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Market Outlook

India Research
April 25, 2012

Dealers Diary
The Indian markets are expected to open in green tracing positive opening in most of the Asian bourses. Asian stocks have snapped a four-day losing streak as corporate profits beat estimates. Globally, US markets turned in a relatively lackluster performance during trading on Tuesday, ending the day mixed as traders seemed reluctant to make any significant moves ahead of the Federal Reserve's monetary policy announcement on Wednesday. The Fed is widely expected to leave interest rates at near-zero levels, however any comments regarding the outlook for further quantitative easing will be given close attention. European markets rebounded from yesterday's sharp sell-off on Tuesday as concerns over Europe's debt crisis were eased a bit after a series of decent bond auctions in Spain, Netherlands and Italy. Meanwhile, Indian shares snapped two days of losses on Tuesday, as investors cheered TCS Q4 earnings and management commentary as well as preliminary reports hinted a normal monsoon this year. Supportive global cues also helped the sentiments.
Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com Chg (%) (Pts) (Close)

0.7 0.4 (0.1) (0.1) (0.4) 0.2 (0.3) 0.0 0.5 (0.0) 4.9
Chg (%)

110.6 17,207 22.1 (8.3) (4.8) (23.6) 13.6 5,223 6,302 6,790 6,762 7,304

(31.3) 11,768 4.5 10,580 57.5 11,014 (2.4) 261.5


(Pts)

7,935 5,562
(Close)

0.6 (0.3) 0.8 (0.8) 0.3 0.4 0.0

74.4 13,002 (8.9) 43.9 (74.1) 12.0 0.3 2,962 5,709 9,468 2,974 2,389

Markets Today
The trend deciding level for the day is 17,167 / 5,212 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,288 17,368 / 5,243 5,264 levels. However, if NIFTY trades below 17,167 / 5,212 levels for the first half-an-hour of trade then it may correct up to 17,087 16,966 / 5,191 5,160 levels.
Indices SENSEX NIFTY S2 16,966 5,160 S1 17,087 5,191 PIVOT 17,167 5,212 R1 17,288 5,243 R2 17,368 5,264

52.8 20,677

Indian ADRs

Chg (%)

(Pts)

(Close)

INFY WIT IBN HDB

0.2 2.0 (0.8) 0.2

0.1 0.2 (0.3) 0.1

$45.7 $10.3 $32.4 $33.5

News Analysis

Initiating Coverage - Force Motors Ltd Diageo looking to pick up minority stake in United Spirits 4QFY2012 Result Reviews Sesa Goa, Cera Sanitaryware 4QFY2012 Result Previews Wipro, Nestle India, Sterlite Industries, Yes Bank, LIC Housing, India Cements, Alembic Pharma

Advances / Declines Advances Declines Unchanged

BSE

NSE

1,295 1,446 117

625 780 85

Refer detailed news analysis on the following page

Net Inflows (April 23, 2012)


` cr FII MFs Purch 1,278 423 Sales 1,617 524 Net (339) (101) MTD (759) (408) YTD 44,567 (5,982)
Volumes (` cr) BSE NSE

2,264 11,244

FII Derivatives (April 24, 2012)


` cr
Index Futures Stock Futures

Purch 5,274 7,339

Sales 5,307 7,200

Net (33) 139

Open Interest 11,965 24,154

Gainers / Losers
Gainers Company
TCS National Alum Pantaloon Retl Wipro Bata India

Losers Company
United Phos Ambuja Cements Ultratech Cem Lanco Infra Idea Cellular

Price (`)
1,195 60 168 443 858

chg (%)
12.8 7.5 4.6 4.4 4.0

Price (`)
120 152 1,410 15 80

chg (%)
(6.0) (4.2) (3.9) (3.8) (3.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Initiating Coverage - Force Motors Ltd - (CMP `539, TP: `678, Upside: 26%)
Force Motors Ltd. (FML) is an integrated automobile company manufacturing light commercial vehicles and tractors in India. Recently, the company sold its stake in MFTL 50:50 JV for an estimated EUR150mn (~`1,050cr). Though the company has a large CAPEX plan, we expect part of the receipts to be distributed in the form of potential dividend or buy-back. We believe FMLs recent entry into the SUV segment with the launch of Force One will enable it to post a top-line CAGR of 22% over FY2011-14E. FML is trading at an attractive PE of 8.7x and EV/Sales of 0.2x on FY2014E. We initiate coverage on FML with a Buy recommendation and a target price of `678, based on target PE of 11x and implied EV/Sales of 0.3x for FY2014E.

Y/E March

Sales (` cr) 2,346 2,753

OPM (%) 6.2 6.6

PAT (` cr) 67 81

EPS (`) 51 62

ROIC (%) 5.2 6.0

P/E (x) 10.6 8.7

P/BV (x) 0.6 0.5

EV/EBITDA (x) 3.0 3.3

EV/sales (x) 0.2 0.2

FY13E FY14E

Diageo looking to pick up minority stake in United Spirits


According to news reports, Diageo, the world's largest spirits company by value is looking at picking up a minority stake in Vijay Mallya owned United Spirits. Negotiations are underway to structure a deal that would arm Mallya with enough cash to revoke pledges on shares of United Spirits. In return, Diageo will get the right to buy shares in United Spirits equivalent to the amount paid to Mallya. If a deal were to be consummated, Diageo is likely to pitch for a reasonable stake, possibly 26%, in United Spirits. Although both United Spirits and Diageo have denied any such news, if Diageo does pick up a stake in United Spirits, it will be a big positive for the company as it will allow Mallya to use the cash to revoke pledges on shares of United Spirits. We recommend a buy on the stock with a target price of `884.

April 25, 2012

Market Outlook | India Research

Result Reviews
Sesa Goa (CMP `184, TP: Under review)
For 4QFY2012, Sesa Goa (Sesa) net sales decreased by 22.9% yoy to `2,794cr, lower than our estimate of `3,006cr, mainly on account of decline iron ore sales volumes and realization. Iron ore sales volumes declined by 21.2% yoy to 5.2mn tonnes while iron ore realization decreased 9.2% yoy to US$101/tonne. Export duty increased 103.4% yoy to `742cr in 4QFY2012 as government had raised export duty on iron ore to 30% from January 2012. EBITDA de-grew by 52.9% yoy to `997cr mainly due to decline in net sales and higher export duty. EBITDA margin slipped 1,232bp yoy due to lower iron ore realization and increase in export duty. The company reported an exceptional item related to forex loss of `66cr in 4QFY2012. Consequently, PAT (but before exceptional items and share of profit from associates) declined 52.5% yoy to `696cr in 4QFY2012. Sesa reported share of income from associate (Cairn India) of `466cr during 4QFY2012. Excluding exceptional items and including share of profit from associates, adjusted PAT decreased 16.0% yoy to `1,228cr (in line with our estimate of `1,247cr). The stock is currently under review.

Y/E March

Sales (` cr) 8,240 8,423

OPM (%) 35.8 35.6

PAT (` cr) 3,902 4,259

EPS (`) 43.9 47.9

ROIC (%) 22.1 20.0

P/E (x) 4.2 3.8

P/BV (x) 0.8 0.7

EV/EBITDA (x) 5.8 5.4

EV/sales (x) 2.1 1.9

FY13E FY14E

Cera Sanitaryware (CMP `252, TP: `320, Upside: 27%)


For 4QFY2012, Cera Sanitaryware Ltd. (CSL) reported 33% yoy growth in its revenue to `100cr, 32% higher than our estimate of `76cr. The companys annual top line grew by healthy 29% to `321cr. Increased top line is assumed to be on the back of the extended capacity being operational. The companys EBITDA came in at `16cr, in-line with our estimate of `16.4cr. EBITDA margin came in at 15.9%, stable on a yoy basis but sequentially lower by 63bp. EBITDA for the year was higher by 11%. Profit for the quarter stood at `9.3cr in 4QFY2012 as compared to `7.9cr in 3QFY2012. Net profit for the year grew by 32% to `32cr. We maintain our Buy recommendation on the stock with a target price of `320, based on a target P/E of 10x for FY2014E.

Y/E March

Sales (` cr) 385 444

OPM (%) 17.2 17.4

PAT (` cr) 37 41

EPS (`) 29 32

ROIC (%) 24 22

P/E (x) 8.9 8.0

P/BV (x) 1.9 1.5

EV/EBITDA (x) 5.9 5.3

EV/sales (x) 1.0 0.9

FY13E FY14E

April 25, 2012

Market Outlook | India Research

Result Previews
Wipro
Wipro is slated to announce its 4QFY2012 results. We expect the companys IT services segment to post revenue of US$1,536mn, up 2.1% qoq. Volume growth is expected to be 2.2% qoq. At the consolidated level, we expect the company to record revenue of `10,125cr, up 1.3% qoq. The company is expected to record 11bp qoq expansion in its EBIT margin to 20.9% of the IT services segment; at a consolidated level, Wipro is expected to record a 6bp qoq decline in its EBIT margin to 17.2%. PAT is expected to come in at `1,522cr. We maintain our Accumulate rating on the stock with a target price of `463.

Nestle India - 1QCY2012 Preview


Nestle is expected to announce its 1QCY2012 results. For the quarter, we expect the company to post 18.3% yoy growth in its top line to `2,141cr. OPM is expected to decline marginally by 29bp yoy to 21.0% due to increased input costs. The companys bottom line is expected to grow by 12.8% yoy to `289cr. We maintain our Neutral view on the stock.

Sterlite Industries
Sterlite Industries is slated to announce its 4QFY2012 results. The companys top line is expected to grow by 9.1% yoy to `10,912cr. However, the companys EBITDA margin is expected to contract by 775bp to 22.8% due to increased prices of key inputs. The companys bottom line is expected to decline by 32.8% yoy to `1,311cr. We maintain our Buy rating on the stock with a target price of `139.

Yes Bank
Yes Bank is slated to announce its 4QFY2012 results. We expect the bank to report healthy NII growth of 30.3% yoy to `454cr. Non-interest income is also expected to grow strongly by 23.3% yoy to `230cr. While operating expenses are expected to increase by 42.3% yoy to `265cr, provisioning expenses are expected to decline by 36.6% yoy to `27cr. Consequently, PAT is expected to increase by 31.5% yoy to `267cr. At the CMP, the stock is trading at 1.8x FY2014E ABV. We value the stock at 2.4x FY2014 ABV. We recommend Buy on the stock with a target price of `477cr.

April 25, 2012

Market Outlook | India Research

LIC Housing
For 4QFY2012, LIC Housing is expected to post a muted performance on the net interest income front. On the back of a yoy decline in non-interest income, operating profit is expected to be lower by 5.7% yoy. Operating expenses of the company are expected to increase by 7.4% yoy, leading to a decline in preprovisioning profit by 7.8% yoy to `413cr. Provisioning expenses are expected to increase by 38.1% yoy to `26cr, leading to a dip in PBT by 9.8% yoy to `387cr. Consequently, PAT is expected to decline by 11.2% yoy to `279cr. At the CMP, the stock is trading at 1.6x FY2014 ABV. We value the stock at 1.85x FY2014 ABV and, hence, recommend Buy on the stock with a target price of `295.

India Cements
India Cements is slated to announce its 4QFY2012 results. The company is expected to post top-line growth of 11.1% yoy to `1,109cr on account of higher volumes and better realization. However, OPM is expected to increase by 290bp yoy to 21.0% due to better realization. The companys bottom line is expected to increase by 27.5% yoy to `71cr. We maintain our Neutral view on the stock.

Alembic Pharmaceuticals
For 4QFY2012, Alembic Pharmaceuticals is expected to post net sales and profit of around `344cr and `26.5cr, registering yoy growth of 16.5% and 157.3%, respectively. Sales growth would be driven by strong exports growth during the period. Along with top-line growth, ~480bp yoy expansion in OPM is expected to drive net profit growth. OPM for the quarter is expected to come in at around 14.0%. We maintain our Buy rating on the stock with a target price of `95.

Quarterly Bloomberg Brokers Consensus Estimates


LIC Housing Finance - (25/04/2012)
Particulars (` cr) Net profit 4Q FY12E 256 4Q FY11 315 y-o-y (%) (19) 3Q FY12 306 q-o-q (%) (16)

Nestle India - (25/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 1Q CY12E 2,175 467 21.5 297 1Q CY11 1,810 383 21.2 256 16 y-o-y (%) 20 22 4Q FY11 1,955 410 21.0 231 29 q-o-q (%) 11 14

April 25, 2012

Market Outlook | India Research

Sterlite Industries Ltd - Consolidated (25/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 10,439 2,545 24.4 1,381 4Q FY11 10,000 3,059 30.6 1,925 (28) y-o-y (%) 4 (17) 3Q FY12 10,246 2,318 22.6 914 51 q-o-q (%) 2 10

Wipro - Consolidated (25/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 10,102 1,909 18.9 1,485 4Q FY11 8,302 1,861 22.4 1,375 8 y-o-y (%) 22 3 3Q FY12 9,881 1,868 18.9 1,375 8 q-o-q (%) 2 2

Yes Bank - (25/04/2012)


Particulars (` cr) Net profit 4Q FY12E 262 4Q FY11 203 y-o-y (%) 29 3Q FY12 254 q-o-q (%) 3

Idea Cellular - Consolidated (26/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 5,304 1,429 26.9 245 4Q FY11 4,199 1,075 25.6 275 (11) y-o-y (%) 26 33 3Q FY12 5,020 1,345 26.8 201 22 q-o-q (%) 6 6

Axis Bank - (27/04/2012)


Particulars (` cr) Net profit 4Q FY12E 1,175 4Q FY11 1,020 y-o-y (%) 15 3Q FY12 1,102 q-o-q (%) 7

ICICI Bank - (27/04/2012)


Particulars (` cr) Net profit 4Q FY12E 1,732 4Q FY11 1,452 y-o-y (%) 19 3Q FY12 1,728 q-o-q (%) 0

Jindal Steel & Power Ltd. - Consolidated (27/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 4,859 1,953 40.2 1,130 4Q FY11 3,848 1,727 44.9 1,002 13 y-o-y (%) 26 13 3Q FY12 4,355 1,742 40.0 996 13 q-o-q (%) 12 12

April 25, 2012

Market Outlook | India Research

Siemens India - (27/04/2012)


Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2Q SY12E 3,159 307 9.7 197 2Q SY11 3,034 445 14.7 278 (29) y-o-y (%) 4 (31) 1Q SY12 2,361 123 5.2 71 177 q-o-q (%) 34 150

Economic and Political News


Government to deregulate diesel prices: Finance Ministry Government disburses `3.93lakh cr farm credit in Apr-Jan Retrospective change in Income Tax Act may yield `40,000cr

Corporate News

SC refuses to grant 400 days to Centre for license auction Lupin to set up new plant at Nagpur, invests `400cr in 5 yrs Sun gets USFDA nod for schizophrenia drug CCI fines United Phosphorus `252cr

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
25/04/2012 26/04/2012 27/04/2012 28/04/2012 30/04/2012 02/05/2012 03/05/2012 Wipro, Sterlite Inds, Nestle, LIC Housing Fin., Yes Bank, Alembic Pharma Idea Cellular, Gujarat Gas, MRF, Vesuvius India ICICI Bank, Jindal Steel, Axis Bank, Siemens, Indiabulls Fin., Hind. Const. Maruti Titan Inds., Bank of India, Dabur India, Godrej Consumer, Exide Industries, Oriental Bank, United Phosphorus, Areva, Vijaya Bank, Punj Lloyd, KPIT Cummins, Automotive Axle, Taj GVK HUL Bharti Airtel, Hero Motocorp

April 25, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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April 25, 2012

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