.8 (9.5)

Bank of Baroda (BOB) 8.9 4.7

Sensex Index 7.6 14.0

Dena Bank (DENABK) 7.4 36.3

IDBI Bank Ltd (IDBIBK) 7.1 (2.4)

United Bank of India (UTDBK) 6.2 (14.2)

Canara Bank (CANBK) 4.6 (2.8)

LIC Housing Finance (LICHF) 4.4 33.2

Punjab National Bank (PNB) 4.0 (11.8)

State Bank of India (SBI) 3.8 17.2

Bank of Maharashtra (BOM) 1.7 9.2

Syndicate Bank (SYNDBK) 1.7 4.5

Corporation Bank (CRPBK) 0.0 (1.0)

Federal Bank Ltd (FEDBK) (0.4) 21.4

Union Bank of India (UNBK) (0.6) (15.1)

Allahabad Bank (ALBK) (1.9) (6.9)

Vijaya Bank (VIJBK) (3.4) 3.0

UCO Bank (UCOBK) (3.5) 17.5

Central Bank (CNTBK) (4.6) (23.9)

Andhra Bank (ANDHBK) (4.9) (9.1)

South Indian Bank (SIB) (5.6) 2.2

Jammu & Kashmir Bank (JKBK) (5.6) 16.3

Indian Overseas Bank (IOB) (6.0) (15.4)

Bank of India (BOI) (10.3) (1.3)


13



Banking

Margins to be aided by lower funding costs

Recently, 16 out of the 27 banks under our coverage havereduced their fixed retail term deposit rates (1-3 year tenure) by25-75bp. Deposit rate cut, in our view, is largely due toimprovement in liquidity as incremental credit growth has beenlower amid weak macro fundamentals. On the asset side, mostbanks have recently also reduced their retail lending rates acrosshome, auto, personal and educational segments, as they clamorfor shoring up retail assets offering higher-risk-adjusted-yields.Also, after the 25bp CRR cut in the September policy review, SBIhas reduced its base rate by 25bp, while State Bank of Bikanerand Jaipur (SBBJ) and State Bank of Mysore (SBM) are effectinga similar reduction in base rate in the first week of October.Depending on their growth targets, some other banks mightalso follow these banks and mull reduction in their base rates.

Even, short-term borrowing rates have eased considerablycompared to the last quarter, as reflected in the sharp correctionin the three-month CD and CP rates. Easier and cheaper accessto short-term funding, in our view, should aid margins to someextent.

Within our coverage universe, HDFCBK had the highest averagebase rate reduction of 20bp, followed by OBC (17bp) andDENABK (14bp). On the deposit front, Canara Bank, HDFCBK,

Exhibit 4: 1QFY2013 and 2QFY2013 – Lending and deposit rates

Source: Company, Angel Research; Note: *1-3 year maturity bucket

Avg Avg Avg Avg Avg. Base rates (%). Base rates (%). Base rates (%). Base rates (%). Base rates (%) Avg Avg Avg Avg Avg. BPLR rates (%). BPLR rates (%). BPLR rates (%). BPLR rates (%). BPLR rates (%) FD rates* (%) FD rates* (%) FD rates* (%) FD rates* (%) FD rates* (%)

BankBankBankBankBank 1QFY131QFY131QFY131QFY131QFY13 2QFY132QFY132QFY132QFY132QFY13 BP changeBP changeBP changeBP changeBP change 1QFY131QFY131QFY131QFY131QFY13 2QFY132QFY132QFY132QFY132QFY13 BP changeBP changeBP changeBP changeBP change 1QFY131QFY131QFY131QFY131QFY13 2QFY132QFY132QFY132QFY132QFY13 BP changeBP changeBP changeBP changeBP change

HDFCBK 10.00 9.80 (20) 18.50 18.30 (20) 9.25 8.75 (50)OBC 10.62 10.45 (17) 14.87 14.75 (12) 9.50 9.10 (40)DENABK 10.59 10.45 (14) 15.75 15.75 - 9.25 9.00 (25)ALLBK 10.58 10.50 (8) 14.83 14.75 (8) 9.50 9.25 (25)ANDHBK 10.58 10.50 (8) 14.83 14.75 (8) 9.25 9.00 (25)BOB 10.58 10.50 (8) 14.83 14.75 (8) 8.85 9.00 15BOI 10.58 10.50 (8) 14.83 14.75 (8) 9.35 9.35 -CANBK 10.58 10.50 (8) 14.83 14.75 (8) 9.25 8.50 (75)CENTBK 10.58 10.50 (8) 15.00 15.00 - 9.00 9.30 30INDBK 10.58 10.50 (8) 14.83 14.75 (8) 9.50 9.25 (25)IOB 10.58 10.50 (8) 15.50 15.50 - 9.25 9.25 -PNB 10.58 10.50 (8) 14.00 14.00 - 8.75 9.00 25SYNBK 10.58 10.50 (8) 14.83 14.75 (8) 9.50 9.05 (45)UCOBK 10.58 10.50 (8) 15.00 15.00 - 9.10 9.10 -FEDBK 10.52 10.45 (7) 17.75 17.75 - 9.25 9.00 (25)VIJAYA 10.52 10.45 (7) 14.83 14.75 (8) 9.50 9.75 25ICICIBK 9.81 9.75 (6) 18.56 18.50 (6) 9.25 8.75 (50)IDBI 10.55 10.50 (5) 15.05 15.00 (5) 9.25 9.25 -CRPBK 10.55 10.50 (5) 15.00 15.00 - 9.25 9.00 (25)UNBK 10.55 10.50 (5) 15.24 15.00 (24) 9.25 9.25 -UTDBK 10.49 10.45 (4) 14.66 14.60 (6) 9.25 9.00 (25)BOM 10.53 10.50 (3) 15.00 15.00 - 9.35 9.30 (5)SBI 10.00 9.98 (2) 14.75 14.74 (1) 9.00 8.50 (50)AXSB 10.00 10.00 - 17.75 17.75 - 9.25 9.00 (25)J&KBK 10.50 10.50 - 15.00 15.00 - 9.25 9.00 (25)SIB 10.50 10.50 - 19.00 19.00 - 9.90 9.50 (40)YESBK 10.50 10.50 - 19.75 19.75 - 9.60 9.60 -

ICICIBK and SBI have reduced their retail term deposit rates(1-3 year tenure) by 50-75bp, highest within our coverageuniverse.

Large private banks expected to post healthy earningsperformance

Overall amongst our coverage, we expect private banks to posta strong 23.5% yoy growth in their net interest income(NII),while PSU banks excluding SBI are expected to register amoderate 9.5% yoy growth. Within our coverage, we expectYESBK, OBC and BOI to outperform others on NII growth front.Moderate NII growth and flat performance on the other incomefront are expected to result in a modest 7.5% yoy growth inpre-provisioning profits for PSU banks; while private banks areexpected to report healthy performances on the pre-provisioningprofit front, with growth of 24.1% yoy. Both large private banksand large PSU banks are expected to post healthy performancesat the net profit after tax level (25.8% yoy and 21.6% yoy,respectively) on account of lower increases in provisioningexpenses.

Asset quality woes continue to plague sector fundamentals

Asset quality pressures, which had made FY2012 a year to forgetfor the banking industry (particularly for PSU banks), intensifiedfurther during 1QFY2013. The non performing assets (NPA)



Banking

Source: Company, Angel Research

Exhibit 8: Net NPA trend (%) for the banking industry

1.08 1.07

1.00 0.98

1.04

1.28

1.36

1.30

1.49

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

2Q

FY1

2

3Q

FY1

2

4Q

FY1

2

1Q

FY1

3


Exhibit 7: Gross NPA trend (%) for the banking industry

2.432.47

2.40

2.27

2.43

2.73

2.852.80

3.09

2.10

2.30

2.50

2.70

2.90

3.10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13


Exhibit 5: Gross NPA trends (%) – Private vs. PSU

Pvt Banks PSU Banks

2.872.80

2.702.57

2.36

2.332.24 2.17

2.01 2.052.24

2.342.42 2.35

2.25

2.45

2.853.02 2.98

3.34

1.50

1.80

2.10

2.40

2.70

3.00

3.30

3.60

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

2Q

FY1

2

3Q

FY1

2

4Q

FY1

2

1Q

FY1

3


Exhibit 6: Net NPA trends (%) – Private vs. PSU

Pvt Banks PSU Banks

1.060.92

0.790.69

0.55 0.56 0.54 0.54 0.46 0.49

1.10 1.121.13

1.07 1.081.16

1.471.56 1.50

1.73

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

2Q

FY1

2

3Q

FY1

2

4Q

FY1

2

1Q

FY1

3

Referred Referred Referred Referred Referred Approved Approved Approved Approved Approved

No. of casesNo. of casesNo. of casesNo. of casesNo. of cases Add. (Add. (Add. (Add. (Add. (`̀̀̀̀ cr) cr) cr) cr) cr) No. of casesNo. of casesNo. of casesNo. of casesNo. of cases Add. (Add. (Add. (Add. (Add. (`̀̀̀̀ cr) cr) cr) cr) cr)

FY10 31 20,175 31 17,763

FY11 49 22,614 27 6,615

1QFY12 18 4,595 10 8,141

2QFY12 18 21,095 7 2,095

3QFY12 23 19,187 17 21,364

4QFY12 28 23,012 16 8,001

FY12 87 67,889 50 39,601

1QFY13 41 20,528 17 17,957

Cumulative 433 227,021 309 168,472

Exhibit 9: CDR snapshot

Source: CDR Cell, Angel Research

ratios for PSU banks have spiked almost every quarter since1QFY2012, as higher exposure to overleveraged companies insensitive sectors amid weakening economic environment continueto weigh heavily on their balance sheets. During 1QFY2013 aswell, the banking industry resorted to letting its provision coverageratio (PCR) deteriorate significantly, so as to lessen the impact ofthe increased slippages on their profitability. The PCR ratio forPSU banks (after taking into account technical write-offs) dippedby ~350bp sequentially to 63.2% as of 1QFY2013.

Slippages and restructured assets in the banking sector haveincreased significantly over the past few quarters and areexpected to remain in the spotlight during 2QFY2013. Thereremains a steady flow of large loans coming up for restructuringas per media reports, the latest and major ones include DeccanChronicle and Sterling Biotech. Some of the companies namedin the Comptroller and Auditor General (CAG) report on coalblock allocation, also run the risks of turning into impaired assetfor their lenders, in our view, if their allocated coal blocks,depending on which they have made significant investment,are de-allocated. Most of these companies have availed theloans under consortiums comprising many banks, thus theimpact would be wide-spread across banks. Recently the CabinetCommittee on Economic Affairs (CCEA) had approved stateelectricity boards (SEB)' loan bailout package, which wouldfurther increase the lender's restructuring book as some of thoseadvances are still not restructured. However the overall schemeremains positive for the banking sector, as it provides more

confidence and clarity on the timeline of the SEB loanrepayments.

Corporate debt restructuring (CDR) referrals have risensignificantly over the past one year. Cases referred for CDRduring 1QFY2013 stand at ~`20,500cr (compared to~`68,000cr during FY2012 and average of ~`21,400cr duringFY2010 and FY2011). Even the pending approvals of~`37,000cr under the CDR mechanism could lead to furtherfattening of restructuring books for the banking industry.

Unlike their PSU peers, private banks have maintained theirasset quality largely intact until now in a tough economicenvironment and are expected to maintain relatively better assetquality going ahead as well.

15



Bond yields remain largely range bound

The Indian 10-year bond yield remained largely range boundthroughout 2QFY2013, as the much needed fiscal consolidationsteps coupled with announcement of big ticket reforms negatedthe impact of reduction in SLR and CRR by the RBI. After theJune’s monthly WPI inflation eased unexpectedly, hopes of apolicy rate cut by the RBI led the 10-year G-sec yields to reachan intra-quarter low of 8.05% in July 2012. However the RBIdashed rate cut hopes maintaining its hawkish stance andinstead reduced the statutory liquidity ratio (SLR) by 100bp, andconsequently yields soared to 8.25%. During August, yieldsagain moved lower on rate cut hopes as the governmentintended pursuing fiscal consolidation. However, the yieldsregained the lost ground and reached an intra-quarter high of8.26%, as rate cut hopes were soon dented after July inflationrose and high global crude prices increased upside risks toinflation and fiscal consolidation. In September, yields edgedlower following the announcements of fiscal measures such ashike in diesel and LPG prices and long awaited big ticket reforms.In its policy meeting, the RBI reduced the CRR to support liquidity,lending support to the yields. Overall, the 10-year bonds endedthe quarter largely flat at 8.15% (8.18% as of June 29, 2012).Even the 3 year Gsec ended flattish at 8.01% compared to 8.06%as of June 29, 2012) and hence the treasury gains/losses for thebanking sector are expected to be limited during 1QFY2013.

Banking


Exhibit 11: Corporate and G-Sec bond yields29-Jun-12 28-Sep-12

9.6

0

9.4

8

9.4

3

9.3

6

8.0

6

8.0

6

8.1

8

8.1

8

9.2

4

9.2

6

9.2

6

9.2

5

7.9

9

8.0

1

8.1

8

8.1

5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

AA

A1

Yr

AA

A3

Yr

AA

A5

Yr

AA

A1

0 Yr

Gse

c1

Yr

Gse

c3

Yr

Gse

c5

Yr

Gse

c10Yr

(%)


Exhibit 12: 10-year G-sec yields movement

7.8

8.0

8.2

8.4

2-J

ul-1

2

9-J

ul-1

2

16

-Jul

-12

23

-Jul

-12

30

-Jul

-12

6-A

ug-1

2

13

-Aug

-12

20

-Aug

-12

27

-Aug

-12

3-S

ep-1

2

10

-Sep

-12

17

-Sep

-12

24

-Sep

-12

(%)

Outlook and valuation

Recent corrective fiscal consolidation measures and otherreformatory announcements coupled with expected reformsacross sectors including mining and power would likely aidimprovement in the investment climate. However, the outlookfor economic growth improving and investment cycle pickingup, rests purely on catalysts such as inflation and interest rates.The downward interest rate movement going by inflation levelscurrently is expected to be slower than anticipated earlier. In fact,inflation levels have the potential to inch up further from thecurrent levels thus certainly delaying the start of the downwardinterest rate cycle. The slippages which started off from particularstressed sectors of the economy such as real estate, airlines andtextiles have now become more broad-based in nature.

Private banks, having structurally stronger balance sheet andcyclically better asset-quality profile, remain our preferredsegment choice with Yes Bank, Axis Bank and ICICI Bank beingour top picks. Even the recent significant correction in thewholesale interest rates over the last few months is expected tobenefit banks such as Yes Bank. While the entire PSU segment isrelatively more burdened with asset quality concerns, few bankssuch as Punjab National Bank and Union Bank, after the recentrun up in their stock prices, are still available near their 8-yearlow valuations and hence provide a case for accumulation froman 18-24 month perspective. Among other banks, we believevaluations of most mid-size PSU banks still do not provideadequate margin of safety from asset-quality risks, warrantinga switch to Syndicate Bank and United Bank, which have arelatively better asset quality outlook and cheaper valuations.

IndustryIndustryIndustryIndustryIndustry No.No.No.No.No. AggAggAggAggAgg. Debt (. Debt (. Debt (. Debt (. Debt (`̀̀̀̀ cr) cr) cr) cr) cr) Debt in %Debt in %Debt in %Debt in %Debt in %

Iron & Steel 34 39,714 23.6

Infrastructure 14 17,490 10.4

Textiles 60 12,090 7.2

Telecom 10 9,886 5.9

Construction 2 8,762 5.2

Fertilizers 8 8,455 5.0

NBFC 7 7,247 4.3

Sugar 26 6,733 4.0

Cements 11 6,595 3.9

Ship-Breaking/Ship Building 3 6,213 3.7

Petrochemicals 3 5,493 3.3

Refineries 1 4,874 2.9

Power 10 4,850 2.9

Jewellery, Liquor, edible oil etc. 6 3,557 2.1

Pharmaceuticals 9 3,349 2.0

Electrical 2 3,333 2.0

Chemicals 15 2,898 1.7

Electronics 6 2,852 1.7

Paper/Packaging 18 2,307 1.4

Metals (Non-ferrous Metals) 5 2,171 1.3

Others 59 9,603 5.7

TTTTTotalotalotalotalotal 309309309309309 168,472 168,472 168,472 168,472 168,472 100.0100.0100.0100.0100.0

Exhibit 10: Industry-wise exposure to CDR

Source: CDR Cell, Angel Research



Banking

Analyst - VAnalyst - VAnalyst - VAnalyst - VAnalyst - Vaibhav Agrawaaibhav Agrawaaibhav Agrawaaibhav Agrawaaibhav Agrawal/l/l/l/l/VVVVVarun Varun Varun Varun Varun Varmarmarmarmarmaaaaa/Saurabh T/Saurabh T/Saurabh T/Saurabh T/Saurabh Tapariaapariaapariaapariaaparia

Exhibit 15: Quarterly estimates ( ( ( ( ( `̀̀̀̀ cr) cr) cr) cr) cr)CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Operating Income Net P Operating Income Net P Operating Income Net P Operating Income Net P Operating Income Net Profit EPS (rofit EPS (rofit EPS (rofit EPS (rofit EPS ( `̀̀̀̀) Adj B) Adj B) Adj B) Adj B) Adj BVPS (VPS (VPS (VPS (VPS ( `̀̀̀̀))))) P/E (x) P/AB P/E (x) P/AB P/E (x) P/AB P/E (x) P/AB P/E (x) P/ABV (x)V (x)V (x)V (x)V (x) TTTTTargetargetargetargetarget Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E (((((`̀̀̀̀)))))

AXSB 1,137 3,691 13.8 1,128 22.5 102.7 115.9 137.5 551.5 630.3 736.4 11.1 9.8 8.3 2.1 1.8 1.5 1,326 Buy

FEDBK 446 629 6.3 185 (3.1) 45.4 44.9 52.5 333.3 368.4 409.2 9.8 9.9 8.5 1.3 1.2 1.1 - Neutral

HDFCBK 629 5,144 23.8 1,562 30.2 22.0 28.7 35.9 127.5 149.7 177.4 28.6 21.9 17.5 4.9 4.2 3.5 - Neutral

ICICIBK 1,057 5,336 25.7 1,868 24.2 56.1 68.6 82.0 524.0 568.6 622.1 18.9 15.4 12.9 2.0 1.9 1.7 1,245 Buy

SIB 23 365 16.9 113 18.7 3.5 3.5 3.9 17.8 21.1 24.2 6.4 6.4 5.8 1.3 1.1 0.9 25 Accum.

YESBK 382 788 31.3 288 22.6 27.7 33.9 42.2 132.5 161.2 196.4 13.8 11.3 9.0 2.9 2.4 1.9 452 Buy

ALBK 147 1,662 2.1 398 (18.4) 37.3 35.5 37.0 192.1 219.0 249.8 3.9 4.1 4.0 0.8 0.7 0.6 131 Reduce

ANDHBK 113 1,180 4.5 308 (2.5) 24.0 23.7 24.5 131.9 144.2 162.1 4.7 4.7 4.6 0.9 0.8 0.7 97 Reduce

BOB 799 3,735 13.1 1,223 4.9 121.4 115.3 139.4 666.3 756.0 864.0 6.6 6.9 5.7 1.2 1.1 0.9 - Neutral

BOI 310 3,039 10.7 912 85.8 46.6 58.2 68.0 324.1 355.6 412.2 6.7 5.3 4.6 1.0 0.9 0.8 330 Accum.

BOM 50 836 7.5 137 36.3 6.2 8.9 11.4 63.8 70.3 78.9 8.0 5.6 4.4 0.8 0.7 0.6 47 Reduce

CANBK 431 2,695 (3.4) 919 7.9 74.1 74.9 85.1 448.1 499.0 560.9 5.8 5.8 5.1 1.0 0.9 0.8 - Neutral

CENTBK 78 1,711 (0.6) 318 30.3 5.2 15.6 21.0 85.6 94.2 107.0 14.9 5.0 3.7 0.9 0.8 0.7 - Neutral

CRPBK 418 1,182 3.4 388 (3.3) 106.4 101.3 101.7 542.3 603.9 688.4 3.9 4.1 4.1 0.8 0.7 0.6 - Neutral

DENABK 106 753 19.9 213 10.1 22.9 24.8 24.4 122.6 143.4 163.7 4.6 4.3 4.3 0.9 0.7 0.6 - Neutral

IDBI 100 1,802 12.5 496 (3.8) 15.9 17.1 22.9 132.6 141.0 160.2 6.3 5.8 4.4 0.8 0.7 0.6 - Neutral

INDBK 192 1,457 (1.4) 475 1.3 39.6 40.5 41.6 210.4 246.2 278.5 4.9 4.7 4.6 0.9 0.8 0.7 181 Reduce

IOB 78 1,792 5.8 300 44.6 13.2 16.0 21.3 129.9 139.8 157.7 5.9 4.9 3.7 0.6 0.6 0.5 83 Accum.

JKBK 932 626 23.9 234 17.0 165.7 192.3 188.0 844.1 991.1 1,134.9 5.6 4.8 5.0 1.1 0.9 0.8 1,021 Accum.

OBC 302 1,492 17.7 389 131.8 39.1 56.7 62.6 350.4 405.6 457.2 7.7 5.3 4.8 0.9 0.7 0.7 - Neutral

PNB 840 4,821 11.1 1,210 0.4 144.0 147.7 166.2 734.2 843.3 990.5 5.8 5.7 5.1 1.1 1.0 0.8 941 Accum.

SBI 2,238 15,168 9.5 3,764 33.9 174.5 225.6 258.4 1,200.1 1,338.7 1,576.5 12.8 9.9 8.7 1.9 1.7 1.4 2,353 Accum.

SYNDBK 108 1,626 4.4 356 10.4 21.8 24.3 27.2 133.5 152.0 172.8 5.0 4.5 4.0 0.8 0.7 0.6 117 Accum.

UCOBK 77 1,328 9.5 385 66.7 14.2 17.0 16.5 79.3 87.9 97.9 5.4 4.5 4.7 1.0 0.9 0.8 - Neutral

UNBK 208 2,383 10.2 468 32.8 32.2 38.6 46.3 217.3 234.5 283.0 6.4 5.4 4.5 1.0 0.9 0.7 226 Accum.

UTDBK 64 846 7.7 162 30.2 15.1 17.2 22.0 109.0 121.7 141.0 4.2 3.7 2.9 0.6 0.5 0.5 78 Buy

VIJBK 56 602 (2.8) 139 (31.7) 9.1 9.2 11.4 69.4 75.8 83.9 6.2 6.1 4.9 0.8 0.7 0.7 - Neutral

HDFC 773 1,743 17.9 1,118 15.2 27.9 31.5 37.8 128.8 157.7 176.9 27.7 24.5 20.4 6.0 4.9 4.4 - Neutral

LICHF 282 431 10.1 248 152.2 18.1 21.1 28.5 112.2 128.4 150.7 15.6 13.4 9.9 2.5 2.2 1.9 301 Accum.

Source: Company, Angel Research; Note: Price as on September 28, 2012

Source:C-line, Angel Research, Note:* For PSU banks , excl. SBI and IDBI

Exhibit 13: PSU banks’ price band (P/ABV)*

0.30

0.60

0.90

1.20

1.50

1.80

Apr-

04

Sep

-04

Mar-

05

Aug

-05

Feb

-06

Jul-

06

Jan

-07

Jun

-07

Dec-0

7

May-

08

Nov-

08

Apr-

09

Oct

-09

Mar-

10

Sep

-10

Feb

-11

Aug

-11

Jan

-12

Jul-

12

Source:C-line, Angel Research

Exhibit 14: Large pvt. banks’ price band (P/ABV)

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Apr-

04

Sep

-04

Feb

-05

Jul-

05

Dec-0

5

May-

06

Oct

-06

Mar-

07

Aug

-07

Jan

-08

Jun

-08

Nov-

08

Apr-

09

Sep

-09

Feb

-10

Jul-

10

Dec-1

0

May-

11

Oct

-11

Mar-

12

Aug

-12

17



Capital Goods

We expect companies in our capital goods (CG) universe topost a moderate cumulative top-line growth of 13%. However,on the bottom-line front, the picture is mixed, with mostcompanies in our coverage universe posting a decline mainlyon account of margin pressure and, in some cases, due to higherinterest costs.

ABB (CMP/TP: `798/593) (Rating: SELL)

For 3QCY2012, we expect ABB India (ABB) to post top-linegrowth of 15.6% yoy to `2,015cr, driven by the company'sbalanced performance across all segments. ABB's margin islikely to improve by 238bp yoy to 6.2%. Aided by modestrevenue growth and margin expansion, ABB's bottom line isexpected to jump by 187% yoy to `63.7cr, albeit on a lowerbase. However, on account of high valuations, we maintain ourSell recommendation on the stock with a target price of `593.

BHEL (CMP/TP: `247/-) (Rating: Neutral)

We expect BHEL to post a top-line growth of 16.2% yoy to`11,967cr for 2QFY2013. On the EBITDA front, the company'smargin is expected to remain stable at 18.8% for the quarter.We expect PAT to come in at ̀ 1,487cr. We maintain our Neutralrecommendation on the stock as we expect weak order flow tocontinue for the rest of the year.

BGR Energy (CMP/TP: `275/-) (Rating: Neutral)

We expect BGR Energy's (BGR) top-line to grow by 10% yoy to`849cr. The EBITDA margin is expected to decrease by 28bpyoy to 14.0%. Interest cost is expected remain high (owing toelevated interest rate scenario and enhanced working capitalrequirements), which is likely to drag the bottom line slightly downby 1.4% yoy to `51cr. We recommend Neutral on the stock.

Crompton Greaves (CMP/TP: ̀ 126/141) (Rating: Accum.)

For 2QFY2013, we project Crompton Greaves to report amodest top-line growth of 10% yoy to `2,976cr. A weak capexcycle along with strained consumer sentiments is also likely toimpact the company's growth. On the EBITDA front, thecompany's margin is expected at 7.0%. Though we expect amodest revenue growth, however due to stress on margins, weexpect the company's PAT to fall by 5.9% yoy to `110cr. Werecommend an Accumulate rating on the stock with a targetprice of `141.

Jyoti Structures (CMP/TP: `47/54) (Rating: Buy)

For 2QFY2013, we expect Jyoti Structures' top-line to remainflat at `651cr. We expect the company's EBITDA margin tocontract by ~76bp yoy to 10.0%. The interest cost is expectedto increase due to higher working capital borrowings. Against

this backdrop, the company's PAT is expected to decline by 18.8%yoy to ̀ 18cr. We recommend an Accumulate rating on the stockwith a target price of `54.

KEC International (CMP/TP: `73/78) (Rating: Accum.)

For 2QFY2013, KEC International (KEC) is expected to registera strong growth of 16% yoy to `1,465cr on the back of strongexecution of its robust order book. On the EBITDA front, thecompany's margin is expected to increase by ~27bp yoy to7.6%. Interest cost is expected to remain at elevated levels. Weexpect the PAT to come in at `31cr, an increase of 31%yoy. Werecommend an Accumulate rating on the stock with a targetprice of `78.

Thermax (CMP/TP: `561/-) (Rating: Neutral)

For 2QFY2013, we expect Thermax to report a top-line of`1,238cr, as weak order inflows since the last couple of quarterswill keep the company's revenue under strict check. Thecompany's EBITDA margin is likely to compress by ~68bp yoyto 10.1%. Falling revenue and margin contraction are expectedto result in a y-o-y fall of 18.7% in the company's PAT to `83cr.We maintain our Neutral rating on the stock.

Capital Goods Index - has outperformed sensex: Capital Goods Index - has outperformed sensex: Capital Goods Index - has outperformed sensex: Capital Goods Index - has outperformed sensex: Capital Goods Index - has outperformed sensex: After a flatperformance of capital goods stocks in 1QFY2013, the sectorhas bounced back for the quarter, outperforming the Sensex by1.7%. Though concerns of weak industrial capex and problemsin the power sector remain, the renewed push for reforms bythe government, aided the recovery of capital goods stocks.While KEC International, Jyoti Structures and Thermax postedimpressive gains, ABB and BGR Energy declined. BHEL andCrompton Greaves remained subdued, underperforming theSensex. Though project awarding in the T&D space (primarilyby PGCIL) has been a silver lining, other sub-sectors, especiallypower, have disappointed. We believe the investment activitywill improve in the medium term if the government continuesreforms and tackles power sector challenges such as inadequatecoal supplies, land acquisition issues etc.

Cabinet hikes import duty on power equipment to 21%:Cabinet hikes import duty on power equipment to 21%:Cabinet hikes import duty on power equipment to 21%:Cabinet hikes import duty on power equipment to 21%:Cabinet hikes import duty on power equipment to 21%:The Cabinet has approved 5% basic customs duty, 12%counter-veiling duty and 4% special additional duty on importof power gear hiking the overall import duty to 21%. The hikeis expected to partially benefit domestic manufacturers such asBHEL and BGR Energy against cheaper Chinese and Koreanimports. However, with most of the 12th Plan orders alreadyplaced and multiple headwinds in power sector, BTG space willcontinue to remain subdued in short to medium term.



Capital Goods

cycle is expected to remain in a downturn for the next fewquarters, as not many orders are expected to be finalized. Intandem, the boiler turbine generator (BTG) market will furtherwitness a dry spell as most of the planned orders have alreadybeen awarded and new orders are in the preliminary stages ofdiscussions, which are likely to witness delay in finalizationsdue to ongoing headwinds (such as fuel issues, constraints inland acquisition and poor health of state electricity boards[SEBs]). However, if reform measures such as captive coalallocation policy and land acquisition policy are addressed, itwill be positive for the sector in medium to long term.

T&D space in a better shape; Although concerns loom:T&D space in a better shape; Although concerns loom:T&D space in a better shape; Although concerns loom:T&D space in a better shape; Although concerns loom:T&D space in a better shape; Although concerns loom: WhileT&D capex is on an uptick given strong traction in orderingfrom PGCIL, land acquisition and forest clearances (RoW) entailexecution risks, which have led to slower-than-expected growthin T&D infrastructure historically.

Overall, the outlook remains challenging:Overall, the outlook remains challenging:Overall, the outlook remains challenging:Overall, the outlook remains challenging:Overall, the outlook remains challenging: A handful of positives,especially in the T&D space do very little to warrant a change inour pessimistic view. Against the backdrop of economicslowdown, we believe the overall picture remains gloomy formarket leaders (read BHEL, BGR and ABB, among others). Webelieve it will take a while for the sector to witness dramaticimprovements, while the government is initiating its efforts toresolve the key issues in the power sector. Given this, we expectthe slowdown to continue for the next couple of quarters.Therefore, companies catering to the power sector will witnessa high degree of discomfort unless core concerns soothe.

VVVVValuations: aluations: aluations: aluations: aluations: We prefer companies with strong growth visibilityand diversified revenue streams. We follow a stock-specificapproach, with Crompton Greaves, KEC International and JyotiStructures being our preferred picks in our coverage universe.In the BTG space, we continue to maintain our negative stance,owing to concerns of heightened competition and slowing oforder inflows.

Analyst - Rahul KAnalyst - Rahul KAnalyst - Rahul KAnalyst - Rahul KAnalyst - Rahul Kaul / Amit Paul / Amit Paul / Amit Paul / Amit Paul / Amit Patilatilatilatilatil

Source: Industry data, Angel Research

Mar-

97

Dec

-97

Sep

-98

Jun-9

9

Mar-

00

Dec

-00

Sep

-01

Jun-0

2

Mar-

03

Dec

-03

Sep

-04

Jun-0

5

Mar-

06

Dec

-06

Sep

-07

Jun-0

8

Mar-

09

Dec

-09

Sep

-10

Jun-1

1

Mar-

12

2

4

6

8

10

12

Private Government

Exhibit 2: Stalled projects as a % of total outstanding

Exhibit 3: Quarterly estimates ((((( `̀̀̀̀ cr) cr) cr) cr) cr)

Source: Company; Angel Research; Note: Price as on September 28, 2012; * December year ending

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


ABB 798 2,015 15.6 6.2 238 64 187.5 3.0 187.5 8.7 14.5 24.7 91.6 55.2 32.3 593 Sell

BHEL 247 11,967 16.2 18.8 (18) 1,487 5.3 6.1 5.3 29.0 25.3 22.8 8.5 9.8 10.8 - Neutral

BGR Energy 275 849 10.0 14.0 (28) 51 (1.4) 7.0 (1.4) 34.6 24.7 29.6 7.9 11.1 9.3 - Neutral

Crompton Greaves126 2,976 10.0 7.0 (135) 110 (5.9) 1.7 (5.9) 5.8 7.0 9.7 21.7 18.1 13.0 141 Accum.

Jyoti Structures 47 651 3.0 10.0 (76) 18 (18.8) 2.2 (18.8) 11.2 9.6 12.2 4.2 4.9 3.8 54 Buy

KEC International73 1,465 16.0 7.6 27 31 30.9 1.2 30.9 8.1 8.3 9.8 9.0 8.8 7.5 78 Accum.

Thermax 561 1,238 (5.0) 10.1 (68) 83 (18.7) 6.9 (18.7) 33.9 26.9 30.3 16.6 20.9 18.5 - Neutral


Exhibit 1: 2QFY2013 - Sensex vs CG stocks

(1)

64

17

(9)

33

18

9.3 7.6

(15)

(10)

(5)

-

5

10

15

20

25

30

35

ABB

BH

EL

Cro

mpto

ngre

ave

s

Therm

ax

BG

REnerg

y

KEC

Inte

rnational

Jyoti

Str

uct

ure

s

CapitalG

oods

Index

SEN

SEX

CCEA clears debt restructuring plan of SEBs

CCEA has cleared the debt restructuring of SEBs under which50% of the short terms loans of these SEBs would be taken overby the state government. The restructuring by lenders is subjectto steps taken by the State discoms to bridge the gap betweenthe cost incurred and revenue realized to restore the viability ofthe sector. It will improve the financial position of State discoms,thereby, enabling them to clear any pending dues of powergenerators.

Outlook and valuationBTG space continues to reel under pressure

Investments across various sectors have substantially deceleratedowing to the deteriorating macro environment. The investment

19



Cement

Cement demand weakens in July-AugustAfter witnessing sustained buoyancy since 2HFY2012(November11-June 2012 cumulative cement dispatches growthof ~12% yoy), cement demand showed weakness in 2QFY2013.The all-India cement demand is estimated to have grown by amarginal ~4% yoy in July-August 2012. However, the overallcement demand growth is estimated to be at ~5.5% during thefirst five months of FY2013, higher than ~3.3% growth reportedduring the corresponding period of FY2012.

The second quarter of the fiscal year is generally weak for thecement industry, due to the slowdown in construction activity onaccount of south west monsoon which covers most parts of thecountry. The southwest monsoon which was weak till the end ofJuly 2012, picked up from August. This has resulted in reducingthe overall monsoon deficit considerably. The deficit which wasat 22% of long period average (LPA) at the end of July hasreduced to 7% of LPA as on September 12, 2012. In particularthe rains were severe in North India with many areas in theregion flooded. Flooding in many parts of the country,particularly in northern and eastern India, affected constructionseverely in the month of August, resulting in cement makersreporting a y-o-y decline in dispatches for the month. Further,cement demand continued to remain weak in Andhra Pradesh,a region which has been plagued by low demand over the pasttwo years. The poor demand scenario resulted in price correctionin many parts of the country in August after hitting all-time highsin July. On a positive note we believe the late pick-up inmonsoons would augur well for cement demand in 2HFY2013.

Andhra Pradesh, supply has increased post the commencementof JP Associates' 5mtpa Balaji Cement plant and JSW Steel'sAndhra Cement plant, which has put pressure on prices. Pricesin Chennai, which went up by ~`8/bag in July, fell by ̀ 10/bagin August and are currently trading at ̀ 330/bag. Cement priceswhich were stable in Bangalore in July fell by ̀ 10/bag in August.Prices declined further in Andhra Pradesh in September.

Northern region: Northern region: Northern region: Northern region: Northern region: Prices in the northern region, which rose by~`30/bag in the month of July, fell steeply in August due to aweak demand scenario. Currently, the prices are in the rangeof ̀ 255-280/bag. Parts of the northern region such as Rajasthanand Himachal Pradesh witnessed heavy rainfall during thequarter (2QFY2013), resulting in flooding which affected theconstruction activity.

WWWWWestern region: estern region: estern region: estern region: estern region: Prices went up by `10/bag in places such asMumbai, Nagpur and Ahmedabad in July before witnessing aslide of ̀ 10/bag in August. Prices declined further in Septemberin this region. Currently the prices are in the range of `290-320/bag.

Eastern region: Eastern region: Eastern region: Eastern region: Eastern region: Prices in Kolkata and Odisha, which remainedflat in July fell by `15-20/bag in August. The eastern regionhas witnessed the highest price hike over the past one year andeven after this correction, prices are still substantially higher by~`50-70/bag on a y-o-y basis. Currently the prices in the regionare in the range of `300-350/bag. The demand in the regionis expected to be muted till the end of Durga Puja in late October.

Central region: Central region: Central region: Central region: Central region: In the central region prices are currently in therange of `260-300/bag. Prices in the region too corrected by~`20/bag in August after rising by `25/bag in July.

Imported coal prices down 28.5% yoy

During 2QFY2013, average prices of New Castle Mckloksey6,700kc coal were down by 28.5% yoy and 8.8% qoq toUS$86.2 per tonne. Although, the benefit of lower prices wasneutralized to some extent by the ~20.7% yoy depreciation inINR vs USD (~2.3% qoq), the reduction in INR terms issubstantial at 13.7% on a y-o-y basis for the quarter. Reductionin coal prices is expected to favor cement companies.


Exhibit 2: New Castle Mckloksey prices

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

50

100

150

200

250

Sep

-05

Mar-

06

Sep

-06

Mar-

07

Sep

-07

Mar-

08

Sep

-08

Mar-

09

Sep

-09

Mar-

10

Sep

-10

Mar-

11

Sep

-11

Mar-

12

Sep

-12

USD

/to

nne

coal prices down in INR terms

PX_LAST INR

INR/to

nne

CompanyCompanyCompanyCompanyCompany Jul-Aug12Jul-Aug12Jul-Aug12Jul-Aug12Jul-Aug12 Jul-Aug 11Jul-Aug 11Jul-Aug 11Jul-Aug 11Jul-Aug 11 yoy(%)yoy(%)yoy(%)yoy(%)yoy(%) 5MFY135MFY135MFY135MFY135MFY13 5MFY125MFY125MFY125MFY125MFY12 yoy(%)yoy(%)yoy(%)yoy(%)yoy(%)

ACC 3.63 3.89 (6.7) 9.71 9.84 (1.3)

Ambuja 3.15 3.16 (0.4) 8.74 8.45 3.4

Dalmia Cement 1.01 0.99 1.1 2.39 2.23 7.6

OCL 0.49 0.54 (8.5) 1.40 1.37 2.0

Exhibit 1: Cement dispatches (mt)


Prices remain at high levels

All-India average cement prices witnessed an increase in July.However, the prices corrected significantly in August due to lowdemand. The prices which fell in North and Central regions inearly september rose later in the month due to someimprovement in demand and pass-through of higher freightcosts due to diesel price hike. For 2QFY2013, on a whole, pricesare substantially higher on a y-o-y basis at All-India level.

Southern region:Southern region:Southern region:Southern region:Southern region: Prices in Hyderabad which fell by ~`3-4/bagin July saw a steep ~`30/bag decline in August due to thepoor demand scenario. Though the demand scenario hascontinued to remain poor in Hyderabad and other parts of



Key developmentsDiesel price increased by Diesel price increased by Diesel price increased by Diesel price increased by Diesel price increased by ̀̀̀̀̀ 5/litre:5/litre:5/litre:5/litre:5/litre: During the quarter, the priceof diesel was hiked by `5/litre due to the elevated crude pricesprevailing over the past several months. Higher crude pricescoupled with a steep decline in INR vs USD resulted in pushingup the cost of refining, thereby necessitating a hike in the priceof diesel. Transporters have already hiked freight rates to factorthe hike in diesel prices. This is expected to push up freightcosts of cement manufacturers.

Reliance Cement commences operation:Reliance Cement commences operation:Reliance Cement commences operation:Reliance Cement commences operation:Reliance Cement commences operation: Reliance Cement, asubsidiary of Reliance Infrastructure, commenced cementproduction from its 1mtpa Butibori cement plant in Maharashtra.The company intends to sell the cement produced in Butibori inthe Vidharbha region of Maharashtra. Reliance Cement wouldbe procuring fly ash from Reliance Power's (subsidiary of RelianceInfrastructure) Butibori power plant. Further, the company intendsto set up another 10mtpa of cement capacity at an investmentof `6,000cr in Maharashtra and Madhya Pradesh. Currentlythe projects are under various stages of development.

Shree Cement fined by CCI:Shree Cement fined by CCI:Shree Cement fined by CCI:Shree Cement fined by CCI:Shree Cement fined by CCI: During the quarter the CompetitionCommission of India (CCI) found eleven cement manufacturersincluding Shree Cement guilty of indulging in unfair tradepractices. The CCI imposed a fine of `397cr on Shree Cementalone as it had already fined other cement manufacturers in adifferent case.

Cement stocks outperform broader markets

Exhibit 3: Sensex vs. cement stocks (2QFY2013)

Source: BSE, Angel Research

Cement majorsCement majorsCement majorsCement majorsCement majors Abs. Return (%)Abs. Return (%)Abs. Return (%)Abs. Return (%)Abs. Return (%) Relative to Sensex (%)Relative to Sensex (%)Relative to Sensex (%)Relative to Sensex (%)Relative to Sensex (%)

Sensex 7.6 -

ACC 15.9 8.3

Ambuja 16.1 8.5

India Cements 9.5 1.8

JK Lakshmi Cement 69.2 61.6

Madras Cements 21.2 13.5

Shree Cements 31.1 23.4

Ultratech 30.2 22.5

2QFY2013 expectations

Top-line to grow by 16.9% yoy; margins to remainhealthy

We expect our cement universe to report an 16.9% yoyimprovement in its top-line primarily on account of a substantialimprovement in realization. Amongst the companies under ourcoverage, Shree Cement is expected to post the highesttop-line growth of 46.1% on account of a 36.8% in thetop-line of cement businesses. We also expect most of the cementplayers to post margin expansion on a y-o-y basis due tobetter realization.


In our view, the cement sector's valuations in terms of EV/salesand EV/tonne are ahead of the cycle when compared toutilization levels and are almost 36% more expensive thanhistorical valuations during periods of similar utilization levels.Hence, we maintain our Neutral view on the sectorHence, we maintain our Neutral view on the sectorHence, we maintain our Neutral view on the sectorHence, we maintain our Neutral view on the sectorHence, we maintain our Neutral view on the sector.....

Analyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V Srinivasan

Exhibit 5: Quarterly estimates (((((`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012; ^December year ending; *June year ending

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS ( EPS ( EPS ( EPS ( EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.

(((((`̀̀̀̀))))) 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E chg bpchg bpchg bpchg bpchg bp 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E (((((`̀̀̀̀)))))

ACC^ 1,469 2,401 11.7 19.3 443 230 37.2 12.2 37.2 70.5 76.9 82.2 20.8 19.1 17.9 - Neutral

Ambuja^ 202 2,123 17.6 23.4 573 307 79.1 2.0 79.1 8.2 11.2 12.5 24.7 18.1 16.2 - Neutral

India Cem. 95 1,113 1.9 19.9 (150) 61 (12.9) 2.0 (12.9) 9.8 9.8 12.3 9.7 9.7 7.7 - Neutral

J K Lakshmi 114 412 16.5 20.3 865 35 445.6 2.9 445.6 8.9 16.3 17.8 12.8 7.0 6.4 - Neutral

Madras Cem. 192 887 8.4 28.8 (379) 101 (8.6) 4.3 (8.6) 16.2 15.7 18.3 11.9 12.2 10.5 - Neutral

Shree Cem.* 3,954 1,249 46.1 27.8 431 145 266.4 41.5 266.4 180.9 222.5 259.3 21.9 17.8 15.2 - Neutral

UltraTech 1,968 4,659 19.2 21.9 525 558 100.1 20.4 100.1 89.3 93.2 110.5 22.0 21.1 17.8 - Neutral


Exhibit 4: One-year forward EV/sales vs. utilization

EV/Sales(x) -LHS Utilization 1yr fwd(%) -RHS

70.0

75.0

80.0

85.0

90.0

95.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Apr-

01

Oct

-01

Apr-

02

Oct

-02

Apr-

03

Oct

-03

Apr-

04

Oct

-04

Apr-

05

Oct

-05

Apr-

06

Oct

-06

Apr-

07

Oct

-07

Apr-

08

Oct

-08

Apr-

09

Oct

-09

Apr-

10

Oct

-10

Apr-

11

Oct

-11

Apr-

12

Cement

21



Volume growth under pressure

For 2QFY2013, we expect our FMCG universe's revenue to growby 14.0% yoy. The revenue growth is expected to be driven bythe impact of substantial price hikes carried out by companiesin 2HFY2012. The price hike trend continued to some extenteven in 1QFY2013. However, volume growth is expected to bemuted in most categories barring categories such as soaps anddetergents which have remained robust over the past fewquarters.

The overall slowdown in the economy (1QFY2013 GDP at 5.5%)has begun to have an impact on consumer spending, particularlywith respect to discretionary spending. This coupled with highinflation has left companies with little room for carrying outfurther price hikes. While volume growth has remained strongin categories such as soaps and detergents, it has remainedweak in categories such as biscuits, paints etc. High inflationand resultant lower disposable incomes pose the risk ofdown-trading. Companies have tried to beat demandslowdown by focusing more on regional brands, launching smallpacks, offering price discounts, offering higher grammage forthe same price, announcing lucky draw contests etc.

Further, the revival of monsoon in August is a big relief for theFMCG sector as the fear of drought has receded in most partsof the country. Drought situation would have aggravated thelow demand situation further and would have caused a furtherdent on rural demand, which has been a major driver of FMCGgrowth over the past few years.

Raw-material price trend mixed

Average prices of agri commodities showed a mixed trendduring 2QFY2013. While wheat and sugar prices went up by21.8% yoy and 22.7% yoy respectively, prices of tea and cocoawere down by 45.1% yoy and 18.1% yoy respectively. Highwheat and sugar prices are a negative for companies such asITC and Britannia. Lower y-o-y tea prices are expected to benefitTata Global Beverages (TGBL).

Among other raw materials, while copra prices continued toremain low (down 31% yoy), palm oil prices too were down by6.3% on a y-o-y basis. Low copra prices are expected to resultin healthy operating margins for Marico. Reduction in palm oilprices is expected to favor Hindustan Unilever (HUL) and GodrejConsumer Products (GCPL).

The steep fall in the INR vs the USD resulted in crude pricesrising higher in INR terms, despite the prices declining by

FMCG

Exhibit 1: Input cost trend during 2QFY2013Average PAverage PAverage PAverage PAverage Pricesricesricesricesrices yoy (%)yoy (%)yoy (%)yoy (%)yoy (%) qoq (%)qoq (%)qoq (%)qoq (%)qoq (%)

Wheat (`/quintal) 1427 21.8 15.1

Barley (`/quintal) 1304 5.3 (7.7)

Sugar (`/ quintal) 3542 22.7 15.3

Tea (`/kg) 289 (45.1) (7.5)

Coffee (US cent/LB) 106 (3.3) 1.5

Cocoa (US$/MT) 2481 (18.1) 8.5

Milk Liquid (`/ltr) 28 (10.5) 0.2

Palm Oil (MYR/tonne) 2899 (6.3) (10.1)

Copra (`/quintal) 4179 (31.0) (1.5)

Safflower (`/ quintal) 3917 44.3 9.2

Soyabean Oil (`/10kg) 754 18.1 5.9

Groundnt Oil (`/MT) 121329 24.9 0.6

Rice Bran Oil (`/MT) 5000 (4.0) 0.0

Crude (US$/ barrel) 109 (2.6) 0.4

Caustic Soda (`/kg) 1956 31.2 4.3

Soda Ash (`/kg) 1148 17.2 3.0

Source: Bloomberg, C-Line, Angel Research

Monsoons showed late pick up; deficit at only 7% of LPA

The southwest monsoon which was weak till the end of July2012, picked up from August. This has resulted in reducing theoverall monsoon deficit considerably. The deficit which was at22% of long period average (LPA) at the end of July has reducedto 7% of LPA as on September 28, 2012.

Most regions in the country barring parts of Karnataka andMaharashtra are expected to have near normal monsoon thisyear. Although the deficiency in rains at the beginning is expectedto result in some crop loss, the cultivation of rabi crop is expectedto be normal due to sufficient availability of water for irrigation.

2.6% yoy during the quarter in USD terms. Elevated prices ofcrude oil are a negative for the FMCG sector in general.

Exhibit 2: Monsoon deficitDeparture from LPDeparture from LPDeparture from LPDeparture from LPDeparture from LPA (%)A (%)A (%)A (%)A (%)

All-India (7)

North West India (7)

Central India (3)

Southern Peninsula (10)

East and North East India (10)

Source: Bloomberg, C-Line, Angel Research



FMCG


Most of the FMCG players in our universe are expected to posta double digit top-line growth. The growth is expected to bemore of value driven rather than volume driven. GCPL isexpected to post the highest top-line growth of 23.4%. Thegrowth in its top-line is expected to be driven by healthyperformance of the core categories in domestic markets anddue to the integration of the revenues of Darling group which isbeing done in multiple stages by the company.


Consumption in many categories with potential for high growthrates is still very low in urban India (like penetration ofdeodorants at ~6%, skin creams at ~30% and noodles at~21%). In rural India, penetration of these products is evenlower. With rising income levels and changing consumerbehavior in the country, consumer spending on branded FMCGproducts is set to rise. Also, growth in modern retail (currentlycontributing ~6% to FMCG sales) offers scope for further growth.

The FMCG Index continued to outperform the broader marketsin the past quarter and most of the stocks are trading at closeto all-time-high valuations. While the long-term consumptionstory for the FMCG industry remains intact, we believe the currentlofty valuations are unjustified. Thus, we remain Neutral on thesector. But, considering the cheap valuations, we recommendBuy on Britannia Industries.

Analyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V SrinivasanAnalyst - V Srinivasan

Source: IMD Angel Research

(23)(22)

(12)

(7)

(25)

(20)

(15)

(10)

(5)

0

June-end July-end Aug-end Sep-end

(%)

Exhibit 3: Monsoon deficit in FY2013


10.4

13.2

5.0

(9.3)

2.8

12.4

9.3

17.7

20.9

8.4

9.6

(2.2)

23.4

(15.0) (10.0) (5.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0

SENSEX Index

BSEFMCG Index

Asian Paints

Britania

Colgate

Dabur

Glaxosmith

Godrej Consum

HUL

ITC

Marico

Nestle

Tata Global

Exhibit 4: 2QFY2013 stock performance

Performance on the bourses

The BSE FMCG Index outperformed the Sensex by 2.8% and

posted an absolute return of 13.2% during the quarter. Tata

Global Paints posted the highest return of 23.4%, while HUL

and Godrej Consumer too gained by 20.9% and 17.7%

respectively. However, Britannia Industries and Nestle declined

by 9.3% and 2.2% during the quarter.

Exhibit 5: Quarterly estimates (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012; * December year ending; ^Consolidated; #Quaterly numbers pertains to standalone financials

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS ( EPS ( EPS ( EPS ( EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco. Reco. Reco. Reco. Reco.


Asian Paints^ 3,937 2,575 14.4 15.0 65 243.1 16.5 26.5 16.5 103.1 121.0 144.8 38.2 32.5 27.2 - Neutral

Britannia 476 1,459 12.7 5.0 20 49.2 29.9 4.1 29.9 15.6 20.7 25.4 30.4 23.0 18.8 584 Buy

Colgate 1,206 739 12.5 21.0 388 113.1 13.5 8.3 13.5 32.8 35.7 42.3 36.7 33.8 28.5 - Neutral

Dabur^ 128 1,531 21.3 16.9 (189) 190.3 9.5 1.1 9.5 3.7 4.5 5.2 34.6 28.7 24.7 - Neutral

GCPL^ 668 1,463 23.4 15.8 (186) 152.4 19.3 4.7 19.3 16.1 21.9 26.5 41.5 30.5 25.2 - Neutral

GSK Con.* 2,994 797 10.6 16.6 21 116.1 12.7 27.6 12.7 86.0 111.4 131.7 34.8 26.9 22.7 - Neutral

HUL 545 6,155 11.5 13.3 (7) 718.2 11.4 3.3 11.4 11.9 14.3 16.5 45.8 38.2 33.1 - Neutral

ITC 272 6,849 14.6 34.5 (78) 1,665 10.0 2.2 10.0 7.9 9.3 10.8 34.5 29.3 25.2 - Neutral

Marico^ 199 1,186 21.7 13.5 158 112.0 43.1 1.8 43.1 5.2 6.8 8.5 38.4 29.4 23.6 - Neutral

Nestle * 4,374 2,217 12.9 19.8 (111) 269.5 5.3 28.0 5.3 99.7 114.8 139.8 43.9 38.1 31.3 - Neutral

TGBL^ 143 1,802 11.8 10.6 396 107.7 28.7 1.7 28.7 5.4 6.6 7.8 26.5 21.6 18.3 - Neutral

United Spirits# 1,218 1,952 9.0 14.0 31 108.0 (27.0) 8.6 (27.0) 12.6 31.0 42.9 96.6 39.2 28.4 - Neutral

23



Infrastructure

For 2QFY2013, we expect the average revenue growth for ourcoverage universe to remain muted at 10.0% yoy as 2Q isseasonally the weakest quarter due to monsoon and owing toslowdown in execution.

During 2QFY2013, there has been no respite from the severalheadwinds (such as high interest and inflationary cost pressuresand slowdown in order inflow) faced by the sector. Thus, dullrevenue performance along with pressure on EBITDAM andhigh interest cost will result in muted performance on theearnings front. Given this backdrop, we expect a decline in theearnings of most companies under our coverage universe.

CCCL (CMP/TP: `̀̀̀̀15/-) (Rating: Neutral)

Consolidated Construction Consortium (CCCL) is expected tocontinue to post poor numbers in 2QFY2013 as well. We expecta decline of 13.0% yoy on the top-line front to `466cr, giventhe slowdown in execution across projects. On the EBITDA front,we expect the company to continue with its dismal performance;however, owing to a low base of 2QFY2012, its EBITDAM isexpected to register an improvement of 379bp yoy to 5.2%.On the bottom-line front, the company is expected to post lossof `3cr for 2QFY2013 vs loss of `19cr in 2QFY2012.

HCC (CMP/TP: `18/-) (Rating: Neutral)

For Hindustan Construction Company (HCC), we project amarginal 4.0% yoy increase in revenue for 2QFY2013 to ̀ 862crdue to slowdown in execution on account of gloomy macroenvironment. On the EBITDA front, we expect a dip of 361bpyoy to 7.7% on the back of muted margin performance in thepast few quarters. On the bottom-line front, we expect a loss of`62cr against a loss of `41cr in 2QFY2012 due to poor showexpected on the revenue and margin fronts and owing toescalating interest cost, which is expected to post a y-o-y jumpof 25.3%.

IRB (CMP/TP: `154/`166) (Rating: Accumulate)

IRB is expected to post a good performance on a quarterly basis.We expect 18.1% yoy growth in the engineering and construction(E&C) segment to `623cr. This would come on back of healthyexecution pace in under construction build-operate-transfer(BOT) projects. The BOT segment is also expected to report adecent 16.0% yoy growth to `277cr, leading the overalltop-line to ̀ 900cr. We expect blended EBITDA margin at 43.4%,a dip of 33bp yoy. Depreciation for the quarter is expected towitness a y-o-y jump of 81.2%, owing to completion of theSurat - Dahisar project. We project net profit before tax andafter tax (post minority interest) at `144cr and `106cr,respectively, after factoring a blended tax rate of 28.8% for thequarter.

ITNL (CMP/TP: `189/`232) (Rating: Buy)

We expect IL&FS Transportation Networks (ITNL) to post a mixedset of numbers for the quarter, with healthy performance on therevenue front, but muted show on the earnings level owing tohigh interest cost. The company's revenue is expected to growby 20.0% yoy to ̀ 1,507cr. We expect the company to register adip of 131bp yoy on the EBITDAM front to 27.1%. Further,on the back of a high interest cost, which is expected tocome at ̀ 265cr, we expect ITNL's earnings to decline by 15.9%yoy to `98cr.


ABL (CMP/TP: `̀̀̀̀225/`̀̀̀̀304) (Rating: Buy)

For 2QFY2013, Ashoka Buildcon (ABL) is expected to postrevenue growth of 40.5% yoy on the consolidated revenue frontto ̀ 403cr. This jump is on account of low base. On the marginfront, we expect ABL to post an EBITDAM of 22.0%, registeringa dip of 134bp on a y-o-y basis. We expect the company topost a 33.1% yoy increase in its earnings to ̀ 22cr for the quarter.

Source: Company, Angel Research; Note: For our analysis, we haveselected 12 companies, as detailed in Exhibit 6

Exhibit 2: Average yoy earnings growth (%)

10.1

4.2

(5.9)

1.24.0

3.1

3.0

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E

Source: Company, Angel Research; Note: For our analysis, we haveselected 12 companies, as detailed in Exhibit 6

Exhibit 1: Average yoy revenue growth (%)18.5

12.6

15.8

17.5

11.6

18.2

10.0

-

5.0

10.0

15.0

20.0

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E



Infrastructure


Exhibit 3: Interest cost as a % of sales for E&C companies

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

JAL HCC IVRCL MPL NCC CCCL SimplexIn.

Sadbhav L&T

1QFY13 1QFY12 4QFY12

Order inflow remains muted

Order inflow in the last couple of quarters has largely beendisappointing for companies under our coverage. Moreoverthe road sector which witnessed robust order awarding inFY2012 also has seen a significant slowdown. Infrastructurecompanies are bidding very cautiously for road projects andare looking to get EPC (engineering, procurement andconstruction) contracts. The main reasons for companies goingslow on road BOT projects are: 1) High interest cost and toughbusiness environment; 2) Difficulties in achieving financialclosure; 3) Banks turning cautious against lending for roadprojects and demanding higher equity contribution.

For 1QFY2013, Simplex, NCC and L&T showed positivegrowth; however, Simplex's growth was due to low base in

IVRCL (CMP/TP: `47/`51) (Rating: Accumulate)

We expect IVRCL to post poor numbers for the quarter. On therevenue front, IVRCL is expected to post a y-o-y growth of 10.0%to ̀ 1,151cr on the back of execution slowdown. On the EBITDAmargin front, we expect an expansion of 64bp to 9.6%. On theearnings front, we expect a loss of `5cr for the quarter againsta profit of `8cr in 2QFY2012, primarily on account of higherinterest costs for the quarter.

JAL (CMP/TP: `81/`91) (Rating: Accumulate)

We expect Jaiprakash Associates (JAL) to post a top-line growthof 3.1% yoy to ̀ 3,231cr for the quarter. We expect the companyto post blended EBITDA margin of 25.2%, registering anexpansion of 136bp for the quarter. The bottom-line is expectedto be at `126cr, registering a y-o-y decline of 2.2% for thequarter. This is mainly on account of an 18.3% yoy expectedjump in interest cost to `479cr.

L&T (CMP/TP: `1,596/`1,721) (Rating: Accumulate)

We expect L&T to record a revenue of `12,634cr, registering a12.3% yoy growth, for 2QFY2013. This growth can be attributedto the company's large order book (~`1.4trillion). On theEBITDA front, we expect the company's margin to witness anexpansion of 96bp yoy to 11.4%. We project the net profit tocome in at `891cr, registering a y-o-y growth of 11.6%.

MPL (CMP/TP: `38/`56) (Rating: Buy)

Madhucon Projects (MPL) is expected to post a 2.1% yoy growthon the top-line front to `425cr for 2QFY2013. We expect thecompany's EBITDA margin to witness a dip of 117bp at 11.8%.Despite muted revenue growth, the company's earnings areexpected to post a jump of 31.0% yoy to `8cr on account oflower interest cost for the quarter on a y-o-y basis.

NCC (CMP/TP: `46/-) (Rating: Neutral)

We expect a subdued performance from NagarjunaConstruction (NCC) for this quarter. On the top-line front, NCCis expected to post a growth of 12.0% to `1,221cr. The EBITDAmargin is expected to witness a dip of 126bp yoy to 8.2% forthe quarter. However, a blow is expected on the earnings front,as we expect the company to post a decline of 53.9% on ay-o-y basis to `5cr for the quarter. This would be primarily onaccount of muted revenue and EBITDAM and burgeoninginterest cost (yoy jump of 36.7%), led by elongated workingcapital cycle.

SEL (CMP/TP: `143/`182) (Rating: Buy)

We expect Sadbhav Engineering (SEL) to post muted numbersin 2QFY2013. The company's revenue is expected to fall by

10.0% to `387cr. The EBITDA margin is expected to witness adip of 42bp yoy to 10.1%. On the earnings front, the companyis expected to post a dip of 31.8% yoy to `12cr.

Simplex Infra (CMP/TP: `208/`265) (Rating: Buy)

Simplex Infra is expected to post a modest performance on therevenue front, as we project a 4.0% yoy top-line growth to`1,375cr for 2QFY2013. We expect the company's EBITDAmargin to fall by 90bp yoy to 8.1%. The bottom-line is expectedto be under pressure due to increased interest cost (expectedjump of 37.2% yoy), resulting in a y-o-y decline of 44.7% to`10cr for the quarter.

No respite from high interest cost

Infrastructure companies continue to reel under pressure onaccount of soaring interest cost. High interest cost (owing to ahigh interest rate regime and increased debt levels) has resultedin a decline in the bottom line of most companies under ourcoverage. Further, on account of inflation continuing to remainabove comfortable levels, the possibility of rate cuts in the nextfew months has become very dim.

25



Infrastructure

Analyst: Nitin AroraAnalyst: Nitin AroraAnalyst: Nitin AroraAnalyst: Nitin AroraAnalyst: Nitin Arora

Exhibit 6: Quarterly estimates ( `̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012, Target prices are based on SOTP methodology; ^Consolidated numbers

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


ABL^ 227 403 40.5 22.0 (134) 22 33.1 4.3 33.1 23.7 27.1 31.7 9.5 8.4 7.2 304 Buy

CCCL 14 466 (13.0) 5.2 379 (3) - (0.2) - (0.5) 1.5 2.7 - 9.6 5.4 - Neutral

HCC 18 862 4.0 7.7 (361) (62) - (1.0) - (3.7) (2.3) (1.0) - - - - Neutral

IRB Infra^ 152 900 22.3 43.4 (33) 106 (3.8) 3.2 (3.8) 14.9 15.7 16.9 10.3 9.7 9.0 166 Accum.

ITNL^ 194 1,507 20.0 27.1 (131) 98 (15.9) 5.0 (15.9) 25.6 24.4 30.3 7.4 7.9 6.4 232 Buy

IVRCL 46 1,151 10.0 9.6 64 (5) - (0.2) - 0.9 2.5 4.6 51.9 18.3 10.1 51 Accum.

JAL 82 3,231 3.1 25.2 136 126 (2.2) 0.6 (2.2) 4.8 4.0 4.8 16.7 20.5 17.2 91 Accum.

L&T 1,597 12,634 12.3 11.4 96 891 11.6 14.5 11.6 72.8 79.7 85.4 21.9 20.0 18.7 1,721 Accum.

MPL 37 425 2.1 11.8 (117) 8 31.0 1.1 31.0 4.9 4.6 4.7 7.6 8.0 8.0 56 Buy

NCC 47 1,221 12.0 8.2 (126) 5 (53.9) 0.2 (53.9) 1.4 3.0 3.5 32.5 15.4 13.4 - Neutral

SEL 147 387 (10.0) 10.1 (42) 12 (31.8) 0.8 (31.8) 9.3 7.5 10.4 15.3 19.5 14.1 182 Buy

Simplex In. 210 1,375 4.0 8.1 (90) 10 (44.7) 2.0 (44.7) 16.8 23.4 29.4 12.4 9.0 7.1 265 Buy


Exhibit 4: Order inflow yoy growth trend during 1QFY2013 (%)

(90)

(83)

21

48

116

(100) (50) - 50 100

HCC

CCCL

L&T

NCC

Simplex In.

Order backlog remains decent

Despite sluggish order inflow during the quarter, the order book(OB) remained decent for companies under our coverageuniverse. Slowdown in execution pace has also kept the


Exhibit 5: Decent order book provides revenue visibility

2.1

3.5

2.3

2.9

2.5

3.2

4.9

3.5

-

1.0

2.0

3.0

4.0

5.0

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

CC

CL

HC

C

Sim

ple

xIn

.

Sadbhav

L&T

MPL

IVRC

L

NC

C

Order book growth yoy (%), LHS OB/Sales (x), RHS

1QFY2012. Most players witnessed a decline in order inflowfor the quarter owing to policy paralysis at the government'send, delays arising due to land acquisition and environmentclearance issues.

company's order book at higher levels. This order backlog givescomfort for growth over the next couple of years. For fewcompanies such as NCC and MPL, the order book has beenboosted by captive orders during FY2012.


There has been no respite for infrastructure companies from

persistent headwinds faced by the industry - high interest rates

and slower-than-anticipated revival in industrial capex. Further,

a stretched balance sheet and working capital on the back of

investment in subsidiaries and delays in payment from clients

continues to pose a problem. However, infrastructure stocks

have seen some positive movement during the past few weeks

as the Indian government has unleashed various reforms to

help revive the dampened investment sentiment and to bolster

the country's economic growth. We believe that although interest

rate cuts and increasing investment in the sector remain key

triggers for infrastructure stocks, removal of bottlenecks such

as delays in environmental clearance and land-acquisition issues

is also of prime importance for the execution pace to pick up.

WWWWWe prefer to remain selective:e prefer to remain selective:e prefer to remain selective:e prefer to remain selective:e prefer to remain selective: We remain positive on companies

having 1) a comfortable leverage position; 2) superior return

ratios and 3) less dependence on capital markets for raising

equity for funding projects. Hence, we recommend L&T andHence, we recommend L&T andHence, we recommend L&T andHence, we recommend L&T andHence, we recommend L&T and

SEL as our top picks in the sectorSEL as our top picks in the sectorSEL as our top picks in the sectorSEL as our top picks in the sectorSEL as our top picks in the sector.....



Information Technology

Mixed economic data causes delays in CY2012 ITspending

Gartner's current US dollar growth forecast for overall global ITspending in 2012 has been revised up slightly from 2.5% lastquarter to 3.0% now but in constant US dollar terms, the growthforecast for overall IT spending in 2012 is unchanged at 5.2%.The challenges facing global economic growth in terms of theeuro zone crisis, weaker US recovery and a slowdown in Chinapersist; still the outlook has stabilized than in the recent past. Also,according to IDC, a market research firm, the global IT spendingis expected to grow by 6% in 2012 despite a turbulent economy.

For August 2012, data points for the US economy were mixed. Forinstance, 1) non-manufacturing index inched up to 53.7 from 52.6in July 2012, 2) unemployment rate stood at 8.1% as against8.3% in July 2012, 3) industrial production declined by 1.2% momas against a 0.6% mom growth in July 2012; 4) manufacturingindex came in at 49.6 as against 49.8 in July 2012; and 5) retailsales grew by 0.9% as against 0.8% in July 2012.

The real GDP in the US grew by 1.5% in 2QCY2012, a slightslowdown from 2.0% in 1QCY2012. Also, US corporate profitgrowth is slowing down with the S&P 500's operating EPS growthhaving moderated to 2% yoy in 2QCY2012 from 7% in1QCY2012. Also, the S&P 500's EPS growth expectations forCY2012 now stand at 5%, down from 9% at the start of CY2012.

These mixed economic data points from the US as well asunsteady economic situation in Europe have created a weakmacro-environment over the past few quarters and companiesare facing some challenges in the near term due to financialturmoil and global uncertainties.

Mixed commentary:Mixed commentary:Mixed commentary:Mixed commentary:Mixed commentary: Infosys' management's commentary wasagain highly cautious in terms of overall business conditions in1QFY2013. The revenue growth guidance for FY2013 wasscaled down to at least 5% yoy from 8-10% yoy earlier. Theguidance was also a tad lower than market expectations. Inaddition, the management stopped issuing quarterly guidanceciting uncertainly in demand environment which wasdiscomforting. Post a 1.1% decline in USD revenue in1QFY2012, the company requires ~3% ask rate in2Q-4QFY2013 to achieve a 5% growth in FY2013, which inthe current scenario looks a bit stretched and indicates that themanagement is banking on back-ended growth. This makes uscautious as the second half of every fiscal year is typically slowfor IT companies. This clearly indicates a challenging visibilityin business volumes and management's future expectations.

Tata Consultancy Services (TCS)' management's commentarycame in contrast to that of Infosys as its management indicatedthat the company is witnessing IT spends returning and seeshigher visibility than in 4QFY2012. The management soundedconfident of surpassing Nasscom's industry growth guidance

Cyclically a strong quarter with robust volume growth

Traditionally, 2Q is the strongest period for IT companies asclient budgets start getting spent aggressively. We expect2QFY2013 to be better than 1QFY2013. However this year's(FY2013) 2Q is not expected to be as good as 2Q tends to betraditionally due to unstable macros and economic uncertaintyacross the developed economies. On account of this, clientsare delaying their incremental budget flush.

For 2QFY2013, we expect volume growth to be in the range of2.0-4.0% qoq for tier-I IT companies, with TCS leading the pack.

of 11-14% yoy for FY2013 in constant currency terms. TCSexpects FY2013 to be a normal year with growth in 1H higherthan that in 2H. Its management indicated that clients are awareof the challenging macro environment and have plans to spendon IT in spite of all these challenges.

Cognizant maintained its CY2012 revenue growth guidance ofat least 20% yoy despite a negative impact of currencymovements. The company gave a 4.4% qoq growth guidancefor 3QCY2012 (2QFY2013), which implies stable growth forthe rest of the year.

Our take: Our take: Our take: Our take: Our take: Given the current uncertain environment, we seemoderation in IT budgets for CY2012 and expect volume growthof tier-I Indian IT companies to scale down to sub-14% inFY2013. The banking, financial services and insurance (BFSI)industry is expected to be a laggard in terms of growth. It is thissegment from which the IT companies derive maximum revenue.A weak performance from this segment due to weaker-than-anticipated acceleration implies industry-wide slowdown in ITspending. We believe FY2013 will see diversity in terms of growthrates of tier-I IT companies. TCS and HCL Technologies (HCLTech) are expected to grow at a rate higher than the industry'saverage (in mid teens) and Infosys is expected to post a midsingle digits growth. The IT spend now is driven due to trendssuch as increased off-shoring of work from Europe and vendorconsolidation. But given all the above mentioned headwinds,IT companies are deriving benefits from INR depreciation againstUSD since the past few months, giving a boost to INR revenue,operating margins and overall profitability of all IT companies.


Exhibit 1: Relative performance to the Sensex

4.1

2.5

2.9

(4.5)

25.8

38.6

42.7

10.3

(4.3)

3.2

7.1

8.6

(8.0) 0.0 8.0 16.0 24.0 32.0 40.0 48.0

BSE IT Index

Infosys

TCS

Wipro

HCL Tech

Tech Mahindra

Mahindra Satyam

Mphasis

Hexaware

Mindtree

Persistent

KPIT Cummins

(%)

27




Pricing is expected to remain stable. For tier-II companies, weexpect growth to be modest at 1.0-4.5% qoq, with TechMahindra leading the pack aided by acquisition of HutchisonGlobal Services.

Margins to be a mixed bag

We expect EBITDA margin of Infosys to expand by 110bp qoqto 31.9%, aided by improvement in utilization level (becausefreshers joining delayed by a quarter) and INR depreciation.On the other hand, the EBITDA margins of Wipro (IT services)and HCL Tech are expected to decline by 225bp qoq and 134bpqoq to 21.8% and 20.6%, respectively, due to wage hikes givenduring the quarter. HCL Tech has divided the quantum of wagehikes between two quarters so that the impact on margin, tosome extent, is less. Wipro gave wage hikes in June 2012, thefull negative impact of which will flow during 2QFY2013. TCSis expected to show a marginal dip of 22bp qoq in its EBITDAmargin as the gains from INR depreciation and productivitywill be offset by increase in employee costs due to freshers joiningand ramp up of projects from India and APAC geography whichgenerate lower margins.

Source: Company, Angel Research; Note: *For the IT services segment

Exhibit 2: Trend in volume growth (qoq) – Tier-I

4.5

3.1

(1.5)

2.73.0

6.3

3.2 3.3

5.3

4.0

5.1 4.9

2.0 1.8

4.0

6.0

1.8

0.8 0.8

2.0

(2)

0

2

4

6

8

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E

(%)

Infosys TCS HCL Tech Wipro*


Exhibit 3: Trend in USD revenue growth (qoq) - Tier-I

4.5

3.4

(1.9)

(1.1)

2.8

4.7

2.42.4

3.0

3.74.1

2.0

2.53.0 3.6

4.6

2.22.0

(1.4)

1.8

(2)

(1)

0

1

2

3

4

5

6

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E

(%)


USD revenue to grow, albeit at a slower pace

The cross-currency movement, which negatively impacted USDrevenue during 1QFY2013, is not expected to be a severe spoilsport this quarter. In 2QFY2013, it would be marginally negativebecause the USD appreciated by ~2.7% against the Euro andby ~0.3% against the GBP. Since the magnitude of appreciationis not high, there will only be a slight impact of 0.2-0.5% qoqon USD revenue of tier-I IT companies.

For 2QFY2013, on the back of decent volume growth, stablepricing and marginally negative cross-currency movement, weexpect USD revenue of tier-I IT companies to grow moderatelyby 1.8-3.7% qoq, with TCS leading the pack.

For tier-II IT companies, USD revenue growth is expected to be1.1-4.4% qoq, with Tech Mahindra leading the pack.

INR revenue expected to lift performance

2QFY2013 again witnessed one of the most volatile seasonsas far as the currency is concerned. In the last 15 days, the INRappreciated by ~5% but still on an average basis, the INRdepreciated by ~2.3% qoq during 2QFY2013. This will aidthe INR revenue growth and boost the operating margins of ITplayers by 70-90bp qoq.

For 2QFY2013, in INR terms, the revenue growth is expectedto be in the range of 2.0-4.5% qoq for tier-I IT companies,marginally higher than USD revenue growth due to depreciationof INR against USD on a q-o-q basis, with average USD/INRrate at 55.2 for 2QFY2013 as against 54.0 in 1QFY2013. Fortier-II IT companies, INR revenue growth is expected to be at1.5-4.6% qoq, with Tech Mahindra leading the pack.


Exhibit 4: Trend in INR revenue growth (qoq) - Tier-I

8.2

14.8

(4.8)

8.6

3.4

7.7

13.5

0.4

12.1

4.5

8.2

12.8

(0.6)

13.5

3.9

6.6

11.4

(0.2)

9.5

2.0

(10)

(5)

0

5

10

15

20

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E(%

)


Source: Company, Angel Research; Note: *For IT services segment

Exhibit 5: EBITDA margin profile – Tier-I

29.1

31.0

33.7 32.6

30.831.9

28.129.1

31.0

29.5 29.1

28.9

18.5

17.1

18.5 18.4

22.0

20.6

25.0

23.2 23.9 23.8

24.0

21.8

15

20

25

30

35

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E

(%)


For tier-II IT companies under our coverage (excluding KPITCummins), we expect the EBITDA margin to decline or remainalmost flat q-o-q due to wage hikes given during 2QFY2013;




Analyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita Somani


Source: Company, Angel Research; Note: Price as on September 28, 2012; *June ending, so 1QFY2013 estimates; ̂ October ending, so 4QFY2012 estimates; #December ending,so 3QCY2012 estimates; Change is on a qoq basis



TCS 1,294 15,542 4.5 28.9 (22) 3,372 2.8 17.2 2.8 54.3 69.0 74.0 23.8 18.7 17.5 1,405 Accum.

Infosys 2,534 9,940 3.4 31.9 110 2,314 1.1 40.5 1.1 145.5 163.2 173.4 17.4 15.5 14.6 2,687 Accum.

Wipro 381 10,990 3.2 18.4 (170) 1,446 (8.5) 5.9 (8.5) 22.7 25.6 28.1 16.8 14.9 13.6 421 Accum.

HCL Tech* 577 6,153 3.9 20.6 (134) 786 (8.0) 11.2 (8.0) 36.0 41.4 45.1 16.0 13.9 12.8 632 Accum.

Tech Mahindra 972 1,615 4.6 19.8 (161) 308 (8.9) 23.4 (8.9) 88.2 92.7 99.6 11.0 10.5 9.8 1,046 Accum.

Mah. Satyam 111 1,929 2.6 19.6 (207) 273 (22.5) 2.3 (22.5) 10.2 9.7 10.0 10.9 11.4 11.1 - Neutral

Mphasis^ 402 1,412 4.2 20.5 73 211 1.1 10.1 1.1 37.8 37.0 37.3 10.6 10.9 10.8 - Neutral

Hexaware# 122 515 2.9 23.0 11 86 (3.1) 2.9 (3.1) 8.9 11.6 12.2 13.7 10.5 10.0 140 Accum.

Mindtree 662 587 4.2 21.0 19 72 (18.6) 17.6 (18.6) 53.7 70.4 77.2 12.3 9.4 8.6 772 Buy

Persistent 427 305 1.5 26.8 (1) 40 (5.0) 9.9 (5.0) 35.4 42.4 44.2 12.0 10.1 9.7 - Neutral

KPIT Cummins 124 554 2.9 16.7 162 50 2.6 5.5 2.6 8.0 11.3 12.9 15.5 11.0 9.5 142 Accum.

Infotech Entp. 189 479 4.9 18.5 (16) 69 3.2 6.0 3.2 14.5 18.1 19.5 13.0 10.4 9.7 185 Neutral

though some of the negative impact will be absorbed by gainsfrom INR depreciation. Tech Mahindra and Mahindra Satyamare expected to record 161bp and 207bp qoq decline in itsEBITDA margin to 19.8% and 19.6%, respectively, due tonegative impact of wage hike given during the quarter.


Nasscom, in February 2012, gave growth forecast of 11-14%for India's IT exports for FY2012. The range of forecast is widerthis time as compared to the past due to uncertainty in theenvironment and delays in decision-making. After subduedresults in 4QFY2012 and mixed results in 1QFY2013 alongwith diverse commentary for FY2013, Nasscom has stillmaintained its guidance. Nasscom expects growth to come backand will not read too much into a couple of quarters ofchallenges.

We believe FY2013 might be different in terms of growth ratesof tier-I IT companies, as companies will have divergent growthrates with TCS and HCL Tech growing higher than the industry'saverage (in mid teens) and Infosys growing in mid single digits.Given the current uncertainly, unfavourable cross currencyenvironment and broadly soft 1QFY2013 results, Nasscom'sgrowth guidance seems to be on the optimistic side. If challengescontinue to prevail in the BFSI industry, which is the largestrevenue generator for IT companies, then the growth trajectoryof Indian IT companies will be shaken up.

Given all the above-mentioned headwinds, IT companiesare deriving benefits from INR depreciation as this is aidingin improving the bottom-line of Indian IT companies.Every 1% depreciation in the INR against the USD aids

EBITDA margins of IT companies by 30-40bp. SomeIT companies might pass on the benefits derived from INRdepreciation to their clients in pursuit of market share gains.

Considering the current economic uncertainties, we seemoderation in IT budgets for CY2012 and expect volume growthof tier-I Indian IT companies to scale down to sub-14% from17% plus in FY2012. Pricing of IT companies came down slightlyduring 1QFY2013, but now we do not foresee any further priceerosion. Going forward, we expect market share led growth tobe restricted to a few IT companies only and the overall sectorgrowth will be highly correlated to the macro-economy andpick-up in overall technology spending. We remain cautiouslyoptimistic on the IT sector, as on one hand global uncertaintiesprevail along with concerns regarding IT budgets for CY2012,while on the other hand software companies are deriving somebenefits from INR depreciation.

We expect TCS and HCL Tech to lead the growth in the tier-I ITpack. TCS and HCL Tech's stock prices have run up significantlyand are currently trading at 17.5x and 12.8x their respectiveFY2014E EPS, which leaves little room for upside in the stockprices. Hence, we recommend an Accumulate rating on TCSand HCL Tech. The PE premium between TCS and Infosys haswidened a lot as Infosys is expected to post a much lower growththan TCS, and is trading at 14.6x FY2014E EPS. So werecommend an Accumulate rating on Infosys as well. In addition,we have a Buy rating on Wipro with a target price of `421. Inthe mid-cap space, we like Tech Mahindra, MindTree and KPITCummins.

29



Media

Healthy top-line growth

For 2QFY2013, we expect our Media universe to post acumulative top-line growth of 7% yoy. The revenue growth ofprint media companies for the quarter would primarily be aidedby resilient local advertisement revenues. Sun TV's agreement withArasu cable is expected to bolster its top-line performance. PVR isalso expected to post a healthy revenue growth on the back ofseat addition and many successful releases during the quarter.

During 2QFY2013, the average prices of newsprint haveremained flat at ~$620. However, newsprint prices increasedin INR terms, on account of ~20.8% yoy and ~2.1% qoqdepreciation in INR vs USD.

Foreign investment limit raised in DTH and cable networks

The Cabinet Committee on Economic Affairs (CCEA) has raisedforeign investment limit (both FDI and FII taken together) from49% to 74% in DTH and cable networks (including multi systemoperators [MSOs]). It will aid them to tap foreign funds to stepup India's digitization aspirations. Therefore, a relaxed foreigninvestment limit is expected to augur well for Sun TV.

Key developments during the quarterIn the last few quarters, print media companies are facingmargin pressure. The companies are likely to counter it bycontinuing cost rationalization measures such as increasingpagination efficiency, improving ad-edit ratio and selectiveincrease in cover prices. The companies are also expected tokeep their expansion plans on backburner for a while.

Sun TV has signed a 1-year agreement with Arasu Cable TVCorp. This agreement will enable total availability of the


Exhibit 1: Newsprint prices up in INR terms

15,000

20,000

25,000

30,000

35,000

40,000

400

450

500

550

600

650

700

750

800

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12

USD

/tonne

USD/tonne INR/tonne

INR/t

onne

Newsprint prices up in INR terms

Outlook and valuationOutlook and valuationOutlook and valuationOutlook and valuationOutlook and valuation

Print media stocks have underperformed due to OPM pressureon account of higher newsprint costs and cyclical nature of adrevenue growth (sluggish due to slower GDP growth). Due tothese cyclical headwinds, the stocks are currently trading atcheaper valuations. However, considering the structural positivesof print business (high brand loyalty and significant entrybarriers), print media stocks deserve a premium to the Sensex.WWWWWe maintain our Buy view on DB Corp, HT Media and Jagran.e maintain our Buy view on DB Corp, HT Media and Jagran.e maintain our Buy view on DB Corp, HT Media and Jagran.e maintain our Buy view on DB Corp, HT Media and Jagran.e maintain our Buy view on DB Corp, HT Media and Jagran.

Sun TV is expected to post a good performance on back of theArasu deal as well as strong content on its general entertainmentchannels (GECs). PVR is expected to register a ~20% CAGR inits top line, aided by seat additions and good performance ofhindi movies such as Ek tha tiger, Bol Bachchan, Barfi etc. Webelieve both the stocks are fairly valued and would prefer towait for a better entry opportunity. Hence, we maintain ourHence, we maintain ourHence, we maintain ourHence, we maintain ourHence, we maintain ourNeutral view on both these stocks.Neutral view on both these stocks.Neutral view on both these stocks.Neutral view on both these stocks.Neutral view on both these stocks.

Analyst - Amit PAnalyst - Amit PAnalyst - Amit PAnalyst - Amit PAnalyst - Amit Patilatilatilatilatil



CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS ( `̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


DB Corp 202 386 9.1 22.0 23 47.1 16.7 2.6 16.7 11.0 11.2 13.6 18.3 18.1 14.8 236 Buy

HT Media 93 504 3.0 14.5 78 48 9.2 2.0 9.2 7.0 7.3 8.1 13.2 12.7 11.5 113 Buy

Jagran 91 329 7.7 22.9 (300) 57 24.6 1.8 24.6 5.6 6.2 7.1 16.2 14.7 12.8 112 Buy

PVR 193 184 34.0 21.3 109 14 (3.1) 5.3 (3.1) 9.8 13.3 15.6 19.7 14.5 12.3 - Neutral

Sun TV 349 445 (1.4) 79.0 (203) 172 (4.5) 4.4 (4.5) 17.7 18.6 21.3 19.7 18.8 16.4 - Neutral

company's channels on all cable TV distribution systems run byArasu Cable across the state of Tamil Nadu. This deal will ensurecable revenues from Tamil Nadu and strengthen the reach ofSun TV network across Tamil Nadu, thereby having a positiveeffect on ad revenues of the company.

L Capital Eco Ltd, a subsidiary of the $640mn global privateequity firm L Capital Asia is investing `108cr in PVR Ltd. Thisdeal will boost PVR's expansion plans in movie exhibitionbusiness as well as leisure business. Meanwhile, PVR openednew multiplexes at Nagpur, Bilaspur and Pune during thequarter.

Performance in the bourses

Source: TRAI, Angel Research

Exhibit 2: Relative performance to Sensex during 2QFY2013

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

DBCORP HTMEDIA JAGRAN PVR SUNTV SENSEX



Metals

Key events

Supreme Court permits mining operations forcategory-A mines in Karnataka

During 2QFY2013 the Supreme Court allowed 18 mines(category-A) to resume iron ore mining in Karnataka after asuspension of over a year on environmental concerns. This wasin line with our expectations given that the Central EmpoweredCommittee had earlier recommended category-A mines toresume operations. The A-category mines are the ones that areeither free of any illegality or had committed marginal illegalitiesin their mining operations. However, the mines need to get freshenvironmental and pollution clearances from the Ministry ofEnvironment and Forest before they resume operations whichcould delay the commencement of operations in our view.Further, there is no clarity on the quantum of annual productioncapacity of these mines (although some media report suggestedthat the new mines could produce ~7mn tonne p.a.). NMDChas been producing iron ore at a run rate of 8-10mn tonne inKarnataka over the past one year. Given the Karnataka steelindustry's requirement of 30mn tonne, the commencement ofproduction from these 18 mines was slightly positive for thesteel industry in Karnataka, especially JSW Steel - which operatesa 10mn tonne plant in Karnataka with annual iron orerequirement of 18mn tonne. For JSW Steel, the eventualstart-up of production from these mines will be positive as thiswill result in higher availability of iron ore at slightly lower prices.As far as Sesa Goa is concerned, all its Tumkur mines fall undercategory-B and these mines are yet to be sanctioned thepermission to start production

Government bans mining in Goa until further notice

During the quarter the Goa government had imposed a banon iron ore mining in Goa until further review. Later, Ministry ofEnvironment and Forest Clearances (MOEF) also suspendedenvironment clearances to all functional mining leases in Goa.There were 90 mines which were operational in Goa. Sesa Goaoperates several mines in the region with an annual productionof 12mn tonne. It generates a significant proportion of itsrevenues and profit from its Goa mines. However, 2QFY2013was a seasonally weak quarter for Sesa Goa given that it sellsonly 10-15% of its annual output during second quarter of afiscal year on account of monsoon in Goa. The ban however isseen to be a short term phenomenon with no majorrepercussions in the long term. The stock of Sesa Goa, as aresult of this development, declined significantly.

Coal India board approves higher penalty for new FSAs:

During the quarter Coal India's board approved higher penaltyrates for Fuel Supply Agreements (FSAs) to be signed withpower producers which have commissioned units afterMarch 30, 2009. The penalty will now be levied at 1.5% for aSource: Bloomberg, Angel Research

Exhibit 1: Metal stocks’ performance – 2QFY2013

(20.0) (15.0) (10.0) (5.0) 0.0 5.0 10.0 15.0 20.0

HZL

JSW

NMDC

Hindalco

COAL

Sterlite

BSE Metal Index

SAIL

Tata Steel

Sesa

MOIL

Nalco

(%)

In our view, steel companies' profitability is expected to improveyoy during 2QFY2013 on the back of flat steel prices coupledwith decreasing prices of key inputs, mainly coking coal.However, we expect profitability of non-ferrous companies to sufferyoy due to lower realizations coupled with higher input costs.

During 2QFY2013, global steel prices continued to decline ledby steep decline in spot iron ore and coking coal prices. Steelprices in China and CIS decreased by 12.9% and 4.4%,respectively, during the quarter. However, steel price declinewas muted in India on account of depreciation of INR againstthe USD. On the raw materials front, coking coal priceshave declined to US$170/tonne for 3QFY2013, compared toUS$225/tonne for 2QFY2013. Iron ore contract prices for3QFY2013 are expected to decline as spot iron ore prices havedeclined sharply during 2QFY2013. Looking ahead, althoughwe expect steel consumption to pick up, concerns on account ofslowdown in the capex cycle and slowdown in constructiondemand remain.

After a steep decline in base metal prices during 1QFY2013, pricesrebounded during August - September. Going forward, we do notexpect base metal prices to spike meaningfully due to the anticipatedslowdown in China and subdued outlook for the eurozone.

The BSE Metal Index posted a positive return of 1.0% in2QFY2013. Steel stocks excluding JSW Steel declined during2QFY2013 on the back of a Comptroller and Auditor General(CAG) report stating the irregularities in coal block allocationto private steel and power producers. JSW Steel stock increasedby 13.1% in 2QFY2013 mainly on the back of SupremeCourt order to lift mining ban in Karnataka and starting18 category-A mines. SAIL and Tata Steel stock prices declinedby 3.3% and 6.6%, respectively. On the non-ferrous side Nalco'sstock prices declined by 15.6% on account of steep fall inaluminium price. On the other hand Hindustan Zinc (HZL) andSterlite Industries (Sterlite) stock prices rose by 15.3% and 2.1%respectively on the back of news reports suggesting thatgovernment may sell its stake in HZL and Balco (Sterlite'ssubsidiary) to Vedanta Resources. Stock prices of Coal Indiaand NMDC recorded an increase of 3.2% and 7.0% respectivelyduring the quarter, as Coal India reported better than expected1QFY2013 results and NMDC raised its prices for 2QFY2013.

31



Metals

shortfall below 80% but above 65% (compared to earlier penaltylevel of only 0.01%). For a shortfall below 65%, the penalty willbe in the range of 5-40% depending on the quantum of theshortfall. However, there is no clarity on price pooling and quantumof imports. We do not foresee a material impact on Coal India'sfinancials on account of this marginal increase in penalty.

JSW Steel to merge with JSW Ispat

During 2QFY2013 JSW Steel announced that it will merge JSWIspat with itself which will result in potential tax benefits to themerged entity, although it will increase the leverage levels ofthe merged entity. JSW Ispat's shareholders will receive 1 shareof JSW Steel for every 72 shares held resulting in equity dilutionof 8%. Shares of JSW Ispat held by JSW Steel will be cancelled.Further, JSW Steel will also issue 48.54cr new 0.01 per centnon-convertible cumulative redeemable preference shares tothe preference shareholders of JSW Ispat. The merged entity'ssteel-making capacity will increase to 14.3mn tonne from thecurrent 11mn tonne capacity of JSW Steel (standalone).Post-merger, JSW Steel's promoters' stake will decrease to35.12% in the merged entity, compared to the current stake inJSW Steel of 38.02%. JSW Ispat, being a loss-making company,has a tax benefit of `288cr which will now benefit the mergedcompany. The merger is also expected to lower the interest costof JSW Ispat as being a loss-making entity JSW Ispat's debt'sinterest rate is higher. However, the net debt (includingacceptances) of the merged entity will increase to `32,700crfrom the current JSW Steel's debt of `24,100cr. JSW Steel'sstandalone tax rate of 30% is likely to fall to 20%, thus boostingthe EPS during FY2014 in our view. The deal is subject to severalapprovals and is expected to be completed by end of FY2013.

CAG reports irregularities in Coal block allocation

During the quarter, the CAG tabled a report in the parliament- "Performance Audit of Allocation of Coal Blocks andAugmentation of Coal Production (Ministry of Coal)" where itstated that an estimated gain of `185,591cr hasoccurred to private companies, on account of theybeing allocated open cast mines, due to policy defaults by theCoal Ministry / government. It stated that there was notransparency in allocation of blocks and auctioning/competitivebidding for the mines would have tapped a part of this financialbenefit. A total of 154 coal blocks were awarded to public andprivate companies (including ultra mega power plants [UMPPs])after July 2004. However, CAG's loss estimates of `185,591crare limited to 57 mines allotted to private companies. The privateplayers named in this report which benefitted from these57 blocks include Tata Steel, JSW Steel, Hindalco, Bhushan Steeland Sterlite. Acting on this report presented by the CAG, the


Exhibit 3: Domestic HRC prices flat qoq

25,000

27,000

29,000

31,000

33,000

35,000

37,000

39,000

(/t

onne)

`

Indian HRC price

Mar-

10

May-

10

Jul-

10

Sep

-10

Nov-

10

Jan-1

1

Mar-

11

May-

11

Jul-

11

Sep

-11

Nov-

11

Jan-1

2

Mar-

12

May-

12

Jul-

12

Sep

-12


Exhibit 2: World HRC prices decreased qoq

World HRC price USA Domestic HRC price CIS export HRC price

500

600

700

800

900

Apr-

10

May-

10

Jul-

10

Aug

-10

Sep

-10

Nov-

10

Dec

-10

Feb

-11

Mar-

11

Apr-

11

Jun

-11

Jul-

11

Aug

-11

Oct

-11

Nov-

11

Jan

-12

Feb

-12

Mar-

12

May-

12

Jun

-12

Jul-

12

Sep

-12

(US$

/tonne)

Inter-ministerial group (IMG) recommended to the coal ministryto cancel the mining leases of 11 companies and deduct bankguarantees of several others for reasons such as delays instarting the production from these allotted mines. The companieswhose coal blocks got de-allocated include JSW Steel, BhushanSteel and Electrosteel Castings.

Ferrous sector

During 2QFY2013, global steel prices continued to decline ledby a steep decline in spot iron ore and coking coal prices. Steelprices in China and CIS decreased by 12.9% and 4.4%,respectively, during the quarter. However, decline in domesticsteel prices remained muted on a qoq basis on account of asharp depreciation of INR against the USD. World average hotrolled coiled (HRC) prices fell by 8.1% qoq and 19.1% yoy toUS$634/tonne. Average HRC prices in India remained flat at`42,560/tonne.

Iron ore and coking coal prices slide

Iron ore prices declined sharply during 2QFY2013 on the backof lower demand from China. Declining supplies from Indiawere more than offset by rising exports from Australia. Australiaexported 57.1mn tonne (+9.6% yoy) in July - August 2012.During the quarter, spot iron ore prices for 63.5% Fe grade(CFR, China) declined by 22.4% qoq to US$108/tonne. Hence,iron ore contract prices for 3QFY2013 are likely to decline ona qoq basis. Ironically, however, domestic iron ore



Metals

Iron ore exports from India continued to decline

As per Federation of Indian Mineral Industries (FIMI), iron oreexports from India had declined by 38.5% to 62mn tonne duringFY2012 on account of export ban in Karnataka, stringentmeasures in issuing export permits in Odisha, a sharp declinein international iron ore price and increased export duty. Further,as per FIMI, total iron ore exports during FY2013 are estimatedto decline by 36.7% to 45mn tonne due to ban on miningimposed by the Goa government and subsequently suspensionof environment clearances of all the 93 mining leases by theMinistry of Environment and Forests.


Exhibit 4: Iron ore prices and inventory in China

Iron ore inventory (RHS) Indian Iron ore 63% Fe, CFR China (LHS)

0

15

30

45

60

75

90

105

120

0

30

60

90

120

150

180

210

Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12

(mn

tonnes

)

(US

$/t

onne)

prices have remained firm on account of the mining ban inKarnataka and government's stricter stance on illegal mining inthe mineral-rich states of Odisha and Goa.

Media reports suggest that quarterly coking coal contractprice between BMA and Nippon steel settlement forOctober-December quarter have been signed at US$170/tonnewhich is likely to be a benchmark for other contracts.


Exhibit 5: Indian iron ore exports to China down

India's iron ore exports to China

0

1

2

3

4

5

6

Jul-

11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun

-12

Jul-

12

Aug

-12

(mn

tonn

es)

Steel imports on a rise

Steel imports have continued to rise over the past one year.Indian steel players continue to face threat of higher steel importsfrom FTA (free trade agreement) countries (which attract lowerimport duty). During January- August 2012, steel imports byIndia have increased by 48.4% yoy to 4.6mn tonne.


Exhibit 6: Production and consumption - steel

Net production Real consumption Net imports - RHS

(200)

(100)

0

100

200

300

400

500

600

700

800

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Sep

-10

Oct

-10

Nov-

10

Dec

-10

Jan

-11

Feb

-11

Mar-

11

Apr-

11

May-

11

Jun

-11

Jul-

11

Aug

-11

Sep

-11

Oct

-11

Nov-

11

Dec

-11

Jan

-12

Feb

-12

Mar-

12

Apr-

12

May-

12

Jun

-12

Jul-

12

(000

tonn

es)

(000

tonn

es)

Outlook

Margins to expand on a yoy basis

Current international iron ore prices are in the range ofUS$100-110/tonne (close to marginal cost of production forseveral Chinese iron ore miners). Hence, we do not expect anyfurther meaningful downside from the current price levels.

Contracted coking coal prices have declined gradually overthe past one year. Moreover, spot coking coal prices havedeclined sharply over the past three months. A decline in cokingcoal prices is expected to benefit Indian steelmakers during2HFY2013, although INR depreciation would partially offsetthe decline in price of coking coal.

According to World Steel, global crude steel production for July2012 increased by 2.0% to 130mn tonne whereas for August2012 it declined 1.0% yoy to 124mn tonne. Global capacityutilization levels during July and August stood at 78.7% and75.5%, respectively.

2QFY2013 expectations: 2QFY2013 expectations: 2QFY2013 expectations: 2QFY2013 expectations: 2QFY2013 expectations: For 2QFY2013, on a yoy basis, weexpect net sales to increase, aided by higher volumes. Thus, weexpect the top-line of steel companies under our coverage togrow by 1.1-9.0% yoy. Also, due to lower raw-material costs,margins of steel companies are likely to improve on a yoy basis.For Sesa Goa, net sales are expected to decline on account ofno production from Karnataka mines and decline in iron oreprices. Further, higher iron ore royalty and increased export taxare expected to result in operating profit declining by 30.0%yoy. For Coal India, we expect a 20.4% yoy growth in net sales(due to increases in both volumes and prices) and 55.1% yoygrowth in net profit. WWWWWe remain positive on Te remain positive on Te remain positive on Te remain positive on Te remain positive on Tata Steel.ata Steel.ata Steel.ata Steel.ata Steel.

Non-ferrous sector

During the quarter, base metal prices continued to decline(during July 2012). Nevertheless, the prices rebounded duringAugust-September 2012. Domestic aluminium companiescontinued to suffer on account of low aluminium prices coupledwith higher coal costs.

33



On a sequential basis, average copper, aluminium and zincprices decreased by 1.5%, 4.9% and 2.3%, respectively. On ayoy basis, average copper, aluminium, and zinc prices declinedby 14.3% 21.0% and 16.3%, respectively on the back ofeurozone debt crisis and lower demand from China.

Analyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay Rachh

Exhibit 9: Quarterly estimates ((((( `̀̀̀̀ c c c c crrrrr)))))

Source: Company, Angel Research; Note: Price as on September 28, 2012; EPS calculation based on fully diluted equity; © Denotes consolidated numbers



Coal India© 359 15,832 20.4 29.8 892 4,013 55.1 6.4 55.1 23.4 26.0 28.3 15.3 13.8 12.7 385 Accum.

Hindalco 121 6,423 3.2 7.5 (330) 364 (27.7) 1.9 (27.7) 17.7 13.2 16.2 6.8 9.1 7.5 - Neutral

Hind. Zinc 135 2,733 5.4 50.7 (580) 1,347 (1.6) 3.1 (1.6) 13.1 14.3 15.5 10.3 9.5 8.7 144 Accum.

JSW Steel 757 8,315 9.0 19.2 220 818 27.8 6.8 27.8 55.9 79.9 89.4 13.5 9.5 8.5 - Neutral

MOIL 252 237 (4.4) 47.7 292 109 7.9 6.5 7.9 25.5 24.5 26.1 9.9 10.3 9.7 271 Accum.

Nalco 51 1,890 19.1 16.4 676 212 52.5 0.8 52.5 3.4 3.4 4.1 15.1 14.9 12.5 48 Reduce

NMDC 194 2,950 (3.7) 74.1 (535) 1,838 (6.4) 4.7 (6.4) 18.3 21.1 23.4 10.6 9.2 8.3 214 Accum.

SAIL 85 10,960 1.1 13.2 228 962 (4.1) 1.2 (4.1) 9.2 9.6 11.7 9.2 8.9 7.3 - Neutral

Sesa Goa© 171 725 (8.2) 25.1 (781) 247 5.1 2.8 5.1 30.3 42.0 43.1 5.6 4.1 4.0 - Neutral

Sterlite Inds© 99 11,121 9.7 19.7 (477) 1,299 26.4 3.8 26.4 14.4 16.3 16.9 6.9 6.1 5.9 - Neutral

Tata Steel© 401 34,498 5.2 9.5 112 743 250.5 13.3 250.5 55.5 48.6 63.3 7.2 8.2 6.3 481 Buy

Outlook

Non-ferrous companies are expected to face a double whammyof declining product prices coupled with higher input costs duringFY2013. Base metal prices have declined steeply over the pastone year and hence realizations for companies are expected todecline during FY2013 (partially offset by INR depreciationagainst the USD). Further, although several aluminiumcompanies (globally) have announced production cuts, we areyet to see any meaningful decline in production. Thus, lowerrealizations coupled with higher prices of key inputs such asimported coal, caustic soda, CP pitch and petroleum coke areexpected to hit margins of non-ferrous companies duringFY2013 in our view.

We expect non-ferrous companies to report lower top-line on ayoy basis, owing to a decline in LME prices. Further, we expectoperating profits to decline yoy on account of lower LME pricesand higher costs of coal. However, for Nalco we expect netprofit to increase by 52.5% yoy during the quarter as it hadreported low profitability during 2QFY2012. WWWWWe remain positivee remain positivee remain positivee remain positivee remain positiveon Hindustan Zinc.on Hindustan Zinc.on Hindustan Zinc.on Hindustan Zinc.on Hindustan Zinc.

Exhibit 7: Average base metal prices (US$/tonne)


2QFY132QFY132QFY132QFY132QFY13 2QFY122QFY122QFY122QFY122QFY12 yoy %yoy %yoy %yoy %yoy % 1QFY131QFY131QFY131QFY131QFY13 qoq %qoq %qoq %qoq %qoq %

Copper 7,710 8,992 (14.3) 7,829 (1.5)

Aluminium 1,920 2,430 (21.0) 2,019 (4.9)

Zinc 1,884 2,251 (16.3) 1,929 (2.3)

On a yoy basis, inventory levels at the London Metal Exchange(LME) warehouse for copper decreased by 4.9%, while zinc andaluminium inventories rose by 12.4% and 7.7%, respectively.On a qoq basis, copper and aluminium inventory decreasedby 1.6% and 1.7%, respectively, while zinc inventory increasedby 4.1%.

Source: Bloomberg, Angel Research; Note: Base = 100

Exhibit 8: Inventory chart

Copper Aluminium Zinc

0

20

40

60

80

100

120

140

160

Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12

Metals



Oil & Gas

During 2QFY2013, the price of Brent crude oil rose in theJuly - August period before falling steeply in September 2012.Overall, average Brent crude oil was flattish during 2QFY2013.Further, the WTI (West Texas Intermediate) crude oil price alsoremained flat, broadly reflecting flattish move in Brent crude oilprice. Average Henry Hub natural gas price increased by 25.6%qoq after falling steeply over the past one year. Further, Asianspot LNG price remained firm on account of demand-supplymismatch in Asia. Prices of petrochemical products, on the otherhand, remained flat on a qoq basis during 2QFY2013.

During July and August 2012, Indian crude oil basket for oilprices stood at US$100/bbl and US$110/bbl, respectively. Risein international crude oil prices coupled with INR depreciationagainst the USD resulted in higher under-recoveries for oilmarketing companies (OMCs) on account of selling diesel,kerosene and domestic LPG at subsidized rates. Thus, thegovernment increased the price of diesel by ̀ 5/liter and cappedthe number of subsidized LPG cylinders to 6 per household peryear during September 2012. During the first half of September2012, OMCs continued to lose ̀ 496cr per day. OMCs continuedto lose `13.9/liter, `32.7/liter and `347/cylinder on diesel,kerosene and domestic LPG, respectively, during the first halfof September 2012. Source: Industry sources, Angel Research

Exhibit 3: Petchem prices remained flat qoq in 2QFY13

0

20

40

60

80

100

120

Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12

(`/k

g)

PTA MEG CHIPS POY


Exhibit 4: World oil supply improved in 2QFY2013

Total oil supply - Monthly

89

89

90

90

91

91

92

92

Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12

(mnb

pd)

Source: PPAC, Angel Research

Exhibit 1: Indian crude basket trend

Indian crude oil basket

80

84

88

92

96

100

104

108

112

116

120

124

128

Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12

(US$/b

bl)

Brent crude increased slightly during 2QFY2013

Brent crude oil price remained volatile in 2QFY2013. Price roseby USD10/bbl in August, partly driven by the European Central

Oil supply across the world continued to improve in 2QFY2013on account of higher production from both, OPEC (Organizationof the Petroleum Exporting Countries) and non-OPEC countries.

EIA downgrades oil demand estimates

The Energy Information Administration (EIA) has lowered itsestimate for world oil consumption to 0.8mnbpd, compared toits previous estimate of 0.9mnbpd for CY2012. Nevertheless, ithas increased its forecast for CY2013 to 0.9mnbpd, comparedto its previous estimate of 0.7mnbpd.

On the supply front, EIA projects non-OPEC crude oil and liquidfuels production to increase by an average 0.6mnbpd inCY2012 and by 1.3mnbpd in CY2013. Higher supplies areexpected mainly from North America (+0.9mnbpd and0.4mnbpd in CY2012 and CY2013, respectively).Source: PPAC, Angel Research

Exhibit 2: Crude oil remained volatile during 2QFY2013

85

90

95

100

105

110

115

120

125

130

(US

$/b

arr

el)

Sep

-11

Oct

-11

Nov-

11

Dec

-11

Jan-1

2

Feb

-12

Mar-

12

Apr-

12

May-

12

Jun-1

2

Jul-

12

Aug-1

2

Sep

-12

Bank which stated that it may undertake outright open marketbond purchases of a size adequate. Outages in North Sea andlower output from Iran also resulted in firm oil price. Further,the announcement of QE3 by the US Federal Reserve resultedin higher crude oil price during September 2013. However,during the second half of September 2012, the price declined.Average Brent crude oil price increase modestly by 1.2% qoq.

Petrochemical prices remained flat qoq in 2QFY2013

Average prices of petrochemical products remained flat on aqoq basis during 2QFY2013 in INR terms as the increase incrude oil prices was offset by lower demand for petrochemicals.

35



Oil & Gas

Key developments

Diesel price hiked by `5/litre; caps on LPG cylinder

During 2QFY2013, the Cabinet Committee on Economic Affairs(CCEA) raised the price of diesel steeply by ̀ 5/litre. Out of this,`1.50/litre was on account of increase in excise duty. Thebalance increase of `3.50/litre is expected to reduce theunder-recoveries of OMCs by ̀ 15,000cr for the remaining partof FY2013. Further, CCEA also decided to cap the number ofsubsidized LPG cylinders to six per household in a year. Thiswould result in reduction in under-recoveries by approximately`5,300cr during 2HFY2013. CCEA also lowered the excise dutyon petrol by ̀ 5.3/litre to make up for the losses of OMCs. Thismove as a whole had a short-term positive impact in stock pricesof both upstream and downstream companies.

CAG blames ONGC over inadequate efforts in oil andgas exploration

During the quarter, CAG in a report on Hydrocarbon ExplorationEfforts of ONGC, blamed ONGC for not putting desiredemphasis on discovering new oil and gas finds and also forbeing slow in monetizing its discoveries. The reportrecommended that the Oil Ministry must reset annual targetsset out in Memorandum of Understanding (MoU) that thecompany signs with the government. The report also stated thatless than 50% of the basins were only able to meet 2D/3Dsurvey targets as ONGC was tardy in purchase of seismic surveyvessels. It also recommended a review of Reserve ReplacementRatio (RRR) as a performance parameter for ensuringperformance in exploration efforts as although ONGC has beenable to maintain its RRR, its production has remained constantover the past several years.

PNGRB slashed GAIL's tariff for a pipeline

During 2QFY2013 the oil regulator - Petroleum and NaturalGas Regulatory Board (PNGRB) had cut GAIL's transportationtariff for the Dadri-Bawana-Nangal pipeline by 57% to`11.85/mmbtu and Jamnagar-Loni LPG pipeline by 18-26%.In case of Dadri-Bawana-Nangal pipeline, GAIL had seeked atariff of `27.73/mmbtu on which it aimed to spend a capex of`2,203cr. PNGRB did not consider the capex of `365cr for thespurline built from Panipat to Amritsar for tariff determination.Since the Dadri-Bawana-Nangal pipeline has not yet been fullycommissioned, there is no material impact on GAIL's financials.However in case of Jamnagar-Loni LPG pipeline the companywill have to make a one-time payment of `100cr as this orderwas from retrospective effect. Further, GAIL's top-line will belower by `120cr annually (0.3% of GAIL's net sales) which isnot very significant and will not impact the company's financials.


Exhibit 7: Crude inventory decreased in 2QFY2013

DOE crude oil inventory

280

300

320

340

360

380

400

Oct

-11

Nov-

11

Dec

-11

Jan

-12

Feb

-12

Mar-

12

Apr-

12

May-

12

Jun

-12

Jul-

12

Aug

-12

Sep

-12

(’000

bbls

)


Exhibit 6: Asian LNG prices remain firm

5

10

15

20

Mar-

06

Jun

-06

Sep

-06

Dec-0

6

Mar-

07

Jun

-07

Sep

-07

Dec-0

7

Mar-

08

Jun

-08

Sep

-08

Dec-0

8

Mar-

09

Jun

-09

Sep

-09

Dec-0

9

Mar-

10

Jun

-10

Sep

-10

Dec-1

0

Mar-

11

Jun

-11

Sep

-11

Dec-1

1

Mar-

12

Jun

-12

(US$

/mm

btu

)

LNG price


Exhibit 5: US gas prices rose in 2QFY2013

1.5

2.5

3.5

4.5

5.5

Sep

-11

Oct

-11

Nov-

11

Dec-1

1

Jan

-12

Feb

-12

Mar-

12

Apr-

12

May-

12

Jun

-12

Jul-

12

Aug

-12

Sep

-12

(US

$/m

mbtu

)

Henry Hub Natural Gas Spot Price

US gas prices rise; Asian gas prices also remain firm

Average Henry Hub natural gas price increased by 25.6% qoqafter declining for the past one year. Further, Asian spot LNG pricescontinued to remain high on account of higher demand in Asia.


Exhibit 8: Motor gasoline inventory declined in 2QFY13

170

180

190

200

210

220

230

240

Oct

-11

Nov-

11

Dec-1

1

Jan

-12

Feb

-12

Mar-

12

Apr-

12

May-

12

Jun

-12

Jul-

12

Aug

-12

Sep

-12

(’000

bbls

)

DOE motor gasoline inventory



Oil & Gas

Analyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay RachhAnalyst : Bhavesh Chauhan / Vinay Rachh


Source: Company, Angel Research; Note: Price as on September 28, 2012; ^Standalone numbers for the quarter and consolidated numbers for the full year



Cairn India 331 4,418 66.6 79.1 (25) 2,807 1,109.9 48.4 1,109.9 42.2 57.0 54.9 7.9 5.8 6.0 380 Accum.

GAIL 383 12,196 25.7 15.7 (159) 1,129 3.2 8.9 3.2 28.8 35.4 36.5 13.3 10.8 10.5 - Neutral

ONGC ^ 280 19,175 (16.4) 55.7 (745) 5,662 (34.5) 6.6 (34.5) 32.9 30.7 32.3 8.5 9.1 8.7 312 Accum.

RIL ^ 837 93,934 19.6 7.8 (474) 5,013 (12.1) 15.3 (12.1) 66.2 61.5 64.3 12.6 13.6 13.0 - Neutral


Exhibit 9: 2QFY2013 stock performance

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

RIL GAIL BSE O&G Index Cairn ONGC

(%)

Cairn India acquired 60% stake in an oil block

During the quarter Cairn India acquired a 60% stake fromPetroSA in an oil exploration block in Orange basin (Block 1) ofSouth Africa. Block 1 covers a large area of 19,922km and isin the initial stages of exploration. It has an existing gas discoveryand has identified oil and gas leads and prospects. Cairn Indiadid not spend any funds for acquisition; however, it will makeall the required investments for exploration and drilling andwill work as an operator.

PNGRB cuts GSPL's pipeline tariff by 40%

During the quarter, PNGRB had cut Gujarat State Petronet's(GSPL) tariff rate for its 2,239km Gujarat Gas Grid by 40% to`23.99/mmbtu. Further, PNGRB had stated that the approvedtariff will be effective from November 2008 which implied thatthe company would have to adjust the rates in subsequent billsfor its customers. The final tariff approved by PNGRB was betterthan street's expectations and it removed the overhang over thestock of the tariff regulation.

O&G stocks increased during 2QFY2013

During 2QFY2013, the BSE Oil and Gas Index recorded anincrease of 9.1% in line with the rise in the broader marketafter a series of reforms in India such as diesel price hike.Reliance Industries (RIL) rose by 16.3% due to increase inSingapore GRMs coupled with ongoing buy-back program.GAIL's stock increased by 10.7% during 2QFY2013 after fallingsteeply over the past several months. ONGC's stock also posteda 1.1% increase due to diesel price hike and cap on LPGcylinders which is expected to reduce the subsidy burden on theupstream companies.


For 2QFY2013, we expect mixed profitability performance forour coverage companies.

For RIL, we expect the top-line to increase by 19.6% yoy onaccount of higher prices of petrochemicals. However, itsoperating profit is expected to decrease by 25.7% yoy mainlydue to decline in production from the KG D6 block.

For ONGC, we expect net sales to decrease by 16.4% yoy mainlyon account of yoy increase in subsidy. ONGC's PAT is expectedto decrease by 34.5% yoy.

GAIL is expected to report a top-line growth of 25.7% yoy onaccount of increase in volume. However, its net profit is expectedto increase by only 3.2% yoy due to higher interest anddepreciation expenses.

Cairn India's net sales are expected to increase by 66.6% yoymainly on account of increase in volumes; its operating incomeis also expected to increase by 66.1% yoy. However, itsbottom-line is expected to increase by 1,109.9% due tolow base in 2QFY2012. Cairn India had charged a one-timeroyalty of `1,355cr in 2QFY2012 which had depressed itsbottom-line.

37



Pharmaceutical

The upward rally during the quarter was mainly driven bymid-caps, whereas the large-caps posted gains in line with theBSE HC. The major gainers were Dishman Pharmaceuticals andChemicals (Dishman Pharma), IPCA Labs and Alembic Pharma,which rose by 41.8%, 33.4% and 30.2% respectively. Othermid-caps like Aurobindo and Indoco Remedies rose by 24.0%and 23.8% respectively. Among the large caps, Cipla rose by20.5%, whereas other large-caps like Ranbaxy Laboratories(Ranbaxy) , Cadila and Lupin rose by 6.8%, 13.2% and 9.7%respectively. Dr. Reddy's (DRL), on the other hand was flat duringthe quarter.

Amongst the MNC pack, Glaxosmithkline Pharmaceuticals(Glaxo) was down by 2.4%, whereas Aventis Pharma was upby 8.4%. Amongst the major losers was Orchid Chemicals,which lost about 6.8%.

Key developments

Orchid sells drugs units to Hospira

A debt overhang coupled with the inability to raise equity hasforced Orchid Chemicals & Pharma to sell its Penicillin andPenem active pharmaceutical ingredient (API), including its plantin Aurangabad, to US-based Hospira for around $200 million(`1,200 crore). Orchid Pharma, the pharmaceutical division ofOrchid Chemicals and Pharmaceuticals, said that it had enteredinto a business transfer agreement (BTA) with Hospira for thesale and transfer of Penicillin and Penem API business and theAPI facility located in Aurangabad (Maharashtra) together withan associated process R&D infrastructure in Chennai. The saleincludes the related Penicillin and Penem product portfolio and

Pharma sector continues its outperformance

During 2QFY2013, the BSE Healthcare (HC) index continuedits outperformance. The HC index rose by 9.0% as against a7.8% rise in the Sensex. The performance of the sector wasmainly driven by the mid-cap stocks and stocks which had notparticipated in the rally so far.

pipeline. Nearly 830 employees would be transferred to Hospiraas part of the business transfer.

The funds raised from this sale will be used to repay high-costdebt. The company has nearly ̀ 2,200 crore as debt on its books.Orchid intends to repay `800 crore from the sale proceeds ofnearly ̀ 1,200 crore and use the balance to fund working capitalrequirements and invest in newer businesses. Assuming allnecessary approvals are secured, the transaction is expected tobe completed in the third quarter of 2012-13.

At current valuations, the deal has been done at attractivevaluations and the sale of the unit will entail a loss of revenuesto the extent of ̀ 450cr annually and ̀ 100cr at the EBDIT levels.However, the management expects to make up for the samethrough the savings on the interest component on back of debtrepayment.

On the EBDITA front, the EBDITA post the deal is expected to bearound 14-15% and consequent to the same the company'ssales mix would be API: Formulation of 70:30 and the EPS forFY2014 is expected to come down to ̀ 12-13. Thus, at the currentmarket price, the stock trades at 8.6x FY2014E earnings, leavinglittle room for further upsides and hence we recommend awe recommend awe recommend awe recommend awe recommend aNeutral stance on the stock.Neutral stance on the stock.Neutral stance on the stock.Neutral stance on the stock.Neutral stance on the stock.

Sun Pharma - USFDA lifts ban on Caraco

Sun Pharma announced that subsequent to inspections earlierthis year and corrective action on 483s, the US Food and DrugAdministration (USFDA) has determined Caraco to be incompliance with relevant paragraphs of the Consent Decree.Therefore, the USFDA has notified that Caraco may resumeoperations at its manufacturing facility and packaging sites inDetriot and Wixom, Michigan.

During their inspection, the USFDA reviewed the certificationreports for production of Carvedilol USP as well as ParamomycinUSP, and subsequently reviewed corrective actions on 483s.Currently, Caraco may resume production of only these twoproducts. Manufacturing of other products from these sites,including those pending approval with the USFDA, will be subjectto a similar rigorous approval procedure. As a result, theincrease in production at these sites and resultant revenuecontribution is expected to be gradual. With reference to otherrequirements of the same Consent Decree, Caraco is requiredto now work with an external auditor conducting regularinspections for an extended period.

Currently we are maintaining our estimates and our NeutralCurrently we are maintaining our estimates and our NeutralCurrently we are maintaining our estimates and our NeutralCurrently we are maintaining our estimates and our NeutralCurrently we are maintaining our estimates and our Neutralrating on the stock, given the valuations.rating on the stock, given the valuations.rating on the stock, given the valuations.rating on the stock, given the valuations.rating on the stock, given the valuations.

Exhibit 1: BSE HC Index vs. the Sensex

Source: C-line, Angel ResearchBSE HC Sensex

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

2QFY2012 3QFY2012 4QFY2012 1QFY2013 2QFY2013

(%)



Pharmaceutical

Ranbaxy - Withdrawal of drugs:Ranbaxy - Withdrawal of drugs:Ranbaxy - Withdrawal of drugs:Ranbaxy - Withdrawal of drugs:Ranbaxy - Withdrawal of drugs: Ranbaxy has withdrawn27 approved abbreviated new drug applications (ANDAs) inthe US market. It has clarified that the withdrawn products wouldhave negligible commercial impact. According to the company,the withdrawal would enable the organization to focus resourceson other applications that are of greater importance and valueto the US business and healthcare system. Further, accordingto the company, the aforesaid ANDAs do not pertain to currentbusiness and will have a negligible impact on the company'sbusiness in the US. WWWWWe recommend a Neutral view on the stock.e recommend a Neutral view on the stock.e recommend a Neutral view on the stock.e recommend a Neutral view on the stock.e recommend a Neutral view on the stock.

Aurobindo Pharma gets approval for Montelukast tablets

Aurobindo Pharma has announced that it has received the finalapprovals from the USFDA to manufacture and marketMontelukast Sodium Tablets 10mg (ANDA 202468) andMontelukast Sodium Chewable Tablets 4mg and 5mg (ANDA202096). The products are ready for a first-day launch.Montelukast Sodium Tablets 10mg and Chewable Tablets 4mgand 5mg are the generic equivalent of Merck & Co Inc's SingulairTablets 10mg and Chewable Tablets 4mg and 5mg respectively.

The annual sales of Montelukast Sodium Tablets 10mg isapproximately US$3.5 billion and that of Montelukast SodiumChewable Tablets is US$1.1 billion for the twelve months endingMarch 2012 according to IMS health. The products have beenapproved out of its Unit VII (SEZ) formulations facility inHyderabad, India. Aurobindo now has a total of 157 ANDAapprovals (131 final approvals including 1 from Aurolife PharmaLLC and 26 tentative approvals) from the USFDA. Overall, thecompany expects around 7-8 players in the product. Given thesize of the product, the product can contribute around US$20-30mn for the full year. However, this has already been included inour financials and the 15% yoy revenue growth target for FY2013.

At the current market price, we maintain our estimates andAt the current market price, we maintain our estimates andAt the current market price, we maintain our estimates andAt the current market price, we maintain our estimates andAt the current market price, we maintain our estimates andAccumulate recommendation with a target price of Accumulate recommendation with a target price of Accumulate recommendation with a target price of Accumulate recommendation with a target price of Accumulate recommendation with a target price of `̀̀̀̀156.156.156.156.156.

2QFY2013 Result Expectations

The Indian pharma sector is expected to post robust numbersfor 2QFY2013 on the sales front. We expect our coverageuniverse to register a 23.0% yoy top-line growth. On theoperating front, the margins are expected to expand by 157bps.This along with the losses on the net level by some of thecompanies in the last corresponding period, the companies inour coverage are expected to post a growth of 60.5% yoy.

Amongst large caps, Sun Pharma is expected to post a 31.0%yoy sales growth. Cipla is expected to post a net sales growth

Among large caps, DRL and Cadila to outperform

Among the large caps in our coverage universe, for 2QFY2013,Sun Pharma is likely to clock a 31.0% yoy growth on the salesfront, led by both exports and domestic sales. Operating profitmargins would decline by 120bps with margins likely to bearound 40.2%. This along with a higher tax outgo, would leadto an expected net profit growth of 11.3% yoy during the quarter.

Lupin, on the other hand, is expected to register a revenuegrowth of 18.2%. OPMs are expected to decline by230bps during the period, which would limit the net profitgrowth to 1.3% yoy.

DRL is expected to post strong results with a top-line growth of23.5% to `2,800cr, majorly driven by the US market. Thecompany is expected to see strong traction in its Indian andRussian formulation businesses as well. In terms of thepharmaceuticals services and active ingredients (PSAI) segment,the performance is expected to be lackluster for 2QFY2013.Thecompany is expected to post an OPM of 25.1%, up 390bp yoy.On the net profit front, the company is expected to post a netprofit of `507cr, ie a growth of 65.3% over the correspondingperiod of the previous year.

Cipla is expected to post a net sales growth of 14.8% to ̀ 1,987cr,driven mainly by the domestic performance. On the operatingfront, the OPM (excluding technical know-how fees) is expectedto come in at 22.6%, almost same as in the correspondingperiod of the previous year. Further, the net profit is expected toincrease by 9.7% yoy to `339cr.

Source: Angel Research

Exhibit 2: Sales growth and OPM for 2QFY2013

31.0

18.214.8

36.9

23.5

40.2

19.122.6

13.5

25.1

0.0

10.0

20.0

30.0

40.0

50.0

Sun Pharma Lupin Cipla Ranbaxy DRL

Sales growth OPM(%

)

of 14.8%. Other players, namely DRL, Lupin and Cadila areexpected to report 23.5%, 18.2% and 26.6% growth in net sales,respectively. Amongst small caps, Indoco Remedies is expectedto post a 23.0% yoy sales growth. Amongst the MNC pack,Aventis Pharma is likely to post a 25.6% yoy growth in net sales,while Glaxo is expected to post a 13.2% yoy growth of sales.

39



Pharmaceutical

Analyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit KAnalyst: Sarabjit Kour Nangraour Nangraour Nangraour Nangraour Nangra

Ranbaxy is expected to post a growth of 36.9% with sales at`2,768cr during 3QCY2012. The OPM is expected to be at13.5% vs 5.0% in 3QCY2011. However, the net profit is likelyto come in at `357cr, vs a loss of `124cr during thecorresponding period of the previous year.

Cadila is expected to post yet another strong quarter with a26.6% growth in net sales to `1,544cr on the back of robustgrowth on the domestic formulation and exports front. On theOPM front, we expect the company's OPM to expand by 40bpsyoy to 18.5% on the back of a favourable product mix. The netprofit is expected to increase by 62.5% yoy to `167cr, on backof a lower interest outgo during the quarter.

IPCA and Aurobindo Pharma excepted to fair well

We estimate Ipca's top-line to grow by 19.7% to `740cr for2QFY2013. The OPM is expected to decline by 280bp yoy to21.9%. In spite of the same, the adjusted net profit is expectedto grow by 37.0% yoy, on back of expected lower interest outgo.

Aurobindo Pharma is expected to post a net sales growth of25.5% yoy, led by formulation exports. The margins are likelyto expand to 15.1% vs 10.7% (in 2QFY2012), which will leadto a net profit of `48.4cr vs a net loss of `80.2cr.

Indoco Remedies is expected to report a top-line growth of23.0% to `178cr.The OPM is expected to expand by 330bpsyoy to 15.7%, driven by growth in domestic formulation sales.As a result, net profit is expected to increase by 9.2% yoy to`15.1cr on back of higher tax outgo.

Outlook and Valuation

With an expected CAGR of ~20% in earnings overFY2012-14E for our universe of pharma stocks, we remainoverweight on the sector maintaining a positive future outlookand earnings growth. Though the stocks have witness a goodupsides, in near time, leavening little upsides for stocks in neartime. However, given the opportunities, in the sector we maintainour long-term buy on the stocks.

Given, the opportunities, in the generic segment; we preferLupin, Cadila Healthcare, Aurobindo Pharma and IndocoRemedies.

In the contract research and manufacturing services (CRAMS)space, though it's currently witnessing some pressure, there havebeen indications of gradual recovery and ramp up from mostof the CRAMS players. Thereby, with the valuations renderingattractive, we recommend Dishman Pharma in this segmentfrom a long term perspective.

Exhibit 3: Quarterly estimates (`̀̀̀̀ cr)

Source: Company, Angel Research; Note: Price as on September 28, 2012; Our numbers do not include MTM on foreign debt. # 3QCY2012

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x) P/E (x) P/E (x) P/E (x) P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


Alembic Pharma 72 419.4 5.7 14.2 (80) 34.7 (8.8) 1.8 (8.8) 6.9 6.6 9.1 10.4 10.8 7.9 91 Buy

Sanofi India# 2,374 392.7 25.6 16.7 60 51.9 (5.4) 22.6 (5.4) 83.2 95.1 104.4 28.5 25.0 22.7 - Neutral

Aurobindo 142 1,349.0 25.5 15.1 440 48.4 - 1.7 - 4.9 11.8 12.6 28.9 12.0 11.2 156 Accum.

Cadila 872 1,544.0 26.6 18.5 40 167.2 62.5 8.2 62.5 31.7 36.0 46.1 27.5 24.2 18.9 953 Accum.

Cipla 381 1987.4 14.8 22.6 0 338.9 9.7 4.2 9.7 14.7 18.4 20.0 25.9 20.7 19.0 - Neutral

Dishman 96 322.0 19.6 20.5 300 19.1 - 2.4 - 7.1 9.2 11.3 13.6 10.5 8.5 - Neutral

Dr. Reddys 1,647 2,800.0 23.5 25.1 390 507.1 65.3 30.1 65.3 88.8 83.7 92.9 18.6 19.7 17.7 1,859 Accum.

Glaxo# 1,977 688.0 13.2 31.1 (130) 167.2 14.5 19.7 14.5 69.8 76.0 82.4 28.3 26.0 24.0 - Neutral

Indoco Rem. 70 178.0 23.0 15.7 330 15.1 9.2 1.6 9.2 5.0 7.4 8.9 13.9 9.4 7.8 92 Buy

Ipca Lab. 482 740.0 19.7 21.9 (280) 106.7 37.0 8.5 37.0 21.8 29.2 36.6 22.1 16.5 13.2 - Neutral

Lupin 596 2,058.4 18.2 19.1 (230) 270.3 1.3 6.1 1.3 19.4 26.3 31.3 30.7 22.7 19.1 647 Accum.

Orchid Chem. 112 434.0 (5.4) 18.0 (320) 29.0 7.5 4.1 7.5 13.6 11.4 13.3 8.2 9.8 8.4 - Neutral

Ranbaxy Lab# 530 2,768.0 36.9 13.5 850.0 357.2 - - - 14.2 31.3 29.8 37.3 16.9 17.8 - Neutral

Sun Pharma. 693 2,482.2 31.0 40.2 (120) 665.1 11.3 6.4 11.3 25.0 26.0 28.2 27.7 26.7 24.6 - Neutral



Power

All-India power generation highlights

During April-August 2012, overall power generation in Indiarose by 4.9% yoy to 382.3BU, aided by a 14.0% yoy increasein installed capacity to 207,006MW.

During this period, thermal power generation grew by 8.6%yoy to 310.2BU while hydro power generation declined by10.9%yoy to 55.5BU. Nuclear power generation posted a growth of3.0% yoy to 13.7BU.

The plant load factor (PLF) of thermal power plants duringApril-August 2012 stood at 69.9% vs 73.4% in correspondingperiod last year due to coal availability constraints.

Generation for companies under coverage

During 5MFY2013, NTPC's power generation stood at 953.5BU,posting an increase of 5.8% yoy. GIPCL's generation (excluding145MW Baroda Plant) rose by 10.3% yoy to 17.2BU; while forCESC, it rose by 1.7% yoy to 40.7BU.

Fuel availability position

As of August 2012, 28 thermal power stations had coal stocksfor less than seven days compared to 32 thermal power stationsat the end of 1QFY2013. The main reason for less coal stockswas attributed to inadequate availability of domestic coal.

Imported coal prices down 28.5% yoy

During 2QFY2013, average prices of New Castle Mckloksey6,700kc coal decreased by 28.5% yoy and 8.8% qoq to US$86.2per tonne. Despite ~20.7% yoy and ~2.3% qoq depreciationin INR vs USD, coal prices are down by 13.7% yoy and 6.4%qoq in INR terms. The fall in imported coal prices augurs wellfor power companies as the shortage of domestic coal has forcedthem to import more coal.

target of 88,425MW for the current Five-Year Plan period endingMarch, 2017 to bridge the widening demand-supply gap forelectricity. However, we believe the target to be over-ambitiousin the wake of multiple headwinds facing the power sector suchas fuel availability issues and land acquisition delays.

Capacity addition

During 5MFY2013, 6,766 MW of capacity was added comparedto targeted capacity of 6954 MW. During the last few years,private power companies have made robust capacity additions.The Planning Commission has set a power capacity addition

Transmission lines and substations

During 5MFY2013, 6,837 circuit kilometers (ckm) were addedto the transmission lines, as against the targeted 7,979ckm. Inthe same period, total addition to the transmission sub-stationcategory was 29,065MVA, as against the targeted 12,045MVA.

Power-deficit situation

The country continues to face power deficit due to the fuel shortageand deficiencies in the T&D system. India's overall and peakpower-deficit levels during 5MFY2013 stood at 8.5% and 9.0%respectively, as against 5.9% and 8.2% reported in 5MFY2012.

Source: CEA, Angel Research

Exhibit 1: Global coal prices

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

50

100

150

200

250

Sep

-05

Mar-

06

Sep

-06

Mar-

07

Sep

-07

Mar-

08

Sep

-08

Mar-

09

Sep

-09

Mar-

10

Sep

-10

Mar-

11

Sep

-11

Mar-

12

Sep

-12

USD

/to

nne

coal prices down in INR terms

PX_LAST INR

INR/to

nne


Exhibit 2: Generation capacity addition: Targeted vs. achieved

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0

5,000

10,000

15,000

20,000

25,000

FY03

(%)(MW)

Target (T) LHS Achievement (A) LHS A as a % of T (RHS)

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 5MFY13

Source:CEA, Angel Research

Exhibit 3: India - Power-deficit scenario

Overall Peak

(%)

8.87.1 7.3

8.49.6 9.9

11.010.1

8.5 8.5 8.5

12.211.2 11.7

12.313.8

16.6

12.0 12.7

9.810.6

9

0.0

4.0

8.0

12.0

16.0

20.0

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY

2012

5M

FY2013


Exhibit 4: Region-wise power deficit (5MFY2013)Region (%)Region (%)Region (%)Region (%)Region (%) OverallOverallOverallOverallOverall PPPPPeakeakeakeakeak

Northern (9.7) (8.9)

Western (3.5) (4.7)

Southern (13.4) (15.3)

Eastern (5.4) (7.4)

Northeastern (8.4) (10.0)

All IndiaAll IndiaAll IndiaAll IndiaAll India (8.5)(8.5)(8.5)(8.5)(8.5) (9.0)(9.0)(9.0)(9.0)(9.0)

41



Analyst - VAnalyst - VAnalyst - VAnalyst - VAnalyst - V. Srinivasan / Amit P. Srinivasan / Amit P. Srinivasan / Amit P. Srinivasan / Amit P. Srinivasan / Amit Patilatilatilatilatil


Source: Company, Angel Research; Note: Price as on September 28, 2012; * Consolidated; #Quaterly numbers pertains to standalone financials

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net P Net P Net P Net P Net Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTararararargggggeeeeettttt Reco.Reco.Reco.Reco.Reco.


CESC 331 1,441 17.8 21.1 (12) 131 14.9 10.4 14.9 44.1 44.6 47.6 7.5 7.4 7.0 - Neutral

GIPCL 71 361 20.2 31.8 17 35 24.8 2.3 24.8 8.4 10.8 11.0 8.5 6.6 6.5 77 Accum.

NTPC*# 168 16,126 4.9 22.2 114 2,365 (2.5) 2.9 (2.5) 11.5 12.1 13.7 14.6 13.9 12.2 - Neutral

Power

Source: BSE, Angel Research

Exhibit 5: Performance on the bourses in 2QFY2013

5.4

14

9.3

3.1

7.6

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

NTPC CESC GIPCL BSE Power SENSEX

(%)

Outlook: Outlook: Outlook: Outlook: Outlook: The power sector is currently facing many headwindssuch as fuel shortage, falling merchant tariffs, land acquisitionproblems, and poor financial health of SEBs. The governmenthas shown its intent on reforms with restructuring plans for SEBsand granting permission of foreign investment of up to 49% inpower trading exchanges. If the government continues withmeasures such as captive coal allocation policy and land acquisitionpolicy, it will be positive for the sector in the medium to long term.WWWWWe e e e e recommend Accumulate recommend Accumulate recommend Accumulate recommend Accumulate recommend Accumulate on GIPCL and remain Neutral onon GIPCL and remain Neutral onon GIPCL and remain Neutral onon GIPCL and remain Neutral onon GIPCL and remain Neutral onNTPC and CESC.NTPC and CESC.NTPC and CESC.NTPC and CESC.NTPC and CESC.

Key developments

Sector

CACACACACAG report might delay captive coal block allocation: G report might delay captive coal block allocation: G report might delay captive coal block allocation: G report might delay captive coal block allocation: G report might delay captive coal block allocation: Duringthe quarter, the Comptroller and Auditor General (CAG)published a report on irregularities in coal block allocation,popularly dubbed as Coalgate scandal. The CAG report oncoal block allocation states that between 2005 and 2009 nearly57 coal blocks were allotted to private firms without transparencyand objectivity which led to an estimated loss of `1.86 lakhcrore to the exchequer. The government has disputed the CAGreport. However, the opposition is demanding de-allocation ofall these coal blocks. Currently, the government's stance is toonly de-allocate coal blocks which have not met deadlines tostart coal production. We believe the Coalgate scandal mayresult in further delay in allotting captive coal mines to powerprojects under construction. This may result in delaying India'spower generation plans.

CCEA clears debt restructuring plan of SEBs: The CabinetCommittee on Economic Affairs (CCEA) has cleared the debtrestructuring of state electricity boards (SEBs) under which 50%of the short terms loans of these SEBs would be taken over bythe state government. The restructuring by lenders is subject tosteps taken by the state power distribution companies (discoms)to bridge the gap between the cost incurred and revenue realizedto restore the viability of the sector. It will improve the financialposition of state discoms, thereby enabling them to clear anypending dues of power generators. Hence, it is a positivedevelopment for power generating companies.

FDI in power trading: FDI in power trading: FDI in power trading: FDI in power trading: FDI in power trading: The CCEA has permitted foreigninvestment of up to 49% in power trading exchanges, withforeign direct investment (FDI) limit of 26% and FII limit of 23%.FII investments would be permitted under automatic route andFDI would be permitted under government approval route.

FSA agreement: FSA agreement: FSA agreement: FSA agreement: FSA agreement: Coal India (CIL) has agreed to supply 80% ofcontracted quantity of coal out of which 15% would be throughimports. CIL has also accepted to pay a hefty penalty of 40% ifit supplies coal below 50% of the contracted quantity. The revisedpenalty clause is a relief to power companies as earlier fuel supplyagreements (FSAs) had penalty as less as 0.01%.

Company

During the quarter, NTPC has commissioned unit 3 of 660MWof Sipat STPS stage-1 and unit 4 of 500MW of Simhadri STPS.With this the commercial capacity of NTPC group stands at37,174MW. Meanwhile, NTPC has agreed to sign the new FSAwith Coal India for units commissioned after January 2010.

Source: Angel Research; Note: *Penalty would be % of value of coal not supplied

Exhibit 6: Revised penalty at different trigger levelsSuppliesSuppliesSuppliesSuppliesSupplies PPPPPenalty(%)*enalty(%)*enalty(%)*enalty(%)*enalty(%)*

Below 50% 40

50%-60% 10-20

60%-65% 5

65%-80% 1.5



Real Estate

Real estate prices in Mumbai have increased significantly overthe past few quarters, that too at a much faster rate than otherkey cities, and have been accompanied by falling absorptions.In our opinion, the increase in prices can be attributed todeclining launches seen over the past few quarters, for whichuncertainty due to Development Control Regulations (DCR) andslow approval process have been significantly responsible.However, with the new DCR rules in place, we expect the launchactivity to significantly improve over the coming quarters. Theaverage prices in Mumbai have rallied by 85% since the end of2009, followed by Pune (35%) and Chennai (20%).

Although it is natural for Mumbai real estate prices to trade ata premium over other cities given its dynamics, we note that theprice premium over other cities has increased significantly to~190% currently from ~90% at the end of 2009. The strongincrease in prices has negatively impacted affordability, whichis being reflected in the city's falling volume levels. For FY2012,the decline in sales was the highest in Mumbai, followed byHyderabad and NCR whereas southern cities of Chennai andBangalore along with Pune showed strong sales for the year.

For 2QFY2013, we expect residential volumes to report a flatto moderate growth on a sequential basis on account of weakdemand due to high interest rates and elevated property prices,especially in Mumbai and NCR. We are of the opinion that a10-15% price cut in Mumbai can lead to a significant demandrevival in Mumbai. Revenue of real estate companies is expectedto be largely driven by execution of existing projects, thoughexecution delays remain a cause of concern. Inventory levelsare expected to remain high in Mumbai and NCR.

In our universe of stocks, we expect HDIL to report negligibleTransfer of Development Rights (TDR) volumes, given lowinventory of TDRs left on account of stoppage of the MumbaiInternational Airport (MIAL) project. DLF's revenue is expectedto be largely driven by the sale of plotted properties in Gurgaon.

Interest rate cuts to benefit

The Reserve Bank of India (RBI) rate cut at the start of the year isexpected to slightly benefit developers, leading to lower cost ofborrowing and marginal improvement in housing demandduring the quarter; however, rates still remain elevated andfurther rate cuts are required in order to see a meaningfulrecovery in sales. We are of the opinion that revival in housingdemand will be led by mid-market housing, which remains moresensitive to interest rate cuts. Housing loans in proportion oftotal non-food credit outstanding have been falling over thepast four years and can see a possible reversion if mortgagerates start to come down.

Cost increase has been moderated

Around 70% of the construction cost is contributed by materials(steel and cement) and labor costs. Although cost overruns havebeen a cause of concern for real estate developers in the past,they seem to be moderating. The major components of thesecosts are steel, cement and labor. Currently, on a y-o-y basis,cement prices have slightly decreased to ~`275/bag from~`290/bag; steel prices, on the other hand, have been moreor less stable at `42,613/ton vs `42,875/ton last year.

During 2QFY2013, the BSE realty index slightly outperformedthe Sensex by 1.0% following the recent strong performance.Anant Raj Industries (+38%) has been the best performerfollowed by DLF (+14%) and Mahindra Lifespace Developers(MLIFE; +13%).

Source: C&W, Angel Research

Exhibit 2: Key cities - Office vacancy rates

-

5

10

15

20

25

30

35

Mumbai Chennai Bangalore NCR Hyderabad Pune

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

(%)

Source: Bloomberg, Liasas foras, Angel Research

Exhibit 1: Key cities sales volume (LTM - yoy%)

(30)

(20)

(10)

-

10

20

30

40

50

60

Mumbai NCR Chennai Bangalore Pune Hyderabad

(%)

DLF has also decided to focus on high margin premium housinggoing forward, citing increased cost pressure. We expect salesvolume to remain robust for Mahindra Lifespace Developers(MIAL) following the launch of its project in Chennai.

43



Real Estate

Analyst - Rahul KAnalyst - Rahul KAnalyst - Rahul KAnalyst - Rahul KAnalyst - Rahul Kaulaulaulaulaul

Exhibit 5: Quarterly estimatesExhibit 5: Quarterly estimatesExhibit 5: Quarterly estimatesExhibit 5: Quarterly estimatesExhibit 5: Quarterly estimates ( `̀̀̀̀ cr)



(((((`̀̀̀̀))))) 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E chg bpchg bpchg bpchg bpchg bp 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg 2QFY13E2QFY13E2QFY13E2QFY13E2QFY13E % chg% chg% chg% chg% chg FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY12FY12FY12FY12FY12 FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E (((((`)))))

MLifeMlife 378 97 3.9 26 (1.5) 24.9 (20.8) 6.1 (20.8) 29.2 32.0 37.0 13.0 11.9 10.3 0 Neutral

DLF 234 2,469 (2.5) 50 3.6 380 2.2 2.2 2.2 7.1 9.6 13.4 32.71 24.3 17.4 - Neutral

HDIL 98 366 (16.9) 52 (0.7) 126 (15.2) 3.0 (15.2) 17.9 22.7 26.6 5.5 4.3 3.7 115 Buy

Anant Raj 71 105 15.2 53 (1.0) 42 20.0 1.4 20.0 3.8 8.4 12.7 18.6 8.5 5.6 - Neutral


India's Realty Index is currently ruling near its lifetime low seenin 2008. However, things are better than 2008 with respect toproject visibility, cash flow, net debt-equity and growingdisposable incomes. Further, refinancing of loans from thebanking sector will give some respite to developers in the fallingvolume scenario. Having said that, we believe absorption andnot price appreciation will drive residential growth over the nextsix quarters. Further, high inventory is still hampering commercialrecovery, especially in the office space with vacancy rates stillelevated in key cities. However we don't expect commercial spaceto deteriorate further given the falling launches in the space.Though the situation is now much better than in 2008,challenges such as high debt levels, falling absorptions andhigh inventory remain a challenge for the sector. Given therecent run up in the realty stocks under our coverage we turnNeutral on MLIFE and Anant Raj Industries.


Exhibit 3: Price performance of coverage universe

0

10

20

30

40

50

60

DLF HDIL MLIFE ARCP BSE Realty SENSEX

(%)


Exhibit 4: BSE Realty vs Sensex (Indexed to 100)

BSE Realty SENSEX

80

85

90

95

100

105

110

115

Jul-

12

Jul-

12

Jul-

12

Jul-

12

Jul-

12

Aug

-12

Aug

-12

Aug

-12

Aug

-12

Sep

-12

Sep

-12

Sep

-12

Sep

-12



Telecom

During February 2012, in a major blow to various telecomplayers, the Supreme Court, in its judgment on the 2G case,cancelled 122 licenses given to telecom firms since January2008. After this move, as expected, some telecom players(DB Etisalat and S Tel) expressed intentions of shuttingdown operations in India. For the companies under ourcoverage - Bharti Airtel (Bharti) and Reliance Communications(RCom), none of their licenses were canceled, as all of theirlicenses had been issued before 2008. We believe this movewill increase consolidation in the highly competitive telecomindustry, and the total number of players operating in the industrycan come down considerably.

Post this, the Telecom Regulatory Authority of India (TRAI) cameout with its recommendation on spectrum auction during April2012. TRAI recommended a reserve price of ~`18,000cr for5MHz pan India (1800MHz spectrum). But after a lot ofdiscussion in the market pointing that the reserve price set byTRAI was high, the cabinet finally decided a reserve price of~`14,000cr for 5MHZ pan India (1800MHz band; 22% lowerthan TRAI's recommendation). We believe, despite the reduction,the reserve price remains a negative for the sector along withthe decision not to reduce spectrum usage charges, which hasbeen kept unchanged at 3-8% as against 1% recommended byTRAI. Decisions regarding one-time excess spectrum fee andmodalities of spectrum refarming are yet to be made, which inour view will add to the overhang on the sector. The recent setof developments again advocate the challenging regulatoryoutlook for industry players.

Along with the aforesaid developments on the regulatory sidein the telecom sector, during 1QFY2013 results, themanagement of all the telecom companies pointed out that thecompetitive intensity in the industry has increased and theindustry has once again started to witness pricing pressure in1QFY2013 after two quarters of respite. Hyper competition inthe industry will lead to increase in pricing pressure on telecomcompanies which will keep voice average revenue per minute(ARPM) under pressure. In addition, lower subscriber additionsadd to the negative woes. All this would lead to margincontraction, thereby leading to overall profitability being underpressure. All these events created pressure on the share pricesof all telecom companies during 2QFY2013. But in the laterhalf of September 2012, RCom raised its tariff by 25% for itsGSM subscriber base which led to speculation in the marketthat other players could also implement similar hikes. This willlead to an increase in operating margins of telecom companies,on expectation of which the stock prices of telecom companiesdrew support during the end of the quarter.


Exhibit 1: Stock return analysis of leading Indian TSPs

(12.6)

14.4

4.8

(30.0)

(13.2)

(17.5)

(35)

(30)

(25)

(20)

(15)

(10)

(5)

0

5

10

15

20

Bharti Idea RCom

(%)

Chg. (3 months) Chg. (1 year)

VLR data points favorable for tier-I companies

As per the recent visitor location register (VLR) data released forJuly 2012, of the total 920mn subscribers, 76.42%, ie 703mnsubscribers were active subscribers on the date of peak VLR.Service-provider wise, Idea leads the tally with a share of 92.8%,followed by Bharti with 90.5%, Vodafone with 89.2% and RComwith 76.0%, whereas MTNL stood at the bottom with 39.5%active subscribers. RCom has shown substantial improvementin its peak VLR data from 66.5 in April 2012 to 76.0 in July2012 as the company removed inactive customers (subscriberswho have not had any usage in the last 60 days) from itssubscriber base, focusing on the quality of its subscribers.


Exhibit 3: Active subscribers (July 2012)ActiveActiveActiveActiveActive Active subscribers'Active subscribers'Active subscribers'Active subscribers'Active subscribers' Active subscribers'Active subscribers'Active subscribers'Active subscribers'Active subscribers' Reported subscribers'Reported subscribers'Reported subscribers'Reported subscribers'Reported subscribers'

subscriberssubscriberssubscriberssubscriberssubscribers market sharemarket sharemarket sharemarket sharemarket share market share (%)market share (%)market share (%)market share (%)market share (%) market sharemarket sharemarket sharemarket sharemarket share(mn)(mn)(mn)(mn)(mn) (%) (%) (%) (%) (%) -April 2012-April 2012-April 2012-April 2012-April 2012 (%)(%)(%)(%)(%)

Bharti 170.8 24.28 24.34 20.51

Vodafone 138.1 19.64 19.54 16.83

Idea 109.2 15.52 15.48 12.78

RCom 102.9 14.63 14.97 14.71

BSNL 50.5 7.19 7.47 10.29

Aircel 38.2 5.42 5.42 7.08

MTNL 2.1 0.29 0.29 0.57


Exhibit 2: VLR data of incumbents

91.488.9

93.2

66.5

54.3

58.7

90.5 89.292.8

76.0

53.4

58.6

50

60

70

80

90

100

Bharti Vodafone Idea Rcom BSNL Aircel

(%)

Apr-12 May-12 Jun-12 Jul-12

45



Telecom


Exhibit 4: RMS vs. SMS of incumbents (as of 1QFY2013)

30.5

22.1

15.1

7.46.9

4.5

19.9

16.3

12.4

16.5

10.0

6.9

0

5

10

15

20

25

30

35

Bharti Vodafone Idea Rcom BSNL Aircel

(%)

RMS SMS

0.28mn, 0.47mn and 23,000 new users, respectively inJuly 2012.

We believe the decline in the subscriber base of the industrywas brought about by operators withdrawing freebies andlucrative offers. DB Etisalat, S Tel and Loop (except Mumbai)have already decided to shut shop in India while Uninor hasscaled down its operations to nine circles. We believe this declinehas been led by a general slowdown in incremental grossadditions and aggressive churn policy by a few operators inresponse to stringent norms for allocation of new number series.

Company (mn)Company (mn)Company (mn)Company (mn)Company (mn) FFFFFebebebebeb-12-12-12-12-12 MarMarMarMarMar-12-12-12-12-12 AprAprAprAprApr-12-12-12-12-12 MayMayMayMayMay-12-12-12-12-12 JuneJuneJuneJuneJune-12-12-12-12-12 JulyJulyJulyJulyJuly-12-12-12-12-12

Bharti 178.8 181.3 183.3 185.3 187.3 188.8

RCom 152.0 153.0 153.6 154.1 154.6 134.1

Vodafone 149.4 150.5 151.3 152.5 153.7 154.9

BSNL 93.8 94.7 94.7 94.7 94.7 94.7

Idea 110.7 112.7 114.2 116.0 117.2 117.6

TTSL 81.8 81.6 81.1 81.4 93.2 88.9

Aircel 63.3 62.6 63.6 64.4 64.9 65.2

MTNL 5.5 5.6 5.5 5.3 5.3 5.2

Loop Mobile 3.3 3.3 3.3 3.3 3.2 3.0

HFCL 1.4 1.3 1.4 1.5 1.5 1.5

Shyam Telelink 15.4 15.8 16.0 16.3 16.5 16.7

S Tel 3.4 3.4 3.4 3.4 - -

Uninor 41.1 42.4 43.6 45.1 45.6 44.5

Videocon 6.2 6.0 6.1 6.2 5.6 5.2

DB Etisalat 1.7 1.7 1.7 1.7 - -

TTTTTotalotalotalotalotal 907.7907.7907.7907.7907.7 915.9915.9915.9915.9915.9 922.7922.7922.7922.7922.7 931.1931.1931.1931.1931.1 943.2943.2943.2943.2943.2 920.3920.3920.3920.3920.3Source: COAI, AUSPI, Angel Research

Exhibit 5: Total subscriber base

MOUs to decline

In 1QFY2013, Bharti (excluding Africa), Idea as well as RComposted stable minutes of usage (MOU) on the back of manypromotional offers as well as a sharp cut in 3G tariffs. For2QFY2013, we expect the overall MOU profile for Bharti(excluding Africa), Idea and RCom to experience a qoq decline

445423 419

431 433 424

391

364 369379 379 372

233 227 224 227 228 225

200

300

400

500


(min

)

Bharti (ex-Africa) Idea RCom


Exhibit 6: Trend in MOU per month per subscriber

RMS vs. SMS

As per the revenue market share (RMS) data for 1QFY2013,Bharti leads at 30.5% with subscriber market share (SMS) of19.9%, whereas Idea has its RMS and SMS at 15.1% and 12.4%,respectively. For Bharti and Idea, their RMS is higher than SMS,which indicates that the quality of subscribers added by thesecompanies is good. On the contrary, in case of RCom, SMS isat 16.5%, which is much ahead of the RMS that is at 7.4% only.This is evident from the average revenue per user (ARPU) profileof these companies; also, RCom has peak VLR of merely 66.6%(in June 2012) as compared to its peers like Bharti, Idea andVodafone - the peak VLR of these varies from 89-94% (for June2012). However, the current step by RCom to remove inactivecustomers from its subscriber base might lead to improvementin its overall ARPU profile as well as reduce the differencebetween its RMS and SMS. Amongst unlisted companies,Vodafone is also part of the Bharti-Idea clan with higher RMSat 22.1% and SMS at 16.3%, whereas incumbents such as BSNLand Aircel are part of RCom's clan with SMS higher than RMS.

Muted momentum in net subscriber addition

The Indian mobile subscriber base fell to 920.3mn in July 2012from 943.2mn in June 2012, the first ever decline in the country.The decline in total subscriber base for the first time was led bythe wireless segment where users declined by 20.6mn. Thebiggest loss in user base came from RCom that lost 20.5mnusers, followed by Tata Teleservices, Uninor, Videocon, Loopand MTNL. Drop in RCom's subscriber base was due to removalof inactive customers from its user base as RCom has decidedto deactivate the inactive prepaid subscribers who have not hadany usage in the last 60 days. Tata Teleservices lost over 2.4mnwireless customers, Uninor lost over 1mn subscribers, Videoconlost 0.4mn subscribers, and Loop Mobile and MTNL lost~0.15mn subscribers each in July. Bharti, however, led thegrowth in mobile subscribers in July by adding 1.5mn newcustomers, taking its total subscriber base to over 188mn.Vodafone added 1.2mn users, taking its total subscriber baseto over 154mn. Idea, Aircel, BSNL and HFCL added 0.45mn,



Telecom

Analyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita SomaniAnalyst - Ankita Somani


Source: Company, Angel Research; Note: Price as on September 28, 2012; Change is on a qoq basis

CompanyCompanyCompanyCompanyCompany CMPCMPCMPCMPCMP Net SalesNet SalesNet SalesNet SalesNet Sales OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) Net PNet PNet PNet PNet Profitrofitrofitrofitrofit EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) EPS (EPS (EPS (EPS (EPS (`̀̀̀̀))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) TTTTTaaaaargrgrgrgrgeeeeettttt Reco.Reco.Reco.Reco.Reco.


Bharti 265 19,382 0.1 30.9 71 862 11.0 2.3 11.0 11.2 9.9 15.1 23.6 26.7 17.6 - Neutral

Idea 85 5,544 0.7 26.0 (13) 250 6.6 0.8 6.6 2.2 3.3 4.7 39.0 25.7 18.1 - Neutral

RCom 65 5,199 (2.3) 30.9 (7) 170 4.5 0.8 4.5 4.5 4.2 5.7 14.4 15.3 11.3 - Neutral


Exhibit 8: Trend in ARPU per month190 183 187 189 185 181

160155 160 160 156 153

103 102 101 100 98 97

50

100

150

200


(/̀m

onth

)



Exhibit 7: Trend in ARPM

0.43

0.43

0.45

0.44

0.43 0.43

0.41

0.430.43

0.42

0.41 0.41

0.44

0.450.45

0.44

0.43 0.43

0.40

0.42

0.44

0.46


(`/m

in)


ARPU to decline

For 2QFY2013, we expect the combination of decline in MOUand stable ARPM to pull down the APRU of Bharti (excludingAfrica), Idea as well as RCom by 2.0%, 2.3% and 1.7% qoq to`181/month, `153/month and `97/month, respectively.


For 2QFY2013, we expect revenue growth to be muted due tomoderating growth in subscriber base, flat voice ARPM anddeclining MOU. Amongst the top three operators, we expectBharti and Idea to post a revenue growth of 0.1% and 0.7%qoq, respectively. RCom is expected to post a revenue declineof 2.3% qoq. On the EBITDA margin front, we expect the marginof Bharti to grow by 71bp qoq to 30.9% as during the lastquarter margins were severely hit because of high administrativeexpenses and tax rates. The EBITDA margin of Idea and RComare expected to be weak and decline by 10bp and 7bp qoq to26.0% and 30.9%, respectively.

We believe industry dynamics point toward a possibleconsolidation in the long run and expect the prevalence of feweroperators, which would include Bharti, Vodafone, RCom, Idea,BSNL, Aircel and Uninor. The Indian telecom sector is currentlyexperiencing heat due to a number of policy uncertainties relatedto spectrum and license fee payments which are yet to beresolved. The actual financial impact on the industry due tohigh reserve price, spectrum refarming and one-time spectrumcharge can be significantly negative for the incumbents.

In our view, the telecom industry can improve structurally onlyafter data revenues start picking up which still looks far. Telecomstocks are currently trading close to historically low valuations,which we believe, is justified given the low business returns andan uncertain industry environment which might pose huge riskto the overall profitability of these companies. WWWWWe are currentlye are currentlye are currentlye are currentlye are currentlyNeutral on the telecom sector and will refrain from taking anyNeutral on the telecom sector and will refrain from taking anyNeutral on the telecom sector and will refrain from taking anyNeutral on the telecom sector and will refrain from taking anyNeutral on the telecom sector and will refrain from taking anycall till financial clarity on the stocks emerges.call till financial clarity on the stocks emerges.call till financial clarity on the stocks emerges.call till financial clarity on the stocks emerges.call till financial clarity on the stocks emerges.

by 2.0%, 2.0% and 1.5% to 424min, 372min and 225min,respectively. This is because 2Q is a seasonally weak quarterfor MOU of telecom players due to the monsoon season, whichleads to higher call drop rates.

ARPM to remain flat

The ARPM, which saw some improvement during 3QFY2012because of tariff hikes taken by most of the players, againdeclined in 4QFY2012 as well as in 1QFY2013 due to manypromotional vouchers launched by various players to tapvolumes and due to 3G tariff cut. During 2QFY2013, we expectARPM to remain stable on a q-o-q basis for Bharti, Idea as wellas RCom at ̀ 0.43/min, ̀ 0.41/min and ̀ 0.43/min, respectively.Idea has recently announced a tariff hike in two circles andRCom in four circles. These moves will have positive implicationon the APRM profile of these companies but the results will beseen from 3QFY2013 onwards.

47



Stock Watch

Stock WStock WStock WStock WStock Watch |atch |atch |atch |atch | October 3, 2012

48Please refer to important disclosures at the end of this report.

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x) (`) Price (`) (` cr) FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E

Agri / Agri ChemicalAgri / Agri ChemicalAgri / Agri ChemicalAgri / Agri ChemicalAgri / Agri ChemicalRallis Neutral 145 - 2,828 1,466 1,686 14.8 14.8 7.0 8.1 20.8 18.0 4.4 3.8 22.6 22.5 2.0 1.7United Phosphorus Buy 131 170 6,053 8,421 9,263 16.5 16.5 15.0 17.0 8.8 7.7 1.3 1.1 15.6 15.5 0.8 0.7Auto & Auto AncillaryAuto & Auto AncillaryAuto & Auto AncillaryAuto & Auto AncillaryAuto & Auto AncillaryAmara Raja Batteries Neutral 219 - 3,748 2,844 3,275 15.4 15.6 15.9 18.8 13.8 11.7 3.7 3.0 29.5 28.3 1.2 1.1Apollo Tyres Accumulate 92 99 4,660 13,412 15,041 11.3 11.0 12.1 14.1 7.6 6.5 1.4 1.2 19.6 19.2 0.5 0.4Ashok Leyland Buy 24 30 6,399 14,920 16,850 9.0 9.3 2.2 2.7 11.0 8.8 2.0 1.8 13.3 15.6 0.5 0.4Automotive Axle Neutral 411 - 621 993 1,140 11.6 11.5 36.9 43.0 11.1 9.6 2.2 1.9 21.2 21.2 0.7 0.5Bajaj Auto Neutral 1,833 - 53,027 21,285 23,927 18.2 18.3 108.5 121.3 16.9 15.1 7.0 5.6 46.1 41.3 2.1 1.8Bharat Forge Buy 305 351 7,108 7,004 7,985 16.2 16.4 20.3 25.1 15.0 12.2 2.8 2.3 19.9 20.9 1.2 1.0Bosch India Neutral 8,804 - 27,644 8,793 10,294 17.4 18.5 348.3 435.8 25.3 20.2 4.9 4.1 19.4 20.1 2.8 2.3CEAT Buy 113 164 386 4,989 5,634 8.7 8.5 32.7 41.1 3.4 2.7 0.5 0.4 15.8 16.9 0.3 0.2Exide Industries Neutral 153 - 13,035 5,913 6,787 16.0 17.0 7.4 9.2 20.8 16.7 3.7 3.1 19.1 20.3 1.9 1.6FAG Bearings Neutral 1,760 - 2,925 1,505 1,768 17.5 18.0 111.2 132.7 15.8 13.3 3.3 2.7 22.7 22.1 1.7 1.4Hero Motocorp Accumulate 1,879 2,077 37,527 24,941 28,706 15.0 15.5 122.5 134.0 15.3 14.0 6.7 5.3 49.6 42.2 1.2 1.0JK Tyre Buy 108 135 444 7,517 8,329 6.1 6.3 26.2 38.5 4.1 2.8 0.5 0.4 13.4 17.2 0.3 0.3Mahindra & Mahindra Accumulate 865 944 53,079 37,434 42,860 11.6 11.5 50.4 56.3 17.2 15.4 3.6 3.1 22.6 21.5 1.2 1.0Maruti Suzuki Neutral 1,350 - 39,000 41,796 49,350 7.6 8.6 66.6 92.6 20.3 14.6 2.3 2.0 12.0 14.8 0.7 0.6Motherson Sumi Accumulate 149 159 8,742 24,285 27,317 6.7 7.2 8.1 10.6 18.5 14.1 4.0 3.3 23.3 25.7 0.5 0.4Subros Buy 29 34 177 1,230 1,378 8.8 8.6 4.5 5.7 6.5 5.2 0.6 0.6 9.8 11.8 0.4 0.3Tata Motors Buy 267 316 71,278 195,096 219,428 12.8 13.0 39.0 44.9 6.9 6.0 2.0 1.5 32.6 28.8 0.4 0.4TVS Motor Buy 42 49 2,007 7,611 8,443 7.9 7.9 4.7 5.4 9.0 7.8 1.5 1.3 17.9 18.1 0.2 0.2FFFFFinancialsinancialsinancialsinancialsinancialsAllahabad Bank Reduce 147 131 7,328 6,944 7,884 3.0 3.1 35.5 37.0 4.1 4.0 0.7 0.6 17.2 15.7 - -Andhra Bank Reduce 113 97 6,298 4,929 5,633 3.1 3.1 23.7 24.5 4.7 4.6 0.8 0.7 16.6 15.3 - -Axis Bank Buy 1,137 1,326 47,121 15,425 18,500 3.1 3.2 115.9 137.5 9.8 8.3 1.8 1.54 19.9 20.1 - -Bank of Baroda Neutral 799 - 31,267 15,473 18,142 2.6 2.6 115.3 139.4 6.9 5.7 1.1 0.9 16.2 17.2 - -Bank of India Accumulate 310 330 17,810 12,573 14,971 2.3 2.4 58.2 68.0 5.3 4.6 0.9 0.8 15.9 16.3 - -Bank of Maharashtra Reduce 50 47 2,948 3,442 3,802 3.1 3.2 8.9 11.4 5.6 4.4 0.7 0.6 13.5 15.5 - -Canara Bank Neutral 431 - 19,100 10,905 12,783 2.1 2.2 74.9 85.1 5.8 5.1 0.9 0.8 15.1 15.3 - -Central Bank Neutral 78 - 5,756 7,095 8,102 2.5 2.7 15.6 21.0 5.0 3.7 0.8 0.7 12.2 14.7 - -Corporation Bank Neutral 418 - 6,185 4,886 5,669 2.1 2.2 101.3 101.7 4.1 4.1 0.7 0.6 17.0 15.1 - -Dena Bank Neutral 106 - 3,705 3,147 3,495 2.8 2.9 24.8 24.4 4.3 4.3 0.7 0.6 18.7 15.9 - -Federal Bank Neutral 446 - 7,621 2,593 3,009 3.2 3.2 44.9 52.5 9.9 8.5 1.2 1.1 12.8 13.5 - -HDFC Neutral 773 - 118,989 7,340 8,805 3.5 3.5 31.5 37.8 24.5 20.4 4.9 4.4 34.8 32.2 - -HDFC Bank Neutral 629 - 148,480 21,753 26,811 4.4 4.5 28.7 35.9 21.9 17.5 4.2 3.54 20.7 21.9 - -ICICI Bank Buy 1,057 1,245 121,534 22,304 26,855 2.9 3.0 68.6 82.0 15.4 12.9 1.9 1.7 14.2 15.5 - -IDBI Bank Neutral 100 - 12,791 7,761 9,484 1.9 2.2 17.1 22.9 5.8 4.4 0.7 0.6 11.9 14.4 - -Indian Bank Reduce 192 181 8,258 6,062 6,818 3.4 3.4 40.5 41.6 4.7 4.6 0.8 0.7 18.1 16.3 - -IOB Accumulate 78 83 6,244 7,343 8,391 2.5 2.5 16.0 21.3 4.9 3.7 0.6 0.5 11.3 13.6 - -




J & K Bank Accumulate 932 1,021 4,518 2,600 2,850 3.6 3.5 192.3 188.0 4.8 5.0 0.9 0.8 21.0 17.7 - -

LIC Housing Finance Accumulate 282 301 14,221 1,867 2,338 2.4 2.4 21.1 28.5 13.4 9.9 2.2 1.9 17.5 20.4 - -

Oriental Bank Neutral 302 - 8,800 6,278 7,125 2.7 2.8 56.7 62.6 5.3 4.8 0.7 0.7 14.1 13.9 - -

Punjab Natl.Bank Accumulate 840 941 28,481 19,934 22,705 3.3 3.3 147.7 166.2 5.7 5.1 1.0 0.8 17.7 17.3 - -

South Ind.Bank Accumulate 23 25 3,032 1,535 1,760 2.9 2.8 3.5 3.9 6.4 5.8 1.1 0.9 19.4 17.1 - -

St Bk of India Accumulate 2,238 2,353 150,173 63,806 73,435 3.5 3.6 225.6 258.4 9.9 8.7 1.7 1.4 17.7 17.7 - -

Syndicate Bank Accumulate 108 117 6,513 6,722 7,719 2.9 3.0 24.3 27.2 4.5 4.0 0.7 0.6 17.0 16.8 - -

UCO Bank Neutral 77 - 5,112 5,411 6,124 2.4 2.5 17.0 16.5 4.5 4.7 0.9 0.8 16.7 14.4 - -

Union Bank Accumulate 208 226 11,432 9,924 11,647 2.8 2.9 38.6 46.3 5.4 4.5 0.9 0.7 15.4 16.3 - -

United Bank Buy 64 78 2,303 3,572 4,041 2.8 2.9 17.2 22.0 3.7 2.9 0.5 0.5 14.2 16.2 - -

Vijaya Bank Neutral 56 - 2,785 2,490 2,881 2.1 2.2 9.2 11.4 6.1 4.9 0.7 0.7 11.5 13.0 - -

Yes Bank Buy 382 452 13,611 3,270 4,253 2.8 3.0 33.9 42.2 11.3 9.0 2.4 1.9 23.1 23.6 - -

Capital GoodsCapital GoodsCapital GoodsCapital GoodsCapital Goods

ABB* Sell 798 593 16,905 8,760 10,023 6.2 8.7 14.5 24.7 55.2 32.3 6.1 5.3 11.6 17.6 1.9 1.6

BGR Energy Neutral 275 - 1,986 3,669 4,561 11.0 11.0 24.7 29.6 11.1 9.3 1.6 1.5 15.3 16.7 1.1 1.0

BHEL Neutral 247 - 60,419 47,801 43,757 19.0 18.8 25.3 22.8 9.8 10.8 3.0 2.5 34.3 25.3 1.1 1.2

Blue Star Neutral 179 - 1,613 3,047 3,328 5.4 6.9 12.5 16.2 14.4 11.0 3.5 2.8 26.1 28.2 0.6 0.5

Crompton Greaves Accumulate 126 141 8,096 12,691 14,126 7.4 8.9 7.0 9.7 18.1 13.0 2.1 1.9 11.9 15.0 0.7 0.6

Jyoti Structures Buy 47 54 385 2,622 2,744 10.7 10.5 9.6 12.2 4.9 3.8 0.5 0.5 10.8 12.3 0.4 0.3

KEC International Accumulate 73 78 1,884 6,858 7,431 7.1 7.4 8.3 9.8 8.8 7.5 1.5 1.3 25.1 24.0 0.4 0.4

LMW Neutral 2,037 - 2,295 2,369 2,727 11.7 11.7 143.4 166.0 14.2 12.3 2.4 2.2 17.4 18.4 0.5 0.3

Thermax Neutral 561 - 6,687 5,514 5,559 8.9 10.2 26.9 30.3 20.9 18.5 3.6 3.2 18.4 18.2 1.1 1.0

CementCementCementCementCement

ACC Neutral 1,469 - 27,584 10,964 12,417 21.6 21.5 76.9 82.2 19.1 17.9 3.6 3.2 19.4 19.1 2.2 1.9

Ambuja Cements Neutral 202 - 31,100 10,163 11,729 25.4 24.9 11.2 12.5 18.1 16.2 3.9 3.5 20.3 20.5 2.7 2.2

India Cements Neutral 95 - 2,917 4,354 4,929 18.6 18.7 9.8 12.3 9.7 7.7 0.8 0.8 8.6 10.2 1.1 1.0

J K Lakshmi Cements Neutral 114 - 1,396 1,964 2,278 19.5 20.4 16.3 17.8 7.0 6.4 1.0 0.9 14.7 14.6 0.9 1.2

Madras Cements Neutral 192 - 4,573 3,608 3,928 27.6 27.0 15.7 18.3 12.2 10.5 1.9 1.7 16.9 17.0 1.9 1.6

Shree Cements Neutral 3,954 - 13,774 5,630 6,187 29.5 27.9 222.5 259.3 17.8 15.2 4.1 3.3 25.3 23.8 1.9 1.5

UltraTech Cement Neutral 1,968 - 53,930 20,913 23,530 21.3 22.7 93.2 110.5 21.1 17.8 3.6 3.1 18.4 18.7 2.5 2.3

ConstructionConstructionConstructionConstructionConstruction

Ashoka Buildcon Buy 227 304 1,194 2,034 2,315 22.4 22.4 27.1 31.7 8.4 7.2 1.0 0.9 13.1 13.4 1.8 2.1

Consolidated Co Neutral 14 - 263 2,262 2,522 6.6 7.5 1.5 2.7 9.6 5.4 0.4 0.4 4.4 7.5 0.4 0.4

Hind. Const. Neutral 18 - 1,095 4,239 4,522 9.9 11.2 (2.3) (1.0) - - 1.0 1.1 (11.4) (5.6) 1.2 1.2

IRB Infra Accumulate 152 166 5,052 3,964 4,582 42.3 40.2 15.7 16.9 9.7 9.0 1.5 1.3 16.6 15.7 2.8 2.7

ITNL Buy 194 232 3,760 6,840 7,767 26.3 26.0 24.4 30.3 7.9 6.4 1.2 1.0 16.0 16.2 2.7 2.9

IVRCL Infra Accumulate 46 51 1,425 5,510 6,722 8.8 9.0 2.5 4.6 18.3 10.1 0.6 0.6 3.4 5.8 0.7 0.7




Jaiprakash Asso. Accumulate 82 91 17,479 15,259 17,502 25.7 24.7 4.0 4.8 20.5 17.2 1.6 1.5 8.5 9.3 2.5 2.2Larsen & Toubro Accumulate 1,597 1,721 98,010 60,474 69,091 12.1 11.5 79.7 85.4 20.0 18.7 3.4 3.0 16.3 15.1 1.8 1.6Madhucon Proj Buy 37 56 276 2,206 2,502 10.7 10.7 4.6 4.7 8.0 8.0 0.4 0.4 5.2 5.0 0.7 0.7Nagarjuna Const. Neutral 47 - 1,205 5,804 6,513 8.0 8.6 3.0 3.5 15.4 13.4 0.5 0.5 3.2 3.6 0.6 0.7Patel Engg. Neutral 77 - 538 3,609 3,836 13.1 13.1 14.0 14.5 5.5 5.3 0.3 0.3 6.2 6.1 1.0 1.0Punj Lloyd Neutral 55 - 1,813 11,892 13,116 8.9 8.9 1.7 3.1 32.2 17.7 0.6 0.6 1.9 3.4 0.6 0.5Sadbhav Engg. Buy 147 182 2,206 2,506 3,147 10.3 10.7 7.5 10.4 19.5 14.1 2.4 2.1 13.5 16.0 1.0 0.9Simplex Infra Buy 210 265 1,037 6,732 7,837 8.1 8.4 23.4 29.4 9.0 7.1 0.8 0.7 9.2 10.6 0.5 0.5FMCGFMCGFMCGFMCGFMCGAsian Paints Neutral 3,937 - 37,759 11,198 13,184 16.3 16.3 121.0 144.8 32.5 27.2 10.9 8.6 37.4 35.3 3.3 2.8Britannia Buy 476 584 5,685 5,835 6,824 5.7 5.9 20.7 25.4 23.0 18.8 9.1 6.9 43.1 41.9 0.9 0.7Colgate Neutral 1,206 - 16,403 3,018 3,429 20.9 22.1 35.7 42.3 33.8 28.5 31.2 23.2 101.0 93.5 5.3 4.6Dabur India Neutral 128 - 22,327 6,124 7,030 17.0 16.8 4.5 5.2 28.7 24.7 11.8 9.4 43.2 41.4 3.7 3.1GlaxoSmith Con* Neutral 2,994 - 12,590 3,124 3,663 17.1 17.6 111.4 131.7 26.9 22.7 8.9 7.2 34.4 32.8 3.7 3.1Godrej Consumer Neutral 668 - 22,725 6,097 7,233 18.4 18.6 21.9 26.5 30.5 25.2 6.8 5.6 25.5 25.4 3.9 3.2HUL Neutral 545 - 117,727 25,350 28,974 13.9 13.9 14.3 16.5 38.2 33.1 22.7 17.5 70.9 59.8 4.4 3.8ITC Neutral 272 - 213,613 29,513 33,885 35.4 35.8 9.3 10.8 29.3 25.2 9.7 8.1 35.6 35.0 6.9 6.0Marico Neutral 199 - 12,856 4,840 5,643 13.1 13.1 6.8 8.5 29.4 23.6 8.1 6.2 31.4 29.7 2.7 2.2Nestle* Neutral 4,374 - 42,176 8,610 10,174 20.9 21.2 114.8 139.8 38.1 31.3 23.0 16.0 71.2 60.3 5.0 4.1Tata Global Neutral 143 - 8,834 7,207 7,927 9.7 10.0 6.6 7.8 21.6 18.3 2.2 2.1 8.6 9.5 1.1 1.0ITITITITITHCL Tech Accumulate 577 632 40,066 24,569 27,002 18.8 17.6 41.4 45.1 13.9 12.8 3.2 2.7 22.8 21.1 1.6 1.4Hexaware Accumulate 122 140 3,609 1,966 2,161 22.5 21.4 11.6 12.2 10.5 10.0 2.7 2.3 26.8 23.9 1.5 1.3Infosys Accumulate 2,534 2,687 145,510 39,383 41,380 31.7 31.9 163.2 173.4 15.5 14.6 3.7 3.2 23.9 22.0 3.1 2.8Infotech Enterprises Neutral 189 - 2,102 1,895 2,049 18.0 17.5 18.1 19.5 10.4 9.7 1.5 1.3 14.5 13.6 0.8 0.6

KPIT Cummins Accumulate 124 142 2,206 2,191 2,364 16.1 16.4 11.3 12.9 11.0 9.5 2.4 1.9 21.8 20.0 1.0 0.8

Mahindra Satyam Neutral 111 - 13,034 7,628 8,062 19.9 18.4 9.7 10.0 11.4 11.1 3.1 2.5 27.7 22.2 1.3 1.1Mindtree Buy 662 772 2,707 2,334 2,481 19.5 17.6 70.4 77.2 9.4 8.6 2.2 1.7 23.3 20.4 0.9 0.8Mphasis Neutral 402 - 8,451 5,700 5,993 18.0 16.9 37.0 37.3 10.9 10.8 1.6 1.4 14.3 12.6 1.0 0.9NIIT Accumulate 32 36 527 1,034 1,146 9.9 11.0 5.2 6.4 6.1 5.0 0.8 0.7 12.8 14.3 0.3 0.2Persistent Neutral 427 - 1,709 1,207 1,278 26.2 24.3 42.4 44.2 10.1 9.7 1.7 1.5 17.1 15.5 1.1 0.9TCS Accumulate 1,294 1,405 253,264 61,611 67,507 29.3 29.1 69.0 74.0 18.7 17.5 6.1 5.0 32.4 28.6 3.9 3.5Tech Mahindra Accumulate 972 1,046 12,404 6,603 7,196 18.2 17.1 92.7 99.6 10.5 9.8 2.5 2.0 23.6 20.5 1.9 1.7Wipro Accumulate 381 421 93,871 43,800 48,332 19.5 19.3 25.6 28.1 14.9 13.6 2.8 2.4 18.9 17.9 1.8 1.5MediaMediaMediaMediaMediaD B Corp Buy 202 236 3,707 1,604 1,786 22.3 23.8 11.2 13.6 18.1 14.8 3.4 3.0 20.3 21.4 2.2 1.9HT Media Buy 93 113 2,190 2,111 2,263 14.7 14.8 7.3 8.1 12.7 11.5 1.4 1.2 11.3 11.2 0.7 0.6Jagran Prakashan Buy 91 112 2,889 1,488 1,664 22.7 22.7 6.2 7.1 14.7 12.8 3.6 3.2 25.2 26.3 2.1 1.8PVR Neutral 193 - 501 625 732 17.4 17.1 13.3 15.6 14.5 12.3 1.6 1.4 13.2 13.8 1.2 1.0Sun TV Network Neutral 349 - 13,769 1,981 2,239 77.0 76.7 18.6 21.3 18.8 16.4 4.7 4.1 27.1 27.5 6.4 5.5




MetalMetalMetalMetalMetalBhushan Steel Neutral 497 - 10,552 11,979 14,584 31.6 31.0 49.2 61.4 10.1 8.1 1.3 1.1 14.1 15.2 2.9 2.4Coal India Accumulate 359 385 227,042 69,808 75,550 27.4 27.4 26.0 28.3 13.8 12.7 4.0 3.2 32.5 28.1 2.3 2.0Electrosteel Castings Accumulate 20 23 702 1,984 2,074 11.2 12.6 2.5 2.9 8.2 7.1 0.4 0.1 5.1 5.7 0.5 0.5Hind. Zinc Accumulate 135 144 57,232 12,446 13,538 52.3 52.9 14.3 15.5 9.5 8.7 1.8 1.5 20.5 18.9 2.7 2.1Hindalco Neutral 121 - 23,071 84,855 92,446 8.7 9.3 13.2 16.2 9.1 7.5 0.7 0.6 7.8 8.9 0.7 0.6JSW Steel Neutral 757 - 16,884 38,740 41,459 17.2 17.0 79.9 89.4 9.5 8.5 0.9 0.9 10.4 10.6 0.9 0.8MOIL Accumulate 252 271 4,240 918 993 50.6 50.9 24.5 26.1 10.3 9.7 1.6 1.4 16.0 15.5 2.3 2.0Monnet Ispat Buy 305 379 1,964 2,511 3,303 23.8 26.0 46.3 57.3 6.6 5.3 0.7 0.7 12.4 13.7 1.7 1.2Nalco Reduce 51 48 13,183 7,401 7,841 16.7 19.2 3.4 4.1 14.9 12.5 1.1 1.0 7.4 8.4 1.3 1.2NMDC Accumulate 194 214 76,836 12,934 14,266 79.4 80.1 21.1 23.4 9.2 8.3 2.4 2.0 29.6 26.5 4.1 3.4SAIL Neutral 85 - 35,295 47,252 60,351 14.2 14.8 9.6 11.7 8.9 7.3 0.8 0.7 9.4 10.6 1.2 1.0Sesa Goa Neutral 171 - 14,901 7,704 8,034 33.6 34.6 42.0 43.1 4.1 4.0 0.8 0.7 22.3 19.2 2.2 2.1Sterlite Inds Neutral 99 - 33,388 41,680 45,382 24.2 23.2 16.3 16.9 6.1 5.9 0.7 0.6 11.3 10.7 0.8 0.7Tata Steel Buy 401 481 38,921 145,799 150,431 10.3 11.2 48.6 63.3 8.2 6.3 0.8 0.7 10.5 12.4 0.5 0.5Sarda Accumulate 135 148 485 1,251 1,321 22.7 23.4 33.0 37.1 4.1 3.6 0.6 0.5 15.1 14.8 0.7 0.7Prakash Industries Buy 56 73 759 2,694 2,906 14.6 16.6 16.4 20.8 3.4 2.7 0.3 0.3 11.4 12.8 0.5 0.4Godawari Power Buy 122 161 389 2,341 2,425 15.6 17.3 33.3 43.2 3.7 2.8 0.4 0.4 13.2 14.4 0.5 0.5Oil & GasOil & GasOil & GasOil & GasOil & GasCairn India Accumulate 331 380 63,131 16,605 17,258 75.4 71.7 57.0 54.9 5.8 6.0 1.1 0.9 20.2 16.3 2.8 2.2GAIL Neutral 383 - 48,589 50,176 55,815 15.5 15.8 35.4 36.5 10.8 10.5 1.9 1.7 18.9 17.0 0.7 0.5ONGC Accumulate 280 312 239,896 147,139 154,821 33.9 33.7 30.7 32.3 9.1 8.7 1.6 1.4 18.3 17.2 1.4 1.2Reliance Industries Neutral 837 - 273,982 362,700 380,031 7.9 8.0 61.5 64.3 13.6 13.0 1.3 1.2 10.3 9.9 0.7 0.7Gujarat Gas* Neutral 343 - 4,393 3,228 3,819 11.5 11.3 19.2 22.1 17.9 15.5 4.7 4.3 28.7 29.0 1.2 1.0Indraprastha Gas Neutral 265 - 3,709 3,040 3,135 24.3 26.7 24.8 27.9 10.7 9.5 2.5 2.1 25.5 23.6 1.3 1.1Petronet LNG Accumulate 158 176 11,831 29,145 33,736 6.6 6.5 14.2 16.0 11.1 9.9 2.7 2.2 26.9 24.4 0.4 0.4Gujarat State Petronet Neutral 81 - 4,538 1,041 939 91.8 91.9 8.5 7.4 9.5 10.9 1.6 1.5 18.1 14.0 5.2 5.8PharmaceuticalsPharmaceuticalsPharmaceuticalsPharmaceuticalsPharmaceuticalsAlembic Pharma Buy 72 91 1,348 1,624 1,855 14.2 15.6 6.6 9.1 10.8 7.9 2.7 2.1 27.9 29.9 1.0 0.8Aurobindo Pharma Accumulate 142 156 4,125 5,243 5,767 14.6 14.6 11.8 12.6 12.0 11.2 1.5 1.3 17.9 16.4 1.3 1.1Sanofi India* Neutral 2,374 - 5,467 1,482 1,682 15.5 15.5 95.1 104.4 25.0 22.7 4.4 3.4 18.6 17.0 3.5 3.0Cadila Healthcare Accumulate 872 953 17,858 6,148 7,386 18.6 19.6 36.0 46.1 24.2 18.9 5.7 4.6 25.8 26.8 3.1 2.6Cipla Neutral 381 - 30,559 8,031 9,130 23.4 22.4 18.4 20.0 20.7 19.0 3.4 3.0 17.8 16.6 3.6 3.1Dr Reddy's Accumulate 1,647 1,859 27,967 10,696 11,662 20.7 21.0 83.7 92.9 19.7 17.7 4.0 3.4 22.4 20.8 2.9 2.5Dishman Pharma Neutral 96 - 777 1,280 1,536 17.8 17.8 9.2 11.3 10.5 8.5 0.8 0.7 7.7 8.5 1.3 1.1GSK Pharma* Neutral 1,977 - 16,746 2,651 2,993 31.7 31.2 76.0 82.4 26.0 24.0 7.5 6.7 20.1 26.3 5.5 4.8Indoco Remedies Buy 70 92 640 685 837 15.2 15.2 7.4 8.9 9.4 7.8 1.4 1.2 16.4 17.0 1.1 0.9Ipca labs Neutral 482 - 6,076 2,850 3,474 20.7 20.7 29.2 36.6 16.5 13.2 3.9 3.1 26.1 26.1 2.3 1.9Lupin Accumulate 596 647 26,656 8,426 10,082 19.7 20.0 26.3 31.3 22.7 19.1 5.3 4.3 26.0 24.7 3.2 2.6Orchid Chemicals Neutral 112 - 790 1,667 1,835 13.9 13.9 11.4 13.3 9.8 8.4 0.6 0.6 6.6 7.3 0.9 0.8Ranbaxy* Neutral 530 - 22,361 12,046 11,980 18.0 15.8 31.3 29.8 16.9 17.8 5.8 4.6 39.1 28.9 1.9 1.8Sun Pharma Neutral 693 - 71,686 9,752 12,134 41.6 41.6 26.0 28.2 26.7 24.6 5.0 4.3 20.3 18.8 6.6 5.1



Source: Company, Angel Research, Note: *December year end; #September year end; &October year end; ^June year end; Price as on September 28, 2012


PPPPPowerowerowerowerowerCESC Neutral 331 - 4,141 5,218 5,644 24.2 23.8 44.6 47.6 7.4 7.0 0.8 0.7 11.0 10.6 1.6 1.6GIPCL Accumulate 71 77 1,076 1,557 1,573 29.3 28.7 10.8 11.0 6.6 6.5 0.7 0.6 10.8 10.2 1.2 1.0NTPC Neutral 168 - 138,400 74,111 85,789 22.7 23.1 12.1 13.7 13.9 12.2 1.7 1.5 12.6 13.2 2.5 2.3Real EstateReal EstateReal EstateReal EstateReal EstateAnant Raj Neutral 71 - 2,107 657 875 52.0 56.1 8.4 12.7 8.5 5.6 0.5 0.5 6.3 8.9 4.5 3.4DLF Neutral 234 - 39,712 9,878 12,033 44.7 46.1 9.6 13.4 24.4 17.4 1.5 1.5 6.4 8.7 6.5 5.4HDIL Buy 98 115 4,092 2,441 3,344 55.1 48.2 22.7 26.6 4.3 3.7 0.4 0.3 8.8 9.4 3.5 2.7MLIFE Neutral 378 - 1,543 813 901 26.2 26.6 32.0 37.0 11.8 10.2 1.2 1.1 10.4 11.0 2.3 2.0TTTTTelecomelecomelecomelecomelecomBharti Airtel Neutral 265 - 100,578 79,147 86,745 31.1 32.5 9.9 15.1 26.7 17.6 1.9 1.7 7.0 9.7 2.0 1.7Idea Cellular Neutral 85 - 28,258 22,582 24,684 26.4 26.9 3.3 4.7 25.7 18.1 2.0 1.8 7.8 9.9 1.7 1.5Rcom Neutral 65 - 13,365 20,650 20,935 32.3 33.0 4.2 5.7 15.3 11.3 0.4 0.3 2.3 3.1 2.3 2.1OthersOthersOthersOthersOthersAbbott India Neutral 1,600 - 3,401 1,602 1,833 10.4 11.8 54.7 71.7 29.3 22.3 5.5 4.7 20.0 22.7 1.9 1.6Bajaj Electricals Buy 198 228 1,971 3,670 4,290 7.6 8.8 15.0 23.0 13.2 8.6 2.4 1.9 18.6 22.4 0.5 0.5Cera Sanitaryware Buy 332 388 420 396 470 16.7 16.6 31.0 35.0 10.7 9.5 2.4 2.0 24.8 23.0 1.1 1.0Cravatex Buy 446 682 115 289 340 5.2 5.9 41.0 57.0 10.9 7.8 2.8 2.1 25.2 26.5 0.5 0.4CRISIL Neutral 965 - 6,772 982 1,136 34.3 34.3 34.3 40.0 28.1 24.1 12.7 10.2 50.9 46.9 6.5 5.4Finolex Cables Buy 41 61 629 2,334 2,687 6.2 6.5 8.0 10.0 5.1 4.1 0.7 0.6 13.0 14.9 0.2 0.1Force Motors Buy 448 591 583 2,214 2,765 4.5 5.4 39.0 74.0 11.5 6.0 0.5 0.5 4.4 7.6 0.1 0.1Goodyear India Neutral 318 - 733 1,543 1,654 6.5 7.3 24.8 31.1 12.8 10.2 2.1 1.8 17.1 19.0 0.3 0.2Disa India Buy 2,880 3,353 435 176 203 22.7 22.6 182.4 209.6 15.8 13.7 8.2 6.5 51.8 47.0 2.2 1.8Greenply Industries Buy 193 309 466 1,925 2,235 10.6 10.9 29.6 44.1 6.5 4.4 1.1 0.9 16.8 21.0 0.5 0.4Hitachi Neutral 127 - 292 868 977 3.9 6.6 2.7 10.9 46.4 11.7 1.7 1.5 3.7 13.6 0.4 0.4Honeywell Automation Neutral 2,850 - 2,519 1,847 2,162 4.3 7.3 69.0 135.0 41.3 21.1 3.7 3.2 9.3 16.3 1.3 1.1Styrolution ABS India Buy 632 744 1,112 1,056 1,081 8.0 10.6 34.0 47.0 18.6 13.4 2.6 2.2 14.7 17.5 1.1 1.0ITD Cementation Neutral 246 - 283 1,451 1,669 12.3 12.4 32.4 41.5 7.6 5.9 0.7 0.6 9.4 10.9 0.6 0.6Jyothy Laboratories Neutral 160 - 2,581 1,248 1,468 9.8 10.4 5.9 7.2 27.0 22.3 3.9 3.5 15.0 16.6 2.5 2.0MCX Accumulate 1,284 1,440 6,549 553 624 65.3 66.3 62.5 72.0 20.6 17.8 5.6 4.9 27.5 27.4 8.8 7.4MRF Buy 10,273 12,884 4,357 11,804 12,727 10.4 10.5 1,289.9 1,431.3 8.0 7.2 1.5 1.3 21.3 19.4 0.5 0.4Page Industries Neutral 3,165 - 3,531 887 1,108 18.3 18.6 95.0 120.9 33.3 26.2 17.4 14.1 57.4 59.5 4.0 3.2Relaxo Footwears Accumulate 726 821 871 1,019 1,208 12.3 13.0 51.0 68.4 14.2 10.6 3.8 2.8 30.3 30.2 1.0 0.8Sintex Industries Buy 67 79 1,821 4,751 5,189 16.3 16.6 13.6 15.8 4.9 4.2 0.7 0.6 12.9 13.2 0.7 0.6Siyaram Silk Mills Buy 284 392 266 1,042 1,173 12.4 12.5 66.3 78.5 4.3 3.6 0.8 0.7 21.1 20.8 0.5 0.4SpiceJet Buy 37 43 1,797 5,720 6,599 5.3 6.8 3.6 5.4 10.3 6.9 14.9 4.7 - - 0.4 0.4TAJ GVK Buy 70 108 440 300 319 35.8 36.2 7.9 9.1 8.9 7.7 1.2 1.1 13.9 14.4 1.8 1.5Tata Sponge Iron Buy 315 377 485 787 837 16.2 17.5 58.5 66.9 5.4 4.7 0.8 0.7 14.9 15.1 0.3 0.2TVS Srichakra Accumulate 309 335 237 1,476 1,643 7.0 8.2 32.6 55.9 9.5 5.5 1.5 1.3 16.8 24.8 0.4 0.3United Spirits Neutral 1,218 - 15,931 10,289 11,421 13.5 14.3 31.0 42.9 39.2 28.4 3.1 2.8 8.1 10.3 2.2 2.0Vesuvius India Neutral 338 - 685 560 611 16.1 17.0 24.7 28.8 13.7 11.7 2.0 1.8 15.8 16.2 1.1 1.0S. Kumars Nationwide Buy 19 24 575 7,134 7,985 19.7 19.4 12.2 14.1 1.6 1.4 0.2 0.1 11.3 11.5 0.6 0.6

53



Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Ratings (Returns) :

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Research Team

Fundamental:

Sarabjit Kour Nangra VP-Research, Pharmaceutical [email protected]

Vaibhav Agrawal VP-Research, Banking [email protected]

Bhavesh Chauhan Sr. Analyst (Metals & Mining) [email protected]

Sharan Lillaney Analyst (Mid-cap) [email protected]

V Srinivasan Analyst (Cement, Power, FMCG) [email protected]

Yaresh Kothari Analyst (Automobile) [email protected]

Ankita Somani Analyst (IT, Telecom) [email protected]

Varun Varma Analyst (Banking) [email protected]

Sourabh Taparia Analyst (Banking) [email protected]

Bhupali Gursale Economist [email protected]

Vinay Rachh Research Associate [email protected]

Amit Patil Research Associate [email protected]

Shareen Batatawala Research Associate [email protected]

Twinkle Gosar Research Associate [email protected]

Tejashwini Kumari Research Associate [email protected]

Technicals:

Shardul Kulkarni Sr. Technical Analyst [email protected]

Sameet Chavan Technical Analyst [email protected]

Sacchitanand Uttekar Technical Analyst [email protected]

Derivatives:

Siddarth Bhamre Head - Derivatives [email protected]

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales [email protected]

Hiten Sampat Sr. A.V.P- Institution sales [email protected]

Meenakshi Chavan Dealer [email protected]

Gaurang Tisani Dealer [email protected]

Akshay Shah Sr. Executive [email protected]

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Documents

2QFY2013ResultPreview-031012[1]