Market Outlook

India Research
February 6, 2012

Dealers Diary
The domestic markets are expected to open in the green tracking gap up opening in most of the Asian markets. Indian markets ended higher on Friday for a fourth day in a row on the back of heavy buying by FIIs. Globally, most of the US and European markets closed higher as traders reacted positively to a much better than expected report on the employment situation in the US in the month of January. With the stronger than expected job growth, the unemployment rate unexpectedly fell to 8.3% (lowest since February 2009) from 8.5% in the previous month. Also, a separate report from the Institute for Supply Management showed that non-manufacturing index rose to 56.8 in January from a revised 53.0 in December, with a reading above 50 indicating growth in the service sector. Indian investors this week, meanwhile, would keenly watch out for the domestic industrial production growth for the month of December due to be released on Friday. Also, consumer comfort index of US which will be released on coming Thursday will be on radar.

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)

1.0 1.1 1.3 1.2 1.7 1.1 1.4 0.8 1.1 0.9
Chg (%)

173.1 17,605 56.0 76.3 77.6 106.7 80.4 74.6 97.3 52.6
(Pts)

5,326 6,046 6,687 6,412 7,486 9,523 8,689 5,912

(Close)

163.5 11,644

(1.1) (131.1) 11,875

1.2 1.6 1.8 (0.5) 0.1 0.6 0.8

Chg (%)

156.8 12,862 46.0 105.0 (44.9) 16.9 17.9

(Pts)

Markets Today
The trend deciding level for the day is 17539 / 5,305 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,696 17,787 / 5,355 5,385 levels. However, if NIFTY trades below 17,539 / 5,305 levels for the first half-an-hour of trade then it may correct up to 17,448 17,292 / 5,276 5,226 levels.
Indices SENSEX NIFTY S2 17,292 5,226 S1 17,448 5,276 PIVOT 17,539 5,305 R1 17,696 5,355 R2 17,787 5,385

2,906 5,901 8,832 2,918 2,330

(Close)

17.5 20,757

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

2.9 2.1 3.1 3.4

1.6 0.2 1.1 1.1

BSE 1,692 1,200 111

$57.1 $11.5 $38.3 $33.5

NSE 881 560 83

News Analysis
3QFY2012 - Result Reviews DRL, Madras Cements, HEG, TVS Srichakra, Subros 3QFY2012 - Result Previews HUL, Nalco, GSKCH, MOIL, India Cements, BGR Energy, NCC, GIPCL
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

Net Inflows (February 02, 2012)

` cr FII MFs Purch
5,125 803

Sales
2,990 916

Net
2,135 (113)

MTD
4,228 72

YTD
15,308 (1783)

Volumes (` cr) BSE NSE 2,923 13,650

FII Derivatives (February 03, 2012)

` cr
Index Futures Stock Futures

Purch 1,590 1,749 Gainers

Sales 1,482 1,487

Net 107 262

Open Interest 12,408 27,550 Losers

Gainers / Losers
Company
Bajaj Finserv Tata Global CESC India Cements Sintex Inds

Price (`)
495 119 269 94 98

chg (%)
8.8 8.3 6.9 6.8 6.6

Company
Reliance Comm Hindalco Inds Hindustan Copp Financial Tech Jindal Steel

Price (`)
94 153 299 775 556

chg (%)
(3.3) (3.1) (3.0) (2.9) (2.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

3QFY2012 - Result Reviews

DRL
For 3QFY2012, DRL posted a good set of numbers, much ahead of our expectations. The companys net sales came in at `2,769.2, growth of 46% yoy. Growth was driven by U.S. sales, which grew by 120% yoy. Other key geographies apart from Europe grew in double digits. Growth in the U.S. was led by the high value launch of Olanzapine 20 mg, new products launched in the past 12 months and strong volume growth across key products. This also aided significant improvement in the companys gross margin and subsequently in OPM. The companys OPM expanded by 12% yoy to 27%. Consequently, net profit grew by 88% yoy during the period. We maintain our Buy rating on the stock. The target price is under review.

Madras Cements
During 3QFY2012, Madras Cements top line rose by 27.9% yoy to `741cr. The cement business posted 29.4% yoy growth in net sales to `733cr on account of 19.1% yoy growth in dispatches (on a low base) and 8.6% yoy growth in realizations. The wind divisions revenue decreased by 38.8% yoy to `7.7cr. Improved cement realization aided OPM to grow by 243bp to 28.0%, amidst cost pressures felt in freight expenses and other costs. The companys bottom line increased by 76.7% yoy to `77cr. We maintain our Neutral view on the stock.

HEG
HEG Ltd. reported revenue growth of 35% yoy to `418cr for 3QFY2012 from `310cr in 3QFY2011 due to increased prices of graphite electrodes and over 100% capacity utilization for the quarter. OPM for the quarter contracted by 1,059bp to 11.9% in 3QFY2012 from 22.4% in 3QFY2011 on account of higher other expenses and forex loss of `35.5cr. PAT dipped by 37% yoy to `24cr as compared to `38cr in 3QFY2011. Tax rate was lower at 12% for the quarter compared to 21% in 3QFY2011. We maintain our Buy rating on the stock with a revised target price of `236, based on a target P/B of 1.0x for FY2013E.

TVS Srichakra
For 3QFY2012, TVS Srichakra reported a mixed set of numbers. The company reported 21.1% yoy growth in its net sales, from `287cr in 3QFY2011 to `348cr in 3QFY2012. Net raw-material cost for the company increased by 23.7% yoy. Increased net raw-material cost along with higher other expenditure by 22.3% yoy led to a substantial decline in the operating profit of the company. Operating profit margin stood at 7.1%, a decline of 95bp yoy and 220bp qoq. The companys profit declined by 33.1% yoy to `7cr, which was `10cr in the same quarter last year. We maintain our Buy recommendation on the stock. The stock price is under review.

February 6, 2012

Market Outlook | India Research

Subros
Subros reported poor results for 3QFY2012, led by a yoy decline in volumes and increased interest expense. However, on a sequential basis, higher interest cost and depreciation expense impacted the companys performance. Subros reported a 7.1% yoy decline in its net sales to `254cr due to a 13% yoy drop in volumes. Net average realization improved by 6.7% yoy, thereby preventing further decline in the top line. On a sequential basis, net sales increased by 5.5% on account of a 9.1% increase in volumes. Operating margin improved by 107bp yoy (62bp qoq) to 8.5%, driven by raw-material cost savings (raw-material to sales ratio declined by 381bp yoy) due to commencement of local production of certain components (mainly evaporators). On the other hand, a 266bp yoy increase in staff cost restricted margin expansion to a certain extent. Net profit nosedived by steep 62.5% yoy (33.7% qoq) to `2.1cr on account of an 88.1% yoy (21.3% qoq) increase in interest cost. The stock rating is currently under review.

3QFY2012 - Result Previews

HUL
HUL is expected to announce its 4QFY2011 results. We expect the company to report a healthy 15.7% yoy growth rate in its revenue to `5,815cr and a 107bp yoy expansion in its operating margin to 13.1%. The company is expected to report 15.7% yoy growth in recurring earnings, owing to healthy revenue traction and an expansion in margins. We maintain our Neutral view on the stock.

Nalco
Nalco is slated to report its 3QFY2012 results. We expect net sales to increase by 24.2% yoy to `1,770cr. However, EBITDA margin is expected to contract by 1,034bp yoy to 17.0% due to rise in prices of key inputs (primarily coal). Net profit is expected to decrease by 12.4% yoy to `224cr. We maintain our Neutral view on the stock.

GSKCH 4QCY2011
GSK Consumer (GSKCH) is slated to announce its 4QCY2011 numbers. For the quarter, we expect GSKCH to post healthy growth of 20% yoy in its top line to `610cr, driven by growth in its core brands and new product launches. The bottom line is expected to register growth of 17.9% yoy to `63cr, aided by top-line growth and margin expansion of 24bp yoy to 11.8%. We maintain our Neutral view on the stock.

February 6, 2012

Market Outlook | India Research

MOIL
MOIL is slated to report its 3QFY2012 results. We expect net sales to decline by 2.1% yoy to `248cr, mainly on account a decline in manganese ore prices. Nevertheless, EBITDA margin is expected to improve by 120bp yoy to 47.0% in 3QFY2012. Net profit is expected to increase by 0.4% yoy to `106cr. We maintain our Neutral view on the stock.

India Cements
India Cements is expected to announce its 3QFY2012 results. We expect the companys top line to grow by 18% yoy to `922cr, primarily on account of 15.4% yoy growth in realization (though on a lower base of last year). The companys margin is expected to improve by 220bp yoy to 14.3%, aided by higher realization. The companys net profit is expected to grow by 19.2% yoy to `26cr. We maintain our Neutral rating on the stock.

BGR Energy
For 3QFY2012, we expect BGR Energy's (BGR) top line to be under pressure due to high base created in 3QFY2011 and partly due to execution delays. The top line is expected to decline by 28.3% yoy to `901.1cr. EBITDA margin is expected to come in at 12.0%. Interest cost is expected to stretch further (owing to hike in interest rates and enhanced working capital debt levels); which, along with slumped revenue, is likely to drag the bottom line down by 46.1% yoy to `47.2cr. At the CMP, the stock is trading at 6.7x and 7.2x FY2012E and Fy2013E EPS, respectively. Currently, we remain Neutral on the stock.

Nagarjuna Construction Company

We expect subdued performance from Nagarjuna Construction (NCC) for this quarter. On the top-line front, NCC is expected to post a yoy decline of 9.0% to `1,215cr. EBITDA margin is expected to be flat at 9.5%. On the earnings front, we expect NCC to post a decline of 65.4% yoy to `14.0cr for the quarter. This would be primarily due to burgeoning interest cost (yoy jump of ~73.2%) and a decline in the companys top line. Owing to the sharp run up in the stock price, we recommend Neutral on the stock.

GIPCL
GIPCL is expected to announce its 3QFY2012 results. The company is expected to register 15.5% yoy growth in its revenue to `353cr, primarily on the back of higher volumes from 250MW SLPP station II. OPM is set to expand by 633bp to 33.1% due to higher availability of Surat II station. The companys bottom line is expected to improve by 52.6% yoy to `37cr in 3QFY2012. We maintain our Buy rating on the stock with a target price of `95.

February 6, 2012

Market Outlook | India Research

Quarterly Bloomberg Brokers Consensus Estimates

Adani Power Ltd - (06/02/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 1,098 526 47.9 211 3Q FY11 y-o-y (%) 503 273 54.3 109 94 118 93 2Q FY12 q-o-q (%) 1,072 519 48.4 177 19 2 1

Adani Ports & SEZ Ltd - (06/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 643 440 68.4 303 3Q FY11 y-o-y (%) 421 310 73.6 228 33 53 42 2Q FY12 q-o-q (%) 588 411 69.9 273 11 9 7

Hindustan Unilever Ltd - (06/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 5,879 857 14.6 700 3Q FY11 y-o-y (%) 5,027 725 14.4 638 10 17 18 2Q FY12 q-o-q (%) 5,522 827 15.0 689 2 6 4

Mahindra & Mahindra Ltd - (07/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 7,985 998 12.5 687 3Q FY11 y-o-y (%) 6,074 924 15.2 735 (7) 31 8 2Q FY12 q-o-q (%) 7,307 874 12.0 737 (7) 9 14

GMR Infra Ltd - Consolidated (07/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 1,814 513 28.3 (63) 3Q FY11 y-o-y (%) 1,359 381 28.1 (22) 184 33 34 2Q FY12 q-o-q (%) 1,812 501 27.7 (63) 1 0 2

Power Grid Corporation Ltd - (08/02/2012)

Particulars (` cr) Net profit 3Q FY12E 739 3Q FY11 591 y-o-y (%) 25 2Q FY12 709 q-o-q (%) 4

February 6, 2012

Market Outlook | India Research

Bharti Airtel Ltd - Consolidated (08/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 18,427 6,288 34.1 1,347 3Q FY11 15,759 5,021 31.9 1,303 3 y-o-y (%) 17 25 2Q FY12 17,270 5,815 33.7 1,027 31 q-o-q (%) 7 8

ONGC Ltd - (08/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 21,127 13,119 62.1 6,859 3Q FY11 18,586 13,531 72.8 7,083 (3) y-o-y (%) 14 (3) 2Q FY12 22,616 14,469 64.0 8,642 (21) q-o-q (%) (7) (9)

Economic and Political News

Court quashes Swamy's petition, relief for Chidambaram Global food prices to ease in 2012: World Bank Government may lower STT in Budget to boost markets GoM meeting on ATF import, FDI, AI on Thursday

Corporate News
Central Bank of India may recast loans to power utilities Fortis invests `274cr in two Singapore healthcare ventures Mundra project may become an NPA: Tata Power Reliance Industries to charge US$0.15 marketing margin on CBM gas

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

Results Calendar
06/02/2012 07/02/2012 08/02/2012 09/02/2012 09/02/2012 10/02/2012 HUL, Mundra Port, Adani Power, Nalco, GlaxoSmith Con, MOIL, Dena Bank, BGR Energy , India Cements, Nagarjuna Const., GIPCL M&M, Cadila Healthcare, GMR Infra., ITNL, SpiceJet, J K Lakshmi Cements ONGC, Bharti Airtel, Power Grid Corpn, Bharat Forge, Orchid Chemicals, Alembic Pharma Adani Enterp., Tata Steel, Hindalco, Ambuja Cements, ACC, HPCL, Cummins India, Tech Mahindra, GSPL, Page Industries, Apollo Tyres, FAG Bearings, Dishman Pharma, JK Tyre Tata Power Co., BPCL, IDFC, Shriram Trans., JSW Steel , Sun TV Network, Britannia, Aurobindo Pharma Reliance Capital, Pantaloon Retail, Aurobindo Pharma, Eros International, BPCL, Apollo Hospitals, Britannia, MTNL, SUN TV, Tata Power, RCom

February 6, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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February 6, 2012