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4QFY2012 Results Preview | April 4, 2012

Table of Contents
Strategy 4QFY2012 Sectoral Outlook Automobile Banking Capital Goods Cement FMCG Infrastructure Information Technology Metals Oil & Gas Pharmaceutical Power Real Estate Telecom Watch Stock Watch 11 14 19 21 23 25 28 31 34 37 40 42 44 47
Note: Stock prices as on March 30, 2012 Refer to important Disclosures at the end of the report

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4QFY2012 Results Preview | April 4, 2012

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Macro fundamentals improving... both on the global and domestic fronts
Global crisis threats, which have plagued world markets since 2007 (first the subprime crisis and then European sovereign debt crisis), have finally begun to recede, as evidenced by the improving global economic environment. With improving sentiment and substantial liquidity support in the U.S. and European economies, we expect emerging markets such as India to once again develop into bright prospects for capital inflows. Indian markets have already witnessed net inflows of ~`45,000cr in the first three months of CY2012 compared to net outflow of ~`4,000cr in CY2011. Further, domestically, with repo rate cuts on the anvil (likely to begin in the next few months), macro fundamentals are expected to improve going into FY2013. During 4QFY2012E, earnings growth of our coverage universe (ex. SBI on account of one-off provisioning in 4QFY2011) is expected to remain moderate at around 4.3% yoy, as successive quarters of margin compression and high interest continue to weigh down on profitability. Similarly, we expect Sensex 4QFY2012E earnings to remain sudued and grow at meager 5.8% yoy (ex. SBI). Sensex earnings growth for FY2012E is expected to be modest at 9% yoy. However, cooling inflation and interest rates are expected to underpin healthier growth over FY2012-14E. We expect Sensex companies to deliver EPS growth of 13.4% yoy in FY2013E and 14.3% yoy in FY2014E, translating into a reasonable 13.9% CAGR over FY2012-14E. Earnings growth is expected to be broad-based with significant contributions from rate-sensitive financials and auto stocks, followed by metal, IT and oil and gas stocks. We assign a conservative multiple of 14.5x to FY2014E earnings, resulting into a 12-month Sensex target of 20,700, which implies an upside of ~19% from current levels. economic data and as reflected in the strong performance of U.S. equity markets (at their four-year high). The initial jobless claims (as of March 23, 2012) have declined sharply to 359K from 390K registered on January 6, 2012, and from the all-time high of 659K registered three years back (March 27, 2009). In fact, the current initial jobless claims reading is the lowest since April 2008 and is lower by ~13% than the average levels of 400K over the last 10 years. Consumer confidence levels in the U.S. (71.6 in February 2012 and 70.2 in March 2012) are at their highest levels since March 2008 (barring the 72 reading recorded in February 2011), indicating the renewed optimism about the future state of economic affairs among consumers. The monthly nonfarm payroll data, which denotes the number of jobs added or lost in the economy (excluding government and farming-related jobs) over the preceding month, has been in the positive territory for the past consecutive 17 months (addition of 2,812K jobs). Since July 2011, nonfarm payroll data has registered higher levels compared to the forecasts for every month; this, along with consistently lower-than-estimated jobless claims, reflects the positive effect of the stimulation created by the Fed's accommodative monetary policy. The Fed is expected to remain committed to ongoing liquidity creation measures (as indicated by a recent speech by Fed's chairperson, Ben Bernanke) to further fuel consumer demand and business investment.

Exhibit 1: Jobless claims lowest since April 2008


(`000) 750 600 450 300 150 0

Global crisis threats receding


Global economic markets have been experiencing turbulent times over the past 3-4 years and have witnessed an elongated downturn on account of multiple financial crisis. The series of crisis started with the subprime crisis in the U.S. and was followed by fears of a double-dip recession in the U.S. and ongoing European sovereign debt crisis. The magnitude of these crisis prompted central banks all around the world to undertake a series of quantitative easing (QE) measures. Notably, QE1 and QE2 by the Fed from November 2008 to June 2011and then the LTRO programs by the ECB over the last three months have led to stimulating effects, as reflected in the overall improving global economic outlook. Economic situation in the U.S. has improved significantly over the past six months (credited to the soft monetary policy adopted by the Fed), as suggested by the series of better-than-estimated
Refer to important Disclosures at the end of the report

Mar-11

Jan-02

Dec-02

Nov-03

Sep-05

Aug-06

May-09

Source: Bloomberg, Angel Research

Exhibit 2: Higher-than-estimated jobs created in last 8 months


('000) 300 250 200 150 100
125 157 155 223 140 284 60 202 95 112 210 227 85 96 85

50 0

Jul-11

Aug-11

67.5

Sep-11

Oct-11 Survey

Nov-11 Latest

Dec-11

Jan-12

Feb-12

Source: Bloomberg, Angel Research

Feb-12

Oct-04

Jul-07

Jun-08

Apr-10

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The recent rounds of LTRO by the ECB, motivated by the success of QEs in the U.S., infused funds worth ~EUR1trn into the capital-starved European banks. Euro reforms coupled with liquidity creation are expected to encourage economic growth in European countries. The recent success of Greek debt swap (up to 70% hair cut), successful introduction of austerity measures and decline in bond yields from their peaks suggest that the worst of Eurozone crisis is behind us. 3) The slowdown in China on account of slowing consumption and weakening export growth is expected to reduce competition for foreign capital inflows. 4) As global crisis threats recede further, global investors would once again look to diversify their portfolios and look at emerging markets like India for enhanced returns.

Domestic economic outlook hinged on interest rate reversal


Back home, the domestic economy has also been able to reduce the magnitude of headwinds over the last couple of months. Improved order book for some of the infra companies (road and ports), increased cement dispatches and rising vehicle sales (partly attributed to pre-budget surge) point towards an improving economic outlook. Strong PMI data over the last four months (both manufacturing and services) indicates continued expansionary activities. The rate of growth in new businesses is the fastest since April 2011, while confidence levels were at their eight-month high in the latest February readings, signaling continued improvement in demand. Going ahead, however, we feel further improvement in domestic fundamentals is also hinged on interest rate reversal, which we expect would begin in the next few months.

Exhibit 3: Bond yields* off their peak levels


Country Current yield Germany Italy Spain Greece 1.9 5.2 5.4 19.9 Peak yield 3.5 7.3 6.7 37.1 1.6 2.1 1.3 17.2 Diff Current spread 3.3 3.5 18.0 Peak spread 5.5 4.7 35.3 2.3 1.2 17.3 Diff

Source: Bloomberg, Angel Research; Note: 10-year govt. bond yields

Capital inflows likely to be healthy


Dual concerns (global and domestic) remained an overhang on Indian stock markets in CY2011, which led to reduced capital inflows into Indian markets. However, with improving sentiment and substantial liquidity support in the U.S. and European economies, Indian markets have witnessed a sharp increase in capital inflow in the last three months. From January-March 2012, Indian markets received net FII inflows worth ~`45,000cr as compared to net outflow of ~`4,000cr in CY2011. We expect FII inflows to further pick up from these levels, primarily on account of the following four reasons: 1) U.S. markets are trading at their four-year highs; and liquidity creation through the LTRO programs, in our view, is likely to make emerging markets such as India once again bright prospects for capital inflows. 2) Improvement in domestic macro fundamentals is expected to gather pace post the commencement of monetary easing, which is expected to begin over the next couple of months.

Exhibit 5: Manufacturing PMI index - India


60.0 57.9 57.9 58.0 57.5 55.3 55.0 53.6 52.6 50.4 50.0 52.0 51.0 54.2 57.5 56.6

45.0
Aug-11 Sep-11 Dec-11 Feb-11 May-11 Mar-11 Nov-11 Apr-11 Feb-12 Jun-11 Oct-11 Jan-12 Jul-11

Source: Markit, Angel Research

Exhibit 6: Services PMI index - India


62.0 60.2 58.8 59.2 58.0 55.0 53.8 54.0 49.8 50.0 49.1 53.2 56.1 54.2 58.2 58.0 56.5

Exhibit 4: Capital inflows have picked up in CY2012


(` cr) 30,000 25,000 20,000 15,000 10,000 5,000 (5,000) (10,000) (15,000)

46.0
Aug-11 Mar-11 Nov-11 Dec-11 Feb-11 Jun-11 May-11 Feb-12 Jul-11 Sep-11 Oct-11 Apr-11 Jan-12

Source: Markit, Angel Research


Feb-11 Jul-11 Sep-11 May-11 Aug-11 Mar-11 Nov-11 Dec-11 Feb-12 Jun-11 Jan-11 Oct-11 Apr-11 Jan-12 Mar-12

Source: Bloomberg, Angel Research Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Strategy
Inflation environment should aid monetary easing commencement
In February 2012, inflation levels moderated substantially to 6.95% (down ~250bp) compared to the preceding three months and are in-line with the RBI's year-end inflation projections. Food inflation for February 2012 climbed back to 6.1% yoy from negative 0.5% yoy for January 2012; however, the sharp yoy jump can be attributed to the low base effect (decline of 5.8% mom in food inflation in February 2011). Also, for February 2012, annualized mom food inflation levels stood at 5.6%, lower than the six-month annualized figure of 7.1%. Manufacturing inflation in February eased further to 5.7% yoy (lowest levels in over a year) from 6.5% yoy levels in January 2012. Annualized mom growth in the manufacturing index stood at 4.2% and even the six-month annualized figure was at low 4.6% levels. More importantly, core inflation, which the RBI tracks closely for its monetary policy decisions, eased further to 5.5% levels.

Sensex EPS expected to post a 13.9% CAGR over FY2012-14E


We expect Sensex EPS to grow by 13.4% to `1,253 in FY2013E and by 14.3% to `1,433 in FY2014E, implying a 13.9% CAGR over FY2012-14E. Meanwhile, Sensex EPS for FY2012E is expected to post modest 9.0% growth with significant contribution from BFSI stocks, followed by stocks from IT, auto and oil and gas sectors. Of the total growth in Sensex EPS in FY2012E over FY2011, BFSI stocks are expected to contribute 47.6%, while IT, auto and oil and gas companies are expected to contribute 23.1%, 16.6% and 16.2%, respectively. Without these contributions, Sensex EPS growth would have been negative in FY2012E. BFSI companies are estimated to post strong yoy profit growth on account of healthy NIM expansions. While earnings of IT companies (mainly Infosys and TCS) are expected to grow on account of sharp INR depreciation and strong business growth, the auto sector's contribution to overall growth is expected to be on account of strong show by Tata Motors despite significant earnings decline expected in Maruti Suzuki. On the other hand, metals, telecom, power and real estate stocks are expected to drag Sensex EPS growth. Metal stocks are estimated to pull down Sensex EPS growth by 17.3%, mainly on account of a 46.7% yoy earnings decline expected in Tata Steel due to higher input cost as well as global demand slowdown affecting overseas operations. Telecom companies are also expected to drag down Sensex EPS growth by 7.1% on the back of higher amortization expenses due to 3G services rollout as well as impact of INR depreciation on interest costs of foreign borrowings.

Exhibit 7: WPI levels have moderated significantly


(%) 20.0 16.0 12.0 8.0 4.0 0.0 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12

WPI

Primary Articles

Fuel & Power

Source: EAIndustry, Angel Research

The marked decline in manufacturing inflation levels over the past three months (~240bp) has been visible post the dip in primary inflation, as a large part of pass-through of primary inflation is, in our view, already done with. Going ahead, sustained lower food inflation levels are likely to lead to lower wage inflation, which in turn are likely to translate into further easing of manufacturing inflation levels. Hence, in our view, the overall inflation environment should aid monetary easing commencement; and we expect the RBI to begin with more decisive signaling through repo rate cuts in the next few months. The consequent reduction in interest rates should end the spell of margin compression, which has afflicted corporate earnings in the past several quarters. We are factoring in ~100bp reduction in interest rates over FY2013 (inflation levels expected to be lower by 150bp) and expect the reduction in interest servicing costs to have a pronounced positive effect on FY2013 earnings, especially for capital-intensive sectors, which have been battered by elevated interest burden for quite a while now.
Refer to important Disclosures at the end of the report

Exhibit 8: Sectoral contribution to Sensex EPS growth in FY12E


133.5 113.5 93.5 73.5 53.5 33.5 13.5 (6.5) (26.5) (17.3) (7.1) (1.8) (0.3) 16.6 7.5 11.1 47.6 23.1 16.2 4.4 100.0

Real Estate

Auto

IT

Oil & Gas

Pharma

Metals

Engg.

Finance

Power

FMCG

Source: Angel Research

In FY2013E, when Sensex EPS is expected to grow by 13.4%, the BFSI sector again would be the largest contributor to its growth with 38.2% of the overall increase. Other sectors, which are also expected to contribute reasonably well, are auto and IT. Ex. BFSI stocks' contribution, Sensex EPS growth would have

Telecom

Total

4QFY2012 Results Preview | April 4, 2012

Strategy
been much lower at 6.4%. The BFSI sector's growth is expected to be primarily on account of strong performances by all companies, owing to stable margins and improving asset quality, implying lower provisioning and, therefore, higher profits. Auto and IT companies are expected to contribute 13.6% and 13.4%, respectively, to total Sensex EPS growth in FY2013E. The auto sector's contribution to overall growth is expected to be on account of strong show by Maruti Suzuki, which had been grappled with production troubles in FY2012E. Growth in the profits of IT companies is expected due to decent business growth as CY2012 IT budget is expected to be flat to marginally positive. Even among them, Wipro is expected to fare much better, as it is expected to reap benefits of restructuring exercise done in FY2012, depicting the low base effect. Metals and FMCG companies are also expected to contribute to Sensex EPS growth by 9.5% and 7.7%, respectively. Notably, none of the sectors is expected to contribute negatively to Sensex EPS growth in FY2013E.

Exhibit 10: Sectoral contribution to Sensex EPS growth in FY14E


100.0 80.0 10.9 60.0 34.9 40.0 20.0 9.8 2.9 6.3 14.4 12.8 1.3 1.5 1.5 3.7 100.0

Auto

Metals

Power

Real Estate

FMCG

IT

Oil & Gas

Finance

Pharma

Engg.

Source: Angel Research

Expect Sensex to reach 20,700 by March 2013


We remain optimistic on the long-term prospects of the Indian growth story due to benefits of demographic dividend, a primarily domestic consumption-driven economy, its relative better positioning globally, reasonable earnings growth trajectory and attractive valuations vis--vis India's structurally positive outlook. Global crisis threats, which have plagued world markets since 2007 (first the subprime crisis and then European sovereign debt crisis), have finally begin to recede, as evidenced by the improving global economic environment. With improving sentiment (driven by accommodative monetary policies) and substantial liquidity support in the U.S. and European economies, we expect emerging markets such as India to once again develop into bright prospects for capital inflows. Further, domestically, with repo rate cuts on the anvil (likely to begin in the next few months), macro fundamentals are expected to improve going into FY2013. Rate-sensitive sectors, which have been facing the brunt of high interest servicing costs for quite some time now, are expected to take the driver's seat from the defensives and drive the earnings growth over FY2012-14E. Within rate-sensitive sectors, we continue to like financials, infra and auto, which are likely to benefit the most from the expected reduction in interest rates. Within export-oriented sectors, we continue to like stocks in the pharma space. We maintain our 12-month Sensex target of 20,700, assigning a conservative multiple of 14.5x (vs. 5-year range of 13.8-19.1x and average of 16.9x and 10-year range of 10.8-17.9x and average of 14.3x) FY2014E earnings. Our target implies an upside of ~19% from current levels, which is likely to be back-ended.

Exhibit 9: Sectoral contribution to Sensex EPS growth in FY13E


100.0 9.5 80.0 60.0 40.0 20.0 13.6 1.0 7.7 38.2 13.5 3.9 2.0 3.2 0.4 6.9 100.0

Auto

IT

Oil & Gas

Finance

Pharma

Engg.

Metals

Power

Real Estate

FMCG

Source: Angel Research

In FY2014E, we expect Sensex EPS to grow by 14.3%, with BFSI stocks continuing to dominate Sensex EPS growth, contributing 34.9%. Other sectors that are expected to contribute significantly to EPS growth are metal and oil and gas. Metal companies are expected to contribute a higher 14.4% of the increase in EPS on the back of strong performance by Tata Steel and JSPL. Both these companies would start getting additional profits in FY2014E from their new capacities coming on stream around that time. Oil and gas companies are expected to contribute 12.8% to Sensex EPS growth due to 11% earnings growth expected in index heavyweight, Reliance Industries. Again, none of the sectors is expected to report a decline in earnings.

Refer to important Disclosures at the end of the report

Telecom

Total

Telecom

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4QFY2012 Results Preview | April 4, 2012

Strategy
Exhibit 11: Sensex EPS estimates
(`)
1,500 1,300 1,100 900 700 500 300 FY2011 FY2012E FY2013E FY2014E 1,014
growth 9.0%
owth % gr 13.4
14.3 % gr owth

Sensex 4QFY2012E earnings to grow 10.9% yoy


1,433 1,253

1,105

Source: Angel Research

Exhibit 12: Sensex one-year forward P/E


27.0 24.0 21.0 18.0 15.0 12.0 9.0 6.0

Sensex companies are expected to report healthy top-line growth of 15.5% yoy during the quarter. Operating margins are expected to contract by 285bp on a yoy basis to 18.3% (ex. Financials). However, on a sequential basis, margin compression, which has affected profitability in the last few quarters, is expected to moderate, with a minimal expected dip of 25bp. Net profit margin is expected to come in at 11.8% (ex. SBI), up by 100bp on a qoq basis. Overall, we expect Sensex 4QFY2012E earnings to grow by 13.6% yoy, aided mainly by SBI (one-off provisioning item in 4QFY2011), despite being dragged by an earnings decline of 14.8% yoy expected in oil and gas stocks on account of margin contraction of 652bp yoy. Ex. SBI, Sensex earnings growth is expected to be much lower at 5.8% yoy. Ex. SBI and oil and gas stocks, Sensex earnings growth is expected to be 10.9% yoy. Sensex net profit growth of 13.6% in 4QFY2012E is primarily aided by strong bottom-line numbers expected from BFSI, IT and auto companies. Ex. BFSI, auto and IT companies' contribution, Sensex' yoy net profit growth is expected to be in the negative territory. Sensex' top-line growth is likely to be dominated by auto and oil and gas stocks, accounting for combined top-line growth of ~57%. Sensex IT companies are expected to report strong 27.0% yoy sales growth on account of modest volume growth emanating from decent budget flush from clients and yoy INR depreciation. Profitability of companies such as Infosys, TCS and Wipro is expected to rebound by healthy 27.1%, 24.0% and 10.6% yoy, respectively, aided mainly by yoy INR depreciation. Sensex pharmaceutical companies are expected to buck the trend of margin compression, with a strong 896bp yoy OPM expansion on the back of 11.4% yoy top-line growth, partly aided by the yoy depreciation of the INR vs. USD. Bottom-line growth is expected to be strong at 60.9% yoy. We expect Sensex BFSI companies ex. SBI (as SBI had one-off item in 4QFY2011 pertaining to provisioning expenses) to post healthy 19.6% yoy bottom-line growth on the back of stable to improving margins and healthy performance of private banks. While oil and gas stocks are expected to contribute a sizeable 23% to the top-line growth of the Sensex, operating margins are expected to decline rather steeply by 652bp. ONGC is expected to face higher subsidy burden in 4QY2012E, which

Sep-01

Jul-11
Sep-11

Mar-03

Mar-09

Mar-06

Mar-97

Dec-97

Mar-00

Sensex 1 year forward P/E

Dec-00

15 year Avg

5 year Avg

Source: Blommberg, Company, Angel Research

Exhibit 13: Earnings yield vs. bond yield


13.0 11.0 9.0 7.0 5.0 3.0
Mar-01 Sep-01 Mar-02 Sep-02 Mar-11 Mar-03 Mar-05 Mar-04 Mar-09 Mar-06 Mar-08 Mar-00 Mar-07 Mar-10 Mar-12 Sep-03 Sep-04 Sep-05 Sep-06 Sep-00 Sep-07 Sep-08 Sep-09 Sep-10

Earnings Yield

10Yr G-Sec Yield

Source: Bloomberg, Company, Angel Research

Refer to important Disclosures at the end of the report

Mar-12

Dec-03

Dec-06

Dec-09

Sep-04

Jun-99

Jun-99

Jnl-05

Sep-98

Sep-07

Jun-08

Sep-10

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Strategy
is expected to result in a 5.6% and 5.0% decline in the top line and bottom line, respectively. Although GAIL is expected to report 20.3% yoy top-line growth on account of higher gas prices, its bottom-line growth is expected to come in at 1.9% on account of 260bp margin compression. For RIL, we expect healthy 16.5% yoy top-line growth on the back of rise in prices of petrochemical products. However, due to margin compression, the bottom line is expected to decline by 22.3% yoy. Sensex' auto companies are also expected to contribute significant 34% to Sensex' top-line growth. Strong revenue growth is mainly on account of healthy volume growth, price increases and favorable currency impact primarily on the JLR front. Operating margins are expected to remain stable on account of easing raw-material prices. Overall, for Sensex auto companies, we expect revenue growth of 31% yoy and net profit growth of 27.1% yoy. We expect Sensex FMCG companies to post decent 15.7% yoy growth in sales, aided by modest volume growth coupled with price hikes taken by companies. Margins are expected to improve by ~255bp yoy. Bottom-line growth for Sensex FMCG companies is expected to be healthy at 23.3% yoy. From the capital goods pack, BHEL is expected to witness 14.0% yoy top-line growth. PAT margin is estimated to fall by 60bp yoy, resulting in decent bottom-line growth of 9.2% yoy. Sensex metal companies are expected to witness overall muted sales growth of 1.9% yoy due to modest top-line performance of steel companies on account of flat yoy realization and the expected decline in the top-line of nonferrous metal companies owing to lower LME prices. Margins are expected to decline by 470bp yoy due to higher input costs. Overall, we expect flat profit growth for Sensex metal companies. For Coal India, we expect a sharp 5.9% yoy decline in net profit mainly on account of higher staff costs provisions. The telecom sector is expected to witness strong sales growth of 20.4% yoy mainly on account of strong growth in Africa business and decent Indian subscriber growth. Operating profit of the sector is expected to grow by modest 10.9% yoy, impacted by increased operational charges. Net profit, however, is expected to decline by 22.2% yoy on account of higher amortization expenses due to 3G services rollout as well as impact of INR depreciation on interest costs of foreign borrowings.

Exhibit 14: Sensex earnings summary


(` Net Sales (` cr) Company Finance IT Oil & Gas FMCG Auto Engineering Metals Telecom Power Pharma Mining Real Estate Sensex Sensex # Source: Company, Angel Research; Note: #On free-float adjusted basis Weightage (%) 24.6 16.1 14.5 11.5 9.9 6.4 6.1 3.1 3.0 2.7 1.5 0.6 100.0 4QFY2012E 27,418 32,662 109,896 12,421 80,782 39,898 55,443 18,973 18,645 3,431 17,672 2,382 419,622 4QFY2011 22,774 25,710 96,964 10,736 61,663 33,765 54,432 15,756 20,505 3,079 15,089 2,683 363,155 % chg 20.4 27.0 13.3 15.7 31.0 18.2 1.9 20.4 (9.1) 11.4 17.1 (11.2) 15.5 16.0 4QFY2012E 7,986 6,784 7,626 2,179 6,232 4,916 5,564 1,090 3,281 1,057 3,958 446 51,119 Profit (` Adj. Net Profit (` cr) 4QFY2011 3,730 5,574 8,950 1,767 4,904 4,484 5,557 1,401 3,409 657 4,207 345 44,984 % chg 114.1 21.7 (14.8) 23.3 27.1 9.6 0.1 (22.2) (3.8) 60.9 (5.9) 29.4 13.6 16.8

Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Strategy
Earnings growth of our coverage to moderate in 4QFY12E
Earnings growth trajectory of our coverage universe is expected to moderate in 4QFY2012 as well, as higher input costs and interest rates continue to affect margins and the overall profitability of corporates. For our coverage universe as a whole (ex. SBI due to one-off provisioning expenses in 4QFY2011), we expect yoy top-line growth to remain reasonable at close to 15% levels. However, the compression in OPM and higher interest costs are likely to restrict operating profit and net profit growth to just ~4.3% yoy each. For our financials coverage universe, private banks are expected to continue to outperform public sector banks and drive earnings growth in the sector. Overall, we expect large private banks to post 18.5% yoy growth in net interest income, while PSU banks are expected to register 19.4% yoy growth (9.8% yoy ex. SBI). While large private banks are expected to report healthy 20.7% yoy growth on the net profit front, PSU banks are likely to post relatively lower 13.4% yoy growth (ex. SBI) due to higher provisioning expenses. For 4QFY2012E, we expect our FMCG coverage universe to register healthy ~16.8% yoy top-line growth, backed by modest volume growth and price hikes. OPMs are expected to expand by 152bp on the back of superior product mix and cut in A&P costs, which would result in healthy 26.4% yoy growth in operating profit and 25.7% yoy growth in net profit. IT companies are expected to report healthy top-line growth of 25.9% yoy on account of INR depreciation vs. the USD and modest volume growth, considering moderate demand for IT solutions. Operating margins are expected to remain flat due to increased employee cost on a yoy basis, as pent-up demand in 1HFY2012 forced companies to hike salaries. Overall, IT companies under our coverage are expected to report earnings growth of ~22% yoy. For our automobile coverage universe, we expect strong revenue growth of 31.4% yoy, driven by volume growth and pricing action. A large portion of this jump is expected to be on account of Tata Motors, which continues to record strong performance on the JLR front. Operating margins are likely to remain flat, led by stable commodity prices. Overall, we expect earnings of our our automobile coverage universe to grow by 20.7% yoy. Pharma companies under our coverage universe are expected to register steep ~77.3% yoy earnings growth (ex. Ranbaxy 29.2% yoy), mainly on account of strong top-line growth of 32.1% yoy coupled with significant improvement in margins by around 876bp. In the metals pack, we expect the top line of steel companies under our coverage to report modest performance on account of flat realizations on a yoy basis. Further, due to relatively higher raw-material costs, margins of steel companies are likely to contract by 295-708bp yoy. For nonferrous metal companies, we expect margin compression (165-1,558bp yoy) on account of declining LME prices and higher coal cost. Moreover, sectors like capital goods, construction and cement are likely to continue facing the brunt of higher interest costs in 4QFY2012E as well. For our capital goods universe, we expect moderate 3.2% yoy bottom-line growth; while for infra and cement companies, we expect a 2.7% and 1.2% yoy decline in net profit, respectively. However, with interest rates projected to have a downward trajectory over FY2012-14E, we expect these sectors to report improved performance going ahead.

Exhibit 15: Angel universe estimates summary


(` Net Sales (` cr) Company Auto & Auto Ancillary Capital Goods Cement Construction Financials FMCG IT Metals & Mining Oil & Gas Pharmaceutical Power Real Estate Telecom Angel Universe 4QFY2012E 100,578 31,719 14,519 33,797 69,804 25,008 44,842 99,566 113,333 18,075 17,863 3,160 29,098 601,363 4QFY2011 76,546 28,595 12,264 30,748 61,777 21,343 35,612 97,279 100,619 13,686 16,675 3,270 24,920 523,332 % chg 31.4 10.9 18.4 9.9 13.0 16.8 25.9 2.4 12.6 32.1 7.1 (3.4) 16.8 14.9 4QFY2012E 7,431 3,558 1,682 2,455 19,485 3,471 8,344 14,545 9,889 3,975 2,916 698 1,433 79,883 Profit (` Adj. Net Profit (` cr) 4QFY2011 6,157 3,447 1,702 2,523 13,856 2,752 6,867 16,878 11,408 2,242 2,975 573 1,832 73,210 % chg 20.7 3.2 (1.2) (2.7) 40.6 25.7 21.5 (13.8) (13.3) 77.3 (2.0) 21.9 (21.7) 9.1

Source: Company, Angel Research; Note: Only for coverage stocks for which quarterly results are estimated Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Strategy
Exhibit 16: Earnings estimates for Sensex companies
(` Net Sales (` cr) Company Bajaj Auto Bharti Airtel BHEL Cipla Coal India DLF Gail India HDFC HDFC Bank Hero Honda Hindalco HUL ICICI Bank Infosys ITC 4QFY2012E 4,721 18,973 20,954 1,690 17,672 2,382 10,697 1,867 4,727 5,984 6,680 5,737 4,875 9,100 6,684 4QFY2011 4,052 15,756 18,380 1,615 15,089 2,683 8,894 1,655 4,095 5,351 6,761 4,899 4,150 7,250 5,836 3,848 15,384 6,682 9,864 15,519 15,396 72,674 12,874 10,000 1,463 35,715 4,986 33,823 10,158 8,302 363,155 % chg 16.5 20.4 14.0 4.6 17.1 (11.2) 20.3 12.8 15.4 11.8 (1.2) 17.1 17.5 25.5 14.5 14.7 23.1 20.4 20.1 6.1 (5.6) 16.5 23.9 9.1 19.0 40.5 (56.3) (1.1) 32.3 21.9 15.5 16.0
#

Adj.Net Profit (` Adj.Net Profit (` cr) 4QFY2012E 815 1,090 3,054 282 3,958 446 798 1,267 1,451 658 516 640 1,719 2,310 1,539 994 1,862 611 503 2,711 2,652 4,177 3,549 1,311 775 3,645 570 2,743 2,952 1,522 51,119 4QFY2011 676 1,401 2,798 214 4,207 345 783 1,142 1,115 502 708 486 1,452 1,818 1,281 1,002 1,686 607 660 2,782 2,791 5,376 21 1,951 443 2,460 627 1,896 2,381 1,375 44,984 % chg 20.7 (22.2) 9.2 31.8 (5.9) 29.4 1.9 11.0 30.2 31.1 (27.1) 31.7 18.3 27.1 20.1 (0.7) 10.4 0.7 (23.8) (2.5) (5.0) (22.3) NA (32.8) 75.0 48.2 (9.1) 44.7 24.0 10.6 13.6 16.8

Weightage (%) 1.7 3.1 1.5 1.1 1.5 0.6 1.3 6.8 6.7 1.4 1.2 3.0 7.0 9.6 8.5 1.6 4.9 2.2 1.3 1.8 3.9 9.2 4.1 1.2 1.6 3.3 1.2 2.2 4.7 1.9 100.0

% Contribution to Sensex growth# 1.9 (2.9) 2.4 1.2 (0.7) 0.7 0.2 3.4 7.2 2.1 (3.6) 2.1 7.2 11.3 4.9 (0.1) 4.3 0.1 (2.1) (0.4) (0.9) (17.8) 42.7 (7.8) 3.6 20.7 (1.1) 16.0 4.6 1.0 100.0

Jindal Steel & Power 4,414 L&T M&M Maruti Suzuki NTPC ONGC RIL SBI Sterlite Sun Pharma Tata Motors Tata Power Tata Steel TCS Wipro Total Sensex
#

18,945 8,046 11,843 16,468 14,530 84,669 15,948 10,912 1,741 50,188 2,177 33,437 13,438 10,125 419,622

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

Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

4QFY2012 Sectoral Outlook

Refer to important Disclosures at the end of the report

10

4QFY2012 Results Preview | April 4, 2012

Automobile
For 4QFY2012, we expect our auto universe to witness robust revenue growth of ~30% yoy (~13% qoq), led by healthy volume growth of ~10% yoy (~3% qoq) coupled with price increases and favorable currency movement (primarily on the JLR front). We expect EBITDA margin of our universe to marginally expand by 40bp yoy (flat qoq) to ~13%, led by stable raw-material prices and better product mix. As a result, adjusted net profit (excluding forex loss) is likely to register strong ~25% yoy (~10% qoq) growth. Amongst automobile companies, Tata Motors (TTMT) is expected to report a robust set of results, benefitting from sustained volume momentum at Jaguar Land Rover (JLR) in recent months. However, Maruti Suzuki (MSIL) and Ashok Leyland (AL) are expected to report poor performance mainly on account of margin pressures. The domestic automotive industry witnessed healthy volume growth YTD in FY2012, registering 12.5% yoy growth despite dual concerns of economic slowdown and high interest rates. Volume growth, however, remained mixed and has been driven by strong 26.9% yoy growth in the light commercial vehicle (LCV) segment and healthy 14.8% and 12.8% yoy growth in the two-wheeler (2W) and utility vehicle (UV) segments, respectively. The passenger car (PC) segment, on the other hand, remained the most affected and reported flat growth during the period. During 4QFY2012, while TTMT and MSIL reported better-than-expected volume performance, TVS Motor (TVSL) and Mahindra and Mahindra (MM, mainly on the tractors front) reported lower-than-expected volume growth. Going ahead, in FY2013, we expect interest rates to ease, leading to revival in demand in the passenger vehicle (PV) and commercial vehicle (CV) segments; however, volume growth in the 2W and tractor segments is likely to be muted, led by high base effect and slowdown in rural demand. In the long run though, volume outlook across all the segments is expected to be positive, aided by rising income levels, easy availability of finance, new product launches and improved outlook for exports.

Auto index outperforms the Sensex


The BSE Auto Index gained 24.5% in 4QFY2012 as against 12.6% gains recorded by the Sensex, thereby posting a strong outperformance of 11.8% during the quarter. The outperformance was led by index heavyweights, TTMT and MSIL; however, MM, BJAUT and HMCL underperformed the index on concerns relating to demand slowdown in the tractors and 2W segments. While TTMT benefitted from strong JLR volume growth and blockbuster 3QFY2012 results, MSIL's performance was boosted by restoration of operations at Manesar plant and availability of additional diesel engines from Fiat. Further, higher discounts and fears of increase in excise duty in Union Budget 2012-13 led to pre-buying by customers, thereby supporting overall volume growth. Further, Apollo Tyres (APTY) and Exide Industries (EXID) also posted sharp gains during the quarter, led by a decline in raw-material (natural rubber and lead) prices.

Exhibit 1: 4QFY2012 - Stock price performance


Tata Motors Maruti Suzuki M&M (22.4) Hero MotoCorp Exide Industries Cummins India Bharat Forge Bajaj Auto Ashok Leyland Apollo Tyres (30.0) (20.0) (10.0) 0.0 (19.1) 5.3 8.7 10.3 10.0 20.0 30.0 33.2 34.7 40.0 50.0 60.0 3.2 27.7 (16.6) 2.0 7.9 17.3 17.9 41.7 42.4 22.2 46.6 30.1 54.5

Relative to Auto index (%)

Absolute

Source: Bloomberg, Angel Research

Strong demand for LCVs driving CV sales


The CV segment sustained its strong growth momentum, registering 18.6% yoy growth YTD in FY2012, led by impressive 26.9% yoy growth in the LCV segment. Demand for LCVs continued to be driven by growth in the agriculture sector, preference for low payload vehicles and structural factors such as proliferation of the hub and spoke model and new launches. The M&HCV segment, however, witnessed 9.2% yoy growth as slowdown in industrial activity and higher financing rates impacted demand. Going ahead, we expect the LCV segment to sustain its strong performance and post a CAGR of 16-18% over the next two years. During 4QFY2012, TTMT is likely to report robust ~41% yoy growth in net sales, led by strong volume growth on the domestic and JLR (driven by Evoque) fronts, along with favorable currency movement (primarily at JLR). As a result, adjusted net profit is likely to report impressive ~38% yoy growth. We expect AL to post strong ~19% yoy growth in volumes; however, higher contribution of Dost in total volumes is likely to impact net

Union Budget 2012-13 - Marginally negative


Union Budget 2012-13 was marginally negative for the automobile sector, as general excise duty was raised by 2% across all product categories. Additionally, excise duty has been rationalized to ad-valorem from ad-valorem and fixed rate for large PV and CV chassis. Following the budget announcements, most of the companies have announced price hikes to pass on the burden. Hence, we do not expect any significant impact of the budget announcement on earnings; however, due to increased cost of ownership for consumers, there could be delay in demand recovery for four-wheelers (4W) in our view. Further, absence of any additional excise duty on diesel vehicles is a big positive for MM and MSIL.

Refer to important Disclosures at the end of the report

11

4QFY2012 Results Preview | April 4, 2012

Automobile
average realization and overall profitability. This coupled with higher interest outgo (higher working capital requirement) is likely to impact the bottom line, which is expected to decline by ~15% yoy during the quarter.

Exhibit 3: MSIL and MM Quarterly volumes


Segment
MSIL Domestic Exports MM Automotive - exports Tractor - domestic Tractor - exports

4QFY2012 4QFY2011 % chg


359,382 321,200 38,182 182,175 8,975 46,791 3,579 343,350 312,399 30,951 167,006 102,056 5,562 56,293 3,095

FY2012

FY2011 % chg

4.7 1,132,743 1,271,015 (10.9) 2.8 1,006,092 1,132,749 (11.2) 23.4 9.1 20.4 61.4 (16.9) 15.6 126,651 714,492 451,227 29,518 220,310 13,437 138,266 590,719 358,023 19,042 201,786 11,868 (8.4) 21.0 26.0 55.0 9.2 13.2

Exhibit 2: TTMT and AL Quarterly volumes


Segment
TTMT M&HCV LCV Total CV Utility vehicles PC Total PV Exports (incl. above) AL

4QFY2012 4QFY2011 % chg


274,336 64,674 103,521 168,195 19,599 86,542 106,141 18,248 35,353 236,329 62,020 83,503 145,523 14,057 76,749 90,806 15,384 29,680 16.1 4.3 24.0 15.6 39.4 12.8 16.9 18.6 19.1

FY2012
900,919 222,105 360,150 582,255 55,974 262,690 318,664 63,273 101,473

FY2011 % chg
803,316 211,636 285,347 496,983 43,070 263,263 306,333 58,042 94,106 12.2 4.9 26.2 17.2 30.0 (0.2) 4.0 9.0 7.8

Automotive - domestic 122,830

Source: Company; Angel Research; Note: Volumes for March 2012 are estimated

Moderation seen in 2W sales


The 2W segment, which had so far remained insulated from the slowdown in economic activity and fuel price hikes, finally succumbed to the pressures and witnessed moderation in demand during 4QFY2012. Retail volumes remained weak during the quarter, leading to an increase in dealer inventory levels to 30-40 days from normal levels of 20-25 days. Going ahead, for FY2013E, we expect the industry's volume growth to remain sluggish, registering around ~10% growth. However, on a YTD basis, the 2W segment has reported healthy 16.2% yoy growth, as sales continue to be benefitted by inadequate public transport system, rising income levels (particularly in rural areas) and strong replacement demand in urban markets. Domestic volumes grew by 14.8% yoy, while exports registered strong 26.9% yoy growth YTD in FY2012. On the volume front, there was a slowdown in growth across 2W majors, with BJAUT and HMCL reporting modest growth of 9.9% and 8.2% yoy, respectively. TVSL, however, reported flat growth as volumes were impacted due to increased competitive pressures and slowdown in demand. We expect 2W companies in our coverage universe to report strong 20-32% yoy growth in 4QFY2012 earnings, led by healthy volume growth and improved margins on the back of increased average net realization and easing of commodity cost pressures. Exhibit 4: BJAUT, HMCL and TVSL Quarterly volumes
Segment
BJAUT BJAUT Motorcycles Three-wheelers

Source: Company; Angel Research; Note: Volumes for March 2012 are estimated

Pre-budget buying and high discounts boost PV sales


The PV industry, which witnessed challenging times during 9MFY2012 owing to multiple headwinds in the form of higher interest rates, persistent inflation, fuel price hikes and labor issues at MSIL, registered better-than-expected growth in 4QFY2012. The better-than-expected performance recorded by the PV industry in 4QFY2012 in spite of various adverse economic factors can be attributed to pre-budget buying by consumers in anticipation of excise duty hike in the Union Budget, higher discounts offered by OEMs and restoration of supply by market leader, MSIL. However, market conditions have remained challenging for the industry in FY2012, which has resulted in modest volume growth of 3% yoy YTD in FY2012. Noticeably, volumes in the domestic PC segment (~75% of PV sales) registered flat growth during the period. Further, significant price differential between petrol and diesel prices in recent times (currently at ~`24 against five-year historical average of ~`14) led to a shift in consumer demand in favor of diesel cars. As a result, diesel car volumes have grown by 35% yoy YTD in FY2012, while petrol car volumes have declined by 15% yoy. Going ahead, with the likely easing of interest rates, we believe the worst is over for the industry and expect the domestic PC segment to report 13-15% yoy volume growth in FY2013, driven by increased diesel engine capacity by manufacturers and pickup in demand for petrol cars. During 4QFY2012, we expect MSIL to report strong ~20% yoy (impressive ~55% qoq) growth in its top line, led by ~5% yoy growth in volumes and ~14% yoy growth in net average realization. However, the bottom line is expected to witness a decline of ~24% yoy, as EBITDA margin is likely to dip by ~300bp yoy to 7% due to adverse currency impact on direct as well as indirect imports.

4QFY2012 4QFY2011 % chg


1,041,652 913,900 127,752 948,195 836,668 111,527 275,843 1,454,431 533,772 218,825 123,726 179,155 12,066 70,513

FY2012

FY2011 % chg
14.4 13.7 19.7 32.7 15.4 7.4 1.0 13.7 11.1 2.0 22.3

9.9 4,374,045 3,823,929 9.2 3,851,057 3,387,018 14.5 522,988 436,884

Exports (incl. above) 364,723 HMCL TVSL Motorcycles Scooters Mopeds Three-wheelers Exports (incl. above) 1,573,737 526,075 194,127 118,162 205,319 8,467 57,070

32.2 1,597,133 1,203,718 8.2 6,236,915 5,402,443 (1.4) 2,198,153 2,046,737 (11.3) (4.5) 14.6 (29.8) (19.1) 845,174 530,367 781,888 40,724 287,210 836,821 466,264 703,723 39,929 234,850

Source: Company; Angel Research; Note: Volumes for March 2012 are estimated Refer to important Disclosures at the end of the report

12

4QFY2012 Results Preview | April 4, 2012

Automobile
Auto ancillaries to track the auto sector
While OE demand continues to remain sluggish on account of macro concerns such as rising interest rates and slowdown in industrial activity, replacement sales have also seen moderate offtake due to weakness in overall economic activity, thereby negatively affecting ancillary manufacturers. We, however, expect the demand environment to improve in the OE as well as replacement segment in FY2013, aided by the likely easing of interest rates. During 4QFY2012, we expect auto ancillary companies to report moderate net profit growth on account of modest domestic auto sales and operating margin pressures. We expect a sequential expansion in the operating margins of Bosch and FAG Bearings, mainly due to stronger INR compared to 3QFY2012, as imports form a substantial portion of rawmaterial costs for both the companies. Motherson Sumi is expected to witness yet another challenging quarter, as its operating margin is likely to remain under pressure owing to ramping up of new plants in Brazil and Hungary and due to consolidation of low-margin Peguform operations. However, the standalone performance will benefit from normal production at its major client, MSIL. We expect EXID to continue to report improved performance sequentially, as revenue growth will be driven by increased 4W battery volumes and uptick in inverter batteries. We expect qoq expansion in the company's operating margin on the back of softening lead prices (down ~20% yoy) and better product mix. As a result, PAT is expected to jump by ~25% sequentially. Led by healthy PV and CV sales, APTY is likely to register a strong ~19% yoy increase in its top line. EBITDA margin is estimated to improve by 50bp qoq to 10.4%, as natural rubber prices have declined by ~6% qoq. We expect Bharat Forge to report strong top-line growth of ~22% yoy, driven by healthy growth in the CV sector and aided further by its diversified business model (one-third of revenue from non-auto business); operating margin of the company is expected to improve with easing commodity prices, leading to ~17% yoy growth in net profit.

Outlook
We believe long-term structural growth drivers of the Indian automobile industry such as GDP growth (leading to increasing affluence of rural and urban consumers), favorable demographics, low penetration levels, entry of global players and easy availability of finance are intact, which should support a 13-14% CAGR in auto volumes over FY2012-14E. As such, we prefer stocks that have strong fundamentals, high exposure to rural and exports markets and command superior pricing power. Against the backdrop of likely easing of interest rates, we expect demand revival in the 4W segment. Hence, we remain AL, TTMT. positive on AL, MM and TTMT.

Exhibit 5: Quarterly estimates Automobile


Company AL BJAUT HMCL^ MSIL MM TTMT* TVSL CMP (`) 30 1,678 2,055 1,349 697 276 41 Net Sales 4QFY12E 4,298 4,721 5,984 11,843 8,046 50,188 1,733 12.3 16.5 11.8 20.1 20.4 40.5 8.0 OPM (%) chg bp (252) 9 36 (300) (131) 170 83 10.8 20.6 12.5 7.0 11.4 14.2 6.4 Profit Net Profit 4QFY12E 253 815 658 503 611 3,645 55 (15.3) 20.7 31.1 (23.8) 0.7 48.2 31.0 (` EPS (`) % chg (15.3) 20.7 31.1 (23.8) 0.7 48.8 31.0 0.9 28.2 32.9 17.4 10.4 11.5 1.1 (` EPS (`) FY12E 2.1 105.3 120.0 50.3 41.8 35.1 4.9 FY13E 2.6 115.9 135.0 85.4 44.6 38.7 5.0 FY14E 3.1 125.9 141.4 100.7 48.7 42.9 5.6 FY12E 14.4 15.9 17.1 26.8 16.7 7.9 8.3 P/E (x) FY13E 11.8 14.5 15.2 15.8 15.6 7.1 8.2 FY14E 9.8 13.3 14.5 13.4 14.3 6.4 7.3 % chg 4QFY12E % chg 4QFY12E (`) (` 37 1,888 2,177 1,510 802 318 56 Buy

(` cr)
rge Target Reco.

Accumulate Accumulate Accumulate Buy Buy Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012, * Consolidated numbers; ^ OPM adjusted for royalty payments

Exhibit 6: Quarterly estimates Auto Ancillary


Company Apollo Tyres* Bharat Forge& Bosch# Exide Industries CMP (`) 79 321 8,251 149 Net Sales 4QFY12E 3,241 967 2,245 1,325 353 5,686 18.7 21.5 8.3 8.0 14.9 145.3 OPM (%) chg bp (137) 76 (35) (425) (147) (353) 10.4 25.0 18.5 14.5 19.0 7.5 Net Profit Profit 4QFY12E 118 301 130 44 158 140 (27.1) 17.4 9.9 (20.4) 3.2 13.6 EPS (`) (` % chg (27.1) 17.4 9.9 (20.4) 3.2 13.6 2.8 5.1 96.0 1.5 26.6 4.1 EPS (`) (` FY12E 7.9 17.9 357.5 5.8 105.9 7.5 FY13E 10.5 22.3 394.5 7.5 121.0 13.3 FY14E 12.5 26.6 439.3 8.9 137.8 18.0 FY12E 10.0 17.9 23.1 25.7 15.8 24.7 P/E (x) FY13E 7.5 14.4 20.9 19.7 13.9 14.0 FY14E 6.3 12.1 18.8 16.7 12.2 10.3 Target rge (` (`) 94 372 8,787 216 Buy Buy % chg 4QFY12E % chg 4QFY12E

(` cr)
Reco.

Accumulate Neutral Neutral Buy

FAG Bearings# 1,676 Motherson Sumi* 186

Source: Company, Angel Research; Note: Price as on March 30, 2012, * Consolidated numbers; # December year ending; & Full year EPS is consolidated

Yaresh Kothari Analyst - Yaresh Kothari


Refer to important Disclosures at the end of the report

13

4QFY2012 Results Preview | April 4, 2012

Banking
Banking stocks after underperforming the Sensex for three consecutive quarters (1QFY2012-3QFY2012) were able to outperform the Sensex handsomely by 15.8% (absolute returns of 28.4%) in 4QFY2012 on account of lower valuations and improving economic outlook. The rally in banking stocks was led by mid cap PSU banks, within which Dena Bank gave the highest sequential returns of 84.3%, followed by UCO Bank and Syndicate Bank, which gave returns of 73.8% and 62.4%, respectively. Inflation levels moderated significantly in 4QFY2012 (~250bp), leading to increased anticipation of rate cuts, which fueled the rally in banking stocks. Throughout 4QFY2012, the RBI continued with open market operations (OMOs) and, along with cumulative 125bp cut in cash reserve ratio (CRR), infused liquidity worth ~`2lakh cr in the financial system, which allowed banks to manage the tight liquidity situation (owing to slowing deposit growth and dollar sales by the RBI). Considering the significant moderation in inflation levels over 4QFY2012, we expect the RBI to commence with repo rate cuts in the next few months, which, in our view, should help banking stocks in maintaining their positive performance in FY2013 as well.

Deposit growth decelerates in 4QFY2012


Credit growth for the banking sector has been on a declining trend since the beginning of FY2011. Credit growth as of March 9, 2012, stood weak at 16.3% yoy, which can primarily be attributed to the slowing economy along with a high base effect (23.2% yoy growth as of March 11, 2011). Interest rates have remained elevated for quite some time now (base rate for SBI at 10% since August 2011), leading to continued tapering off in the credit appetite of the economy. Incremental credit in FY2012 YTD is lower by 10.3% yoy compared to FY2011 YTD; deposit accretion, which had picked up post successive deposit rate hikes, decelerated quite sharply during 4QFY2012 to 13.9% yoy (as of March 9, 2012) compared to 16.9% yoy as of December 30, 2011. Incremental FY2012 YTD deposits as of March 9, 2012, are only marginally higher by 0.2% yoy compared to FY2011 YTD.

Exhibit 2: Deposits growth decelerates


(` cr) 700,000

Exhibit 1: 4QFY2012 stock performance


(%) Dena Bank UCO Bank Syndicate Bank Allahabad Bank United Bank Yes Bank Central Bank Andhra Bank Bank of Maharashtra Axis Bank Union Bank of India Bank of India Jammu & Kashmir Bank IDBI Bank Indian Bank Canara Bank ICICI Bank State Bank of India Vijaya Bank Oriental Bank of Commerce Indian Overseas Bank Bankex Federal Bank South Indian Bank HDFC Bank Corp Bank Bank of Baroda LIC Housing Finance Punjab National Bank Sensex HDFC Source: Bloomberg, Angel Research Returns (qoq) 84.3 73.8 62.4 61.9 55.4 54.4 53.3 49.0 42.5 41.8 38.8 36.2 36.0 34.3 31.9 30.5 30.0 29.5 29.3 28.7 28.6 28.4 26.6 22.9 21.8 21.4 19.7 19.0 18.5 12.6 3.3 Returns (yoy) (13.4) (26.0) (9.5) (19.0) (32.0) 19.1 (28.2) (20.9) (8.2) (18.4) (32.1) (23.7) 5.1 (26.5) 4.8 (24.0) (20.2) (24.2) (26.4) (35.1) (34.4) (11.6) 1.9 8.1 10.8 (33.2) (17.5) 16.5 (23.7) (10.5) (4.0)
600,000 611,278 548,021 500,000

647,544

648,667

400,000 Credit offtake (` cr) Deposit mobilisation (` cr)

FY2011#

FY2012*

Source: RBI, Angel Research; Note: #Between March 26, 2010 and March11, 2011, * Between March 25, 2011 and March 09, 2012

Slowing deposit growth coupled with the RBI's intervention in the forex market to support the depreciating rupee has led to liquidity pressures exacerbating since the starting of CY2012 (avg. borrowings of ~`1.4lakh cr compared to ~`88,000cr in 3QFY2012). While the RBI has infused ~`2lakh cr in the system through CRR cuts and OMOs, liquidity pressure has remained intact (`1.25lakh cr as of March 30, 2012) and is expected to ease only post the commencement of FY2013.

Exhibit 3: Average LAF borrowings higher in 4QFY2012


('000 cr) 50 (50) (100) (150) (200) (250)
Aug-11 Dec-11 Jun-11 May-11 Nov-11 Mar-12 Sep-11 Jan-12 Feb-12 Jul-11 Apr-11 Oct-11

Source: RBI, Angel Research

Refer to important Disclosures at the end of the report

14

4QFY2012 Results Preview | April 4, 2012

Banking
Exhibit 4: 3QFY2012 and 4QFY2012 Lending and deposit rates
Avg. Avg. Base rates (%) Bank 3QFY12 4QFY12 BP change 3QFY12 17.75 15.00 20.00 15.00 15.00 17.75 15.00 15.00 15.00 15.00 15.00 18.50 18.75 15.25 15.00 15.50 15.00 14.25 14.75 19.00 15.00 15.00 14.85 15.00 15.75 15.00 15.50 FEDBK 10.52 10.74 22 J&KBK 10.31 10.50 19 YESBK 10.43 10.50 7 ALLBK 10.75 10.75 ANDHBK 10.75 10.75 AXSB 10.00 10.00 BOB 10.75 10.75 BOI 10.75 10.75 CANBK 10.75 10.75 CENTBK 10.75 10.75 CRPBK 10.65 10.65 HDFCBK 10.00 10.00 ICICIBK 10.00 10.00 IDBI 10.75 10.75 INDBK 10.75 10.75 IOB 10.75 10.75 OBC 10.75 10.75 PNB 10.75 10.75 SBI 10.00 10.00 SIB 10.50 10.50 SYNBK 10.75 10.75 UCOBK 10.75 10.75 UTDBK 10.60 10.60 VIJAYA 10.65 10.65 DENABK 10.70 10.70 BOM 10.70 10.67 (3) UNBK 10.75 10.65 (10) Source: Company, Angel Research; Note: *1-3 Yr Maturity bucket BPLR rates (%) 4QFY12 17.75 15.00 20.00 15.00 15.00 17.75 15.00 15.00 15.00 15.00 15.00 18.50 18.75 15.25 15.00 15.50 15.00 14.25 14.75 19.00 15.00 15.00 14.85 15.00 15.75 15.00 15.50 BP change 3QFY12 9.50 9.50 9.60 9.50 9.40 9.25 9.35 9.25 9.25 9.40 9.65 9.25 9.25 9.50 9.50 9.50 9.75 9.40 9.25 9.75 9.35 9.50 9.25 9.35 9.60 9.35 9.25 FD rates* (%) 4QFY12 9.75 9.50 9.60 9.50 9.40 9.25 9.35 9.25 9.25 9.30 9.65 9.25 9.25 9.50 9.50 9.50 9.75 9.30 9.25 9.75 9.35 9.50 9.25 9.35 9.60 9.35 9.25 BP change 25 (10) (10) -

Margins expected to remain stable in 4QFY2012


Deposit and lending rates for most banks remained stable over 4QFY2012. Consequently, we do not expect any major sequential variance in the margins of banks during 4QFY2012. The cumulative release of ~`80,000cr through CRR cuts during 4QFY2012 is expected to aid in improved NIMs for the banking sector. However, a sharp rise in short-term borrowing rates on account of ongoing liquidity crisis (avg. 3M CD at 10.3% compared to 9.4% in 3QFY2012) is likely to weigh down the impact, especially for mid-size PSU banks that rely heavily on bulk deposit for their liability funding (leading to possible margin contraction in a few cases). Moreover, volatility in asset quality, poses a corresponding risk to our margin estimates and could lead to divergence in NIMs from our estimates.

4QFY2011 due to pension expenses.While large private banks are expected to report healthy 20.7% yoy growth on the net profit front, PSU banks are likely to post relatively lower 13.4% yoy growth (excl. SBI) due to higher provisioning expenses.

Asset quality remains the major overhang


Asset quality pressures for Public sector banks were expected to marginally abate post the switchover to system based NPA recognition as higher recoveries and upgrades (technical as well as cash) were expected to keep NPA levels under control. However, continued chunky NPAs from the corporate sector (aviation, telecom, mining, textiles, etc.) as well as from agriculture led to higher than estimated fresh slippages from these segments during 3QFY2012, leading to upsurge in NPA levels as a whole for public sector banks. Private Banks, on the contrary which have sharply improved their asset quality over the past two years saw their provisioning costs decline further during 4QFY2012. Consequently, while PSU banks saw a 12.1% qoq and 12.7% qoq increase in their gross and net NPA levels, private banks only witnessed a 1.3% qoq and 4.1% qoq rise in their gross and net NPA levels, respectively.

Private Banks to continue outperforming PSUs at net profit level


Overall, we expect large private banks to post 18.5% yoy growth in net interest income, while PSU banks are expected to register 19.4% yoy growth (9.8% yoy excl. SBI). Both Private and PSU banks are expected to report healthy performances on the preprovisioning profit front with growth of 21.0% yoy and 28.6% yoy (23.3% yoy excl. SBI), respectively. High growth at PPP level in PSU banks (excl. SBI) is also attributable to low base effect in
Refer to important Disclosures at the end of the report

15

4QFY2012 Results Preview | April 4, 2012

Banking
Exhibit 5: Gross NPA trends (%) Private vs. PSU
3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50
3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12

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


3.29

1.70 1.50 1.30 1.39 1.15 1.22 1.26 1.21 1.05 1.27 0.90 0.78 0.62
3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11

1.53 1.18 1.26 1.28

1.69

3.19

3.12

3.20

3.06 2.89 2.65 2.55 2.71

2.96

1.10
2.45

2.53

2.56

2.64

2.58

2.59

2.61

0.90
2.41

0.70 0.50 0.30

0.62
1QFY12

0.59
2QFY12

0.60
3QFY12

Pvt Banks

PSU Banks

Pvt Banks

PSU Banks

Source: Company, Angel Research

Source: Company, Angel Research

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


3.10 2.86 2.90 2.73 2.70 2.46 2.50 2.30 2.10
3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12

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


1.50 1.40 1.28 1.30 1.16 1.09 1.10 1.00 0.90
3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12

1.36

2.43 2.36

2.47 2.40 2.27

2.43

1.20

1.08

1.07 1.00 0.98

1.04

Source: Company, Angel Research

Source: Company, Angel Research

Almost all banks resorted to higher restructuring during 3QFY2012 with loans to SEBs and GTL being the primary contributors. Within PSU banks, BOM (up 55.0% qoq) and Central bank (up 50.5% qoq) witnessed highest sequential rises in their restructured books. Banks with exposure to GTL also had to take NPV hits in their P&L (ranging from 10%-20% of the total loan advances) during 3QFY2012, denting their bottom-line. Approvals of cases worth `20,000cr during 3QFY2012 (~`45,000cr during 9MFY2012) and pending approvals of `24,000cr under the CDR mechanism along with bank-specific exposures, in our view, are expected to further fatten the alreadyheavy restructured books over the next few quarters. Also, with sectors such as infra, real estate, metals and aviation continuing to face macro headwinds, asset-quality concerns, in our view, are expected to linger.

Exhibit 10: Industry wise exposure to CDR


Industry Iron & Steel Infrastructure Textiles Telecom Fertilizers NBFC Sugar Cements Petrochemicals Refineries Power Other (Jewel., Liq., edible oil etc.) Pharmaceuticals Chemicals Electronics Metals (Non-ferrous Metals) Paper/Packaging Others Total Source: CDR Cell, Angel Research No. 30 12 57 9 8 6 24 9 3 1 7 5 9 15 3 5 16 57 276 Agg. (` Agg. Debt (` cr) 38,186 17,080 11,370 9,199 8,454 6,592 6,562 6,112 5,493 4,874 3,836 3,498 3,349 2,898 2,521 2,171 2,147 8,172 142,514 Debt in % 26.8 12.0 8.0 6.5 5.9 4.6 4.6 4.3 3.9 3.4 2.7 2.5 2.4 2.0 1.8 1.5 1.5 5.7 100.0

Exhibit 9: CDR Snapshot


Referred (` No. of cases Add. (` cr) FY10 FY11 1QFY12 2QFY12 3QFY12 9MFY12 Cummulative 31 49 18 18 23 59 364 20,175 22,614 4,595 21,095 19,187 44,877 183,481 Approved No. of cases 31 27 10 7 17 34 276 (` Add. (` cr) 17,763 6,615 8,141 2,095 21,364 31,600 142,514

Source: CDR Cell, Angel Research

Refer to important Disclosures at the end of the report

16

4QFY2012 Results Preview | April 4, 2012

Banking
Bond yields remain volatile during the quarter
The 10-year G-sec bond yields maintained their downward trajectory and touched an eight-month low in the first fortnight of January 2012 (8.19% as on January 9, 2012), as liquidity infusion through RBI's OMOs, moderating inflation and expectations of rate cuts eased bond market sentiments. Bond yields, however, rose upwards in the first fortnight of March 2012 on account of uptick in global crude oil prices and expectations of the government exceeding its annual fiscal deficit target for FY2012, before rising further post Union Budget 2012-13, as the government's higher-than-expected market borrowings plan dampened bond market sentiments. The 10-year G-sec yields ended the quarter at 8.54% (8.57% as of December 30, 2011) and hence we do not expect material MTM losses/gains for the banking sector. However, considering the intra-quarter volatility witnessed, several banks could report trading gains on their investment book in 4QFY2012 results.

Exhibit 13: Capital Infusion in PSU banks


Bank St. Bank of India IDBI Bank Punjab National Bank Bank of India Indian Overseas Bank Bank of Baroda Allahabad Bank Union Bank Central Bank Bank of Maharashtra Punjab and Sind Bank Syndicate Bank UCO Bank United Bank Dena Bank Vijaya Bank Tier 1 Ratio (9MFY2012) 7.6 7.5 7.9 7.7 6.7 9.3 8.9 8.0 7.8 7.1 8.0 8.4 7.8 8.4 8.5 9.0 GOI ( ` cr) 7,900 4,630 1,285 1,045 1,675 1,003 355 659 860 895 539 500 173 LIC ( ` cr) 663 1,590 1,037 303 1,613 459 650 341 135 96 327 259 132 151 147 Total ( ` cr) 7,900 5,293 2,875 2,083 1,978 1,613 1,462 1,005 1,000 995 991 866 759 305 151 147

Exhibit 11: Corporate and G-Sec bond yields


10.00 9.50 9.00 8.50 8.00 7.50 AAA 1-yr AAA 3-yr AAA 5-yr AAA 10-yr Gsec 1-yr Gsec 5-yr Gsec 7-yr Gsec 10-yr

Source: Company, Angel Research

Outlook and Valuation


Asset quality, in our view, continues to be the key monitorable and a major concern on the banking sector's fundamentals. However, considering the impending repo rate cuts, which are expected to begin in the next few months, and stable margin outlook going ahead, we remain positive on the banking sector. Inflation levels for FY2012 are lower by 100-150bp compared to FY2011, which is a key positive, and we believe the current inflation environment (apart from fuel-related concerns) should aid the commencement of the monetary easing cycle. Margins of the banking sector are also expected to hold on to current levels due to capital constraints in PSU Banks (owing to Basel 3 norms). Moreover, recoveries from technical NPAs and RBI's prudent countercyclical norms, in our view, are an additional buffer which should aid in absorbing higher provisioning costs. Further, with the improvement in domestic macro fundamentals expected to gather pace in 2HFY2013 on account of lower interest burden, we expect asset-quality headwinds to begin receding, albeit gradually. Within private banks, our top picks remain Axis Bank and Yes Bank, where we expect significant re-rating upsides. We expect these banks to continue posting healthy operating performance going forward. At current valuations, we view them as being substantially undervalued compared to Sensex/HDFC Bank/ peers. We also like ICICI Bank on account of its conservative stance adopted for its balance sheet growth over the last three years, which has resulted in significant improvement in the bank's ROAs.

9.54 9.85

9.58 9.65

9.52 9.57

9.42 9.47

8.43 8.41

8.44 8.64

8.53 8.61

Dec. 30, 2011

Mar. 29, 2012

Source: Bloomberg, Angel Research

Exhibit 12: 10-year G-sec yields movement


8.8 8.6 8.5 8.3 8.2 8.0

30-Dec-11

6-Jan-12

13-Jan-12

20-Jan-12

27-Jan-12

3-Feb-12

10-Feb-12

17-Feb-12

24-Feb-12

2-Mar-12

9-Mar-12

16-Mar-12

23-Mar-12

8.57 8.59

Source: Bloomberg, Angel Research

Capital Infusion in PSU banks


The government, in light of capital constraints being faced by the banking sector and the upcoming Basel-3 norms, earmarked a healthy allocation of ~`16,000cr for capital infusion in public sector banks in Union Budget 2012-13. In terms of the ongoing round of capital infusion by the government, State Bank of India is the biggest beneficiary with capital infusion of `7,900cr, followed by IDBI Bank and Punjab National Bank with capital infusion worth `5,293cr and `2,875cr, respectively.

Refer to important Disclosures at the end of the report

30-Mar-12

17

4QFY2012 Results Preview | April 4, 2012

Banking
Exhibit 14: PSU banks price band (P/ABV)*
1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 1.00 0.50 1.50

Exhibit 15: Large Pvt. banks price band (P/ABV)


2.50 2.00

Apr-01

Apr-02

Apr-03

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Apr-01

Apr-02

Apr-03

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

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

Source:C-line, Angel Research

Coming to PSU banks, valuations for the entire pack revived sharply during the quarter. This led to a few specific cases (Andhra Bank, UCO Bank, Central Bank and Vijaya Bank), wherein we believe valuations exceeded fundamentals. Hence, we recommend Neutral or Reduce on these stocks, while being

positive on banks such as Dena Bank, United Bank, Bank of Maharashtra and Syndicate Bank, which we believe have a superior earnings quality outlook compared to peers. Within large-cap PSU banks, we continue to prefer SBI and BOB due to their structurally strong fundamentals vis--vis peers.

Exhibit 16: Quarterly estimates


Company CMP (`) AXSB FEDBK HDFCBK ICICIBK SIB YESBK ALLBK ANDHBK BOB BOI BOM CANBK CENTBK CRPBK DENABK IDBI INDBK IOB J&KBK OBC PNB SBI SYNBK UCOBK UNBK UTDBK VIJAYA HDFC LICHF 1,146 426 520 887 25 367 186 119 794 361 55 474 100 425 90 105 240 94 917 252 926 2,095 111 79 235 72 58 674 263 Operating Income 4QFY12E 3,838 694 4,727 4,875 350 684 1,857 1,282 3,761 3,066 821 2,880 1,623 1,372 738 1,786 1,554 1,706 591 1,531 4,772 15,948 1,651 1,370 2,454 886 630 1,867 489 % chg 21.8 17.9 15.4 17.5 24.1 27.9 14.6 10.5 9.1 -2.1 12.1 24.1 -16.8 9.6 13.2 0.1 12.4 6.6 10.4 16.6 14.3 23.9 16.6 20.6 5.9 11.6 1.5 12.8 (5.7) Profit Net Profit 4QFY12E 1,159 227 1,451 1,719 111 267 565 328 1,297 704 110 981 127 416 209 389 525 252 207 418 1,321 3,549 329 342 600 206 129 1,267 279 % chg 13.6 32.2 30.2 18.3 35.5 31.5 119.3 5.0 0.2 42.6 59.2 9.1 (4.0) 20.4 32.8 (24.7) 19.5 (41.9) 49.3 25.3 10.0 NA 13.8 51.2 0.4 44.0 138.5 11.0 (11.2) FY12E 100.5 44.8 22.1 54.5 3.5 28.0 42.7 23.8 121.8 44.4 8.4 77.5 9.4 106.0 22.7 16.8 44.0 12.5 165.4 44.4 150.9 176.5 23.3 16.2 30.6 17.5 8.8 27.6 18.6 (` EPS (`) FY13E 113.9 49.5 28.4 65.3 3.7 34.4 37.4 23.6 131.4 50.0 10.7 85.7 13.1 108.3 23.2 15.5 45.5 15.9 178.0 50.8 156.3 220.9 23.2 17.8 40.7 18.4 9.5 31.2 25.3 FY14E 136.4 57.2 35.6 78.3 3.9 42.2 40.9 27.0 153.3 65.4 13.5 95.4 19.9 111.5 25.6 21.5 48.8 21.1 195.8 60.9 178.7 27.5 18.8 49.5 21.7 11.5 37.2 31.9 BVPS (` Adj BVPS (`) FY12E 538.8 333.8 125.4 509.0 17.8 133.8 193.9 129.2 628.4 295.9 67.7 450.8 100.0 544.1 123.0 126.4 218.5 138.8 843.9 374.7 733.4 134.1 77.8 225.1 107.7 67.5 128.4 113.5 FY13E 615.2 372.9 147.2 546.0 20.7 163.0 225.2 144.6 738.9 344.5 72.1 515.6 104.2 618.6 141.1 132.1 253.5 143.7 411.5 FY14E 721.1 417.9 174.6 590.3 23.8 198.8 256.9 166.6 857.3 392.0 82.6 590.9 115.6 700.2 162.6 147.2 291.3 160.1 456.0 FY12E 11.4 9.5 23.6 16.3 7.1 13.1 4.4 5.0 6.5 8.1 6.5 6.1 10.7 4.0 4.0 6.2 5.5 7.5 5.5 5.7 6.1 11.9 4.8 4.9 7.7 4.1 6.6 24.4 14.1 P/E (x) FY13E 10.1 8.6 18.3 13.6 6.7 10.7 5.0 5.1 6.0 7.2 5.1 5.5 7.6 3.9 3.9 6.7 5.3 5.9 5.2 5.0 5.9 9.5 4.8 4.4 5.8 3.9 6.1 21.6 10.4 P/ABV P/ABV (x) FY14E FY12E FY13E FY14E 8.4 7.4 14.6 11.3 6.2 8.7 4.6 4.4 5.2 5.5 4.1 5.0 5.0 3.8 3.5 4.9 4.9 4.5 4.7 4.1 5.2 7.8 4.0 4.2 4.7 3.3 5.1 18.1 8.2 2.1 1.3 4.1 1.7 1.4 2.7 1.0 0.9 1.3 1.2 0.8 1.1 1.0 0.8 0.7 0.8 1.1 0.7 1.1 0.7 1.3 2.0 0.8 1.0 1.0 0.7 0.9 5.2 2.3 1.9 1.1 3.5 1.6 1.2 2.3 0.8 0.8 1.1 1.0 0.8 0.9 1.0 0.7 0.6 0.8 0.9 0.7 0.9 0.6 1.0 1.6 0.7 0.9 0.9 0.6 0.8 4.3 2.0 1.0 3.0 1.0 1.8 0.7 0.7 0.9 0.9 0.7 0.8 0.9 0.6 0.6 0.7 0.8 0.6 0.8 0.6 Target (`)

(` ( ` cr)
Reco.

1.6 1,550

Buy

- Neutral 567 Accum. Buy Buy - Neutral 477 205 Accum. - Neutral 943 Buy 392 Accum. 62 Accum. 532 Accum. 92 508 114 Reduce Buy Buy

1.5 1,135

- Neutral - Neutral 104 Accum. - Neutral 296 Buy Buy Buy Buy Buy Buy Reduce

980.0 1,129.9 883.2 1,034.1 149.3 90.1 260.9 117.6 71.9 158.3 133.8 170.4 101.4 304.3 134.2 78.0 178.6 159.4

0.9 1,138 1.3 2,593 0.7 0.8 0.8 0.5 0.7 3.8 1.7 128 274 87 55

269.8 1,055.0 1,318.1 1,584.5

- Neutral

- Neutral 295 Accum.

Source: Company, Angel Research; Note: Price as on March 30, 2012

Vaibhav Agrawal/ l/V Varm arma Analyst - Vaibhav Agrawal/ Varun Varma
Refer to important Disclosures at the end of the report

18

Apr-12

4QFY2012 Results Preview | April 4, 2012

Capital Goods
We expect companies in our capital goods (CG) universe to post average top-line growth of 10.9%. However, on the bottom-line front, the picture is mixed, with most companies in our coverage universe posting a decline mainly on account of margin pressure and, in some cases, due to higher interest cost. we expect an uptick of 200bp sequentially. Led by low revenue and margin contraction, the company's PAT is expected to drop PA 150.3cr. We by 40.2% yoy to `150.3cr. We recommend Buy on the stock with a target price of `164.

Jyoti Structures (CMP/TP: `39/`67) (Rating: Buy)


For 4QFY2012, we expect Jyoti Structures to post decent top-line growth of 13.0% yoy to `815.7cr. We expect the company's EBITDA margin to contract by ~114bp yoy to 10.5% (unlike stable EBITDAM at 11% since the past several quarters). Interest cost is expected to increase due to higher working capital borrowings (as is the case since the past few quarters). Against this backdrop, the company's PAT is expected to decline by PA 30.0cr. We 14.3% yoy to `30.0cr. We maintain our Buy recommendation on the stock with a target price of `67.

ABB India (CMP/TP: `842/`503) (Rating: Sell)


For 1QCY2012, we expect ABB India (ABB) to post decent top-line growth of 14.5% yoy to `2,053cr, driven by the company's balanced performance across all segments. EBITDA margin is likely witness marginal improvement of 23bp yoy to 5.9%. Also, on a qoq basis, we expect the company's margin to improve by 100bp. Aided by modest revenue growth, ABB's 68.9cr. We bottom line is expected to jump by 15.7% to `68.9cr. We maintain our Sell recommendation on the stock with a target price of `503.

KEC (CMP/TP: `65/`72) (Rating: Accumulate)


For 4QFY2012, KEC International (KEC) is expected to register strong growth of 22.0% yoy to `1,902cr on the back of strong execution of its robust order book. On the EBITDA front, the company's margin is expected to contract by ~249bp yoy to 8.0% because of margin pressures in the domestic business (as was the case in the previous quarter). Nonetheless, increased contribution from SAE Towers is likely to support the company's margins. Interest cost is expected to remain at elevated levels, resulting in a yoy decline of 13.2% at the earnings level to `68.2cr. We recommend Accumulate on the stock with a target price of `72.

BHEL (CMP/TP: `257/-) (Rating: Neutral)


We expect BHEL to post top-line growth of 14.0% yoy to `20,954cr for 4QFY2012. This growth is on the back of its strong order book of ~`1.4tn, which provides revenue visibility for the next couple of years. On the EBITDA front, the company's margin is expected to compress by ~186bp yoy to 21.5%. Despite healthy growth, margin erosion is expected to restrain 3,054cr. the company's bottom-line growth to 9.2% yoy to `3,054cr. We maintain our Neutral recommendation on the stock.

BGR Energy (CMP/TP: `327/`274) (Rating: Sell)


We expect BGR Energy's (BGR) top line to be under pressure due to the high base created in 4QFY2011 and partly to due execution concerns, as witnessed in 9MFY2012. The company's top line is expected to decline by 29.1% yoy to `1,036.3cr. EBITDA margin is expected to increase by 255bp yoy to 14.0%. Interest cost is expected to stretch further (owing to high interest rate scenario and enhanced working capital levels), which is likely to drag the bottom line further down by 41.2% yoy to `57.8cr. We recommend Sell on the stock with a target price of `274.

Thermax (CMP/TP: `464/`430) (Rating: Reduce)


For 4QFY2012, we expect Thermax to report top-line growth of 1.0% yoy to `1,789cr, as weak order inflows since the last couple of quarters will keep the company's revenue under strict check. The company's EBITDA margin is likely to compress by ~42bp yoy due to higher execution of low-margin EPC contracts. Flat revenue and margin contraction are expected result in yoy PA 128.5cr. We growth of 1.6% in the company's PAT to `128.5cr. We maintain our Reduce rating on the stock with a target price of `430.

Crompton Greaves (CMP/TP: `138/`164) (Rating: Buy)


For 4QFY2012, we project Crompton Greaves to report modest top-line growth of 9.0% yoy to `3,170cr, which can mainly be attributed to the power system segment, which has remained a drag since the past few quarters. In addition, we do not expect substantial growth from the overseas business, which is likely to keep growth under check. Weak capex cycle along with strained consumer sentiment is also likely to impact the company's growth. On the EBITDA front, the company's margin is expected to decline sharply by ~483bp yoy to 8.0%. However,
Refer to important Disclosures at the end of the report

CG Index - Outperforms Sensex, but concerns remain


During 4QFY2012, Capital Goods (CG) Index outperformed Sensex by gaining 24.3% in contrast to Sensex' 12.6% gain. This outperformance was mainly on account of low valuations and expectations of interest rate cuts. Interest rate cuts would help in the revival of industrial capex, thus giving a fillip to the sector. All companies (except Jyoti Structures) in our CG universe gained, with BGR Energy, KEC and ABB emerging as the major gainers, adding 44-84% in absolute terms and outperforming the Sensex by 32-71%. Rest of the companies in our universe gained around 8-17%. However, we believe investment activity
19

4QFY2012 Results Preview | April 4, 2012

Capital Goods
is likely to remain subdued in the near-to-medium term. Acceleration in awarding road projects and improved ordering in the T&D space are few silver linings in the otherwise dampened investment climate. Overall, a substantial pick-up in the implementation of big-ticket economic reforms, growth impulse and anticipated easing of monetary policy will remain key drivers for CG stocks, in our view. We believe challenges outlined in the power sector (such as inadequate coal supplies land acquisition issues) would remain as near-term drags for companies in our CG universe.

Outlook and valuation


BTG space continues to reel under pressure
Investments across various sectors have substantially decelerated owing to the deteriorating macro environment. Further, with no signs of respite, the investment cycle will continue to be in a downturn for the next few months, as not many orders are expected to be finalized. In tandem, the BTG market will further witness a dry spell as most of the planned orders have already been awarded and new orders are in the preliminary stages of discussions, which are likely to witness delay in finalizations due to ongoing headwinds (such as day-by-day intensifying fuel crisis, constraints in land acquisition and poor health of SEBs). T&D space in a better shape; Although concerns loom: While T&D capex is on an uptick, land acquisition and forest clearances (RoW) entail execution risks, which have led to slower-than-expected growth in T&D infrastructure historically. (Of late, few companies in the transmission EPC space have cited execution bottlenecks). Overall, the outlook remains challenging: A handful of positives, especially in the T&D space, do very little to warrant a change in our pessimistic view. Against the backdrop of economic slowdown, we believe the overall picture remains gloomy for market leaders (read BHEL, BGR and ABB, among others). We believe it will take a while for the sector to witness dramatic improvements, while the government is initiating its efforts to resolve the key issues in the power sector. Given this, we expect the slowdown to continue for the next couple of quarters. Therefore, companies catering to the power sector will witness a high degree of discomfort unless core concerns soothe. Valuations: In this report, we introduce our FY2014 estimates. stockWe follow a stock-specific approach, with Crompton Greaves, sector. KEC and Jyoti Structures being our top picks in the sector. In the BTG space, we continue to maintain our negative stance, owing to concerns of heightened competition and slowing of order inflows.
( ` cr)

Exhibit 1: 4QFY2012 Sensex vs. CG stocks


Abs. Returns (%) BSE Sensex BSE Cap Goods ABB BHEL BGR Energy Sys. Crompton Greaves Jyoti Structures K E C Intl. Thermax Source: C-line, Angel Research 12.6 24.3 44.3 7.5 83.0 9.9 (1.0) 83.9 17.4 Relative to Sensex (%) 11.7 31.7 (5.1) 70.4 (2.7) (13.6) 71.3 4.8

Exhibit 2: CG index Relative returns to the Sensex


55.0 45.0 35.0 25.0 15.0 5.0 9.4 0.6 3.5 8.2 10.1 11.7 48.6

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12
(18.8)

(5.0) (15.0) (25.0)

(6.2) (14.1)

(9.7)

(7.1)

(10.7)

(0.6)

(4.6)

(5.8)

(9.0)

Source: C-line, Angel Research

Exhibit 3: Quarterly estimates


Company ABB* BHEL BGR CMP 842 257 327 Net Sales 2,053 20,954 1,036 3,170 815.7 1,902 1,789 14.5 14.0 (29.1) 9.0 13.0 22.0 1.0 OPM (%) 5.9 21.5 14.0 8.0 10.5 8.0 10.6 23 (186) 255 (483) (114) (249) (42) Profit Net Profit 68.9 3,054 57.8 150.3 30.0 68.2 128.5 15.7 9.2 (41.2) (40.2) (14.3) (13.2) 1.6 (` EPS (`) % chg 15.7 9.2 (41.2) (40.2) (14.3) (13.2) 1.6 FY12E 8.7 27.4 29.6 6.6 11.9 6.6 35.3 3.3 12.5 8.0 2.3 3.7 2.7 10.8 (` EPS (`) FY13E 18.6 23.5 27.2 10.9 10.9 9.7 30.4 FY14E 20.9 24.1 30.4 11.7 13.4 12.1 28.7 FY12E 96.5 9.4 11.1 20.9 3.3 9.9 13.2 P/E (x) FY13E 45.2 10.9 12.0 12.7 3.6 6.7 15.3 FY14E 40.2 10.7 10.7 11.8 2.9 5.4 16.2 arg Target (` (`) 503 274 164 67 (`) 4QFY12E % chg 4QFY12E chg bp 4QFY12E % chg 4QFY12E

4Q12

Reco. Sell Neutral Sell Buy Buy

Crompt. Greav. 138 Jyoti Structures Kec Intl' Thermax 39 65 464

72 Accumulate 430 Reduce

Source: Company; Angel Research; Note: Price as on March 30, 2012; * December year ending

Analyst - Nitin Arora


Refer to important Disclosures at the end of the report

20

4QFY2012 Results Preview | April 4, 2012

Cement
Cement demand improves
Cement demand, after growing at a healthy pace (10.4% yoy) in 3QFY2012, continued its momentum and grew by 10.5% yoy in January-February 2012. Despite this healthy show, cement demand growth for FY2012 is expected to be at around 6% (as 1HFY2012 demand growth has been modest at 3.1% yoy) and, hence, will not lead to any material improvement in utilization levels. Such healthy demand growth over the past few months is estimated to have been primarily on account of electionrelated demand push across few poll-bound states and strong demand growth in Western India. However, we would like to monitor the situation over some more time before arriving at any conclusion about the sustenance of high demand growth. announcements. Prices are currently quoting at `292-305/bag and are expected to inch further due to continuous power cuts in T.N. and A.P and the expected increase in power tariffs in T.N. . Northern region: Prices in the northern region, which corrected on an average by `15-20/bag during mid-December 2011 due to lesser-than-anticipated demand on account of severe winters, further witnessed a `5-15/bag decrease in January. In February, prices improved in few places by `10-15/bag; however, in H.P due to the state government's intervention, ., prices corrected by `15-20/bag. Prices are currently quoting at `230-270/bag and are expected to increase further by `10-15/bag by March-end. Western region: In the western region, prices are currently in the broad range of `270-310/bag, up on an average by `25/bag from `245-285/bag seen at the end of 3QFY2012. The sharp increase in prices has been on the back of strong growth in demand, particularly in Gujarat. Eastern region: Prices in the eastern region, which stood in the broad range of `300-330/bag at the end of 3QFY2012, moved upwards during January by `5-15/bag on account of the uptick in demand post the festive season. Prices inched further upwards during February by `15-25/bag due to supply-side constraints and healthy demand and are currently quoting at `320-370/bag. Central region: Prices in the central region, which had fallen by `10-15/bag to `240-265/bag in mid-December due to moderate demand, increased by `15-25/bag during the first two months of the quarter and are currently quoting at `255-290/bag as demand in the region has slightly improved.

Exhibit 1: Trend in cement dispatches


(mts) 25 20 15 10 5 0
Dec -11 Aug-11 Sept-11 Oct-11 May-11 Nov-11 Jan-11 Feb-11 Mar-11 Apr-11 Jun-11 Jul-11 Aug-10 Sept-10 Nov-10 Dec-10 Feb-12 Oct-10 Jan-12

(%) 20 15 10 5 0 (5) (10)

All India dispatches

yoy growth-RHS

Source: CMA, Company, Angel Research

Exhibit 2: All-India cement dispatches (mt)


JanUltraTech ACC Ambuja JP Associates Others All India 7.2 4.4 3.9 4.0 21.4 40.9 Janyoy(%) 11MFY12 11MFY11 8.5 8.1 8.4 28.9 9.0 10.4 35.7 21.8 19.5 16.8 106.9 200.8 34.6 19.7 18.5 14.1 101.7 188.6 yoy(%) 3.2 11.0 5.6 18.9 5.1 6.5 6.7 4.1 3.6 3.1 19.6 37.0 Company Feb 12 Feb 11

Higher yoy railway freight charges and domestic coal prices to put pressure on margins
Cement companies are expected to face some cost pressure in this quarter on account of higher yoy power and fuel cost (due to higher domestic coal prices) and increased yoy freight and forwarding cost (due to the increase in railway freight charges). During January 2012, Coal India had notified prices for its coal in different grades based on the GCV mechanism from the earlier prevalent UHV mechanism, which led to a significant increase in coal cost for the cement industry. However, the company later revised the prices to neutralize the impact caused by switching to the new mechanism. Earlier, in March 2011, the company hiked the price of coal supplied by it to non-core sectors by ~30%, which had resulted in spiking power and fuel costs of many cement companies. As far as imported coal prices are concerned, they have declined marginally (in INR terms) on a yoy basis. During 4QFY2012, average prices of New Castle Mckloksey 6,700kc coal decreased by 11.3% yoy (flat qoq), however due to a 10.3% yoy depreciation in INR v/s USD coal price in INR terms declined by lower 2.2% yoy (1.8% qoq).

Source: CMA, Company, Angel Research

Price situation
All-India average cement prices, after declining towards the end of the previous quarter, remained firm on an average in January and increased by `10-15/bag in February. However, in March, prices have already increased/are expected to increase on an average by `10-25/bag as an after effect of the recent rail and Union Budget proposals amidst seasonal buoyancy in demand. Southern region: Prices at the start of the quarter were at `275-285/bag and have edged marginally since then due to project-related demand pick-up. Post the budget, prices increased by `7-10/bag to pass on the effect of budget
Refer to important Disclosures at the end of the report

21

4QFY2012 Results Preview | April 4, 2012

Cement
Indian Railways has also increased base freight rates for cement by around 22% (average increase up to 1,000kms) w.e.f. March 6, 2012. Earlier it had imposed a busy season surcharge and development charge at the rate of 10% and 5% for October 2011-June 2012, much higher from 7% and 0% for October 2010-June 2011. Cumulative effect of these measures is expected to be witnessed in 4QFY2012 (higher base freight rates for ~30% of the period and higher busy season surcharge for the entire period). However on qoq basis effect of only increased base freight rates is expected to be evidenced. Exhibit 4: Sensex vs. cement stocks (4QFY2012)
Cement majors Sensex ACC Ambuja India Cements JK Lakshmi Cement Madras Cements Shree Cements Ultratech Source: BSE, Angel Research
7000

Abs. Return (%) 12.6 19.4 8.0 68.8 74.7 48.8 47.5 29.9

Relative to Sensex (%) 6.7 (4.6) 56.2 62.1 36.2 34.9 17.2

Exhibit 3: New Castle Mckloksey coal prices


145 135 125 115 105 95 85 Jan-10 4000 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 5000 6000 global coal prices have started cooling off

4QFY2012 - Result expectations


Top line to grow by 18.4% yoy; But margin to remain under pressure
We expect our cement universe to report an 18.4% yoy improvement in its top line on account of 6.1% growth in dispatches and a substantial improvement in realization. However, companies continue to face cost pressures due to higher coal and freight cost, which is expected to result in margin decline for some of the players.

US $/tonne - LHS

`/tonne - RHS

Source: Bloomberg, Angel Research

Union Budget positive for the cement sector


On the central excise front, Union Budget 2012-13 has proposed to change the method of charging excise on cement from invoice value to retail sale price with 30% abatement apart from increasing the rate of excise by 200bp. For imported steam coal used in power generation, the budget proposes waiver of basic customs duty and reduction of countervailing duty (CVD) from 5% to 1%. In terms of service tax, the budget proposes an increase in service tax rates from 10% to 12% and removal of exemption from 'goods transport service provided by rail' by not including it in the negative list of services and specific exemptions. We expect nil/minimum overall impact on account of all aforementioned indirect taxes proposals as increased excise duty and service tax are expected to be offset by the decrease in import duty on coal.

Outlook and valuation


We remain concerned on the cement sector on account of low capacity utilization, which is due to modest demand growth and significantly excess capacity. In our view, the cement sector's valuations in terms of EV/sales and EV/tonne when compared to utilization levels are almost 41% more expensive than historical valuations during periods of similar utilization levels. However, production discipline among cement companies has helped healthy pricing and has led to high valuations currently. Nevertheless, in our view, this is a thin investment thesis to rely on, as there is a persistent risk of a breakdown in production discipline. Hence, we remain Neutral on the sector. That said, we maintain our Buy recommendation on JK Lakshmi due to its attractive valuations as it is trading at EV/tonne of US$44 on FY2014E capacity.

Exhibit 5: Quarterly estimates


Company ACC^ Ambuja^ JK Lakshmi CMP (`) 1,356 171 65 Net Sales 4QFY12E 2,826 2,643 1,109 439 902 1,424 5,176 17.8 19.7 11.1 5.9 31.4 33.1 15.3 OPM (%) chg bp (231) (155) 163 63 438 3 (439) 21.9 26.9 16.4 19.4 29.1 24.6 19.8 Profit Net Profit 4QFY12E 376 457 70 43 106 79 551 7.2 12.0 27.5 33.9 65.8 20.1 (24.1) (` EPS (`) % chg 7.2 12.0 27.5 33.9 65.8 20.1 (24.1) FY12E 70.5 7.9 9.7 11.1 14.8 70.8 77.7 20.0 3.0 2.3 3.5 4.4 22.6 20.1 (` EPS (`) FY13E 69.1 9.7 9.9 12.2 14.1 130.3 82.1 FY14E 86.5 10.5 12.7 16.4 18.1 181.9 97.5 FY12E 19.2 21.7 11.5 5.9 10.4 45.1 19.4 P/E (x) FY13E 19.6 17.4 11.3 5.3 10.8 24.5 18.4 FY14E 15.7 16.3 8.8 4.0 8.5 17.6 15.5 arg Target (`) 79 % chg 4QFY12E % chg 4QFY12E

(` cr)
Reco. Neutral Neutral Neutral Buy Neutral Neutral Neutral

India Cements 111 Madras Cem. 153 Shree Cem. 3,197 UltraTech 1,507

Source: Company, Angel Research; Note: Price as on March 30, 2012; ^December year ending

Taparia Analyst - V Srinivasan / Sourabh Taparia


Refer to important Disclosures at the end of the report

22

4QFY2012 Results Preview | April 4, 2012

FMCG
Strong performance on the cards
For 4QFY2012, we expect our FMCG universe to report revenue growth of 16.8% yoy, aided by consistent price hikes taken by companies throughout the past year. We also expect companies to post reasonably strong yoy growth on the volume front, owing to low base, better distribution reach and new product launches. Bottom-line growth of our FMCG universe is expected to be much higher at 20.1%, as price hikes undertaken have been higher than the increase in input costs.

Raw-material costs - A mixed trend


During the quarter, prices of several raw materials such as wheat, barley, tea, coffee, cocoa, milk liquid, palm oil, rice bran oil, copra and coconut oil witnessed a decline. This is expected to moderate key raw-material costs for most FMCG companies. However, average prices of crude-related raw materials are expected to edge higher on a yoy basis on account of higher crude prices and INR depreciation against USD. Average prices of agri commodities showed a mixed trend during 4QFY2012, with wheat and barley prices declining by 5.5% and 2.7% yoy, respectively; however, sugar prices increased by 4.7% yoy. Average prices of edible oils also witnessed a mix trend during the quarter, with palm oil and rice bran oil prices sliding down by 13.1% and 6.3% yoy, respectively. Copra and coconut oil prices fell by 25.2% yoy each (likely to aid Marico). However, average prices of safflower oil, soyabean oil and groundnut oil significantly increased on a yoy basis during the quarter. Average prices of tea, coffee, cocoa and milk liquid witnessed a decline on a yoy basis during the quarter (expected to benefit Nestle, TGBL and HUL). Average prices of crude-linked raw materials were also high on a yoy basis, as crude remained high during 4QFY2012.

Exhibit 1: 4QFY2012E revenue growth (yoy, %)


(%) 30.0 25.0 20.0 15.0 10.0 5.0 17.4 14.2 28.3 21.7 18.3 14.5 15.3 22.4 17.1 16.4

6.6

Britannia

ITC

HUL

Dabur

GCPL

Nestle

Source: Company; Angel Research;

Budget was a dampener


Overall, Union Budget 2012-13 appears to be negative for the FMCG sector, in our view. The budget proposes: 1) an increase in excise rates on cigarettes with the addition of ad valorem rates to already prevalent specific rates; 2) 2% hike in basic excise rates on all other consumer goods; and 3) expansion in the service tax net along with a 2% hike in service tax rate. In our view, the combined effect of all these would lead to moderate price hikes, with minimum impact on volumes as input costs have stabilized. Further, the budget has announced reduction of basic customs duty on titanium dioxide from 10% to 7.5%, which would aid Asian Paints, as it is reeling under severe input cost pressure. The budget has also increased personal income tax slabs and has introduced Rajiv Gandhi Equity Savings Scheme, which will increase disposable income (as maximum combined tax saving would range from `27,000 to `47,000). Further, continued thrust on improving supply chain, agriculture and overall rural development by various measures will reduce supply bottlenecks and increase rural disposable income. However, the budget has provided no timeline for the implementation of the widely needed GST (even though GST network is expected to be operational by August 2012) and, thus, the cascading effect of taxes would continue.

Asian Paints

Colgate

GSKCH

Marico

TGBL

Exhibit 2: Input cost trend during 4QFY2012


Prices Average Prices Wheat (`/quintal) Barley (`/quintal) Sugar (`/ quintal) Tea (`/kg) Coffee (UScent/LB) Cocoa (US$/MT) Milk Liquid (`/ltr) Palm Oil (MYR/tonne) Copra (`/quintal) Safflower (`/quintal) Soyabean Oil (`/10kg) Groundnt Oil (`/MT) Coconut Oil (`/quintal) Rice Bran Oil (`/MT) Crude (US$/ barrel) Caustic Soda (`/kg) Soda Ash (`/kg) TiO2 - Anantese (`/kg) 1246 1256 3017 271 198 2330 26 3187 4682 3142 679 106817 7165 5000 123 1746 1000 197 yoy (%) (5.5) (2.7) 4.7 (17.0) (32.1) (30.1) (1.0) (13.1) (25.2) 24.2 10.4 40.4 (25.3) (6.3) 6.4 39.0 2.9 71.3 qoq (%) 6.3 7.3 (1.8) 2.6 26.4 4.0 (9.9) 5.8 (14.5) 13.2 7.9 21.4 (14.4) 0.0 14.1 4.2 0.0 0.0

Source: Bloomberg, C-Line, Angel Research

Refer to important Disclosures at the end of the report

23

4QFY2012 Results Preview | April 4, 2012

FMCG
Performance on the bourses
BSE FMCG Index outperformed the Sensex by 2.3% and posted an absolute return of 14.9% during the quarter. TGBL posted the highest return of 33.5%, while Asian Paints and Britannia gained 23.5% and 25.8%, respectively. However, industry heavyweights, HUL and ITC underperformed the Sensex. While ITC gained 5.5%, HUL declined by 6.5% during the quarter.

Outlook and valuation


Consumption in many categories with high growth rates is still very low in urban India (like penetration of deodorants at ~6%, skin creams at ~30% and noodles at ~21%). In rural India, penetration of these products is even lower. With rising income levels and changing consumer behavior in the country, consumer spending on branded FMCG products is set to rise. Also, growth in modern retail (currently contributing ~6% to FMCG sales) offers scope for further expansion. FMCG Index has outperformed the broader markets by 37% in the last year, with industry stalwarts HUL and ITC outperforming by 57% and 37%, respectively. While the long-term consumption story for the FMCG industry remains intact, any further re-rating from current valuations seems less likely given near-term concerns over 1) high inflationary scenario, 2) possible rise in inflation after the much-expected hike in fuel price and 3) spike in input costs.
40.0

Exhibit 3: Performance on the bourses (4QFY2012)


Sensex BSE FMCG TGBL Nestle Marico ITC HUL (6.5) GSKCH GCPL Dabur Colgate Britannia Asian Paints
(10.0) (5.0) -

12.6 14.9 7.8 10.5 5.5 2.2 16.3 3.5 11.9 25.8 23.5
5.0 10.0 15.0 20.0 25.0 30.0 35.0

33.5

Source: Company, Angel Research

We remain underweight on the sector. Amongs heavyweights, we prefer ITC. In mid caps, TGBL is our top pick.

Strong overall performance expected


Most of the companies in our FMCG universe are expected to post a strong performance on the top-line front. We expect, market leaders, HUL and ITC to post growth of 17.1% and 14.5%, respectively. We expect HUL's growth to be driven by healthy performance from both the soaps and detergents and personal products segments. ITC's top-line growth is expected to be mainly driven by price hikes taken by the company. GCPL is expected to post the highest growth of 28.3%, driven by healthy performances from the domestic and other Asian businesses. However, on the margin front, we expect a mixed show with some of the companies expected to post margin compression due to higher input costs.

Exhibit 4: FMCG Universe One-year forward P/E


(INR mn) 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Mcap

15x

18x

21x

24x

27x

Source: Company, Angel Research

Exhibit 5: Quarterly estimates


Company CMP (`) Asian Paints^ 3,238 Britannia Colgate Dabur India^ GCPL GSKCHL* HUL ITC Marico^ Nestle* TGBL 593 1,116 106 480 2,748 410 227 175 4,603 112 Net Sales 4QFY12E 2,405 1,299 677 1,301 1,283 687 5,737 6,684 910 2,141 1,660 22.4 15.3 16.4 17.4 28.3 14.2 17.1 14.5 21.7 18.3 6.6 OPM (%) chg bp (101) 65 348 (106) (25) (199) 162 353 (211) (29) 343 13.7 7.1 25.0 17.5 17.5 8.3 13.4 34.2 13.0 21.0 11.7 Net Profit Profit 4QFY12E 219 53 131 161 160 53 640 1,539 70 289 65 17.4 23.5 15.0 9.7 13.0 (10.8) 31.7 20.1 (2.1) 12.8 122.1 EPS (`) (` % chg 17.4 23.5 15.0 9.7 13.0 (10.8) 31.7 20.1 (2.1) 12.8 122.1 FY12E 102.1 15.7 32.2 3.8 16.5 86.0 11.7 7.4 5.0 101.3 5.9 22.8 22.4 9.6 0.9 4.9 12.5 3.0 2.0 1.1 29.9 1.1 EPS (`) (` FY13E 120.3 22.3 37.7 4.4 22.6 100.6 14.1 9.2 6.8 120.8 5.9 FY14E 142.5 28.3 42.5 5.2 26.9 117.9 16.1 10.5 8.2 149.8 7.1 FY12E 31.7 37.8 34.6 27.8 29.0 31.9 35.0 30.5 35.2 45.4 18.9 P/E (x) FY13E 26.9 26.5 29.6 24.1 21.3 27.3 29.1 24.8 25.8 38.1 18.8 FY14E 22.7 21.0 26.2 20.5 17.8 23.3 25.4 21.6 21.3 30.7 15.7 Target arg (`) 650 112 512 252 136 % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Neutral Accum. Neutral Accum. Accum. Neutral Neutral Accum. Neutral Neutral Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012; * December year ending; ^Consolidated

Taparia Analyst - V Srinivasan / Sourabh Taparia


Refer to important Disclosures at the end of the report

24

4QFY2012 Results Preview | April 4, 2012

Infrastructure
For 4QFY2012, we expect the average revenue growth for our coverage universe at 9.9% on the back of slowdown in execution and high base in 4QFY2011 for few companies. Although the fourth quarter is seasonally the strongest quarter for construction companies, we are factoring lower growth due to macro headwinds faced by the sector. front, we expect ABL to post OPM of 20.3%. We expect the company to post a 10.0% yoy decline in its earnings to `34.4cr for the quarter.

CCCL (CMP/TP: `16/-) (Rating: Neutral)


Consolidated Construction Consortium (CCCL) is expected to continue its trend of reporting poor numbers on all fronts for 4QFY2012 as well. We expect an 11.0% decline on the top-line front to `572.2cr, given that the slowmoving infra orders form ~22% of its total order book. On the EBITDA front, we expect the company to continue its dismal performance; however, its EBITDAM is expected to register an increase of 90bp yoy to 4.4% on account of low base. Against this backdrop, the bottom line is expected to post a yoy decline of 54.9% to `0.7cr quarter. for the quarter.

Exhibit 1: Average yoy revenue growth (%)


30.0 25.5 25.0 19.8 20.0 15.0 10.0 5.0 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12E 12.6 9.9 18.2 19.0

HCC (CMP/TP: `26/-) (Rating: Neutral)


For Hindustan Construction Company (HCC), we project a 15.0% yoy decline in revenue for 4QFY2012 to `1,022cr due to slowdown in execution on account of gloomy macro environment. On the EBITDA front, we expect a dip of 200bp yoy to 11.8% on the back of muted margin performance in the past two quarters. On the bottom-line front, we expect a loss of `23.2cr against profit of `22.6cr in 4QFY2011 due to poor show expected on the revenue and margin front and owing to escalating interest cost, which is expected to post a yoy jump of 24.8%.

Source: Company, Angel Research; Note: For our analysis, we have selected 12 companies, as detailed in Exhibit 5

During 4QFY2012, there has been no respite from the several headwinds (such as high interest and commodity cost and slowdown in order inflow) faced by the sector. Thus, subdued revenue performance along with pressure on EBITDAM and high interest cost will result in muted performance on the earnings level. Against this backdrop, we expect a decline in earnings for most of the companies under our coverage universe, with L&T and IRB Infra (IRB) the only exception.

Exhibit 2: Average yoy earnings growth (%)


20.0 15.0 14.2 10.0 5.0 3QFY11 (5.0) (10.0) 4QFY11 1QFY12 2QFY12 (1.9) (5.9) 3QFY12 4QFY12E (2.7) 8.2 0.4

IRB Infra (CMP/TP: `186/`228) (Rating: Buy)


IRB is expected to post a mixed performance on a quarterly basis. We expect a 1.7% yoy decline in the E&C segment to `568.7cr, as Surat Dahisar and Kolhapur road projects are complete and, hence, will not be contributing to E&C revenue. However, the BOT segment is expected to report healthy 23.2% yoy growth to `260.6cr, leading to overall top-line growth of 8.1% to `829.4cr. We expect blended EBITDA margin at 42.5%, an improvement of 140bp yoy. This is on the back of low base in 4QFY2011. Depreciation for the quarter is expected to witness a yoy jump of 76.8%, owing to completion of Surat Dahisar project. We project net profit before tax and after tax (post 103.6cr, respectively, minority interest) at `139.5cr and `103.6cr, respectively, after quarter. factoring a blended tax rate of 23.9% for the quarter.

Source: Company, Angel Research; Note: For our analysis, we have selected 12 companies, as detailed in Exhibit 5

4QFY2012 expectations
ABL (CMP/TP: `200/`302) (Rating: Buy)
For Ashoka Buildcon (ABL), 4QFY2012 numbers are not comparable with 4QFY2011 due to change in accounting policy, which was incorporated by the company in 4QFY2011. On the revenue front, ABL is expected to post a decline of 18.0% yoy on the consolidated revenue front to `494.6cr. On the margin

ITNL (CMP/TP: `193/`265) (Rating: Buy)


We expect IL&FS Transportation Networks (ITNL) to post a weak set of numbers for the quarter on account of high base in 4QFY2011. The company's revenue is expected to decline by 9.0% yoy to `1,507cr. We expect the company to register flat

Refer to important Disclosures at the end of the report

25

4QFY2012 Results Preview | April 4, 2012

Infrastructure
EBITDAM of 24.8%. Further, on the back of high interest cost, which is expected to come at `200cr, we expect ITNL's earnings to decline by 30.1% yoy to `111.3cr. revenue and EBITDAM and burgeoning interest cost (yoy jump of 23.1%), led by elongated working capital cycle.

SEL (CMP/TP: `155/`199) (Rating: Buy)


We expect Sadbhav Engineering (SEL) to post weak numbers on account of high base in 4QFY2011. Revenue is expected to decline by 18.2% yoy to `856.2cr. However, on a sequential basis, it implies growth of 18.3%. EBITDA margin is expected to witness a jump of 130bp yoy to 10.0% on account of low EBITDAM posted in 4QFY2011 due to higher sub-contracting charges. On the earnings front, the company is expected to 52.9cr. post a decline of 1.9% yoy to `52.9cr.

IVRCL (CMP/TP: `66/`79) (Rating: Buy)


We expect IVRCL to post poor numbers for the quarter. On the revenue front, IVRCL is expected to post a yoy decline of 18.0% to `1,682cr on the back of slowdown in execution. On the EBITDA margin front, we expect a dip of 70bp at 8.0%. On the earnings front, we expect a decline of 56.6% for the quarter to 27.9cr, `27.9cr, primarily on account of higher interest costs for the quarter. quarter.

JAL (CMP/TP: `82/`104) (Rating: Buy)


We expect Jaiprakash Associates (JAL) to post marginal top-line growth of 2.0% yoy to `4,063cr for the quarter on the back of higher revenue contribution from the cement segment due to capacity addition. We expect the company to post blended EBITDA margin of 22.9%, an improvement of 150bp for the quarter. The bottom line is expected to be at `230.6cr, registering a yoy decline of 23.6% for the quarter. This is mainly on account of a 16.3% yoy expected jump in interest cost to `470.9cr.

Simplex (CMP/TP: `226/`316) (Rating: Buy)


Simplex Infra is expected to continue its healthy performance on a sequential basis, as we project 27.1% yoy top-line growth to `1,738cr for 4QFY2012. We expect EBITDA margin to fall by 100bp yoy to 9.0%. The bottom line is expected to be under pressure due to increased interest cost (expected jump of 62.2% yoy), resulting in a yoy decline of 15.1% to `31.4cr for the quarter. quarter.

Union Budget 2012-13 - Positive for the sector


Union Budget 2012-13 continued to lay stress on infrastructure development by increasing allocation towards infrastructure and announcing steps to fuel projects with low-cost funds. Announcements made for the sector focused on increasing the avenues to meet the long-term fund requirements of the sector, higher allocation for the irrigation and road sectors, tax incentives and making sectors such as irrigation eligible for viability gap funding.

L&T (CMP/TP: `1,307/`1,641) (Rating: Buy)


We expect L&T to record revenue of `18,945cr, registering 23.1% yoy growth, for 4QFY2012. This growth can be attributed to the company's large order book (~`1.4trillion). On the EBITDA front, we expect the company's margin to witness a decline of 150bp yoy to 13.7%. We project net profit to come in at 1,862cr, `1,862cr, yoy growth of 10.4%. We believe the company would end the quarter with a total order inflow of ~`26,000cr.

MPL (CMP/TP: `57/`84) (Rating: Buy)


Madhucon Projects (MPL) is expected to post 11.0% yoy growth on the top-line front to `658.7cr for 4QFY2012. We expect the company's EBITDA margin to fall by 140bp yoy to 9.2%. Despite revenue growth, the company's earnings are expected to post EBITDAM a decline of 27.7% yoy to `13.9cr on account of low EBITDAM quarter. and higher interest cost for the quarter.

Key developments Road sector


NHAI expected to award ~6,500km in FY2012: NHAI had set itself an aggressive target of ~7,300km for FY2012 as against ~5,084km achieved in FY2011. So far, NHAI has awarded projects for ~4,500km; and with another 2,000km of projects in the pipeline to be awarded in March 2012, we expect NHAI to end the year with ~6,500km of project awarding. Thus, although NHAI will miss its target by ~800km, we believe achieving ~6,500km would imply yoy growth of 27.8% over FY2011, which is commendable. Competition intensity dropping: During the past few quarters, competition in the road segment has declined. This is clearly evident from the lower participation of players in the final bidding of projects, as against the high number of pre-qualified players (refer exhibit below). Few quarters back, the road segment had witnessed heightened competition among players owing to

NCC (CMP/TP: `56/`76) (Rating: Buy)


We expect subdued performance from Nagarjuna Construction (NCC) for this quarter. On the top-line front, NCC is expected to post a decline of 1.5% yoy to `1,429cr. EBITDA margin is expected to witness a dip of 160bp yoy to 7.4% for the quarter. However, However, the blow is expected on the earnings front, as we expect the company to post a decline of 72.6% yoy to `9.8cr quarter. for the quarter. This would be primarily on account of muted

Refer to important Disclosures at the end of the report

26

4QFY2012 Results Preview | April 4, 2012

Infrastructure
slowdown in order inflow from other segments. Although the overall ordering activity scenario has not improved by a great deal, funding and viability concerns are making players more cautious while bidding for new projects. acknowledged by one and all. Hence, we believe the long-term growth story for the sector remains intact. In this report, we introduce our FY2014 numbers, which factor in 8-30% earnings growth by most companies in our coverage during the year. Our estimates are primarily based on the following assumptions: 1) revival in order inflow, driven by government and private outlay; 2) respite in interest rates owing to lower inflation; and 3) relaxation on the working capital front. We remain positive on companies having 1) Comfortable leverage position (L&T and SEL); 2) Strong order book position (L&T, IRB and SEL); 3) Superior return ratios (L&T, IRB and SEL); and 4) Lower dependence on capital markets for raising equity for funding projects (L&T and SEL).

Exhibit 3: Bidding trend in recently awarded road projects


Project Kiratpur Ner chowk Kharagpur Baleshwar Bikaner Suratgarh Obdellagang Betul Length (Km) 113 119 172 121 TPC (` cr) 1,818 471 510 910 1,280 ITNL ITNL MBL Infra Transstroy Sadbhav Winner Pre-qualified 28 22 33 36 39 Final 4 5 6 6 16 bidders bidders

Gomti Chauraha 79 Source: NHAI, Angel Research

Outlook and valuation


In the past 12 months, the infrastructure sector has been plagued by severe headwinds - inflationary pressures, depleting order books, high interest rates and policy paralysis, resulting in execution slowdown and shrinking bottom line of most infrastructure companies. Many projects could not take off due to delays in approval and decision making. Moreover, new project launches have dropped by ~32% in 2011-12, owing to lack of clearances and no clarity on policy reforms (in particular, the power sector) for various sectors. Further, with no immediate signs of respite in sight for infrastructure companies, we believe the pain is expected to continue for some more time and expect things to improve only in 2HFY2013. Notwithstanding this, it should be noted that there is a pertinent need of infrastructure in the country and the economy would get derailed from its high-growth trajectory if these needs are not met, which is

Exhibit 4: L&T, SEL and IRB enjoy higher returns on equity as compared to their peers (FY2014E)
18 16 14 12

ITNL ABL Simplex CCCL MPL NCC

IRB SEL

L&T

(RoAE)

10 8 6 4 2 0 0.0

JAL IVRCL

3.0

6.0

9.0

12.0 (P/E)

15.0

18.0

21.0

24.0

27.0

Source: Company, Angel Research

Hence, we maintain L&T and SEL as our top picks in the E&C space and recommend IRB in the development space.

Exhibit 5: Quarterly estimates


Company ABL^ CCCL HCC IRB Infra^ ITNL^ IVRCL JAL L&T MPL NCC SEL Simplex In. CMP (`) 200 16 26 186 193 66 82 1,307 57 56 155 226 Net Sales 4QFY12E 494.6 572.2 1,021.8 829.4 1,506.8 1,682.3 4,063.4 18,944.6 658.7 1,428.7 856.2 1,737.8 (18.0) (11.0) (15.0) 8.1 (9.0) (18.0) 2.0 23.1 11.0 (1.5) (18.2) 27.1 OPM (%) chg bp 780 90 (200) 140 (70) 150 (150) (140) (160) 130 (100) 20.3 4.4 11.8 42.5 24.8 8.0 22.9 13.7 9.2 7.4 10.0 9.0 Net Profit Profit 4QFY12E 34.4 0.7 (23.2) 103.6 111.3 27.9 230.6 1861.9 13.9 9.8 52.9 31.4 (10.0) (54.9) 0.9 (30.1) (56.6) (23.6) 10.4 (27.7) (72.6) (1.9) (15.1) EPS (`) (` % chg (10.0) (54.9) 0.9 (30.1) (56.6) (23.6) 10.4 (27.7) (72.6) (1.9) (15.1) 6.5 0.0 (0.4) 3.1 5.7 1.0 1.1 30.2 1.9 0.4 3.5 6.3 EPS (`) (` FY12E 18.0 (1.1) (3.0) 14.2 22.4 2.0 2.9 63.5 4.4 1.4 9.3 19.6 FY13E 28.4 1.8 (0.3) 15.0 24.7 4.7 4.2 70.7 5.8 3.5 10.2 27.2 FY14E 30.8 2.8 0.6 16.9 26.2 6.0 5.0 76.2 6.5 5.4 11.3 35.1 FY12E 11.1 13.2 8.6 32.8 27.9 20.6 12.9 40.8 16.7 11.5 P/E (x) FY13E 7.1 8.5 12.4 7.8 14.2 19.4 18.5 9.8 16.2 15.3 8.3 FY14E 6.5 5.5 40.2 11.0 7.4 11.0 16.3 17.1 8.7 10.4 13.7 6.4 Target arg (`) 302 228 265 79 104 1,641 84 76 199 316 % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Buy Neutral Neutral Buy Buy Buy Buy Buy Buy Buy Buy Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012, Target prices are based on SOTP methodology; ^Consolidated numbers

Analyst: Nitin Arora


Refer to important Disclosures at the end of the report

27

4QFY2012 Results Preview | April 4, 2012

Information Technology
CY2012 IT budgets to remain largely flat due to uncertainty in developed countries
Worldwide economic trends: In June 2011, the IMF forecasted that global GDP is set to grow at 4.5% for CY2012. However, rising sovereign debt due to QE measures and bailouts led to gross debt to GDP of developed economies such as U.S., U.K. and Eurozone surge to an alarmingly uncomfortable zone. Further, as the effect of QE measures is gradually fading, economic data points for developed economies are also moving back into the alarming zone. As a result, in September 2011, the IMF marginally downgraded its global GDP growth forecast to 4.0% for CY2012 and gave 4.5% growth forecast for CY2013. This forecast has been slashed again by the IMF in January 2012 to 3.3% and 3.9% for CY2012 and CY2013, respectively, and IMF warned that CY2012 global GDP could drop to as low as 1.3% if Europe's problems persist. Interestingly, GDP growth forecast for almost every major part of the world was lowered for both CY2012 and CY2013, with U.S. being the only key exception. U.S. GDP growth for CY2012 was left unchanged at 1.8%, but the outlook for CY2013 was cut by 0.3 percentage points to 2.2%. For February 2012, data points for the U.S. economy have become mixed, for instance, 1) non manufacturing index grew to 57.3 from 56.0 in January 2012; 2) unemployment rate stood flat mom at 8.3%; 3) industrial production stood at 0.0% as against 0.4% in January 2012; 4) manufacturing index came in at 52.4 as against 54.6 in January 2012 (but a reading above 50 indicates an expanding factory sector); and 5) retail sales grew by 1.1% as against 0.6% in January 2012. We believe stability in the U.S. economy would help Indian IT services players cover up the risk of slower demand in the European region. Technological indicators: The recent financial results of Oracle, the global enterprise giant for the quarter ending February 2012, gave some signs of relief, after its disappointing performance in the last quarter, as new software-license sales, a predictor of revenue growth, grew by 7% to US$2.37bn. The management of Oracle indicated that business fundamentals remain strong, with the company not seeing anything negative in the markets. However, guidance of 1-11% yoy growth in license sales in the next quarter builds in some conservatism in closing rates, after Oracle missed its own guidance in the quarter ending November 2011, as some closures were delayed unexpectedly. Further, recent results by Accenture, in which it upgraded its full-year guidance to 10-12% from 7-10% and its bullish outlook on outsourcing services, are positive signs for the IT sector. However, recently Gartner has lowered its global technology spending growth forecast because of the sluggish economy and Euro crisis. Gartner now expects worldwide spending on technology to grow by 3.7% to US$3.8tn in CY2012, down from its earlier forecast of 4.6% growth. In 2011, global tech spending grew by 6.9% to US$3.7tn compared to 2010. Our take: Given the current economic uncertainties, we see moderation in IT budgets for CY2012 and expect volume growth of tier-I Indian IT companies to scale down to sub-15% from 18% plus in FY2012. However, we do not foresee any price erosion as of now because the current pricing is still at a discount to peak levels and risks are lower as compared to what they were in CY2008, when Lehman bankruptcy was filed. In addition, since the last couple of quarters, the INR has depreciated ~11% against USD, giving a boost to INR revenue, operating margins and overall profitability of all IT companies. However, most of the gains due to the depreciated INR have already flown in 3QFY2012. Hence, on account of all these events, IT index rose by 5.7% in 4QFY2012.

Exhibit 1: Relative performance to the Sensex


9.4 (3.5) 23.0 55.9 34.7 (%) 23.6 25.6 24.6 10.4 0.7 3.6 5.7 12.6 (8.0) 0.0 8.0 16.0 24.0 32.0 40.0 48.0 56.0 64.0 KPIT Cummins Persistent Mindtree Hexaware Mphasis Mahindra Satyam Tech Mahindra HCL Tech Wipro TCS Infosys BSE IT Index Sensex

Source: Bloomberg, Angel Research

Utilization to inch up
In 4QFY2012, we expect the utilization level (including trainees) of almost all the IT companies to inch up as freshers hired in 9MFY2012 are expected to start being billed. In addition, in 4Q, by and large, freshers are not hired by IT companies and companies resort to just-in-time hiring as per the demand landscape. Utilization level (including trainees) of Infosys, TCS and HCL Tech is expected to rise by 70bp, 30bp and 90bp qoq to 70.6%, 74.4% and 74.5%, respectively. In case of Wipro, we expect utilization level (including trainees) to increase by 110bp qoq to 76.4%, on the back of absorption of a higher number of freshers. In case of tier-II Indian IT companies, utilization levels of most companies are expected to move up primarily because these companies were chasing to achieve the flattening of their employee pyramids by hiring freshers since the past three quarters. Most of the campus hires joined the companies in 2QFY2012 and 3QFY2012; a majority of them would have completed their training period and are expected to turn billable in 4QFY2012. Hence, we expect utilization levels of Hexaware, MindTree, Mahindra Satyam and Tech Mahindra to move up by 90bp, 100bp, 110bp and 100bp qoq to 70.6%, 66.5%, 76.1% and 74.0%, respectively. However, in case of KPIT Cummins, we expect utilization level to rise by 220-300bp qoq on account of Systime's acquisition.

Refer to important Disclosures at the end of the report

28

4QFY2012 Results Preview | April 4, 2012

Information Technology
Cyclically a muted quarter but with modest volume growth
Traditionally, 4Q is a soft quarter for IT companies as budgets get closed from January to March and decisions are taken between February and March on the kind of discretionary, operational and capital spending; the spend happens heavily in the next couple of quarters. For 4QFY2012, we expect volume growth to remain at 0.4-3.5% qoq for tier-I IT companies, with TCS leading the pack and Infosys at the fag end of the range. For tier-II companies, we expect growth to be modest at 0.5-4.2% qoq, as utilization is expected to inch up on a qoq basis, as the hired freshers will start being billed. KPIT Cummins is expected to lead the entire IT pack with 31% qoq volume growth because of Systime's acquisition. Other than this, Hexaware is expected to be the leading tier-II IT company, whereas Tech Mahindra is expected to be at the bottom. For 4QFY2012, on the back of modest volume growth, stable pricing and unfavorable cross-currency movement, we expect USD revenue of tier-I IT companies to grow moderately by 0.3-3.5% qoq. For tier-II IT companies, USD revenue growth is expected to be 0.4-4.0% qoq, with Hexaware leading the pack. KPIT Cummins is expected to lead the entire IT pack with 30.5% qoq USD revenue growth because of Systime's acquisition.

INR revenue growth to remain muted


3QFY2012 witnessed one of the most volatile seasons as far as the currency is concerned. During 3QFY2012, INR depreciated by ~12% qoq against USD, which resulted in higher INR revenue growth vs. USD revenue growth and boosted the operating margins of IT players by 100-350bp qoq. But in 4QFY2012, INR appreciated by ~1.1% qoq against USD, with average rate for the quarter standing at `50.2 as against `50.8 in 3QFY2012, which would negatively impact INR revenue growth of IT companies and operating margins by 35-45bp qoq. For 4QFY2012, in INR terms, revenue growth is expected to be muted at (2.1)-2.0% qoq for tier-I IT companies due to appreciation of INR against USD on a qoq basis.

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


7.4 6.3 6 4 4.9 4.0 2.9 1.9 1.8 3.9 4.5 3.2 3.1 1.8 0.4 0 (2) (1.4) 4QFY11 1QFY12
Infosys TCS

6.0 4.9 3.5 3.3 2.2

5.1

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


14 12 10 8.2 8.2 7.7 6.6 14.8 13.5 12.8 11.4

(%)

2QFY12
HCL Tech

3QFY12
Wipro*

4QFY12E

(%)

6 4 2 0 (2) (4)

6.4 5.1 5.7 2.0

6.3 3.2 3.9 1.8

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

1.8

USD revenue to grow, albeit at a slower pace


The cross-currency movement, which had proved to be a boon during 2QFY2011-1QFY2012, has turned into a bane since the last couple of quarters. In 4QFY2012 again, it turned negative for IT companies with the USD appreciating by 2.8% and 0.1% qoq against the Euro and GBP respectively. The magnitude of this is not , much, so this will have a slight impact of 0.1-0.2% qoq on USD revenue of Infosys, TCS, Wipro and HCL Tech. Amongst the entire IT pack, Tech Mahindra is expected to be the highest looser due to unfavorable cross-currency movement by 0.4% on a qoq basis.

1.5 0.8

(2.1)

Infosys

TCS

HCL Tech

Wipro*

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

For tier-II IT companies, INR revenue growth is expected to be at (2.9)-2.0% qoq, with Hexaware leading the pack.

Margins to be a mixed bag


We expect EBITDA margin of Infosys and TCS to slip by 59bp and 19bp qoq, respectively, because of INR appreciation against USD, which will offset the positive impact gained from improvement in utilization level. EBITDA margin of Wipro's IT services is expected to remain almost flat qoq at 24.0%. For HCL Tech, we expect EBITDA margin to improve by 30bp qoq to 18.8%, as the negative impact of INR appreciation will get absorbed by improvement in utilization level in its IT services business and turnaround in BPO operations, which is expected to turn EBITDA positive in 4QFY2012. For tier-II IT companies (excluding MindTree and MphasiS), we expect INR appreciation and moderate volume growth to pull EBITDA margin downwards on a qoq basis. EBITDA margin of
29

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


7.5 7 6 5 4.7 5.8 4.2 5.3 4.3 4.7 4.6 4.5 4.1 3.4 2.4 2.2 2.0 1.1 0.5 0.3 4QFY11 1QFY12
Infosys TCS

(%)

4 3 2 1 0

3.3 3.0 2.1

2QFY12
HCL Tech

3QFY12
Wipro*

4QFY12E

Source: Company, Angel Research; Note: *For the IT services segment Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Information Technology
Tech Mahindra, Hexaware and Mahindra Satyam is expected to decline by 22bp, 140bp and 22bp qoq to 16.0%, 21.6% and 16.0%, respectively. In case of KPIT Cummins, despite whopping revenue growth, EBITDA margin is not expected to increase because incremental growth is expected to come from Systime's acquisition, who has a single-digit EBITDA margin. MindTree is expected to record 44bp qoq expansion in margin to 17.7%, as the average USD/INR realization of MindTree was much lower than other mid-tier IT companies, which makes it less prone to the damage caused by INR appreciation in this quarter. Exhibit 5: EBITDA margin profile Tier-I
33.3 32.1 29.1 30.2 30.4 28.1 29.1 24.0 25.2 25.1 18.5 16.3 15 25.0 23.2 20 20.7 17.1 23.9 18.5 18.8 31.0 30.8 33.7 31.0 33.1

Amongst mid-tier IT companies, profitability of most IT companies is expected to slide down due to INR appreciation against USD, which will wipe off gains that the companies got in the last quarter. Profitability of Tech Mahindra, Mahindra Satyam, Hexaware, MindTree and Persistent is expected to decline by 6.2%, 25.7%, 12.5%, 8.7% and 23.9% qoq, respectively.

Outlook and valuation


The global macro data is showing some signs of stability since the past couple of months, but still uncertainty regarding future global corporate profits has caused IT budgets to remain largely flat yoy for CY2012. However, as per TPI's recent report, deal pipelines of IT companies were higher in the latter half of CY2011, but few project ramp ups are getting delayed, as indicated by the managements of selective companies such as HCL Tech and Infosys. Thus, we expect tier-I IT companies to replicate growth of above 16% in FY2012. Further, we expect moderation in volumes to sub 15% only in FY2013. However, in INR terms, we expect growth to be higher considering USD/INR assumption for FY2013 to be at 49.0, following a sharp ~11% depreciation against USD over the past couple of quarters. We remain cautiously optimistic on the IT sector, as on one hand global uncertainties are prevailing along with concerns regarding the spending pattern for clients IT budgets for CY2012, while on the other software companies are deriving benefits from INR depreciation. We prefer diversified players such as TCS, Infosys and HCL Tech in tier-I IT companies. In case of tier-II IT companies, we like MindTree.

30

(%)

25

Infosys

TCS

HCL Tech

Wipro*

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

Earnings growth to be a mixed bag


During 3QFY2012, INR depreciated by ~12% against USD, which boosted earnings of IT companies; however, again in 4QFY2012, INR appreciated against USD by ~1.1% qoq, which is expected to negatively affect the operating as well as net income of IT companies. Profitability of tier-I companies such as TCS, Wipro and HCL Tech is expected to increase by 2.3%, 4.5% and 7.6% qoq, respectively, in 4QFY2012. For Infosys, profitability is expected to decline by 2.6%, as volumes are expected to be flat qoq.

Exhibit 6: Quarterly estimates


Company TCS Infosys Wipro HCL Tech* Mah. Satyam Mphasis^ Hexaware# Mindtree Persistent KPIT Cummins Infotech Entp. CMP (`) 1,168 2,865 439 482 80 404 117 488 320 80 149 Net Sales 4QFY12E 13,438 9,100 10,125 5,288 1,456 1,668 1,380 440 528 267 481 420 1.8 (2.1) 1.3 0.8 0.8 (2.9) 0.9 1.8 1.6 (0.2) 27.0 0.8 OPM (%) chg bp (19) (59) 3 30 (22) (22) 66 (140) 44 1 6 (82) 30.8 33.1 19.9 18.8 16.0 16.0 19.1 21.6 17.7 26.0 15.4 19.7 Profit Net Profit 4QFY12E 2,952 2,310 1,522 616 259 229 189 77 55 31 38 41 2.3 (2.6) 4.5 7.6 (6.2) (25.7) 2.2 (12.5) (8.7) (23.9) (6.7) 21.0 (` EPS (`) % chg 2.3 (2.6) 4.5 7.6 (6.2) (25.7) 2.2 (12.5) (8.7) (23.9) (6.7) 21.0 FY12E 54.4 145.5 22.9 33.1 83.5 8.5 36.7 8.9 50.5 32.8 7.7 11.9 15.1 40.4 6.2 8.8 19.6 1.9 9.0 2.6 13.6 7.7 2.1 3.7 (` EPS (`) FY13E 62.5 164.9 27.1 37.1 81.1 7.6 38.7 9.3 47.7 36.2 9.6 16.6 FY14E 69.8 186.0 30.3 41.6 87.0 8.3 41.2 10.4 54.0 39.1 10.9 18.1 FY12E 21.5 19.7 19.2 14.6 8.6 9.4 11.0 13.1 9.6 9.8 10.4 12.5 P/E (x) FY13E 18.7 17.4 16.2 13.0 8.9 10.5 10.4 12.6 10.2 8.8 8.4 9.0 FY14E 16.7 15.4 14.5 11.6 8.3 9.7 9.8 11.3 9.0 8.2 7.4 8.2 arg Target (`) 1,360 3,348 562 % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Buy Buy Buy Neutral

463 Accumulate

Tech Mahindra 720

89 Accumulate 433 Accumulate 569 98 172 Neutral Buy Buy Buy

352 Accumulate

Source: Company, Angel Research; Note: Price as on March 30, 2012; *June ending, so 3QFY2012 estimates; ^October ending, so 2QFY2012 estimates; #December ending, so 1QCY2012 estimates; Change is on a qoq basis

Analyst - Ankita Somani


30

Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Metals
In our view, profitability of steel companies is expected to improve during 4QFY2012 compared to 3QFY2012 on the back of decreasing prices of key inputs coupled with stable domestic prices. During 4QFY2012, steel demand improved sequentially, with steelmakers increasing prices by `1,000-2,000/tonne. Globally, steel prices have risen during the quarter, including increases in the CIS and China by 10% and 4%, respectively. For 1QFY2013, coking coal prices have settled at lower levels of US$206/tonne (down 12.3% qoq). Iron ore contract prices for 1QFY2013 are expected to remain flat due to stable iron ore prices during 4QFY2012. Steel consumption in India grew by only 1.8% yoy in 1HFY2012 on account of subdued demand. Nevertheless, steel demand improved in 3QFY2012 and grew by 7.7% yoy. Looking ahead, although we expect steel consumption to pick up, there are some concerns owing to slowdown in the capex cycle, high interest rates and slowdown in construction and auto demand. Base metal prices improved modestly in 4QFY2012 on account of lack of any major disappointments from the Eurozone. Going forward, we do not expect base metal prices to spike meaningfully due to slowdown in global growth. BSE Metal Index posted positive return of 21.3% in 4QFY2012. Steel stocks gained during 4QFY2012 mainly on account of improved demand in the domestic market, increased steel prices, a decline in prices of key inputs and lack of adverse news from the troubled Eurozone. JSW Steel gained 42.2% in 4QFY2012 on the hope of lifting of mining ban in Karnataka, fall in iron ore prices and improvement in utilization levels at its Karnataka plant. SAIL and Tata Steel stocks gained 15.6% and 40.7%, respectively. On the non-ferrous side, stock prices of Sterlite, Hindalco, Nalco and Hindustan Zinc increased by 23.8%, 11.7%, 7.0% and 10.6%, respectively, on account of rise in spot prices of base metals during the quarter. Stock prices of Coal India and MOIL increased by 14.4% and 10.2%, respectively, during the quarter. NMDC underperformed during the quarter, as it lowered iron ore prices and reduced its volume guidance. Stocks of mid-cap steel companies also recorded significant gains during 4QFY2012.

Key events
Coal India shifts to new pricing mechanism
Coal India shifted to the new pricing mechanism from January 2012. The company now prices its non-coking coal based on internationally accepted Gross Calorific Value (GCV). Prior to January 2012, non-coking coal was priced on the basis of various grades, ranging from A to F The new pricing system is . based on the recommendations of the Integrated Energy Policy Committee and the Expert Committee on Road Map for the coal sector's reforms. Initially, although the change in pricing mechanism increased the tariff for Coal India, it rolled back the hike subsequently due to opposition from its customers. Coal India will review the pricing during April 2012. Meanwhile, the change in pricing mechanism is expected to be revenue-neutral for Coal India.

Government raises export duty on iron ore


During January 2012, the government raised export duty on iron ore to ad valorem 30% on lumps and fines, with effect from December 30, 2011, compared to 20% earlier. The increase in export duty, rise in rail freight and the recent iron ore price decline are expected to severely affect iron ore exports from India, in our view.

NMDC cuts ore prices; Lowers volume guidance


During February 2012, NMDC (surprisingly) cut prices of iron ore fines and lumps by 20% and 3%, respectively, for 4QFY2012, citing reasons such as the decline in global iron prices, INR appreciation and increased export duty on iron ore. NMDC also lowered its sales volume guidance for FY2012 and FY2013. The company now expects sales volumes of 27mn tonnes and 30mn tonnes (earlier 30mn tonnes and 33mn tonnes) for FY2012 and FY2013, respectively.

Vedanta announces to merge Sesa Goa and Sterlite Industries


During February 2012, Vedanta Resources, the promoter of Sesa Goa and Sterlite Industries, approved to merge the two companies to simplify the group's holding structure and lower its debt. According to the proposed structure, the merged entity will fully takeover the loss-making company, Vedanta Aluminium (at an enterprise value of `32,695cr). Also, the merged entity will take over Vedanta Resources' 38.8% stake in Cairn India at a nominal consideration of US$1 along with the associated Cairn-acquisition debt of US$5.9bn. In our view, the deal is negative for the minority shareholders of Sesa Goa and Sterlite Industries, mainly on account of transfer of loss-making Vedanta Aluminium at a very high price.

Exhibit 1: Metal stock performance 4QFY2012


NMDC Nalco MOIL HZL Hindalco COAL SAIL Sesa BSE Metal Index Sterlite Tata Steel JSW 0.0 10.0 20.0 (%) 30.0 40.0 50.0

Australia approves 30% tax on iron ore and coal mining


During March 2012, Australian Senate approved a Mineral Resource Rent Tax (MRRT) on the super-normal profits of iron ore and coal mining companies, which will be effective from July 2012. According
31

Source: Bloomberg, Angel Research Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Metals
to MRRT, a company will have to pay MRRT @30% of its annual mining profit if its annual profit reaches AUD75mn or is higher than AUD75mn. As this tax is on the profit of coal miners, we do not expect the tax to have a significant impact on sea-borne iron ore and coal prices. yoy to 54.2mn tonnes and 29.2mn tonnes, respectively, during the same period. During the quarter, average spot iron ore prices for 63.5% Fe grade (CFR, China) remained flat qoq at US$147/tonne (although down 20.2% yoy). Hence, iron ore contract prices for 1QFY2013 are likely to remain flat on a qoq basis. However, domestic prices of iron ore fines declined during 4QFY2012. Media reports suggest that Teck Resources has settled a coking coal contract with South Korean steelmaker Posco at US$206/tonne FOB Australia (down 12.3% qoq) for the April-June 2012 quarter, in-line with our expectation. The decline in coking coal prices coupled with stable steel prices domestically are expected to improve steel companies' margins in the coming quarters.

Budget - Broadly neutral for the metal sector


Union Budget 2012-13 was a mixed bag for the metals and mining sector. While the increase in excise duty would be marginally negative for metal producers, exemption from import duty on coal would be slightly positive for thermal coal importers, including non-ferrous metal producers and few sponge iron producers. Moreover, the increase in customs duty on non-alloy flat-rolled steel from 5.0% to 7.5% would be slightly positive for flat steel producers.

Ferrous sector
During 4QFY2012, steel demand improved on a qoq basis. In addition, steelmakers hiked prices by `1,000-2,000/tonne during the quarter. Globally, steel prices have increased, representing increases in the CIS and China by 10% and 4%, respectively, during the quarter. World average HRC prices rose by 5.6% qoq to US$704/tonne, while average Chinese domestic prices increased by 4.0% qoq to RMB4,375/tonne. Average HRC prices in India grew by 3.6% qoq to ~`36,500/tonne.

Exhibit 4: Iron ore prices and inventory in China


210 180 150 120 105 90 75 60 90 60 30 0 May-09 45 30 15 0 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12

(US $/tonne)

120

Iron ore inventory (RHS)

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

Source: Bloomberg, Angel Research

Exhibit 2: Domestic HRC prices increased sequentially


39,000 37,000

Iron ore exports from India continued to decline


Iron ore exports from India have declined by 29.3% yoy to 56.1mn tonnes between April 2011 and February 2012 on account of export ban in Karnataka, stringent measures in issuing export permits in Odisha, a decline in international iron ore prices and increased export duty. Further, during March 2012, Justice M B Shah commission recommended to ban export of mining iron ore in Goa until the whole system is streamlined and regularized in order to prevent illegal mining.

(`/tonne)

35,000 33,000 31,000 29,000 27,000 25,000

Sep-11

Nov-11

Jan-12

Nov-10

Nov-09

Mar-11

Mar-10

May-10

Indian HRC price

Source: Bloomberg, Angel Research

May-11

Mar-12

Sep-10

Sep-09

Jan-11

Jan-10

Jul-10

Jul-11

Exhibit 3: World HRC prices up sequentially


900 800

Exhibit 5: Indian iron ore exports to China


12 10

(US$/tonne)

(mn tonnes)

8 6 4 2 0

700

600

Feb-11

May-11

Jul-11

Sep-11

Mar-11

Aug-11

Nov-11

Dec-11

May-11

Jun-11

Aug-11

Nov-11

Dec-11

Feb-12

Jul-11

Sep-11

Apr-11

Oct-11

Jan-12

Mar-12

World HRC price

USA Domestic HRC price

CIS export HRC price

Source: Bloomberg, Angel Research

Source: Bloomberg, Angel Research

Iron ore prices flat; Coking coal prices continue to slide


Iron ore prices remained range-bound during 4QFY2012 after a steep decline in 3QFY2012. Iron ore exports declined in India by 41.0% yoy to 9.4mn tonnes during January-February 2012. Iron ore exports from Australia and Brazil grew by 16.6% and 10.2%
Refer to important Disclosures at the end of the report

Outlook
Margins to expand hereon
Steel prices in India are expected to remain flat in the near term. With the decline in international iron ore prices, domestic iron ore prices have also come off slightly, thus benefitting
32

Feb-12

Jan-11

Apr-11

Jun-11

Oct-11

Jan-12

500

(mn tonnes)

4QFY2012 Results Preview | April 4, 2012

Metals
non-integrated steelmakers. Also, coking coal prices have declined steadily over the past three quarters. These factors are expected to result in margin improvement for steelmakers during FY2013. According to World Steel, global crude steel production for January 2012 and February 2012 stood at 122mn tonnes and 119mn tonnes compared to 128mn tonnes and 118mn tonnes during January 2011 and February 2011, respectively. Global capacity utilization levels during January 2012 and February 2012 stood at 77% and 80%, respectively. 4QFY2012 expectations: For 4QFY2012, on a yoy basis, we expect steel companies under our coverage to report modest top-line performance on account of flat realization. Further, due to relatively higher raw-material costs, margins of steel companies are likely to contract by 295-708bp yoy. For Sesa Goa, net sales are expected to decline by 17.0% yoy on account of no production from Karnataka mines and a decline in iron ore prices. Further, higher iron ore royalty and increased export tax are expected to result in net profit declining by 15.0% yoy. For Coal India, we expect a 5.9% yoy decrease in net profit on account of increased provisions for staff costs. For NMDC, we expect its top line and bottom line to decrease by 33.1% and 27.2% yoy, respectively, on account of a decline in its sales volumes and realization. Nevertheless, we remain positive on we NMDC at current price levels. Non-ferrous sector: After a steep decline during 3QFY2012, base metal prices rose during 4QFY2012 on account of lack of adverse news from the troubled Eurozone. On a sequential basis, average copper, aluminium and zinc prices increased by 10.6%, 4.9% and 6.4%, respectively, after a steep decline in 3QFY2012. On a yoy basis, average copper, aluminium and zinc prices decreased by 13.5%, 11.5% and 15.3%, respectively.

Exhibit 6: Average base metal prices (US$/tonne)


4QFY12 Copper Aluminium Zinc 8,329 2,219 2,028 4QFY11 9,633 2,506 2,394 yoy % (13.5) (11.5) (15.3) 3QFY12 7,530 2,115 1,906 qoq % 10.6 4.9 6.4

Source: Bloomberg, Angel Research

On a qoq basis, zinc and aluminium inventory increased by 10.0% and 9.2%, respectively, while copper inventory declined by 24.7%.

Exhibit 7: Inventory chart


130

110

90

70

50 Apr-11

Jun-11

Aug-11 Copper

Oct-11 Aluminium

Dec-11 Zinc

Feb-12

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

Outlook: Although base metal prices are likely to remain under pressure in the near term due to growth concerns, high cost of production should lend support to prices. While the copper market is struggling with supply constraints, the downside for aluminium prices is capped due to high energy cost. Zinc and lead prices are unlikely to see any major upside as the market remains in surplus. For 4QFY2012, we expect non-ferrous companies to register a dip in their top line on a yoy basis, owing to the decline in LME prices. Further, we expect a margin decline of 165-1,558bp yoy on account of lower LME prices and higher coal cost. We remain positive on Sterlite Industries and Hindustan Zinc.

Exhibit 8: Quarterly estimates


Company Coal India Hindalco Hind. Zinc JSW Steel MOIL Nalco NMDC SAIL Sesa Goa Tata Steel CMP (`) 343 129 132 722 251 55 161 94 194 470 Net Sales 4QFY12E 17,672 6,680 2,919 8,406 240 1,588 2,524 12,183 3,006 10,912 33,437 17.1 (1.2) (8.7) 19.5 (4.5) (11.2) (33.1) 2.0 (17.0) 9.1 (1.1) OPM (%) chg bp (1,623) (165) (1,112) (708) (2,090) (1,558) 416 (295) (1,887) (775) (515) 26.8 11.9 50.5 16.4 42.5 9.8 76.8 14.0 39.6 22.8 8.1 Net Profit Profit 4QFY12E 3,958 516 1,335 432 97 115 1,528 1,263 1,247 1,311 2,743 (5.9) (27.1) (24.6) (48.1) (26.9) (62.5) (27.2) (16.2) (15.0) (32.8) 44.7 EPS (`) (` % chg (5.9) (27.1) (24.6) (48.1) (26.9) (62.5) (27.2) (16.2) (15.0) (32.8) 44.7 6.3 2.7 3.2 18.1 5.8 0.4 3.9 3.1 13.1 3.9 25.2 EPS (`) (` FY12E 23.3 16.4 13.0 44.7 24.3 2.7 18.0 11.2 35.9 15.8 36.7 FY13E 24.0 15.2 15.2 72.1 24.5 2.5 18.6 13.2 43.9 18.4 45.8 FY14E 26.3 17.3 17.2 89.5 26.6 3.5 20.6 14.5 47.9 19.6 58.9 FY12E 14.7 7.9 10.2 16.2 10.3 20.0 8.9 8.4 5.4 7.0 12.8 P/E (x) FY13E 14.3 8.5 8.7 10.0 10.3 21.7 8.6 7.1 4.4 6.0 10.3 FY14E 13.0 7.4 7.7 8.1 9.4 15.7 7.8 6.5 4.1 5.7 8.0 Target arg (`) 136 147 51 185 102 206 139 503 % chg 4QFY12E % chg 4QFY12E

cr ( ` cr )
Reco. Neutral Accum. Accum. Neutral Neutral Reduce Buy Accum. Accum. Buy Accum.

Sterlite Inds 111

Source: Company, Angel Research; Note: Price as on March 30, 2012; EPS calculation based on fully diluted equity; Denotes consolidated numbers

Analyst : Bhavesh Chauhan


Refer to important Disclosures at the end of the report

33

4QFY2012 Results Preview | April 4, 2012

Oil & Gas


During 4QFY2012, average Brent crude oil price increased by 8.7% qoq as tension over Iran's nuclear issues supported prices, offsetting the news of increased oil production from Saudi Arabia. WTI crude oil price rose by 9.5%, broadly reflecting the rise in Brent crude oil price. Henry Hub natural gas price declined by 27.1% qoq on the back of forecasts suggesting cooler weather, which in turn would cut demand for air conditioning. Prices of petrochemical products rose modestly during the quarter. During January and February 2012, Indian crude oil basket stood at US$110/bbl and US$118/bbl, respectively. During March 2012, oil marketing companies (OMCs) continued to lose `486cr per day on account of selling diesel, kerosene and domestic LPG at subsidized rates. During March 2012, OMCs continued to lose `13.1/liter, `28.7/liter and `440/cylinder on diesel, kerosene and domestic LPG, respectively.

Petchem prices up modestly (qoq) in 4QFY2012


Average prices of petrochemical products increased slightly on a qoq basis in 4QFY2012. However, although petrochemical prices rose in January and February 2012, prices declined slightly in March 2012.

Exhibit 3: Petchem prices rose qoq in 4QFY2012


120 100 80

(`/kg)

60 40 20 0 May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

PTA

MEG

CHIPS

POY

Source: Bloomberg, Angel Research

Exhibit 1: Indian crude basket rose in 4QFY2012


116 112
(US$/bbl)

Oil supply across the world continued to improve in 4QFY2012 mainly on account of higher production from non-OPEC countries.

Exhibit 4: World oil supply improved in 4QFY2012


92 91 91

108 104 100 96 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12


(mnbpd)

90 90 89 89 88 88 87 87 Apr-11 Jun-11 Aug-11 Oct-11 Total oil supply - Monthly Dec-11 Feb-12

Indian crude oil basket

Source: Bloomberg, Angel Research

Brent crude rose in 4QFY2012


Brent crude oil price average stood at US$120/bbl in 4QFY2012 compared to US$110/bbl in 3QFY2012. WTI crude increased to average US$103/bbl in 4QFY2012 compared to US$94/ bbl in 3QFY2012, in-line with the increase in Brent crude oil price. Tension over Iran's nuclear issues largely resulted in increased crude prices during the quarter.

Source: Bloomberg, Angel Research

Spread between WTI and Brent rose during 4QFY2012


Although the spread between WTI crude and Brent crude has remained insignificant historically, Brent crude traded at a premium of 20% over WTI during 1HFY2012. However, the

Exhibit 2: Brent crude rises in 4QFY2012


130 125 120
(US $ /barrel)

Exhibit 5: WTI - Brent crude oil spread rises


130 120 110 100
(US$/bbl)

115 110 105 100 95 Mar-11

90 80 70 60 50

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

40 Mar-09

Aug-09

Jan-10

Jun-10

Nov-10

Apr-11

Sep-11

Feb-12

Source: Industry sources, Angel Research

Brent crude oil spot price

WTI crude oil spot price

Source: Bloomberg, Angel Research

Refer to important Disclosures at the end of the report

34

4QFY2012 Results Preview | April 4, 2012

Oil & Gas


spread narrowed during 3QFY2012 and increased again during 4QFY2012, as the rise in WTI crude outpaced the rise in Brent crude. WTI crude rose by 9.5% qoq, while Brent crude price increased by 8.7% qoq during 4QFY2012.

Key developments
RIL's KG-D6 output hits all-time low
Reliance Industries' (RIL) largest gas fields in the KG-D6 gas block have hit an all-time low production of 28mmscmd as the firm shut six wells due to water and sand ingress. Dhirubhai 1 and 3 gas fields in the eastern offshore KG-DWN-98/3 output plummeted to 28mmscmd during the week ending March 4, 2012. Including the gas production of 6.5mmscmd from MA fields, total production from KG-D6 block averaged 35mmscmd (significantly below the field development plan of 70mmscmd approved during 2006) during the same week. We continue to await further clarity on the sustainable levels of production from KG-D6 block.

U.S. gas prices decline


The benchmark Henry Hub natural gas price average stood at US$2.43/mmbtu in 4QFY2012 compared to US$3.33/mmbtu in 3QFY2012. The qoq price decline was mainly due to forecasts of cooler weather, which would result in lower demand for air conditioning.

Exhibit 6: Natural gas prices declined in 4QFY2012


5.5

4.5

(US $/mmbtu)

Union Budget negative for oil producers


3.5

2.5

1.5 Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

Source: Bloomberg, Angel Research

Exhibit 7: Crude inventory increased in 4QFY2012


380 360

Union Budget 2012-13 was negative for the oil and gas sector. The budget pegged the government's share of petroleum subsidy at only `43,737cr for FY2013, which would be insufficient if Brent crude stays at current levels (above US$115/bbl) or diesel and LPG cylinder prices are not revised upwards. The government's share of subsidy for FY2012 is expected to be `68,533cr, which is in-line with our expectation of `65,000cr, although it is significantly above the government's initial target of `23,696cr. The budget proposed to increase cess for oil producers from `2,500/tonne to `4,500/tonne, which is negative for Cairn India and ONGC. In light of this event, we had cut Cairn India's and ONGC's FY2013 EPS estimate by 10.7% and 10.3%, respectively.

(mn bbls)

340 320 300 280 Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

DOE crude oil inventory

O&G stocks rise during 4QFY2012


During 4QFY2012, BSE Oil and Gas (O&G) Index recorded an increase of 6.0%. After a steep decline during 3QFY2012, O&G stocks gained during January and February 2012, in-line with the increase in broader markets. However, the stocks declined during March 2012. Cairn India stock gained during January and February due to higher global crude oil prices. RIL's stock gained during January and February 2012 but declined in March 2012 due to the decrease in gas production from KG-D6 basin. GAIL stock declined by 1.9% during 4QFY2012, reflecting the decrease in KG-D6 gas production. RIL, Cairn and ONGC stocks gained 8.3%, 6.3% and 4.6%, respectively, during the quarter.

Source: Bloomberg, Angel Research

Exhibit 8: Motor gasoline inventory up in 4QFY2012


240 230

(mn bbls)

220 210 200 190 Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

DOE motor gasoline inventory

Source: Bloomberg, Angel Research

Refer to important Disclosures at the end of the report

35

4QFY2012 Results Preview | April 4, 2012

Oil & Gas


Exhibit 9: 4QFY2012 stock performance
10.0 8.0 6.0 4.0
(%)

4QFY2012 - Result expectations


For 4QFY2012, we expect a decline in the net profit of O&G companies under our coverage. ONGC is expected to post a decline of 5.6% yoy in its top line. The companys bottom line is expected to decline by 5.0% yoy due to increased subsidy burden. RIL is expected to report top-line growth of 16.5% yoy on the back of higher prices of petrochemical products. However, we expect RIL's bottom line to decrease by 22.3% yoy mainly due to lower gas production from KG-D6 block. GAILs top line is expected to grow by 20.3% yoy on the back of higher realization. The companys net profit is expected to increase by only 1.9% yoy. Cairn India's net sales are expected to decrease by 6.0% yoy. The company s bottom line is expected to decrease by 7.9% yoy due to increased royalty expenses.

2.0 0.0 (2.0) (4.0) RIL Cairn BSE O&G Index ONGC GAIL

Source: Bloomberg, Angel Research

Exhibit 10: Quarterly estimates


Company Cairn India GAIL ONGC ^ RIL ^ CMP (`) 334 375 267 748 Net Sales 4QFY12E 3,437 10,697 14,530 84,669 (6.0) 20.3 (5.6) 16.5 OPM (%) chg bp (482) (260) (699) (689) 82.1 11.7 48.6 8.1 Net Profit Profit 4QFY12E 2,263 798 2,652 4,177 (7.9) 1.9 (5.0) (22.3) EPS (`) (` % chg (7.9) 1.9 (5.0) (22.3) 11.9 6.3 3.1 12.8 EPS (`) (` FY12E 43.9 31.1 30.2 64.2 FY13E 46.3 35.4 31.0 64.7 FY14E 48.2 37.0 33.6 71.8 FY12E 7.6 12.1 8.9 11.6 P/E (x) FY13E 7.2 10.6 8.6 11.6 FY14E 6.9 10.1 8.0 10.4 Target arg (`) 353 319 875 % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Accum. Neutral Buy Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012; ^Standalone numbers for the quarter and consolidated numbers for the full year

Analyst: Bhavesh Chauhan


Refer to important Disclosures at the end of the report

36

4QFY2012 Results Preview | April 4, 2012

Pharmaceutical
During 4QFY2012, the BSE Healthcare (HC) Index kept its outperformance, rising 13.0% vis-a-vis BSE Sensex, which rose by 12.6%. This depicts the robust earnings growth outlook and positive stance for the sector. During 4QFY2012, in our our coverage universe, mid caps posted higher gains compared to large caps. the R&D front to tap opportunities in the domestic and global markets. To encourage the same, the weighted deduction on R&D expenditure to 200% (in-house research) was extended for a further period of five years.

Announcements
To extend weighted deduction of 200% for R&D expenditure in an in-house facility for a further period of five years beyond March 31, 2012 Allocation for NRHM proposed to be increased from `18,115cr in FY2011-12 to `20,822cr in FY2012-13 Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15% up to March 2013 Introduced MAT on partnership firm

Exhibit 1: BSE HC Index vs. the Sensex


15.0 10.0 5.0

(%)

0.0 (5.0) (10.0) (15.0) BSE HC Sensex

4QFY2011

1QFY2012

2QFY2012

3QFY2012

4QFY2012

Impact
Overall, the budgetary announcements have been positive for all Indian pharmaceutical companies. However, the introduction of MAT on partnership firm would negatively impact Cadila and Sun Pharma. However, since we are already working with higher tax provision for FY2013, we are not changing our FY2013 estimates for both the companies. Thus, overall the budget has been positive for the sector. Litigation clouds Sun Pharma: Wyeth, a Pfizer Group company, has recently estimated damages of US$960mn (around `4,700cr) against Indian pharma firm, Sun Pharma, for infringing on the patents of its anti-ulcer drug, Protonix. Wyeth believes that it should be compensated for the US$960mn losses it had to bear due to the at-risk launch by Sun Pharma. The damages claimed against Sun Pharma and Teva by Pfizer, which acquired Wyeth in 2011, allegedly represent Wyeth's and Nycomed's combined lost profits due to Teva's and Sun Pharma's at-risk launches, including interest and other expenses incurred as a result of generic launches, according to Pfizer. Nycomed had licensed the drug to Wyeth for sale in the U.S. However, Sun Pharma believes the damage claims are unjustified. The company believes that it has sound reasons to disagree with the overstated claims of Wyeth. According to management, the patent is invalid and unenforceable and will pursue all available legal remedies including appeals. Sun Pharma has around US$1bn cash on books. Thus, while an adverse verdict would have a negative impact on the stock, given the healthy balance sheet, we believe the company has healthy cash position to tide over the adverse verdict, without impacting the balance sheet. We maintain our Neutral recommendation on Sun Pharma.

Source: C-line, Angel Research

Amongst large caps, Lupin, Ranbaxy and Sun Pharma outperformed the HC Index by posting gains of 18.4%, 15.7%, and 14.7%, respectively. Lupin performed well after languishing for many quarters, as its valuations became more attactive compared to peers. However, Cipla (down 4.7%), Cadila (gain of 7.9%) and Dr. Reddys (gain of 11.5%) were the large-cap underperformers during the quarter. Among mid caps, the major gainer was Orchid Chemicals, which posted gain of 45.7% during 4QFY2012. The stock had been languishing at lower levels for a while on the back of poor quarterly numbers. However, valuations of the stock became attractive and, thus, the stock bounced back sharply. Other mid cap gainers included Alembic Pharma and Aurobindo Pharma, which rose by 36.5% and 30.9%, respectively. IPCA Labs was also among the gainers, rising 22.0% during the quarter. Amongst the MNC pack, there was a divergent trend. While Glaxo rose by 18.3% during the quarter, Aventis Pharma dropped by 4.8%. Among CRAMS and small caps, Dishman Pharma and Indoco Remedies posted meager gains of 7.4% and 4.0%, respectively, during 4QFY2012.

Key developments
A positive budget for the pharma sector
Union Budget 2012-13, as expected, is positive for the pharmaceutical sector. As expected, R&D sops would continue to be positive for the sector as a whole. The government has again increased budgetary allocation for healthcare spending, which would be an overall positive for the sector. Indian pharma companies have been investing on
Refer to important Disclosures at the end of the report

37

4QFY2012 Results Preview | April 4, 2012

Pharmaceutical
Lupin settles the diabetics case
Pharma major, Lupin Ltd. and its subsidiary, Lupin Pharmaceuticals, Inc., entered into a settlement agreement with Santarus, Inc. and Depomed, Inc. to resolve the pending patent litigation involving GLUMETZA (extended release metformin tablets) 1,000mg and 500mg. The settlement agreement grants Lupin the right to begin selling a generic version of GLUMETZA on February 1, 2016, or earlier under certain circumstances. GLUMETZA extended release metformin tablets, 1,000 mg and 500 mg, had annual U.S. sales of approximately US$71mn for the 12 months ending December 2011. The settlement agreement is subject to review by the U.S. Department of Justice and the Federal Trade Commission, as well as entry by the U.S. District Court for the Northern District of California of an order dismissing the litigation. Lupin had earlier received the tentative approval for generic GLUMETZA (Metformin Hydrochloride Extended Release Tablets) 1,000 mg and 500 mg from the U.S. Food and Drugs Administration (FDA) in January 2012. Lupin believes it is the first applicant to file an ANDA for GLUMETZA 1,000 mg and 500 mg strengths and as such is entitled to 180 days of marketing exclusivity. The development is positive for the company and at current valuations, the stock trades at 17.9x FY2013E and 16.1x We FY2014E earnings. We maintain our Buy recommendation on the stock with a target price of `656.

4QFY2012 - Result expectations


The Indian pharmaceutical sector is expected to post muted numbers for 4QFY2012. We expect our coverage universe to register 32% yoy top-line growth. On the operating front, margins are expected to expand by 876bp yoy, which would aid in high net profit growth. However, the same would be driven by Ranbaxy's Lipitor sales. Apart from Ranbaxy, DRL's numbers would also be driven by one-time opportunity of generic olanzapine. Further, Sun Pharma's numbers would be driven by robust top-line growth and improvement in operating margin. Amongst large caps, Sun Pharma is expected to post 19% yoy sales growth, mainly on the back of integration of Taro. Cipla is expected to post net sales growth of 4.6%. Other players, namely DRL, Lupin and Cadila, are expected to report 14.0%, 22.6% and 20.7% growth in net sales, respectively. Amongst small caps, Indoco Remedies is expected to post 28.7% yoy growth. Amongst the MNC pack, Aventis is likely to post 12.9% growth in net sales, while Glaxo is likely to report 15.8% yoy sales growth.

Exhibit 3: Sales growth for 4QFY2012


140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Sun Pharma Lupin Cipla
Sales growth

133.3

19.0

22.6 4.6 Ranbaxy

14.1

DRL

ANDA approvals in 4QFY2012


During the quarter, Lupin and Sun Pharma received five and seven ANDA approvals, respectively. DRL received three approvals. Large caps continued to get regular approvals.

Source: Angel Research

Large caps to post robust bottom-line growth


Among large caps in our coverage universe, Ranbaxy is expected to post a robust set of numbers, with sales of `5,000cr during 1QCY2012, mainly on the back of Lipitor, which would aid the company's OPM to expand to 38.8% vs. 17.0% in 4QCY2011. The company's net profit for the quarter is expected to come in at `1,470cr. Sun Pharma is likely to register 19% yoy sales growth, mainly on the back of integration of Taro, which will drive its export formulation sales during the period. Along with strong top-line growth, on account of the integration, the company's OPM is expected to expand by 1,080bp yoy, with margin likely to be around 41.1%. The company's net profit for the quarter is expected to register 75.0% yoy growth. DRL is expected to post top-line growth of 14% yoy to `2,301cr, majorly driven by the U.S. market. The company is expected to
38

Exhibit 2: ANDA approvals for select companies


Company Lupin Generic Metformin HCL, Ziprasidone HCL, Metmorfin HCL, Repaglinide, Quetiaine fumarate Fenofibrate, Divalproex Sodium, Quetiaine fumarate Hydrochlorothaiazide; Metoprolol Tartrate, Fexofenadine HCL,Doxorubicin HCL, Naltrexone HCL, Olanzapine, Methylphenidate HCL Amoxicillin; Clavulanate Potassium, Quetiaine fumarate Abacavir Sulfate; Lamivudine Memantine HCL,Ibandronate Sodium # of approvals

5 3

Dr. Reddys Sun Pharma

7 3 2 2

Aurobindo Pharma Cipla Orchid

Source: Angel Research Refer to important Disclosures at the end of the report

4QFY2012 Results Preview | April 4, 2012

Pharmaceutical
see good traction in its Indian and Russian formulation businesses as well. The company is expected to post EBITDA of 32.0%, up 770bp yoy. On the net profit front, the company is expected to post net profit of `526cr, registering 57.3% yoy growth. Cipla is expected to post muted net sales growth of 4.6% to `1,690cr, mainly driven by the domestic formulation business, while export performance is expected to remain muted. On the operating front, OPM (excluding technical know-how fees) is expected to come in at 21.5%, registering an expansion of 610bp yoy. This would aid the company's net profit to increase by 31.8% yoy to `282cr. Lupin, on the other hand, is expected to register top-line growth of 22.6%. The company's OPM is expected to expand by 190bp yoy during the period. However, net profit growth is expected to be lower at around 13.7% yoy on account of higher tax outgo. Cadila is expected to post a good set of numbers, with 20.7% yoy growth in net sales to `1,411cr on the back of robust growth on the domestic formulation and exports front. On the OPM front, we expect the company's OPM to expand by 270bp yoy to 18.4% on the back of favorable product mix. However, net profit is expected to increase by 7.8% yoy to `193cr, mainly on the back of increased tax outgo. Aurobindo Pharma is expected to post a decline of 4.0% yoy in its net sales. Consequently, the company's margin is likely to dip to 13.9%, which will lead to a dip of 63% yoy in its net profit to `47cr. Indoco Remedies is expected to report top-line growth of 28.7% yoy to `155cr. The company's OPM is expected to expand by 120bp yoy to 14.1%, driven by growth in domestic formulation sales. As a result, net profit is expected to increase by 31.6% yoy to `16.0cr on the back of improvement in OPM.

Outlook and valuation


Overall, our universe of stocks is expected to post an earnings CAGR of 20% over FY2012-14E, which is high despite increased tax outgo in FY2014. Thus, overall we maintain our Overweight stance and positive future outlook for the pharmaceutical sector. In the generic segment, we prefer Lupin, Cadila, Aurobindo Pharma and Indoco Remedies. In CRAMS, though the segment is currently witnessing some pressure, there have been indications of a gradual recovery and ramp up from most CRAMS players. Thereby, with valuations rendering attractive, we recommend Dishman Pharma in this segment.

Mid caps to report muted numbers


We estimate Ipca Laboratories' top line to grow by 42.0% yoy to `673cr for 4QFY2012. The company's OPM is expected to expand by 170bp yoy to 20.7%. However, adjusted net profit is expected to decline by 5.3% yoy.

Exhibit 4: Quarterly estimates


Company Alembic Pharm. Aventis Cadila Cipla Dishman Dr. Reddys Glaxo # Indoco Rem. Ipca Lab Lupin Ranbaxy Lab Sun Pharma.
#

(` cr) `
OPM (%) chg bp 480 (110) (270) 270 610 170 770 (70) 120 170 190 160 2,180 1,080 14.0 14.6 13.9 18.4 21.5 17.8 32.0 34.3 14.1 20.7 19.7 24.5 38.8 41.1 Net Profit Profit 4QFY12E 26.5 51.5 47.0 193.0 282 28.5 526 200 16.0 64.9 258.3 36.2 1,470 775.0 157.3 1.8 (63.0) 7.8 31.8 24.0 57.3 7.4 31.6 (5.3) 13.7 (43.1) 385.6 75.0 EPS (`) (` % chg 157.3 1.8 (63.0) 7.8 31.8 24.0 57.3 7.4 31.6 (5.3) 13.7 (43.1) 384.8 75.0 FY12E 7.3 85.5 11.8 33.5 14.1 6.8 98.6 74.9 42.5 26.6 22.4 16.8 15.1 24.5 1.4 22.4 1.6 9.4 3.5 3.5 31.3 23.6 13.1 5.2 5.8 5.1 34.8 7.5 EPS (`) (` FY13E 8.2 89.7 13.8 43.3 17.0 10.1 92.1 87.9 55.5 32.7 29.7 28.3 41.1 26.7 FY14E 9.5 110.3 14.7 50.8 19.0 13.0 89.9 96.7 66.5 40.6 32.8 38.1 36.9 28.8 FY12E 6.6 25.8 10.1 22.7 21.6 6.7 17.8 30.6 9.5 12.6 23.7 11.0 31.1 23.3 P/E (x) FY13E 5.9 24.6 8.6 17.6 17.9 4.5 19.1 26.1 7.3 10.2 17.9 6.5 11.4 21.3 FY14E 5.1 20.0 8.1 15.0 16.0 3.5 19.6 23.7 6.1 8.3 16.1 4.9 12.7 19.8 Target arg (`) 95 175 1,016 380 92 665 443 656 270 634 Buy Neutral Buy Buy Buy Buy Neutral Neutral Buy Buy Buy Buy Neutral Accum. Reco. % chg 4QFY12E

CMP (`) 48 2209 119 760 305 46 1759 2291 406 335 530 469 570

Net Sales 4QFY12E 344 312 1,082 1,411 1,690 383 2,301 697 155 673 1,853 528 5,000 1,741 16.5 12.9 (4.0) 20.7 4.6 11.3 14.1 15.8 28.7 42.0 22.6 0.0 133.3 19.0

% chg 4QFY12E

Aurobindo

Orchid Chem. 185


#

Source: Company, Angel Research; Note: Price as on March 30, 2012; Our numbers do not include MTM on foreign debt. # 1QCY2012

Kour Analyst: Sarabjit Kour Nangra


Refer to important Disclosures at the end of the report

39

4QFY2012 Results Preview | April 4, 2012

Power
All-India power generation highlights
During January-February 2012, overall power generation in India rose by 5.4% yoy to 145.3BU (137.9BU); while for 11MFY2012, it rose by 8.6% yoy to 798.9BU (735.3BU). Higher power generation was aided by 18,666MW of yoy higher installed capacity operational by the end of February 2012. During 11MFY2012, the country's thermal power generation rose by 6.8% yoy to 642.3BU. The plant load factor (PLF) of thermal plants for 11MFY2012 stood at 72.8%, down 152bp yoy. During 11MFY2012, hydro power generation increased substantially by 16.3% yoy to 122BU, while nuclear power generation grew sharply by 26.2% yoy to 29.4BU. Generation of companies under coverage: During 11MFY2012, NTPC's power generation stood at 201.1BU, registering an increase of 0.8% yoy. GIPCL's generation (excluding 145MW Baroda Plant) rose by 2.7% yoy to 3.5BU; while for CESC, it rose by 1.1% yoy to 8.2BU. against the targeted 17,616MW. Capacity addition has been generally below the target due to execution issues relating to acquisition of land and obtaining environment and other statutory clearances. In all, we expect capacity addition of 52,000MW during the plan period, which will be short of the targeted 62,374MW of capacity addition. Despite this shortfall in capacity addition, the quantum of the actual addition will be well ahead of 27,283MW added in the Tenth Plan. Exhibit 2: Generation capacity addition: Targeted vs. achieved
(MW) 25,000 20,000 15,000 10,000 5,000 0
11MFY12 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

(%) 100.0 80.0 60.0 40.0 20.0 0.0

Fuel availability position


As of February 2012, 34 thermal power stations, out of the 89 monitored by the CEA, had coal stocks for less than seven days. Fuel stock situation has improved considerably during the fourth quarter, compared to the dire situation faced in 3QFY2012, as on an average 44 thermal power stations had coal stocks for less than seven days from mid-October to December-end.

Target (T) LHS

Achievement (A) LHS

A as a % of T (RHS)

Source: CEA, Angel Research

Power-deficit situation
The country continues to face power deficit due to the delay in commissioning of new capacities, fuel shortage and deficiencies in the T&D system. India's overall and peak power-deficit levels during 11MFY2012 stood at 8.3% and 11.2%, respectively, as against 8.6% and 10.4% reported in 11MFY2011.

Imported coal prices down 2.2% yoy


During 4QFY2012, average prices of New Castle Mckloksey 6,700kc coal decreased by 11.3% yoy. However, the benefit was neutralized largely on account of ~10% depreciation in INR vs. USD. Thus, coal prices in INR terms were down marginally by 2.2% yoy. Exhibit 1: New Castle Mckloksey coal prices
145 135 125 115 105 95 85 Jan-10 4000 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 5000 6000 global coal prices have started cooling off 7000

Exhibit 3: India A power-deficit scenario


(%)
20.0 16.6 16.0 12.2 12.0 8.0 8.8 4.0 0.0
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 11MFY12

11.2

11.7

12.3

13.8

12.0

12.7 9.8

11.2

7.1

7.3

8.4

9.6

9.9

11.0

10.1

8.5

8.3

Overall

Peak

Source:CEA, Angel Research

Exhibit 4: Region-wise power deficit (11MFY2012)


Region (%) Northern Western Southern Eastern North Eastern All India Source: CEA, Angel Research Overall (6.6) (11.6) (7.9) (4.8) (9.5) (8.3) Peak (7.8) (15.1) (10.9) (3.7) (7.2) (11.2)
US $/tonne - LHS `/tonne - RHS

Source: CEA, Angel Research

Capacity addition: Status check


As of February 2012, only 76.5% of the revised Eleventh Plan generation capacity addition target of 62,374MW was completed. During 11MFY2012, 13,333MW of capacity was added as

Refer to important Disclosures at the end of the report

40

4QFY2012 Results Preview | April 4, 2012

Power
Key developments
During the quarter, the Prime Minister's Office (PMO), after considering the fuel shortage faced by power producers, ordered Coal India Limited (CIL) to sign FSAs with power plants that had entered into long-term PPAs with power distribution companies and had been commissioned/would get commissioned on or before March 31, 2015. As per the PMO's directive, for power plants that were commissioned up to December 31, 2011, FSAs will have to be signed before March 31, 2012. FSAs have to be signed for the full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years, with trigger level of 80% for levy of disincentive and 90% for levy of incentive. In case of any shortfall in fulfilling its commitment under the FSAs from its own production, CIL was ordered to arrange for the supply of coal through imports or through arrangement with state/central PSUs who have been allotted coal blocks.

Exhibit 5: Power stocks performance in the bourses in 4QFY2012


NTPC GIPCL 1.3

2.3 33.8

CESC BSE Power

16.4 12.6 0.0 5.0 10.0 15.0 20.0 (%) 25.0 30.0 35.0 40.0

Sensex

Source: BSE, Angel Research

289bp yoy to 27.5% due to better plant availability and expected grossing up of RoE under corporate tax rate for FY2012. Net profit is expected to decline marginally by 2.5% yoy to `2,711cr. CESC is expected to register 28.1% yoy growth in its standalone top line to `1,081cr, aided by improved realization. During the quarter, CESC got the approval from WBERC for increasing the tariff for Kolkata region on an average by 13%. Post this order, the company would charge its customers at a higher rate with retrospective effect. The companys OPM for the quarter is expected to expand by 385bp yoy to 33.0%. Net profit is expeted to increase by 62.9% yoy to `182cr. We expect GIPCL to register flat top-line performance during the quarter. The companys OPM is expected to decline by 1,201bp yoy to 27.4% on a high base on account of lower plant availability and lesser generation-linked incentives. The first unit of SLPP I plant (125MW) was not operational during 4QFY2012 due to damaged rotor. The bottom line is expected to decline by 71.9% yoy to `23cr due to poor operational performance and higher base due to the tax write-back in 4QFY2011. Outlook: With the power sector currently facing many headwinds such as fuel shortage, falling merchant tariffs and poor SEB financial position, we believe players with cost-plus return models and assured fuel supply are better placed than others. And, hence, we maintain our Buy view on NTPC, GIPCL and CESC.

Union Budget 2012-13 - Positive for the power sector


Union Budget 2012-13 made many favorable announcements for the power sector. The budget waived off the basic customs duty on coal imports until FY2014 and reduced the counter veiling duty from 5% to 1%. Waiver of import duty on coal is a substantial positive for many private sector power generators, such as Adani Power and JSW Energy, who rely on imported coal for running their plants. Further, the budget extended the benefits under section 80-IA of Income Tax Act until FY2013. Another major budget announcement affecting the power sector is the extension of the benefit of additional depreciation to power plants (20% in the first year). The budget also announced the reduction of withholding tax (from 20% to 5%) on interest payments towards ECBs. In all, the budget is expected to have a positive impact on the power sector.

4QFY2012 - Result expectations


For 4QFY2012, we expect NTPC to record a 6.1% yoy increase in its top line to `16,468cr, driven largely by improved realization. The companys operating margin is expected to increase by

Exhibit 6: Quarterly estimates


Company CESC GIPCL NTPC CMP (`) 272 67 163 Net Sales 4QFY12E 1,081 314 16,468 28.1 0.6 6.1 OPM (%) chg bp 385 (1,201) 289 33.0 27.4 27.5 Profit Net Profit 4QFY12E 182 23 2,711 62.9 (71.9) (2.5) (` EPS (`) % chg 62.9 (71.9) (2.5) FY12E 38.3 7.3 11.5 14.5 1.5 3.3 (` EPS (`) FY13E 41.0 10.4 12.6 FY14E 46.2 10.2 14.1 FY12E 7.1 9.1 14.2 P/E (x) FY13E 6.6 6.4 12.9 FY14E 5.9 6.5 11.6 arg Target (`) 342 98 201 % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Buy Buy Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012.

V. Taparia Analyst - V. Srinivasan / Sourabh Taparia


Refer to important Disclosures at the end of the report

41

4QFY2012 Results Preview | April 4, 2012

Real Estate
For 4QFY2012, we expect residential volumes to report negative to flat growth on a sequential basis on account of weak demand due to high interest rates and elevated property prices. Revenue of real estate companies is expected to be largely driven by sale of plotted land and execution of existing projects, though execution delays remain a cause of concern. Companies such as DLF are expected to continue to see sustainability in office-leasing volumes on a sequential basis. Accordingly, we believe commercial rentals have bottomed out, and we do not foresee any material uptick until inventory levels come down. In our universe of stocks, we expect DLF's revenue to be largely driven by the sale of plotted properties in Gurgaon. For ARIL, we expect revenue to be driven by the residential segment and rental income. HDIL is expected to report flat growth qoq in Transfer of Development Rights (TDR) volumes and prices, given the low inventory of TDRs left on account of earlier stoppage of the MIAL project, which has restarted but the company does not foresee any material uptick in the generation and sale of TDR.

Hike in excise and service tax to negatively affect demand


The real estate sector, which was already facing cost inflation, is further expected to be impacted by the increase in excise and service tax in the budget recently. Major raw materials such as steel, cement and electric and other finishing equipment are expected to witness price escalation. Developers are expected to pass on this increase in raw-material prices, which will result in higher cost of property for the end-consumer. Further, service tax is expected to be passed on to the end-consumer, and we expect prices of properties to increase by 2%, which would further impact demand negatively, which is already facing a slowdown. Residential property sales in Mumbai have plummeted by over 70% since their 2007 peak levels, as high prices and rising interest rates have dented demand. In January 2012, sales in Mumbai stood at 12mn sq. ft. - the lowest in 30 months. Further, Mumbai registrations declined by 13% yoy and were at their three-year low in February 2011. According to Knight Frank, a global real estate consultant, unsold inventory levels are estimated to be ~27% of the under construction stock. Mumbai and Noida have been the worst hit regions, with inventory in Mumbai (19 months) hitting a 32-month high and inventory in Noida hitting a 21-month high, according to PropEquity. Further, the investors segment, which makes up ~20% of the market demand, has been observed to be actively reducing its real estate portfolio, thereby adding significant supply into the market. In Mumbai and Delhi, residential prices are currently ruling 15-20% above their 2008 peak levels; whereas prices in most other markets are still 10-15% lower than their last peak levels. This has resulted in tapering of volumes in regions such as Mumbai and NCR.

Exhibit 1: 4QFY2012E Operating and PAT yoy growth


90 80 70 60 50
(%)

73.9

78.8

40.3

40.7 29.4

40 30 20 10 0 (10) Operating Profit

PAT

(0.0)

ARIL

DLF

HDIL

Source: Angel Research

Budget policies to give a push to the affordable housing sector


Union Budget 2012-13 announced measures that were in favor of boosting affordable housing projects in tier II and III cities by extending interest subvention, allowing to raise money through ECB and increasing priority advances. The budget also announced extension of one year on interest subvention of 1% on housing loans for loan amount up to `15lakhs, where the cost of the house does not exceed `25lakhs. This would continue to benefit developers having low-cost affordable housing projects. The budget also allowed external commercial borrowings (ECBs) for low-cost affordable housing projects and reduced withholding tax on interest payments on ECBs from 20% to 5% for three years. This should benefit developers who plan to raise money through ECBs for the construction of affordable houses, as it would lower the borrowing cost. Further, indirect advances under the priority sector have been increased from `5lakhs to `10lakhs, which would benefit developers having projects in tier II and III cities.

Commercial and retail demand to pick up after 12-15 months


After registering a sharp decline in the past few quarters, capital values started strengthening and registered a marginal appreciation across most micro markets. Vacancy is estimated to be above 20%, which will keep commercial rates stagnant over the coming quarters. JLL expects vacancy to remain above Exhibit 2: Absorbtion level to remain low

Source: Real Estate Intelligence Service (JLL), 2Q11

Refer to important Disclosures at the end of the report

42

4QFY2012 Results Preview | April 4, 2012

Real Estate
22.9% in CY2012 and gradually reduce in CY2013. Industry participants have indicated that the surge in leasing enquiries has come on the back of renewed interest shown by the IT industry. Vacancy in the retail segment is expected to remain above 20% over CY2012-13 on the back high supply and low absorption rate.

Outlook and valuation


India's Realty Index is currently ruling near its life-time low seen in 2008. However, things are much better than 2008 with respect to project visibility, cash flow, net debt-equity and growing disposable income. Further, refinancing of loans from the banking sector will give some respite to developers in the declining volume scenario. Having said that, we believe absorption and not price appreciation will drive residential growth over the next six quarters. Amidst this scenario, new launches have been more rewarding for developers who have launched projects at 10-15% discount to prevailing market rates. Further, high inventory is still hampering commercial recovery, though there has been an uptick in absorption levels. We expect rentals to remain firm at current levels with an uptick likely over the next 12 months. We believe stock performances are related to macro factors interspersed with company-specific issues such as the CCI penalty on DLF and 2G-related issues for Unitech. We are positive on the long-term outlook of the realty sector, taking into account growing disposable income, shortage of 25mn houses in India and reasonable affordability. Given the current scenario, we expect stability in residential prices with the exception of certain micro markets, where prices have overheated, and expect an uptick in the commercial and retail segments over the next 12 months.

CCI penalty on DLF - No incremental impact but negative bias remains


Competition Commission of India (CCI) has again pulled up DLF for using its dominant position in the Magnolias project, Gurgaon. The order was in-line with the earlier order against the company with respect to its projects - Park Place and The Belaire, which are based in Gurgaon. The company had earlier fined `630cr to DLF and, thus, CCI has not imposed fresh penalty on the company. Since the CCI has not penalized DLF this time, there wouldn't be any cash outflow, but this would definitely have a negative impact on the company's brand image. DLF is expected to take appropriate action and appeal against the order. Such cases generally take long to reach settlements. If DLF is found guilty in the first case, then it will have to pay `630cr along with an interest rate of 9%, which would result in significant outflow at a time when the company is finding it hard to reduce its current debt.

Sensex vs. realty stocks


During 4QFY2012, the BSE Realty Index outperformed the Sensex by 1,656bp on the back of expectation of favorable budget policy changes towards the sector and reversal in interest rates in the coming months. However, we believe the recent upside move proves that interest rate cycle is about to turn, which can result in better demand for the sector. Despite the rise in real estate stocks, we believe it is still a good entry opportunity on account of 1) companies trading at a significant discount to our one-year forward NAV, 2) stability in volumes and 3) comfortable balance sheet position unlike that in 2008. We believe HDIL and ARIL are best placed in the sector.

Exhibit 3: Coverage vs. BSE Sensex in 4QFY2012


70 60.5 60 50 40
(%)

47.5

29.2 30 20 10.2 10 0 DLF BSE Sensex BSERealty ARIL HDIL 12.6

Source: Bloomberg, Angel Research

Exhibit 4: Quarterly estimates


Company CMP (`) ARIL DLF HDIL 59 202 85 Net Sales 4QFY12E 177 2,382 601 OPM (%) chg bp Profit Net Profit 4QFY12E 54.8 445.7 197.3 (` EPS (`) % chg 78.8 29.4 (0.0) FY12E 5.4 8.5 17.1 (` EPS (`) FY13E 8.4 9.6 21.4 FY14E 12.7 13.4 25.4 FY12E 10.9 23.8 5.0 P/E (x) FY13E 7.0 21.0 4.0 FY14E 4.6 15.0 3.4 arg Target ) (`) 78 115 % chg 4QFY12E 179.2 (11.2) 14.8 % chg 4QFY12E 78.8 29.4 (0.0) 1.9 2.6 4.7

(` cr) `
Reco.

44.7 (2,703.5) 39.2 59.9 1,440.7 1,104.8

Buy Neutral Buy

Source: Company, Angel Research; Note: Price as on March 30, 2012

Analyst - Sharan Lillaney


Refer to important Disclosures at the end of the report

43

4QFY2012 Results Preview | April 4, 2012

Telecom
During 4QFY2012, in a major blow to various telecom players, the Supreme Court, in its judgment for the 2G case, cancelled 122 licenses given to telecom firms since January 2008. The cancelled licenses include nine of Idea Cellular, three of Tata Teleservices, nine of Swan Telecom, 21 of Loop Telecom, 21 of Videocon and 22 of Uninor. Telecom firms can operate the licenses for four months at market rate payment. However, of the companies under our coverage, for Bharti Airtel (Bharti) and Reliance Communication (RCom) none of the licenses were cancelled, as all licenses were issued to them before 2008. Due to this, share price of Bharti rose in the middle of the quarter. Also, Bharti and Vodafone appear to be marginal beneficiaries due to their potential for rationalization in competition and further pricing stability. Operators such as Idea and Tata Teleservices may also benefit from this, but they will have to incur additional charges (from re-bidding at market prices) if they intend to maintain their pan-India presence. We believe this move will increase consolidation in the highly competitive telecom industry, and the total number of players operating in the industry can come down to 9-10 from 14 currently. In Union Budget 2012-13, the government penciled in `40,000cr non-recurring revenue from telecom companies on the back of 1) 2G spectrum auction; 2) one-time receipts from spectrum held in excess of 6.2MHz; and 3) auction of BWA spectrum. All these will necessitate telecom companies to shell out cash from their kitty, which are already in a dire need of cash post 3G and BWA spectrum auctions and are witnessing added cash outgo burden due to ~11% INR depreciation against USD in the past six months, as there is huge forex debt in their books, which leads to higher interest outgo in domestic currency terms. All these events created pressure on the share prices of all telecom companies during 4QFY2012. wise, Idea leads the tally with a share of 93.2%, followed by Bharti with 91.2%, Vodafone with 86.6% and RCom with 65.1%, whereas DB Etisalat is at the bottom with 25.6%. Vodafone has shown considerable improvement in its peak VLR data from 81.0 in August 2011 to 86.6 in January 2012 by focusing on the quality of its subscribers.

Exhibit 2: VLR data of incumbents


100 90 80 88.8 91.2 86.6 82.8 92.0 93.2

(%)
70 60 52.2 50 Bharti Vodafone Oct-11 Idea Nov-11 Rcom Dec-11 BSNL Jan-12 Aircel 53.2

64.6

65.1 55.9

55.3

Source: TRAI, Angel Research

Exhibit 3: Active subscribers (January 2012)


Active subscribers (mn) Bharti Vodafone Idea RCom BSNL Aircel MTNL 161.3 128.7 100.8 99.1 49.7 34.9 2.0 Active subscribers' market share (%) 24.64 19.66 15.39 15.13 7.59 5.33 0.30 Active subscribers' Reported subscribers' market share (%) market share (%) -Nov 2011 24.71 19.34 15.17 15.43 7.72 5.25 0.30 19.75 16.61 11.96 17.02 10.41 6.93 0.61

Source: TRAI, Angel Research

RMS vs. SMS


As per the revenue market share (RMS) data for 3QFY2012, Bharti leads at 30.5% with subscriber market share (SMS) of 19.8%, whereas Idea has its RMS and SMS at 14.3% and 12.0%, respectively. RMS for Bharti and Idea is higher than SMS, which indicates that the quality of subscribers added by these companies is good. On the contrary, in case of RCom, SMS is at 17.0%, which is much ahead of RMS that is only at 8.5%. This is evident from the ARPU profile of these companies; also, RCom has peak VLR of merely 64.6% (in December 2011) as compared to its peers Bharti, Idea and Vodafone - the peak VLR of these companies varies from 85-93% (for December 2011). Thus, though the pace of subscriber addition sported by each of these companies remains modest, additions made by Bharti and Idea are value additions, whereas those by RCom are more of volume additions. Amongst unlisted companies, Vodafone is also part of the Bharti-Idea clan with higher RMS at 21.4% and SMS at 16.6%, whereas incumbents such as BSNL and Aircel are part of RCom's clan with SMS higher than RMS.

Exhibit 1: Stock return analysis of leading Indian TSPs


60 50 40 30
(%)

49.9

20.0

20.0

20 10 0 (10) (20) (30) Bharti Idea (23.5) RCom (1.6) (6.0)

Chg. (3 months)

Chg. (1 year)

Source: Bloomberg, Angel Research

VLR data points favorable for tier-I companies


As per the recent VLR data released for January 2012, of the total 903.7mn subscribers, 73.03%, i.e. 660mn subscribers, were active subscribers on the date of peak VLR. Service-provider
Refer to important Disclosures at the end of the report

44

4QFY2012 Results Preview | April 4, 2012

Telecom
Exhibit 4: RMS vs. SMS of incumbents (as of 3QFY2012)
35 30.5 30 25 19.8 20
(%)

21.4 16.6 14.3 12.0 8.5 6.9 4.6 10.4 6.9 17.0

Thus, a trend was spotted with net subscriber additions being led by incumbent telecom players and Uninor. Idea's and Uninor's subscriber market share grew to 12.2% and 4.5% in February 2012 from 12.0% and 4.1% in December 2011, respectively.

15 10 5 0 Bharti Vodafone

MOUs to be under pressure


In 3QFY2012, Bharti (excluding Africa) and RCom continued to experience a decline in their minutes of usage (MOU), while Idea reported MOU growth on the back of higher-than-expected gains due to the festive season. For 4QFY2012, we expect MOU for Bharti (excluding Africa), Idea as well as RCom to decline marginally by 0.2%, 0.3% and 0.5% qoq to 418min, 368min and 223min, respectively.

Idea RMS

Rcom SMS

BSNL

Aircel

Source: TRAI, Angel Research

Modest momentum in net subscriber addition


Over December 2011-February 2012, subscriber net addition run rate picked up after the lull witnessed in the past four months. Indian subscriber base grew at an average rate of 0.9% mom, led by Uninor and Idea, which added 4.8mn and 4.3mn subscribers, respectively, in their subscriber base over DecemberFebruary 2012. Idea was followed by Bharti, RCom, Aircel and Vodafone, which added 3.1mn, 1.9mn, 1.6mn and 1.0mn subscribers over December-February 2012, growing at an average rate of 0.9%, 0.6%, 1.3% and 0.3% mom, respectively. Amongst new entrants, Uninor emerged as a positive surprise, subscriber base of which grew at an average rate of 6.7% mom over December-February 2012, leaving behind all the other telecom players. Other new entrants such as HFCL and Shyam Telelink added merely 0.2mn and 0.4mn subscribers, respectively, during the above-mentioned period; however, subscriber base of S Tel and Videocon reduced by 0.6mn and 0.3mn subscribers, respectively, during the same period.

Exhibit 6: Trend in MOU per month per subscriber


500 449 449 445 423 400
(min)

419

418

401

397

391 364 369 368

300 241 251 200 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12E 233 227 224 223

Bharti (ex-Africa)

Idea

RCom

Source: Company, Angel Research

VAS share to slightly inch up


We expect VAS share in the mobility revenue of Bharti to inch up qoq to 14.5%, while for Idea, VAS share is expected to remain flat qoq at 13.7%, as in 3QFY2012 Idea showed considerable improvement in its VAS share. Bharti's VAS share in mobility revenue declined despite the festive season in 3QFY2012; however, the company is now likely to roll back in 4QFY2012.

Exhibit 5: Total subscriber base


Company (mn) Bharti RCom Vodafone BSNL Idea TTSL Aircel MTNL Loop Mobile HFCL Shyam Telelink S Tel Uninor Videocon DB Etisalat Sep-11 Sep-11 172.8 147.1 145.0 91.1 100.2 88.7 59.8 5.3 3.2 1.2 13.3 3.5 29.7 6.3 1.5 Oct-11 Oct-11 173.7 148.1 145.9 91.6 101.8 87.7 60.3 5.4 3.2 1.2 14.0 3.5 32.3 6.1 1.6 Nov-11 174.7 149.1 146.8 92.1 104.0 83.3 61.0 5.4 3.2 1.2 14.5 3.6 34.2 5.5 1.6 Dec-11 175.7 150.1 147.7 92.6 106.4 83.4 61.6 5.4 3.2 1.2 15.0 3.5 36.3 5.4 1.7 889.3 Jan-12 177.0 151.0 148.6 93.4 108.1 83.6 62.5 5.5 3.2 1.3 12.6 3.4 38.8 5.8 1.7 896.6 eb-12 Feb-12 178.8 152.0 148.7 93.4 110.7 81.8 63.3 5.5 3.3 1.4 15.4 3.0 41.1 5.2 1.7 905.2

Exhibit 7: Trend in VAS share as a % of mobility revenue


17 15.0 15 13.8 13 13.0 11 12.1 12.1 13.2 13.7 13.7 14.6

(% of mobility revenue)

14.5

14.3

14.5

9 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12E

Bharti (ex-Africa)

Idea

Source: Company, Angel Research

ARPM to move up
Average revenue per minute (ARPM), which has been falling since 4QFY2009, has been witnessing a slight uptick since

Total 868.5 876.4 880.1 Source: COAI, AUSPI, Angel Research

Refer to important Disclosures at the end of the report

45

4QFY2012 Results Preview | April 4, 2012

Telecom
2QFY2012, after telecom players undertook 20% tariff hike. In 4QFY2012, we expect ARPM of Bharti (excluding Africa), Idea and RCom to grow on a qoq basis to `0.46/min, `0.43/min and `0.45/min, respectively, on account of tailwind effect of tariff hikes undertaken, as these tariff hikes were applicable only after the existing vouchers of subscribers expired. top three listed operators, we expect Bharti and Idea to post revenue growth of 2.7% and 3.2% qoq, respectively. RCom is expected to post revenue growth of merely 2.2% qoq. On the EBITDA margin front, we expect margins of Bharti, Idea as well as RCom to decline by 43bp, 67bp and 65bp to 31.8%, 26.1% and 28.0%, respectively. We believe industry dynamics point toward a possible consolidation in the long run and expect few operators, including Bharti, Vodafone, RCom, Idea, BSNL, Aircel and Uninor, to be the survivors out of the current 14 operators. Bharti continues to be our preferred pick amongst telcos due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share, and relatively better KPIs. However, overall we remain Neutral on the sector.

Exhibit 8: Trend in ARPM


0.46 0.45 0.44 0.44 0.43 0.44 0.44 0.43 0.42 0.42 0.40 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12E 0.41 0.41 0.43 0.44 0.43 0.43 0.43 0.45 0.45 0.45 0.46

(`/min)

Key concerns
Uncertain regulatory environment: The telecom sector is currently surrounded by a number of policy uncertainties related to spectrum and license fee payments. The Telecom Regulatory Authority of India (TRAI) has deemed that any spectrum held beyond 6.2MHz in a circle market is 'excess spectrum' and has levied a one-time fee on the excess spectrum held by any operator based on a market-based value of spectrum for each circle. As per TRAI's recommendations, the liability for Bharti due to the above-said issue arises to ~`2,750cr, i.e., per share impact of `8.3, while for Idea the impact boils down to ~`1,085cr, i.e., per share impact of `3.3. In addition, telecom licenses in India were issued with validity of 20 years, so licenses will start coming for renewals from 2014, which will again pose a huge financial liability for telecom companies. In FY2015 and FY2016, license renewals for Bharti and Idea are due in eight and nine circles, respectively. These renewals, as per TRAI's recommendations, will require Bharti and Idea to shell out `5,500cr and `5,300cr, respectively, for the contracted spectrum (upto 6.2MHz). Adverse forex movement: Players in the telecom sector (especially Bharti) continue to be haunted by INR depreciation against USD due to huge forex debt in their books. Bharti has foreign currency denominated loans worth ~US$11.5bn in its books. Given the yoy INR depreciation against USD, the company will suffer from higher interest outgo, which will negatively affect its profitability.

Bharti (ex-Africa)

Idea

RCom

Source: Company, Angel Research

ARPU to continue to show a mixed performance


For 4QFY2012, we expect the combination of weak MOU and modest ARPM to push Bharti's (excluding Africa) average revenue per user (ARPU) to `190/month, 1.9% qoq growth. Idea's ARPU is expected to remain flat qoq at `160/month, while RCom's ARPU is expected to decrease by 0.5% qoq to `100/month.

Exhibit 9: Trend in ARPU per month


250 198 200 194 190 190

183

187

(`/month)

168 150

161

160

155

160

160

100

111

107

103

102

101

100

50 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12E

Bharti (ex-Africa)

Idea

Source: Company, Angel Research

Outlook and valuation


For 4QFY2012, we expect revenue growth to be modest on the back of improvement in ARPM, growth in VAS share in mobility revenue and decent growth in subscriber base. Amongst the

Exhibit 10: Quarterly estimates


Company Bharti Idea RCom CMP (`) 337 99 84 Net Sales 4QFY12E 18,973 5,193 4,933 2.7 3.2 2.2 OPM (%) chg bp (43) (67) (65) 31.8 26.1 28.0 Net Profit Profit 4QFY12E 1,090 191 152 7.8 (4.9) (18.4) EPS (`) (` % chg 7.8 (4.9) (18.4) 2.9 0.6 0.7 EPS (`) (` FY12E 11.4 2.0 3.6 FY13E 17.9 3.3 4.2 FY14E 22.0 4.6 6.7 FY12E 29.4 48.3 23.2 P/E (x) FY13E 18.8 30.3 19.9 FY14E 15.3 21.7 12.6 Target rge (`) % chg 4QFY12E % chg 4QFY12E

(` cr) `
Reco. Neutral Neutral Neutral

Source: Company, Angel Research; Note: Price as on March 30, 2012; Change is on a qoq basis

Analyst - Ankita Somani


Refer to important Disclosures at the end of the report

46

4QFY2012 Results Preview | April 4, 2012

Stock Watch

Refer to important Disclosures at the end of the report

47

Watch Stock Watch | April 2012


Company Name Agri / Agri Chemical Rallis United Phosphorus Auto & Auto Ancillary Amara Raja Batteries Apollo Tyres Ashok Leyland Automotive Axle Bajaj Auto Bharat Forge Bosch India CEAT Exide Industries FAG Bearings Hero Motocorp JK Tyre MM Maruti Motherson Sumi Subros Tata Motors TVS Motor Banking Allahabad Bank Andhra Bank Axis Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank Corporation Bank Dena Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank Indian Bank Reco CMP (`) 121 130 293 79 30 515 1,678 321 8,251 88 149 1,676 2,055 85 697 1,349 186 25 276 41 Target Price (`) 133 210 345 94 37 1,888 372 8,787 126 2,177 113 802 1,510 216 30 318 58 205 1,550 943 392 62 532 92 508 114 567 1,135 Mkt Cap (` cr) 2,362 6,003 2,501 3,999 8,062 778 48,553 7,473 25,906 303 12,657 2,785 41,033 349 42,788 38,977 7,207 150 74,206 1,948 8,870 6,676 47,349 31,075 19,728 2,628 20,983 6,479 6,293 3,001 7,283 99,530 121,961 101,962 10,309 10,302 Sales (` cr) FY13E FY14E 1,570 7,797 2,691 13,580 15,008 1,211 22,362 7,173 9,335 5,017 5,812 1,544 25,852 8,058 35,095 42,290 23,342 1,225 191,183 7,965 7,700 5,284 16,159 16,013 13,139 3,665 12,120 6,860 5,361 3,003 2,766 7,244 21,606 21,609 7,821 6,469 1,884 8,150 3,032 15,007 16,906 1,390 25,633 7,998 10,564 5,575 6,710 1,770 29,106 9,025 40,213 49,251 26,366 1,393 213,150 8,897 8,677 5,998 19,277 18,849 15,255 4,107 14,009 7,934 5,995 3,366 3,163 8,625 27,203 26,105 9,418 7,244 OPM (%) FY13E FY14E 17.9 19.7 15.6 10.1 9.5 11.6 19.7 16.3 18.3 5.1 16.2 19.0 15.0 5.4 10.7 7.5 7.8 8.5 12.6 6.3 3.4 3.3 3.1 2.7 2.4 3.5 2.2 2.4 2.2 3.0 3.4 3.3 4.3 2.6 1.9 3.5 17.9 19.7 15.5 10.2 9.5 11.4 19.0 16.5 18.3 5.4 16.5 18.8 15.2 5.5 10.5 7.8 8.2 8.2 12.6 6.3 3.3 3.2 3.1 2.6 2.3 3.4 2.2 2.4 2.1 2.9 3.3 3.3 4.4 2.6 2.0 3.3 EPS (`) FY13E FY14E 9.8 16.0 29.4 10.5 2.6 48.1 115.9 22.3 394.5 18.6 7.5 121.0 135.0 24.8 44.6 85.4 13.3 4.2 38.7 5.0 37.4 23.6 113.9 131.4 50.0 10.7 85.7 13.1 108.3 23.2 49.5 31.2 28.4 65.3 15.5 45.5 11.1 18.6 32.8 12.5 3.1 55.3 125.9 26.6 439.3 28.0 8.9 137.8 141.4 32.2 48.7 100.7 18.0 5.0 42.9 5.6 40.9 27.0 136.4 153.3 65.4 13.5 95.4 19.9 111.5 25.6 57.2 37.2 35.6 78.3 21.5 48.8 PER (x) FY13E FY14E 12.4 8.1 10.0 7.5 11.8 10.7 14.5 14.4 20.9 4.8 19.7 13.9 15.2 3.4 15.6 15.8 14.0 6.0 7.1 8.2 5.0 5.1 10.1 6.0 7.2 5.1 5.5 7.6 3.9 3.9 8.6 21.6 18.3 13.6 6.7 5.3 10.9 7.0 8.9 6.3 9.8 9.3 13.3 12.1 18.8 3.2 16.7 12.2 14.5 2.6 14.3 13.4 10.3 5.0 6.4 7.3 4.6 4.4 8.4 5.2 5.5 4.1 5.0 5.0 3.8 3.5 7.4 18.1 14.6 11.3 4.9 4.9 P/BV (x) FY13E FY14E 3.0 1.2 2.4 1.2 2.5 2.6 5.7 2.8 4.2 0.5 3.6 3.0 7.2 0.4 2.8 2.3 3.3 0.6 2.5 1.4 0.8 0.8 1.9 1.1 1.0 0.8 0.9 1.0 0.7 0.6 1.1 4.3 3.5 1.6 0.8 0.9 2.4 1.1 1.9 1.1 2.1 2.1 4.5 2.3 3.5 0.4 3.1 2.5 5.6 0.3 2.4 2.0 2.6 0.6 1.9 1.3 0.7 0.7 1.6 0.9 0.9 0.7 0.8 0.9 0.6 0.6 1.0 3.8 3.0 1.5 0.7 0.8 RoE (%) FY13E FY14E 25.9 16.1 26.5 21.8 15.5 26.8 44.4 21.0 20.1 10.0 19.4 24.4 54.5 11.4 18.8 15.3 26.2 10.3 39.8 18.9 19.0 16.5 20.0 19.7 15.1 17.8 17.2 10.5 17.9 18.0 14.0 34.2 20.8 14.8 12.9 19.6 24.3 16.4 23.6 30.7 17.0 25.2 37.9 21.0 18.7 15.3 19.8 22.3 43.2 13.2 18.1 15.6 28.4 11.8 33.9 18.3 17.0 16.7 20.4 19.2 16.5 17.5 16.7 13.8 16.2 16.9 14.5 31.3 22.1 16.2 14.1 18.2 EV/Sales (x) FY13E FY14E 1.5 0.6 0.9 0.5 0.6 0.7 1.8 1.1 2.4 0.3 1.8 1.6 1.3 0.3 0.9 0.7 0.5 0.3 0.5 0.2 1.2 0.7 0.7 0.4 0.5 0.6 1.5 0.9 2.1 0.3 1.5 1.3 1.0 0.3 0.8 0.6 0.4 0.3 0.4 0.2 -

Accumulate Buy Buy Buy Buy Neutral Accumulate Buy Accumulate Buy Neutral Neutral Accumulate Buy Buy Accumulate Buy Buy Buy Buy

Accumulate 186 Neutral 119 Buy 1,146 Buy 794 Accumulate 361 Accumulate 55 Accumulate 474 Reduce 100 Buy 425 Buy 90 Neutral 426 Neutral 674 Accumulate 520 Buy 887 Neutral 105 Neutral 240

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

48

Watch Stock Watch | April 2012


Company Name IOB J & K Bank LIC Housing Finance Oriental Bank Punjab Natl.Bank South Ind.Bank St Bk of India Syndicate Bank UCO Bank Union Bank United Bank Vijaya Bank Yes Bank Capital Goods ABB* BGR Energy BHEL Blue Star Crompton Greaves Jyoti Structures KEC International LMW Thermax Cement ACC Ambuja Cements India Cements J K Lakshmi Cements Madras Cements Shree Cements UltraTech Cement Construction Ashoka Buildcon Consolidated Co Hind. Const. IRB Infra ITNL IVRCL Infra Jaiprakash Asso. Larsen & Toubro Reco CMP (`) Accumulate 94 Neutral 917 Accumulate 263 Buy 252 Buy 926 Neutral 25 Buy 2,095 Buy 111 Neutral 79 Buy 235 Buy 72 Reduce 58 Buy 367 Sell 842 Sell 327 Neutral 257 Buy 189 Buy 138 Buy 39 Accumulate 65 Buy 1,588 Reduce 464 Neutral Neutral Neutral Buy Neutral Neutral Neutral Buy Neutral Neutral Buy Buy Buy Buy Buy 1,356 171 111 65 153 3,197 1,507 200 16 26 186 193 66 82 1,307 Target Price (`) 104 295 296 1,138 2,593 128 274 87 55 477 503 274 221 164 67 72 2,609 430 79 302 228 265 79 104 1,641 Mkt Cap (` cr) 5,835 4,447 12,486 7,360 29,338 2,789 133,032 6,366 4,942 12,314 2,494 2,760 12,953 17,833 2,358 62,891 1,695 8,862 320 1,678 1,789 5,533 25,465 26,288 3,419 798 3,649 11,136 41,300 1,053 290 1,559 6,190 3,750 1,769 17,352 80,031 Sales FY13E 7,328 2,420 2,149 6,359 20,708 1,368 69,568 7,069 5,727 10,352 3,666 2,678 3,161 8,926 4,170 46,344 3,250 12,936 2,622 6,865 2,663 5,473 11,018 10,017 4,423 1,880 3,434 5,552 20,116 2,014 2,526 4,350 3,821 6,619 5,758 16,017 60,258 (` cr) FY14E 8,264 2,792 2,662 7,218 24,094 1,557 81,445 7,961 6,443 11,987 4,128 3,010 4,118 10,220 5,396 46,916 3,551 14,101 2,801 7,650 3,130 5,497 12,663 11,482 4,906 2,201 3,777 6,193 22,655 2,294 2,792 4,728 4,582 7,263 6,860 18,359 69,900 OPM (%) FY13E FY14E 2.5 2.5 3.5 3.5 2.7 2.7 2.6 2.5 3.5 3.5 2.8 2.7 3.7 3.7 3.1 3.0 2.5 2.5 2.9 2.9 2.9 2.9 2.2 2.2 2.8 2.9 7.6 11.5 18.3 5.9 9.6 10.6 8.5 12.8 10.1 19.9 23.3 18.2 19.0 25.5 25.7 21.3 22.4 5.7 12.4 42.3 23.8 9.2 24.4 12.1 7.5 10.3 18.6 5.9 10.0 11.0 8.7 12.8 9.8 21.2 23.7 18.8 22.6 26.1 26.0 22.5 22.4 6.6 12.7 40.2 24.2 9.2 23.5 11.5 EPS (`) FY13E FY14E 15.9 21.1 178.0 195.8 25.3 31.9 50.8 60.9 156.3 178.7 3.7 3.9 220.9 269.8 23.2 27.5 17.8 18.8 40.7 49.5 18.4 21.7 9.5 11.5 34.4 42.2 18.6 27.2 23.5 12.4 10.9 10.9 9.7 185.0 30.4 69.1 9.7 9.9 12.2 14.1 130.3 82.1 28.4 1.8 (0.3) 15.0 24.7 4.7 4.2 70.7 20.9 30.4 24.1 15.8 11.7 13.4 12.1 217.4 28.7 86.5 10.5 12.7 16.4 18.1 181.9 97.5 30.8 2.8 0.6 16.9 26.2 6.0 5.0 76.2 PER (x) FY13E FY14E 5.9 4.5 5.2 4.7 10.4 8.2 5.0 4.1 5.9 5.2 6.7 6.2 9.5 7.8 4.8 4.0 4.4 4.2 5.8 4.7 3.9 3.3 6.1 5.1 10.7 8.7 45.2 12.0 10.9 15.2 12.7 3.6 6.7 8.6 15.3 19.6 17.7 11.3 5.4 10.9 24.5 18.4 7.1 8.5 12.4 7.8 14.2 19.4 18.5 40.2 10.7 10.7 11.9 11.8 2.9 5.4 7.3 16.2 15.7 16.3 8.8 4.0 8.5 17.6 15.5 6.5 5.5 40.2 11.0 7.4 11.0 16.3 17.1 P/BV (x) FY13E FY14E 0.7 0.6 0.9 0.8 2.0 1.7 0.6 0.6 1.0 0.9 1.2 1.0 1.6 1.3 0.7 0.7 0.9 0.8 0.9 0.8 0.6 0.5 0.8 0.7 2.3 1.8 6.1 2.0 2.2 3.1 2.2 0.4 1.3 1.7 2.9 3.2 3.3 0.9 0.6 1.5 4.3 2.9 0.9 0.5 1.3 1.9 1.2 0.8 1.6 2.8 5.5 1.8 1.9 2.6 1.9 0.4 1.1 1.5 2.6 2.9 3.0 0.9 0.5 1.3 3.6 2.5 0.8 0.4 1.3 1.6 1.1 0.8 1.5 2.4 RoE (%) FY13E FY14E 12.7 13.9 19.5 18.6 20.4 21.8 12.5 13.6 19.7 18.5 19.1 17.7 18.9 19.1 17.4 17.2 17.8 16.2 16.8 17.4 15.9 16.0 12.1 13.2 23.2 23.3 14.5 17.3 21.3 21.2 18.4 12.7 27.6 21.2 20.5 17.2 17.5 8.6 11.9 15.2 19.1 16.8 14.1 5.6 (1.3) 16.3 17.0 6.0 8.8 16.1 14.4 17.4 18.9 23.8 17.3 13.9 27.0 21.7 16.9 19.5 19.1 10.5 14.3 16.9 22.2 17.4 13.3 8.2 3.3 15.9 15.7 7.3 9.7 15.2 EV/Sales (x) FY13E FY14E 2.1 1.2 1.2 0.6 0.7 0.3 0.5 0.2 0.9 2.0 2.2 1.0 0.6 1.7 1.7 2.0 2.3 0.3 1.3 3.2 2.1 0.8 2.4 1.5 1.7 1.1 1.2 0.5 0.6 0.3 0.4 0.2 0.8 1.7 1.9 0.9 0.9 1.4 1.3 1.9 2.6 0.3 1.2 2.9 2.2 0.7 2.1 1.3

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

49

Watch Stock Watch | April 2012


Company Name Madhucon Proj Nagarjuna Const. Patel Engg. Punj Lloyd Sadbhav Engg. Simplex Infra FMCG Asian Paints Britannia Colgate Dabur India GlaxoSmith Con* Godrej Consumer HUL ITC Marico Nestle* Tata Global IT HCL Tech Hexaware Infosys Infotech Enterprises KPIT Cummins Mahindra Satyam Mindtree Mphasis NIIT Persistent TCS Tech Mahindra Wipro Media D B Corp HT Media Jagran Prakashan PVR Sun TV Network Buy Buy Buy Neutral Neutral 219 138 101 148 313 274 170 137 4,023 3,252 3,182 384 12,339 1,656 2,255 1,499 625 2,135 1,869 2,555 1,642 732 2,458 26.0 17.8 27.4 17.4 75.2 26.8 18.3 28.8 16.9 74.4 14.0 10.0 7.6 12.4 20.9 16.1 12.0 9.1 15.8 24.0 15.7 13.9 13.2 11.9 15.0 13.7 11.5 11.1 9.4 13.0 3.6 1.9 4.4 1.9 3.5 3.0 1.6 4.0 2.0 2.9 24.8 14.7 34.6 8.5 26.0 24.1 15.4 37.7 9.9 25.1 2.4 1.2 2.1 0.8 4.7 2.0 1.0 1.9 0.6 3.8 Buy Neutral Buy Buy Buy Accumulate Buy Accumulate Accumulate Accumulate Buy Neutral Accumulate 482 117 2,865 149 80 80 488 404 54 320 1,168 720 439 562 3,348 172 98 89 569 433 60 352 1,360 463 33,387 3,455 164,514 1,665 1,423 9,438 1,975 8,494 894 1,281 228,574 9,171 107,934 23,366 1,829 38,931 1,766 2,042 7,142 2,210 5,904 1,105 1,098 57,294 6,030 43,249 26,545 2,099 44,986 1,979 2,139 8,042 2,514 6,320 1,200 1,227 66,696 6,511 48,043 17.0 18.7 31.3 17.0 15.2 15.4 14.3 18.3 16.4 22.3 29.5 16.3 19.7 16.5 18.3 30.6 16.8 14.9 15.0 13.9 17.9 16.9 20.8 28.9 15.7 19.3 37.1 9.3 164.9 16.6 9.6 7.6 47.7 38.7 7.5 36.2 62.5 81.1 27.1 41.6 10.4 186.0 18.1 10.9 8.3 54.0 41.2 9.2 39.1 69.8 87.0 30.3 13.0 12.6 17.4 9.0 8.4 10.5 10.2 10.4 7.2 8.8 18.7 8.9 16.2 11.6 11.3 15.4 8.2 7.4 9.7 9.0 9.8 5.9 8.2 16.7 8.3 14.5 2.8 2.7 4.1 1.2 0.7 1.4 1.7 1.6 1.3 1.3 6.1 1.8 3.3 2.4 2.4 3.4 1.1 0.7 1.3 1.4 1.4 1.1 1.4 5.0 1.5 2.8 21.9 22.0 23.3 13.8 19.2 13.8 16.8 14.9 17.6 14.6 32.6 20.1 20.2 20.8 21.6 21.8 13.2 18.0 13.0 16.0 13.7 19.0 13.8 29.9 18.0 19.3 1.4 1.6 3.5 0.6 0.6 0.9 0.7 1.0 0.6 0.9 3.8 1.5 2.2 1.2 1.3 2.9 0.4 0.5 0.7 0.5 0.8 0.4 0.7 3.2 1.3 1.8 Neutral Accumulate Neutral Accumulate Neutral Accumulate Neutral Accumulate Neutral Neutral Buy 3,238 593 1,116 106 2,748 480 410 227 175 4,603 112 650 112 512 252 136 31,056 7,077 15,177 18,536 11,555 16,322 88,600 177,361 10,731 44,379 6,948 10,961 5,906 3,007 6,010 3,111 5,904 25,546 28,955 4,669 8,848 7,011 12,773 6,856 3,417 6,929 2,687 6,905 29,031 33,595 5,467 10,681 7,712 16.3 6.9 21.1 17.4 16.9 17.8 15.2 35.9 13.0 21.0 9.7 16.3 7.0 22.1 17.6 15.8 18.1 15.3 35.7 12.9 21.4 10.0 120.3 22.3 37.7 4.4 100.6 22.6 14.1 9.2 6.8 120.8 5.9 142.5 28.3 42.5 5.2 117.9 26.9 16.1 10.5 8.2 149.8 7.1 26.9 26.5 29.6 24.1 27.3 21.3 29.1 24.8 25.8 38.1 18.8 22.7 21.0 26.2 20.5 23.3 17.8 25.4 21.6 21.3 30.7 15.7 8.9 10.8 35.3 9.1 8.3 5.8 22.1 7.9 7.0 23.5 1.7 7.1 8.0 28.5 7.3 10.1 4.7 27.4 6.5 5.5 15.9 1.6 36.9 45.2 129.4 41.4 33.3 29.9 84.3 34.8 30.5 73.6 8.9 34.7 44.1 120.1 42.1 33.8 36.3 76.7 33.1 28.8 61.7 10.2 2.7 1.2 4.9 3.1 3.4 2.9 3.3 5.8 2.3 5.0 0.9 2.3 1.0 4.3 2.7 3.9 2.5 2.9 5.0 1.9 4.1 0.8 Reco Buy Buy Neutral Neutral Buy Buy CMP (`) 57 56 106 55 155 226 Target Price (`) 84 76 199 316 Mkt Cap (` cr) 420 1,442 739 1,835 2,328 1,117 Sales (` cr) FY13E FY14E 2,503 5,790 3,609 10,592 2,989 6,732 2,903 7,022 3,836 12,193 3,314 7,902 OPM (%) FY13E FY14E 10.7 9.2 13.1 8.4 10.6 9.3 10.7 9.5 13.1 8.4 10.6 9.6 EPS (`) FY13E FY14E 5.8 3.5 14.0 2.9 10.2 27.2 6.5 5.4 14.5 4.5 11.3 35.1 PER (x) FY13E FY14E 9.8 16.2 7.5 19.0 15.3 8.3 8.7 10.4 7.3 12.1 13.7 6.4 P/BV (x) FY13E FY14E 0.6 0.6 0.5 0.6 2.4 0.9 0.6 0.6 0.4 0.6 2.1 0.8 RoE (%) FY13E FY14E 6.5 3.7 6.2 3.9 17.6 11.0 6.9 5.6 6.1 3.1 16.3 12.6 EV/Sales (x) FY13E FY14E 0.7 0.9 1.1 0.6 1.0 0.5 0.7 0.8 1.1 0.6 0.9 0.4

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

50

Watch Stock Watch | April 2012


Company Name Metal Bhushan Steel Coal India Electrosteel Castings Hind. Zinc Hindalco JSW Steel MOIL Monnet Ispat Nalco NMDC SAIL Sesa Goa Sterlite Inds Tata Steel Oil & Gas Cairn India GAIL ONGC Reliance Industries Pharmaceuticals Alembic Pharma Aurobindo Pharma Aventis* Cadila Healthcare Cipla Dr Reddy's Dishman Pharma GSK Pharma* Indoco Remedies Ipca labs Lupin Orchid Chemicals Ranbaxy* Sun Pharma Power CESC GIPCL NTPC Reco CMP (`) 416 343 20 132 129 722 251 465 55 161 94 194 111 470 334 375 267 748 48 119 2,209 760 305 1,759 46 2,291 406 335 530 185 469 570 272 67 163 Target Price (`) 27 147 136 585 51 185 102 206 139 503 353 319 875 95 175 1,016 380 92 665 443 656 270 634 342 98 201 Mkt Cap (` cr) 8,826 216,714 699 55,880 24,784 16,100 4,211 2,991 14,097 63,872 38,848 16,882 37,335 45,686 63,614 47,562 228,688 245,031 912 3,461 5,088 15,563 24,453 29,807 370 19,404 499 4,214 23,656 1,302 19,793 58,977 3,400 1,009 134,154 Sales (` cr) FY13E FY14E 9,232 65,654 1,984 12,818 84,638 39,161 979 2,986 8,276 11,726 52,461 8,240 47,107 141,358 14,715 50,472 148,157 325,734 1,576 5,243 1,401 6,196 7,006 9,183 1,282 2,788 685 2,907 8,272 2,143 12,023 9,272 4,926 1,557 73,558 13,557 71,756 2,074 14,520 88,753 43,958 1,061 3,908 8,578 12,890 62,935 8,423 49,100 142,265 16,682 55,503 150,563 329,787 1,813 5,767 1,569 7,443 8,164 10,063 1,538 3,148 837 3,541 9,929 2,508 12,264 11,080 5,429 1,573 84,843 OPM (%) FY13E FY14E 30.8 26.8 10.6 52.8 9.6 17.8 45.7 22.1 12.7 77.8 18.0 35.8 24.2 11.1 72.7 15.2 37.6 10.9 15.9 14.6 15.3 18.5 20.0 25.7 17.9 35.5 15.2 21.5 19.7 21.8 19.9 40.3 23.8 28.7 23.4 31.1 27.3 12.0 52.6 10.5 17.9 46.8 28.9 16.4 78.4 18.8 35.6 25.1 13.7 68.8 15.6 39.5 11.9 16.9 14.6 15.0 19.5 21.2 25.1 17.9 35.2 15.2 21.5 20.0 21.8 16.9 36.3 23.9 27.5 23.6 EPS (`) FY13E FY14E 48.0 24.0 2.7 15.2 15.2 72.1 24.5 50.5 2.5 18.6 13.2 43.9 18.4 45.8 46.3 35.4 31.0 64.7 8.2 13.8 89.7 43.3 17.0 92.1 10.1 87.9 55.5 32.7 29.7 28.3 41.1 26.7 41.0 10.4 12.6 58.6 26.3 3.3 17.2 17.3 89.5 26.6 83.4 3.5 20.6 14.5 47.9 19.6 58.9 48.2 37.0 33.6 71.8 9.5 14.7 110.3 50.8 19.0 89.9 13.0 96.7 66.5 40.6 32.8 38.1 36.9 28.8 46.2 10.2 14.1 PER (x) FY13E FY14E 8.7 14.3 7.5 8.7 8.5 10.0 10.3 9.2 21.7 8.6 7.1 4.4 6.0 10.3 7.2 10.6 8.6 11.6 5.9 8.6 24.6 17.6 17.9 19.1 4.5 26.1 7.3 10.2 17.8 6.5 11.4 21.3 6.6 6.4 12.9 7.1 13.0 6.1 7.7 7.4 8.1 9.4 5.6 15.6 7.8 6.5 4.1 5.7 8.0 6.9 10.1 8.0 10.4 5.1 8.1 20.0 15.0 16.0 19.6 3.5 23.7 6.1 8.3 16.1 4.9 12.7 19.8 5.9 6.5 11.6 P/BV (x) FY13E FY14E 1.1 3.9 0.4 1.7 0.7 0.9 1.6 1.1 1.2 2.1 0.8 0.9 0.7 1.0 1.1 1.8 1.5 1.2 2.1 1.0 4.0 4.5 3.2 4.1 0.4 8.4 1.1 2.6 4.6 1.3 2.4 4.3 0.7 0.7 1.6 1.0 3.2 0.1 1.4 0.7 0.8 1.4 0.9 1.1 1.7 0.8 0.7 0.7 0.9 0.9 1.6 1.4 1.1 1.7 0.4 3.2 3.6 2.8 3.5 0.3 7.0 1.0 2.1 3.6 1.0 2.1 3.7 0.6 0.6 1.5 RoE (%) FY13E FY14E 14.4 30.4 5.2 21.3 8.7 10.1 16.1 13.5 5.6 26.1 12.4 22.2 12.7 10.0 16.6 18.7 18.8 11.7 35.0 11.4 17.1 25.4 16.8 22.8 8.5 34.8 16.4 27.8 25.0 19.3 30.0 22.1 10.4 10.5 13.3 7.5 27.0 6.2 20.0 9.2 11.4 15.8 19.2 7.4 23.8 12.3 20.1 12.1 11.7 14.8 17.0 18.1 11.7 34.3 10.9 15.4 24.8 18.2 18.8 10.1 32.1 16.9 27.7 22.9 23.4 17.6 20.8 10.7 9.6 13.5 EV/Sales (x) FY13E FY14E 3.1 2.3 0.5 2.5 0.5 0.7 2.1 1.9 1.3 3.3 1.1 0.4 0.4 0.6 3.1 0.6 1.2 0.7 0.8 1.0 3.1 2.5 3.5 3.3 1.0 6.2 0.9 1.6 2.9 1.5 1.4 5.6 1.3 1.1 2.6 2.1 2.0 0.4 1.7 0.5 0.6 1.8 1.3 1.3 2.8 1.0 0.0 0.3 0.6 2.2 0.5 1.0 0.7 0.7 0.9 2.6 2.0 3.0 3.0 0.9 5.4 0.8 1.3 2.3 1.2 1.3 4.6 1.2 0.9 2.4

Neutral Neutral Buy Accumulate Accumulate Neutral Neutral Buy Reduce Buy Accumulate Accumulate Buy Accumulate Accumulate Neutral Buy Buy Buy Buy Neutral Buy Buy Neutral Buy Neutral Buy Buy Buy Buy Neutral Accumulate Buy Buy Buy

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

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Watch Stock Watch | April 2012


Company Name Real Estate Anant Raj DLF HDIL Telecom Bharti Airtel Idea Cellular Rcom Others Bajaj Electrical CRISIL Finolex Cables Graphite India Greenply Page Industries Sintex Siyaram Silk Mills SpiceJet Taj GVK Reco CMP (`) 59 202 85 337 99 84 195 977 31 84 203 2,701 86 258 24 76 Target Price (`) 78 115 245 60 116 298 129 439 116 Mkt Cap (` cr) 1,726 34,220 3,580 127,882 32,708 17,348 1,940 6,842 476 1,631 489 3,013 2,355 242 1,040 474 Sales (` cr) FY13E FY14E 657 9,878 2,441 80,967 23,002 21,899 3,670 982 2,341 2,053 1,800 935 5,219 1,045 5,384 322 875 12,033 3,344 88,684 25,921 23,740 4,384 1,136 2,656 2,437 2,047 1,168 5,912 1,173 6,443 355 OPM (%) FY13E FY14E 52.0 44.7 53.0 33.1 26.6 32.7 8.5 34.3 8.5 22.6 11.1 19.6 16.5 12.3 (1.0) 36.3 56.1 46.1 46.7 33.4 26.9 32.7 8.5 34.3 8.8 22.4 11.6 19.6 16.9 12.3 4.1 35.8 EPS (`) FY13E FY14E 8.4 9.6 21.4 17.9 3.3 4.2 18.3 34.3 8.0 13.5 34.1 99.7 15.8 61.5 (3.4) 8.3 12.7 13.4 25.4 22.0 4.6 6.7 22.3 40.0 10.0 16.3 49.6 122.2 21.4 73.2 2.4 9.6 PER (x) FY13E FY14E 7.0 21.0 4.0 18.8 30.3 19.9 10.6 28.4 3.9 6.2 5.9 27.1 5.5 4.2 9.1 4.6 15.0 3.4 15.3 21.7 12.6 8.7 24.4 3.1 5.1 4.1 22.1 4.0 3.5 9.9 7.9 P/BV (x) FY13E FY14E 0.4 1.3 0.3 2.2 2.3 0.4 2.3 12.6 0.5 0.9 1.1 15.7 0.8 0.8 (9.5) 1.2 0.4 1.3 0.3 1.9 2.1 0.4 1.9 9.9 0.5 0.8 0.9 12.6 0.7 0.7 20.1 1.1 RoE (%) FY13E FY14E 6.3 6.4 8.4 11.5 7.7 2.1 23.9 50.4 18.1 15.4 20.1 64.2 14.7 20.2 14.5 8.9 8.7 9.1 12.5 9.7 3.2 24.3 45.4 20.2 16.5 23.7 63.1 17.1 20.4 14.9 EV/Sales (x) FY13E FY14E 3.9 6.0 3.3 2.3 1.9 2.2 0.5 6.5 0.1 1.0 0.5 3.3 0.7 0.5 0.4 1.8 2.9 4.9 2.5 1.9 1.6 1.8 0.4 5.5 0.1 0.8 0.4 2.6 0.6 0.4 0.3 1.5

Buy Neutral Buy Neutral Neutral Neutral Buy Neutral Buy Buy Buy Neutral Buy Buy Neutral Buy

Source: Company, Angel Research, Note: ^Sept. year end; *December year end; #Consolidated; Price as on March 30, 2012

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

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4QFY2012 Results Preview | April 4, 2012

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

Refer to important Disclosures at the end of the report

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4QFY2012 Results Preview | April 4, 2012


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