Market Outlook

India Research
February 10, 2012

Dealers Diary
The domestic markets are expected to open flat to negative tracking negative opening in most of the Asian markets. Indian markets rose on Thursday, with the Nifty index hitting a 27-week high, as optimism that Greek leaders are nearing an agreement on austerity measures, that could secure them a new 130bn bailout from the EU and the IMF, easing some of the concerns about the nation's ongoing going debt crisis. Globally, U.S. stocks closed in green yesterday mainly on the back of positive news about Greece as well as some upbeat U.S. jobs data. The U.S. Labor Department reported that the initial jobless claims for U.S. fell to 358,000 in the week ended February 4th from the previous week's revised figure of 373,000. Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth (Bloomberg estimate 2.6%) for the month of December due to be released today. Also, consumer sentiment and trade balance data of the U.S. will be on radar.

Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com

Chg (%)

(Pts)

(Close)

0.7 0.8 1.3 1.2 (0.0) 0.7 1.9 1.8 2.1 (0.2) 1.1
Chg (%)

123.4 17,831 44.2 78.2 80.3 (1.7) 54.9 170.0 (21.4) 68.2
(Pts)

5,412 6,240 6,892 6,392 7,674 9,736 8,842 6,066

(Close)

219.4 12,069 247.1 12,293

Markets Today
The trend deciding level for the day is 17,773 / 5,392 levels. If Nifty trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,937 18,043 / 5,444 5,476 levels. However, if Nifty trades below 17,773 / 5,392 levels for the first half-an-hour of trade then it may correct up to 17,667 17,503 / 5,360 5,307 levels.
Indices SENSEX NIFTY S2
17,503 5,307

0.1 0.4 0.3 (0.2) (0.0) (0.0) 0.1

Chg (%)

6.5 12,891 11.4 19.5 (13.4) (1.0) 2.1

(Pts)

2,927 5,895 9,002 2,981 2,350

(Close)

(8.5) 21,010

S1
17,667 5,360

PIVOT
17,773 5,392

R1
17,937 5,444

R2
18,043 5,476 Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

1.0 1.3 0.5 1.2

0.6 0.2 0.2 0.4

BSE

$56.3 $11.3 $37.9 $33.9

NSE 995 473 51

News Analysis
3QFY2012 Result Reviews Tata Steel, Hindalco, Ambuja Cements, ACC, Apollo Tyres, MRF, Page Industries, FAG Bearings, Anant Raj, HAIL, Dishman Pharmaceuticals, JK Tyre 3QFY2012 Result Previews DLF, RCom, Britannia, Aurobindo Pharma, CCCL
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

1,828 1,057 125

Net Inflows (February 08, 2012)

` cr FII MFs Purch
4,405 717

Sales
3,955 687

Net
451 30

MTD
7,449 (480)

YTD
18,529 (2,335)

Volumes (` cr) BSE NSE

3,326
15,684

FII Derivatives (February 08, 2012)

` cr
Index Futures Stock Futures

Purch 1,788 1,920

Sales 1,845 2,179

Net (58) (259)

Open Interest 15,467 30,347

Gainers / Losers
Gainers Company
Jubilant Food Bhushan Steel HDIL JSW Steel IVRCL

Losers Company
Manappuram Fin Adani Enter Adani Power Coromandel Intl Shriram Trans

Price (`)
1,031 396 98 819 59

chg (%)
8.8 8.7 8.5 7.9 7.1

Price (`)
46 393 71 272 569

chg (%)
(6.9) (4.3) (3.5) (3.4) (2.8)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

3QFY2012 - Result Reviews

Tata Steel
For 3QFY2012, Tata Steel reported net loss on a consolidated basis due to weak performance from its European and Southeast Asian operations. Consolidated net sales increased by 13.8% yoy to `33,103cr, above our estimate of `30,992cr, mainly on account of increased average realizations in rupee terms. Standalone net sales increased by 12.3% yoy to `8,305cr. Consolidated sales volumes stood at 5.8mn tonnes in 3QFY2012 compared to 5.9mn tonnes in 3QFY2011. Average realization/tonne decreased by 3.4% and 0.6% to US$975 and US$1,149 in Tata Steel India and Tata Steel Europe operations, respectively. However, EBITDA/tonne decreased by 7.1% and US$303 in Tata Steel India. EBITDA/tonne of Tata Steel Europe operations stood at US$(1) compared to US$25 in 3QFY2011 on account of higher raw-material costs. India operations EBITDA decreased by 9.5% yoy to `2,553cr. European operations reported EBITDA of US$(147)mn and Southeast Asian operations reported EBITDA of US$(2)mn during the quarter. Consequently, consolidated EBITDA decreased by 49.9% yoy to `1,717cr. Hence, Tata Steel reported net loss of `603cr in 3QFY2012 compared to adjusted PAT of `1,125cr in 3QFY2011. The companys net debt has increased to US$9.5bn as on December 31, 2011, compared to US$8.5bn as on September 30, 2011. Tata Steels Jamshedpur 2.9mn tonnes brownfield expansion project remains on track to be completed during 4QFY2012. We maintain our Buy recommendation on the stock, while we keep our target price under review.

Hindalco
Hindalcos standalone 3QFY2012 top line was above our estimate, while its bottom line was slightly below our expectation. The companys net sales increased by 11.4% yoy to `6,590cr (above our estimate of `5,909cr) mainly on account of higher volumes in the aluminium and copper segments. In the aluminium segment, alumina, aluminium, wire rods and flat products production increased by 7.1%, 7.8%, 6.7% and 20.4% yoy to 343k, 146k, 25k and 56k, respectively. In the copper segment, copper cathode and CC rods production grew by 9.4% and 42.3% yoy to 88k and 38k, respectively. However, the aluminium segments EBIT decreased by 33.4% yoy to `310cr due to increased input costs (mainly coal and crude derivatives). Nevertheless, the copper segments EBIT rose by 51.1% yoy to `216cr due to higher treatment and refining charges and by-product credits. Overall, Hindalcos EBITDA decreased by 3.3% yoy to `716cr and EBITDA margin slipped by 165bp yoy to 10.9% during 3QFY2012. Interest expenses grew by 53.8% yoy to `79cr and other income grew by 48.6% yoy to `90cr. Consequently, net profit decreased by only 1.9% yoy to `452cr (below our estimate of `480cr). The company reported that all its expansion plans are on track. The stock is under review currently.

February 10, 2012

Market Outlook | India Research

Ambuja Cements
During 4QCY2011, Ambuja Cements standalone top line increased strongly by 30.2% yoy to `2,329cr on account of 17.5% yoy improvement in realization to `4,197/tonne and a 10.8% yoy increase in volumes to 5.55mn tonnes. OPM declined by 60bp yoy to 19.1% on account of higher raw-material costs, power and fuel costs and freight costs. On the bottom-line front, net profit for the quarter rose by 17% yoy to `302cr, aided by better operating performance, 72.2% yoy growth in other income to `65cr and 53% saving in interest expense to `10cr. Reported net profit was lower by `33cr on account of an exceptional item relating to change in accounting method for stock options, adjusting for which net profit would have grown by 30% yoy. We continue to remain Neutral on the stock.

ACC
ACC posted 27.8% yoy growth in its standalone net sales to `2,503cr on account of 17.8% growth in sales volumes and 20.3% higher realization. The companys sales volumes for the quarter stood at 5.95mn tonnes, up 6.3% yoy, on account of higher capacity (on a yoy basis) operational at Wadi and Chanda during the quarter. Further, realization stood higher by 20.3% yoy to `4,206/tonne. Despite the substantial yoy improvement in realization, OPM rose only marginally by 100bp due to the surge in operating costs. The companys net profit rose by 83.8% yoy to `470cr. The companys profit was boosted by tax credit of `228cr during the quarter (vs. 82cr in 4QCY2010), adjusted for which profit would have been at `242cr higher by 39.3% yoy. We remain Neutral on the stock.

Apollo Tyres
Apollo Tyres (APTY) registered robust results for 3QFY2012 with consolidated top line posting better-than-expected 36.3% yoy (12.4% qoq) growth to `3,228cr, aided by an 18.2% yoy (8.3% qoq) jump in volumes and 15.3% yoy (3.8% qoq) increase in net average realization. Domestic, Europe and South Africa revenue grew strongly by 46.2%, 26.3% and 27.9% yoy, respectively. Operating margin expanded by 202bp qoq to 10%, mainly due to 100bp savings on the raw-material front. As a result, adjusted net profit grew by 63.8% qoq to `127cr. However, on a yoy basis, adjusted net profit reported modest 5.8% yoy growth, largely due to contraction in operating margin and higher interest expense (up 38.2% to `73cr). During the quarter, APTY made a provision of `29cr in relation to a penalty following settlement agreement with South Africa Competition Commission for the companys operations in South Africa. At `76, the stock is trading at 6.8x its FY2013E earnings. We retain our Buy recommendation on the stock; however, the target price is under review. We shall release a detailed result note soon.

February 10, 2012

Market Outlook | India Research

MRF 1QSY2012
MRF reported top-line growth of 32.7% yoy to `3,138cr in 1QSY2012 from `2,367cr in 1QSY2011. The companys EBITDA margin came in at 9.0%, 174bp higher on a qoq basis, on account of a decrease in overall expenses as a percentage of sales. On the profitability front, MRF reported an increase of 9.7% yoy, from `103cr to `113cr. We maintain our Buy recommendation on the stock with a target price at `9,647, based on a target PE of 8x its SY2013E earnings.

Page Industries
Page Industries announced its 3QFY2012 numbers. The companys net sales increased by 28.4% yoy to `172cr (`134cr). EBITDA improved only by 6.3% yoy to `30cr (`28cr), despite higher revenue growth due to margin compression. EBITDA margin declined by 356bp yoy to 17.2% (20.7%), mainly due to higher raw-material cost, which increased to 51.2% of net sales in 3QFY2012 vs. 48.3% of net sales in 3QFY2011. Despite lower growth in EBITDA, PAT increased by 27.6% yoy to `20cr (`16cr), in-line with top-line growth on the back of higher other income, which increased by 78.2% to `4cr and lower tax rate, which came in at 31.5% in 3QFY2012 vs. 41.6% in 3QFY2011. PAT margin declined marginally by 7bp yoy to 11.6%. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.

FAG Bearings - 4QCY2011

FAG Bearings (FAG) registered a strong performance in 4QCY2011, with betterthan-expected net sales growth of 31.4% yoy (4.8% qoq) to `350cr against our expectation of `310cr. EBITDA margin contracted by 150bp yoy (170bp qoq) to 18.1% mainly due to higher raw-material expenses. Raw-material cost increased primarily on the trading part of the business, which we believe could be due to the depreciation of INR against the Euro. Purchase of traded goods as a percentage of sales jumped substantially by 480bp yoy during the quarter. However, 380bp yoy savings in other expenditure arrested further fall in margins. Led by strong top-line performance net profit posted better-than-expected 27.3% yoy growth to `43cr. We expect the company to sustain its strong performance going ahead, led by likely easing of interest rates from 1QFY2013, which is expected to revive demand in the automotive and industrial segment. We maintain our Buy view on the stock; however, our target price is under review.

Anant Raj
Anant Raj Industries announced its 3QFY2012 numbers. Net sales declined by 25.9% yoy to `92cr (`124cr), well below our estimate. EBITDA declined by 36.5% yoy to `49cr (`77cr) due to lower revenue and margin compression. EBITDA margin declined by 888bp yoy to 53.2% (62.1%). Adjusted PAT declined by 37.3% yoy to `31cr (`50cr) and PAT margin declined by 622bp yoy to 31.5% (50.3%), almost in-line with EBITDA margin contraction. We will be coming out with a detailed report post management interaction. We have an Accumulate rating on the stock with a target price of `78.
February 10, 2012

Market Outlook | India Research

HAIL 4QCY2011
Honeywell announced its 4QCY2011 numbers. The top line grew by 21% qoq to `503cr in 4QCY2011 from `412cr in 4QCY2010. Annual sales for CY2011 stood at `1619, 19% higher from CY2010. The company's margin came in at 9.1%, 259bp higher on a qoq basis, on account of a decrease in raw-material and employee cost as percentage of sales. Net profit for the quarter rose by 31.5% yoy, from `25.7cr to `33.9cr. Annual net profit stood at `107cr, 6.7% higher yoy. We maintain our Buy recommendation on the stock; our target price is under review.

Dishman Pharmaceutical
For 3QFY2012, Dishman Pharmaceutical posted net sales of `265.5cr, registering 14.5% yoy growth. The companys growth was driven by the MM segment, which reported 30.9% yoy growth. The CRAMS segment reported 6.9% yoy growth. The companys OPM came in at 15.9%; however, adjusted for forex losses, it stood at 20.1%. The company reported higher tax expenses during the quarter. Consequently, net profit came in at `16.7cr, lower than our expectation of `19.8cr. However, given the traction in growth and improving profitability, we maintain our Buy rating on the stock; the target price is under review.

JK Tyre
JK Tyre (JKI) reported dismal set of results for 3QFY2012, posting net loss on the bottom-line front, led by higher interest expense and forex loss of `38cr. For 3QFY2012, net sales grew strongly by 20.7% yoy (10.4% qoq) to `1,423cr. Operating performance bounced back sequentially with EBITDA margin expanding by 297bp to 5.1%, driven by raw-material cost savings (100bp qoq) and decline in other expenditure (200bp qoq). JKI, however, posted net loss of `21cr on account of an 87.8% yoy increase in interest expense to `45cr and forex loss of `38cr. The stock rating is currently under review.

3QFY2012 - Result Previews

DLF
DLF is expected to announce its 3QFY2012 results. We expect the companys net sales to increase by 9.6% yoy to `2,719cr. EBITDA margin is expected to contract by 377bp yoy to 43.7% on account of higher input costs. Net profit is expected to decline by 11.1% yoy to `414cr. We maintain our Neutral rating on the stock.

RCom
Reliance Communication (RCom) is slated to announce its 3QFY2012 results. We expect the company to record revenue of `4,968cr, up 3.7% qoq. Growth is expected primarily on the back of qoq flat ARPM at `0.45/min and 1.0% qoq growth in MOU to 229min. EBITDA margin is expected to increase by 83bp qoq to 29.1%. PAT for the quarter is expected to come in at `144cr. We maintain our Neutral view on the stock.
February 10, 2012

Market Outlook | India Research

Britannia
Britannia is expected to announce its 3QFY2012 results. For the quarter, we expect Britannia to report healthy 18% yoy growth in revenue to `1,271 due to improvement in sales mix. For the quarter, we expect the company to report an 11bp yoy margin improvement. Earnings for the quarter is expected to grow by 20% yoy to `45cr on the back of healthy top-line growth. At the CMP, the stock is trading at 21.7 x F2013E EPS of `22.5. We recommend Neutral on the stock.

Aurobindo Pharma
For 3QFY2012, Aurobindo Pharma is expected to post net sales of `1,295cr, registering 20.8% yoy growth. The company is expected to post OPM of 12.1%, reporting a dip of 652bp yoy. Net profit is expected to come in at `98.5cr, down 49% yoy. At the CMP, the stock is trading at 8.4x FY2013. We continue to maintain our Buy recommendation on the stock with a target price of `166.

CCCL
Consolidated Construction Consortium (CCCL) is expected to post modest 8.0% yoy growth in its top line to `535.9cr, given the slow-moving infra orders forming ~40% of its total order book. On the EBITDA front, we expect the company to continue to report a dismal performance and register a dip of 654bp yoy to 3.2%, in-line with management's guidance. Against this backdrop, the bottom line is expected to post loss of `5.2cr in 3QFY2012 vs. profit of `16.7cr in 3QFY2011. We continue to maintain our Neutral view on the stock.

Quarterly Bloomberg Brokers Consensus Estimates

BPCL Ltd (10/02/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 48,753 (79) (0.2) (692) 3Q FY11 y-o-y (%) 36,665 749 2.0 187 (470) 33 (111) 2Q FY12 q-o-q (%) 42,282 (2,695) (6.4) (3,229) (79) 15 (97)

DLF Ltd Consolidated (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 2,536 1,162 45.8 422 3Q FY11 y-o-y (%) 2,480 1,178 47.5 466 (9) 2 (1) 2Q FY12 q-o-q (%) 2,532 1,173 46.3 372 13 0 (1)

February 10, 2012

Market Outlook | India Research

Essar Oil Ltd (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 12,638 308 2.4 (125) 3Q FY11 y-o-y (%) 12,233 797 6.5 273 (146) 3 (61) 2Q FY12 q-o-q (%) 12,939 544 4.2 (166) (25) (2) (43)

RCom Ltd Consolidated (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 5,195 1,639 31.5 218 3Q FY11 y-o-y (%) 5,004 1,668 33.3 480 (55) 4 (2) 2Q FY12 q-o-q (%) 4,689 1,357 28.9 252 (14) 11 21

Tata Chemicals Ltd Consolidated (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 3,140 551 17.5 190 3Q FY11 y-o-y (%) 2,860 441 15.4 165 16 10 25 2Q FY12 q-o-q (%) 3,540 674 19.0 275 (31) (11) (18)

Tata Power Ltd Consolidated (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 6,197 1,421 22.9 514 3Q FY11 y-o-y (%) 4,413 1,055 23.9 442 16 40 35 2Q FY12 q-o-q (%) 6,248 1,385 22.2 (1,219) (142) (1) 3

Unitech Ltd Consolidated (10/02/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3Q FY12E 682 171 25.1 107 3Q FY11 y-o-y (%) 660 209 31.6 111 (4) 3 (18) 2Q FY12 q-o-q (%) 626 138 22.0 92 16 9 24

IDFC Ltd (10/02/2012)

Particulars (` cr) Net profit 3Q FY12E 381 3Q FY11 y-o-y (%) 321 18 2Q FY12 q-o-q (%) 524 (27)

Shriram Transport Company Ltd (10/02/2012)

Particulars (` cr) Net profit 3Q FY12E 320 3Q FY11 y-o-y (%) 301 6 2Q FY12 q-o-q (%) 299 7

Suzlon Energy Ltd (11/02/2012)

Particulars (` cr) Net sales Net profit 3Q FY12E 5,232 (47) 3Q FY11 y-o-y (%) 4,433 (254) 18 (81) 2Q FY12 q-o-q (%) 5,071 48 3 (198)

February 10, 2012

Market Outlook | India Research

Economic and Political News

Current account deficit seen widening as exports struggle Government nods for JVs by defense PSUs Exports up 10.1%; Imports jump by 20.3% in January 2012

Corporate News
Additional tax on diesel cars will further impede industry growth: M&M CEAT to set up `250cr plant in Bangladesh Tata Global, PepsiCo JV eyes `700cr turnover in the next five years Tulip Telecom CEO Sanjay Jain quits Unity Infraprojects bags orders worth `485cr
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
10/02/2012 11/02/2012 12/02/2012 13/02/2012 14/02/2012 DLF, Tata Power Co., BPCL, IDFC, Rcom, Shriram Trans., Essar Oil, Sun TV Network, Reliance Capital, Unitech, Britannia, Aurobindo Pharma Suzlon Energy, Consolidated Co Areva Coal India, St Bk of India, IOC, Sun Pharma, SAIL, Cipla, Reliance Infra., Tata Chemicals, Motherson Sumi, CESC, Punj Lloyd, Amara Raja Batteries Tata Motors, Nestle, Reliance Power, Jaiprakash Asso., HDIL, Monnet Ispat, Graphite India, Simplex Infra, IVRCL Infra, Madhucon Proj, Indoco Remedies

February 10, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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February 10, 2012