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Wednesday, May 30, 2007

Citigroup - India Pharma Capsule

Citigroup in their report on Indian Pharma say,

Indian pharma is best viewed as distinct sub sectors to better understand valuation opportunities. Each sub sector faces its own pressures and has unique growth and valuation drivers. Innovator CRAMS is gaining traction, while Generics are winding through an obstacle course of regulatory and pricing hurdles. Given rapid evolution in the Indian market, we see strong growth potential for MNC pharma and Hospital stocks, although valuations remain challenging.

Ranbaxy, NPIL and Glenmark are our top buys. Initiate Buys on Shasun & Dishman, upgrade Apollo (to Buy), Sun (to Hold) & downgrade Matrix (to Sell).

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Emkay - Offshore Oil Field Services Sector

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M&M, L&T, Dishman Pharma, VSNL,

SSKI on Mahindra & Mahindra

M&M's standalone Q4FY07 revenues and profits were above our expectations; though margins were lower by ~50bps vis-à-vis our expectations. Net sales grew by 20%yoy to Rs27.47bn on the back of 17.7% volume growth at 75,155 units. The company's EBIDTA margins were lower at 11.4%, lower 50bps yoy and 60bps qoq due to lower margins in the automotive segment. The company's Q4FY07 operating profit grew by 15.2%yoy to Rs3.13bn and net profit before extraordinary items was higher by 47%yoy at Rs2.28bn. M&M's FY07 consolidated revenues grew by 43%yoy to Rs176.2bn led by strong performance of the standalone entity and the company's key subsidiaries. Consolidated EBIDTA margin for the company increased to 15.3% in FY07 against 14.1% in FY06 and consolidated PAT before extraordinary items grew by 54% to Rs16.0bn in FY07.

We expect M&M's core business to remain under pressure due to moderation in growth rates, both in the UV and Tractors segment, pressure on margins and a sharp surge in depreciation and interest charges due to the company's enhanced capex and borrowing plans. The company's consolidated performance for FY07 has exceeded our expectations and its subsidiaries are likely to continue their growth momentum. We have introduced Punjab Tractors into our consolidated estimates, resultant of which, we have recognized amortization of our estimate of goodwill arising due to the acquisition and also adjusted for minority interest in PTL. This, along with higher depreciation and interest charges has led to a marginal earnings downgraded of 1% for FY08 and 2.2% for FY09 - the positive impact of increased revenues has been negated by higher depreciation and interest charges and good will amortization. We have an SOTP based price target of Rs845/share for M&M with the core business valued at Rs402/share, which implies that ~52% of the SOTP value is derived from the company's subsidiaries. Segments other than Automotive and Farm Equipment contribute to ~40% of consolidated revenues and ~51% of M&M's consolidated profits. Thus, we believe M&M is currently more a play on its value accretive subsidiaries than on the core business. Maintain Outperformer.


L&T's 4QFY07 earnings were sharply ahead of our estimates at Rs7bn driven by sharply higher than estimated revenue growth and operating margins of the E&C segment. The overall operating margins improved by 50bps to 13% during the quarter led by 300bps margin improvement in E&C segment as few large projects crossed the profit booking threshold limit. Moreover, order booking during the quarter increased by 19% yoy to Rs61.2bn thereby resulting in strong order backlog growth of 48% yoy to Rs353bn. However, the lower than estimated performance of its subsidiaries led to consolidated earnings being in line with our estimates at Rs18.1bn for FY07. We have upgraded our standalone FY08 and FY09 estimates by 19.3% and 26% respectively (higher operating margins and higher revenue growth), while consolidated earnings are upgraded by 7.5% and 12.1% for FY08 and FY09 respectively (led by sharp upgrade in standalone earnings estimates). L&T is currently trading at 17.4x FY09E earnings on consolidated earnings. Considering its strong order book of Rs353bn and ensuing visibility of revenues and hence earnings growth of 27% CAGR over the next two years, we believe the valuations are attractive. Also, L&T continues to be amongst the largest and most preferred "infrastructure plays" in the country, thereby L&T will continue to trade at a significant premium to the market multiples. As a result, we maintain our Outperformer rating on the stock.

SSKI on Dishman Pharma

Dishman's Q4FY07 results have been impacted by one-offs and regroupings related to consolidation of Carbogen-Amcis and material write-off. Net profits at Rs329m are significantly ahead of estimates due to higher other operating income, lower tax and depreciation provisions even though the operating profits are considerably lower at Rs215m. Operating profits have been impacted have by rupee appreciation (Dishman exports ~75% of sales) and Rs900m of one-off provisions. Overall the broad story remains firmly on track. Carbogen-Amcis is doing better than expected; Solvay is on track while there is very strong momentum in non-Solvay CRAMS business executed out of India. We expect this non-Solvay business to drive growth for Dishman with increasing traction from multiple big pharma clients. Dishman has started to leverage synergies with Carbogen-Amcis with 3 of existing Amcis clients seeking to transfer manufacturing to Indian facilities. We remain positive on Dishman's business model and believe it is one of the best companies on play the CRAMS opportunity in India. Maintain earning estimates and reiterate Outperformer with price target of Rs.312 (20xFY08E and 15.6xFY09E). Commercialization of any of the 3 Phase III products in Carbogen-Amcis will be upsides to estimates. Dishman remains one of our top picks in the space.

JP Morgan on Mahindra & Mahindra

· M&M's 4Q adjusted earnings at Rs.2.4B (up 36% yoy) were in line with our expectations. While EBITDA was lower than expected (the margin was 60bp below our estimate), higher other income and lower rate of taxation offset the impact.
· While unit sales grew 19%, and EBITDA increased just 14%. EBITDA margin at 11.3% (down 60bp yoy) declined due to a 200bp yoy increase in other expenditure. Though RM/sales ratio was lower by 120bp yoy, it could only partially offset the effect of higher other expenditure.
· Higher other income (due to increased dividends from subsidiaries) and lower tax rate (down 540bp yoy) mitigated the drop in operating performance.
· In FY08, M&M expects unit sales grow to moderate to c.8-10% for both UV's and tractors (due to higher interest rates and base effect).
· M&M firmed up plans for its newly announced plants for commercial vehicles at Pune and passenger cars at Chennai. Both plants are expected to commence production in FY10.
· The company is working on two new platforms in UVs: The Ingenio, a Multi Purpose Vehicle (MPV), which is expected to launched over the next 12 months, and a new UV, which will be launched from the Chennai facility.
· For commercial vehicles, M&M will launch a mass market vehicle (both in the goods and passenger segment) besides launching its range of heavy CVs in collaboration with its foreign partner, Navistar.
· M&M has planned a capex of Rs20B p.a. for the above initiatives over the next three years. To fund these activities, M&M will use its internal accruals as well as raise debt; however it would restrict its leverage (Debt: Equity ratio would not exceed 1x).
· Over FY08, M&M plans to list its subsidiary, Mahindra Holidays. It is also in the process of merging the recently acquired forging companies in its group company, Mahindra Forging.

JP Morgan on Videsh Sanchar Nigam Limited,

· Mixed operational performance. VSNL's 4QFY07 (unconsolidated) revenues were up 1.7% Q/Q (+13.0% Y/Y) but EBITDA was down 5.6% Q/Q (+3.0%) because of higher SG&A costs. On full year (FY07) basis, EBITDA increased by only 6.3% Y/Y to Rs9.3 bn but we expect growth to be higher in FY08 based on continued strong volume growth (total LD minutes were up 53% Y/Y, IPLC bandwidth +103% Y/Y in FY07) and cost optimization (impact of recent headcount reduction).
· Consolidated results highlight the challenges. FY07 consolidated EBITDA of Rs10.54 bn reflects start up losses in South Africa and the challenges in revenue generation from loss making Tyco network (TGN). We estimate EBITDA loss from TGN was US$35 mn in FY07 compared with our estimated US$50-55 mn in FY06. EBITDA growth in Teleglobe is a consolation but has been mainly driven by cost reductions.
· Valuations and stock view. We maintain neutral rating on VSNL stock with Jun-08 SOP price target of Rs500 (Rs475 previously). Our SOP includes Rs235 from the India business, which we have valued using DCF (implied FY08E EV/EBITDA is 6.0x). Stock is likely to remain in a trading range and we would consider buying around Rs400/share level.
· Risks to our view. Downside risks are competition, adverse regulatory changes (regulation of access to cable landing stations) and delay in cash breakeven of TGN. Upside may come from unlocking of surplus land value. Furthermore, listing of RCOM's cable assets (FLAG) could also boost investor outlook on the value of TGN submarine cable system.

Religare on Riddhi Siddhi Gluco Oils

Strategic location of Gokak and Pondicherry plants provides substantial operational benefits; upcoming Uttaranchal unit also offers a strategic cost-advantage and opens up access to north and eastern markets Tie-up with French starch giant, Roquette Freres, generates strong value addition for its product portfolio Net sales CAGR of 38.9% expected over FY06-FY09 to Rs 6.2bn We initiate coverage with Buy with an end-FY08 target price of Rs 365, 47% potential upside from the current levels

Merrill Lynch on Larsen and Tourbo

Margins Surprise in FY07; Raising Earnings & PO to Rs2150
We hike our earnings estimates by 15% for FY08 and 10% for FY09 & PO to Rs2150 (1925) led by better-than-expected FY07 parent EBITDA margins (+300bps) and subsidiary performance. Further L&T had 48%YoY growth in order backlog, rebound in parent sales (+35%YoY in 4Q FY07), 300bps EBITDA margin expansion in E&C to 11% and consolidated rec. PAT growth of 72%YoY. Buy

Citigroup - HPCL, BPCL, IOC

Citigroup on BPCL

Our target price for BPCL of Rs385 based on an FY08E EV/EBITDA of 5.5x for core earnings and 2.0x to contribution from oil bonds. We use FY08E as a base considering a normalized earnings scenario along with improved marketing profitability (in line with lower crude) but continued policy ambiguity. While valuing the Indian oil refining and marketing companies, we prefer to use EV/EBITDA to compare companies across the region to avoid differences in accounting policies in depreciation and taxation. Our target price is also based on an FY06E P/BV of 1.4x, between the value we ascribe to HPCL and IOC, justified given the better mix of refining and marketing BPCL as compared to HPCL, but a lower proportion of high-yielding pipeline assets vis-a-vis IOC.

Citigroup on HPCL

We assign a Medium Risk rating to the stock, even though our quantitative rating system rates the stock Low Risk, as we believe volatility in international oil prices will continue to impact earnings given the linkage to marketing margins. Sentiment towards the sector and HPCL is closely linked to crude price fluctuations, sector deregulation, subsidy losses, and auto fuel price hikes. Upside risks to our target price include: a further decline in crude prices (to US$50-55/bbl) and stronger-than-expected recovery in the company's marketing profitability leading to higher-than-estimated returns; if the government took concrete pricing action on retail products to bring them in line with international prices, it would put our earnings forecasts at risk; and on the macro front, if the government were to adopt the Downstream Regulatory Bill, appoint an independent regulator, and give pricing freedom to the oil-marketing companies, it would likely give a fillip to the stock price.

Citigroup on IOC

Our target price for IOC of Rs450 is based on an FY08E EV/EBITDA of 6.0x—at a premium to BPCL and HPCL and 2.0x the contribution from oil bonds. We are maintaining a valuation premium (for core earnings) to BPCL and HPCL considering IOC's superior revenue mix and sustainable competitive advantage. The target price includes the value of IOC's holdings in ONGC and GAIL at current market prices worth Rs103/share at a 20% discount to the current market prices. IOC has stated its intention to liquidate a part of the crossholdings in ONGC and GAIL in installments, the first tranche of which was completed earlier this year. While valuing the Indian oil refining and marketing companies, we prefer to use EV/EBITDA to compare companies across the regions to avoid the differences in accounting policies on depreciation and taxation. Our target price is also based on an FY06E P/BV of 1.6x, at a premium to BPCL/HPCL given IOC's lower proportion of marketing assets as a proportion of total assets.

Sharekhan Investor's Eye dated May 30, 2007

Cluster: Emerging Star
Recommendation: Buy
Price target: Rs585
Current market price: Rs488

Price target revised to Rs585

Result highlights

  • The consolidated revenues of Thermax grew by a whopping 65% year on year (yoy) to Rs856.5 crore in Q4FY2007, sharply ahead of our expectation. The revenue of the energy segment grew by a strong 74% yoy to Rs685.5 crore and that of the environment segment grew by a robust 53.7% yoy to Rs205 crore.
  • The company's operating profit margin (OPM) declined by 70 basis points yoy to 12.4% in the quarter. The dip in the margin was due to a rise in the raw material prices and a change in the product mix. On a full year basis, the OPM stood at 12.4% as against 13.1% in Q4FY2006 and we expect the company to maintain the OPM in FY2008. The operating profit grew by 56% to Rs106 crore.
  • The energy segment continued its robust performance with a revenue growth of 74% yoy. Although the profit before interest and tax (PBIT) margin for this segment declined by 240 basis points yoy in this quarter, yet we don't see this as a cause for concern. That's because the margin declined more because of a change in the product mix and rupee appreciation. The company has said in its conference call that it has taken adequate measures to tackle the rupee appreciation. The environment segment reported an impressive 53.7% growth in its revenue and a 230-basis-point improvement in the PBIT margin on a year-on-year (y-o-y) basis.
  • The consolidated net profit grew by 66% yoy to Rs69.7 crore in Q4FY2007, in line with our expectation.
  • The order backlog grew at 79% yoy to Rs3,100 crore. It is equivalent to 1.3x FY2007 consolidated revenues and order inflows during the quarter were up by 38% to Rs894 core. This imparts a very strong visibility to the revenues.
  • The company has done a capital expenditure (capex) of Rs80 crore in this year and will further do a capex of around Rs150 crore in FY2008 as it is setting up a factory in Vadodara at a cost of Rs175 crore. So far it has invested Rs50 crore in this factory. The factory will start production in a phased manner. The production from the first phase of the project will commence from July this year and full production would start by March 2008.
  • The company has guided for a stable to better OPM in FY2008, which, in our opinion, is indicative of the improving outlook of its business.
  • In light of the continued growth traction over the last few quarters, the closure of the loss-making subsidiary ME Engineering and the revised guidance of a 40% top line growth for FY2008, we are revising our FY2008 earnings estimate upwards by 2.4%. We are also revising our one-year price target upwards to Rs585. The Rs50 per share of cash and cash equivalent on the company's books provides a margin of safety to our price target. We maintain a Buy on the stock with a revised price target of Rs585.



Possibility of another CRR hike remains alive
The continued growth momentum, easy liquidity driven by strong foreign inflows and concerns over increase in global commodity prices could prompt the Reserve Bank of India (RBI) to suck out the excess liquidity from the banking system. Expectations are building up that the RBI may be prompted to take a pre-emptive action as the system is again flush with funds and the government is all set to resume spending.

Amidst this developing situation, the comforting factors have been the moderation in inflation (down to 5.27% from 5.44%) and non-food credit growth (lower at 27.1% compared with 30.5% growth in the previous year). However, money supply growth at 20.2% (RBI's FY2008 target being 17%) is the only factor that could prompt the RBI to step in and suck out liquidity from the system to keep the money supply growth in check.

Angel - IGL, Mahindra & Mahindra

Angel on IGL

Over the next two-three years, we expect IGL to achieve size and maintain the growth
momentum. CNG sales are expected to receive a boost going ahead on the back of an increase in the conversion of private cars as well as new CNG buses. Given the aggressive capex plan to expand its CNG and PNG network, the company is likely to achieve overall double-digit volume growth. The company has secured from GAIL for 2.0 mmscmd of gas supply till 2010 whereas on an average it has utilised only 1.3mmscmd in FY2007. Hence, the supply-side woes are phased out for the time being. We expect IGL to post net Revenues of Rs725.7cr and Rs834.9cr with PAT of Rs160.9cr and Rs185.8cr in FY2008E and in FY2009E, respectively. At the CMP, the stock is available at 10.4x and 9.0x FY2008E EPS of Rs11.5 and FY2009E EPS of Rs13.3. We maintain a Buy on the stock with a Target Price of Rs160.

Angel on Mahindra and Mahindra

At the CMP, M&M trades at 17.4x FY2008E and 15.9x FY2009E Earnings. High growth potential of its subsidiaries is expected to unlock actual value of the stock. Our SOTP Target Price for M&M works out to Rs960 wherein its core business fetches Rs558 and subsidiaries Rs402. We maintain a Buy on the stock.

Post Session Commentary

The BSE Sensex closed the session on a negative note lower by 96.83 points at 14,411.38 while Nifty closed at 4,249.65 down by 43.6 points. Of the 2,652 stocks actively traded on BSE, 1,594 stocks declined while 991 stocks advanced. The BSE Mid cap and Small cap closed lower by 62.90 points and 38.77 points at 6,191.61 and 7,349.56 respectively.

BSE Capital goods index closed higher by 183.29 points at 11,079.43 as L&T 7.39% closed in green while BHEL (3.08%), ABB (1.36%) and Siemens (0.42%) closed in red.

BSE Metal index closed at 10,344.67 down by 149.58 points as SAIL (3.07%), Hindalco (2.73%), NALCO (0.38%) and Tata Steel (0.24%) closed lower.

BSE Auto Index closed in negative at 4,948.16 down by 9.37 points as Maruti Udyog (2.10%) and M&M (1.72%) closed in red while Hero Honda (1.70%), Bajaj Auto (0.39%) and Tata motors (0.14%) closed in green.

BSE bank index closed lower by 95.57 points at 7,505.22 as PNB (1.14%) and ICICI bank (1.07%) closed in negative whereas HDFC bank 3.56% and SBI 0.21% closed in positive.

BSE IT index closed at 4,814.09 plunged 94.06 points as Infosys (2.42%), TCS (1.45%), Satyam (1.44%), Wipro (0.62%) and HCL Tech (0.28%) closed in red.

BSE Health Care Index closed lower by 30.15 points at 3,827.38 as Cipla (1.74%), Ranbaxy labs (0.26%) and Dr. Reddy lab (0.18%) closed lower while Glaxosmithkline (0.25%) closed higher.

BSE oil & gas index closed lower by 37.05 points at 7,755.58 as Reliance petroleum (3.52%) and BPCL (1.30%) closed in red while IPCL (1.57%), GAIL (0.20%) and HPCL (0.16%) closed in green.

BSE FMCG index closed lower by 32.93 points at 1,881.32 as HLL (1.92%), ITC (1.61%) and Dabur (1.36%) closed in red.

Market Close: China weigh over India !

Extremly choppy and volatile sessions continued through out the day. Global cues were not much supportive as China raised securities trading duty by three times to 0.3%. This fueled the Asian markets to trade weak and end in red. Shanghai Composite ended down by 6.5%. This is F&O expiry week and China's excuse was good reason for market to see profit booking. Selling pressure was seen across the board except selective stocks in Engineering and Real estate. IT stocks continued its downward trend as Rupee maintained its strength against Dollar. Even Mid and Small caps also followed frontline indices.

Sensex closed down by 114 points at 14394. It was helped up by gains in L&T (1979,+6.60 percent), Hero Honda (696,+1.49 percent), HDFC (1830,+0.91 percent), Ambuja Cement (115.20,+0.35 percent) and Bajaj Auto (2200,+0.34 percent). Restricting the gains are HDFC Bank (1100,-3.96 percent), R Com (501,-3.88 percent), REL (534,-3.84 percent), BHEL (2759,-3.4 percent) and Hindalco (140.35,-2.87 percent).

IT stocks ended in a weak note for the day. According to a leading business daily, IT majors like TCS, Infosys and I-flex are now targeting the Islamic banking space by offering new software solutions. The estimated US$ 300 bn assets under Islamic banking offers a huge potential, which Indian IT companies are now planning to tap through specially designed software solutions. Islamic banking is based on the 'Shariah' law which does not permit interest based transactions. Infosys has tied up with the Arab National Bank in Saudi Arabia and is in advanced prospects with various banks in the middle east and south east Asia. On the other hand, TCS invested about Rs 1600 cr last year on its Islamic Banking IT solution called TCS BáNCS which covers financial and investment products. TCS's clients are based in UAE, Indonesia, Iran, Saudi Arabia and Dubai. I-flex too has a presence in the middle-east. Some of the banks that I-flex supplies solutions to include the Shamil Bank in Bahrain and Dubai Islamic Bank. As of now, banks in India do not offer Islamic banking products as the RBI is yet to give them a green signal to do so. TCS ended by loosing 1.58%, Infosys closed down by 2.5% and I-flex closed down by 1.77%.

Engineering and construction major Larsen & Toubro ended up by 6.60%. It reported 50% rise in net profit in to Rs 701 crore in Q4 March 2007 from Rs 467 crore in Q4 March 2006. Sales rose 35.01% to Rs 6248.24 crore in the Q4 March 2007 as against Rs 4627.87 crore in previous Q4 March 2006. The net profit rose 38.62% to Rs 1403 crore in the year ended March 2007 as against Rs 1012 crore in FY 2006. Sales rose 19.31% to Rs 17579 crore (Rs 14733.85 crore). The company's order book stands at over Rs 35000 crore. Engineering stocks ended in mixed note. While Punj Lloyd closed up by 6%, Thermax ended up by 4%, ABB ended up by 2% and BHEL ended down by 3%.

Technically Speaking: It was a volatile session for the whole day. Sensex touched intraday high of 14576 and low of 14379. Resistance lies at 14520, 14646 and Support lies at 14323 and 14252 levels. Market turnover was pretty good at Rs 4737 cr. Overall breadth was in favor of Declines, where the Advances stood at 1006, Declines stood at 1608. 14520 is an improtant level to be watched out...If this level is breached we may see 14800.

Edelweiss - BEL - Positional Call

The stock has crossed the wave 3 (demonstrated on the above chart) and has entered fifth wave in the impulse, which has a target in the range of 1975 - 2050 levels. In the recent past the stock has consolidated around 1700-1770 range and is now breaking out of the same. On the weekly chart the stock is breaking out of a cup and handle formation confirming our bullish outlook. The stock has been accumulated well in the F&O segment as reflected by a nearly 27% jump in average Open interest in the futures segment from the third week of April. We believe that the stock has the potential to test the aforementioned price levels and recommend to initiate a long position with a stop placed at 1717.

Nokia - 3G brings TV to mobile phones today

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Credit Suisse - India Economy

Credit Suisse in their report on Indian Economy is pretty bullish on 10% growth.

They say,

We expect 4Q FY06/07 GDP growth, due to be released on
31 May, to come in at 10% YoY versus consensus 9.5% and the
3Q FY06/07 figure of 8.6%.

The manufacturing and services sectors are not showing much
signs of slowing.

Our FY07/08 GDP growth forecast is 10%. The risk to this forecast
is we are too aggressive on our forecast for private consumption.

We expect the RBI to continue to tighten monetary policy in

We expect 4Q FY06/07 GDP growth to come in at 10% YoY versus consensus 9.5% and the 3Q FY06/07 figure of 8.6% In our view, GDP growth may remain stronger for longer compared to consensus estimate of 8% for FY07/08. The manufacturing and services sectors are not showing much signs of slowing . The slowing we are observing on the growth front is in consumer durables IP, property market transactions,cement production, commercial vehicle sales, motorcycle sales and
passenger car sales. The prime minister has mentioned that he expects GDP growth to exceed 8.5% in FY07/08, which is a surprising statement considering the RBI's forecast for the year is 8.5%.

Our FY07/08 GDP growth forecast is 10%. The risk to our 10% GDP growth forecast is we are too aggressive on our private consumption growth forecast of 7.8%. In FY06/07, private consumption growth was 7.3%. From the demand side of the economy, we expect investment spending and consumer staples to remain robust in FY07/08. Consumer durables spending is the area where downside surprises may arise. We remain confident about our fixed investment growth forecast of 15% versus consensus 10.5% and FY06/07 12.5%.

We expect the RBI to continue to tighten monetary policy in FY07/08. With the current pace of GDP growth unlikely to slow significantly in the next two quarters, inflation likely to pick up in the July-December 2007 period, and large capital inflows likely to persist, we expect the RBI to continue to tighten monetary policy in FY07/08.

Our FY07/08 average WPI inflation forecast is 5.5% versus consensus 5.1% and the RBI's 5%. We expect the repo rate to rise to 8.25-8.5% by end-March 2007 from the current 7.75%, additional cash reserve ratio hikes, and sector-specific policies to be implemented. In addition, our USD:INR forecast of 40-40.5 by end-March 2008 may be too conservative. We believe imported commodity inflation may be an important driver of headline WPI in FY07/08. With global food and base metals prices likely to accelerate in 2H07 and feeding through to the WPI, the exchange rate management policy response of the RBI may be to allow a faster pace of INR appreciation than we are
currently anticipating.

ISEC - HPCL, Britannia, Tata Tea


HPCL’s Q4FY07 recurring net income at Rs5.5bn against Rs2.2bn in Q4FY06 was slightly above our expectations (Rs5.4bn). This was despite higher-than-expected subsidy sharing by upstream companies and the Government. This is primarily due to 82% QoQ increase in other expenditure and lower-than-expected Q4FY07 refining margins. HPCL’s reported net income fell 72.7% YoY to Rs5.5bn as FY06 oil bonds were issued and accounted in Q4FY06 results. The stock fell 10.7% YoY and underperformed the Sensex 45.2% YoY. We remain positive on the stock on the back of a robust margin outlook, favourable Government under-recovery sharing and proposed reforms on CST/octroi.

HPCL seems attractive on current valuations, given the robust outlook on refining margins and a benign Government policy on under-recovery sharing. Proposed reforms on CST, octroi and a possible fuel price increase post the
Uttar Pradesh elections would provide further impetus. The stock is currently trading at FY08E P/E of 7.1x and EV/EBITDA of 3.7x and has underperformed the Sensex by
45.2% YoY. Potential news on LPG/SKO, subsidy reforms and new E&P finds could
add further upside. We reiterate BUY on HPCL with a 12-month fair value of Rs424-

ISEC on Britannia

Britannia’s Q4FY07 performance was ahead of our expectations; sales growth accelerated to a new high of 32% YoY despite a high base. Operating margins before ad spends expanded 419bps QoQ to 13.9%, notwithstanding the sustained inflationary pressure from input prices. With the enhanced excise exemptions up to Rs100/kg by the Budget, excise exemption benefit for 75-80% of Britannia’s portfolio would be reflected Q1FY08 onwards. We believe the worst is over for Britannia and expect 40% earnings CAGR through FY07-09E. Despite the recent run up, maintain BUY.

Maintain BUY. With the entire benefit of price hikes and excise exemption reflected Q1FY08 onwards, we expect Britannia’s profitability to boost significantly. We believe the worst is over for Britannia and expect 40% earnings CAGR through FY07-09E. The company has emerged stronger post past two years of intense cost & competitive pressures and is well positioned to capture growth in the fast-growing processed foods business. Despite the recent run up, we maintain BUY on the stock, which is trading at FY08E P/E of 23x.

ISEC on Tata Tea

With the entire adverse impact of the Glaceau acquisition being reflected in H2FY07 and the stock having significantly underperformed, this would be an opportune time to BUY from a long-term perspective.

ENIL - Investor Presentation

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Morgan Stanley - L&T

Morgan Stanley in their report on L&T

Upside Surprise on the Margin Front With L&T’s revenues growing at an average of 12% YoY for the last eight quarters and its order book jumping by an average 33.5%, we expected execution to begin soon leading to a spurt in revenues. While revenue
growth was in line with guidance (up 36% YoY to Rs62.7 billion), the company surprised significantly on the upside with strong EBIDTA margins (up 170 bps to
13.3%) despite a traditional inverse relationship between revenue and profit booking in the construction sector. Order booking also continued to grow strongly, with a 25% increase in orders (despite a large base in F4Q06) with order backlog growing by 48% YoY.

F2008 Guidance Creates Upside Risk to Estimates L&T’s guidance of 25–30% revenue growth in F2008 and operating margins held flat at the high levels of F2007 (10.14%) is aggressive, but looks achievable, especially in light of the F4Q07 performance. Matching guidance would result in 12–17% higher operating profit (based on the lower and upper end of guidance) compared to our estimates. We follow up with more
details to incorporate the earnings surprise in the last two quarters into our estimates.

JP Morgan - India Strategy

JP Morgan in their India Strategy report,

Earnings expectations lowered. Over May, consensus earnings estimates for FY08E & FY09E were revised down by 1.2% and 1.6% respectively. The trend in terms of breadth also remained weak - 29 out of 67 stocks in the MSCI India saw upward revisions, while earnings for 36 stocks were revised down for FY08.

· Consumer, healthcare and financials lead downward revisions. Earnings estimates for the metals, industrials and energy sectors were revised up, while for consumers, healthcare and financial sectors were reduced.

· Earnings expectations and index performance. An analysis of changes in historic and forward EPS expectations vs stock prices indicates significantly higher correlation in the case of materials, financials and consumer discretionary and relatively weaker relationship in the case of IT services, healthcare, telecoms and industrials.

· Key consensus earnings and recommendation changes. Among the stocks mentioned, we have Overweight rating on Jet Airways and Underweight on Bajaj Hindusthan and Arvind Mills.

Sensex slips on weak overseas markets

After yesterday's strong upsurge, the market failed to rally further as weak Asian markets weighed down on the sentiment. Barring the capital goods and consumer durable counters selling was visible in all other sectors. The Sensex opened with a negative gap of seven points at 14501 and recovered to touch the day's high of 14576. The Nifty index went into the negative territory after hitting a record high of over 4,300 level in early morning trades. Major gainers that helped the Nifty to cross the 4,300 mark were L&T, HDFC, BHEL and SBI. The market entered into negative territory again as the participants turned sceptical after the Chinese market crashed over 6% on account of a hike in stamp duty. The market tried to recover from the fall in the afternoon, surrendered to heavy selling in front-line socks and touched the intra-day low of 14379. The Sensex finally closed the session at 14411, down 97 points. The Nifty shed 43 points to close at 4250.

The breadth of the market was extremely weak. Of the 2,652 stocks traded on the BSE, 1,594 stocks declined, 991 stocks advanced and 67 stocks ended unchanged. The sectoral indices were largely weak. The BSE Teck index lost 1.95%, the BSE IT index declined by 1.93% and the BSE FMCG shed 1.88%. However, the BSE CD index rose 1.59% and the BSE CG index jumped by 1.26%.

Several heavyweights took a sharp tumble on late selling pressure. Reliance Communication slipped and shed 3.79% at Rs501, Reliance Energy tumbled by 3.71% at Rs535, HDFC Bank dropped 3.56% at Rs1,105, BHEL declined by 3.08% at Rs2,768, Hindalco slumped by 2.73% at Rs141, Infosys lost 2.42% at Rs1,904, Maruti Udyog slipped by 2.10% at Rs803, HLL dipped 2.07% at Rs198 and Cipla shed 1.74% at Rs215. Select counters, however, ended in the green. L&T zoomed 7.39% at Rs1,994, Hero Honda added 1.70% at Rs697 and HDFC advanced 1.08% at Rs1,833 while Bajaj Auto, Gujarat Ambuja Cement, SBI and Tata Motors closed with marginal gains.

Teck stocks declined on sharp selling pressure. Patni Computer tumbled by 7.63% at Rs522, Inox Leisure dropped 4.98% at Rs135, Zee Entertainment shed 4.94% at Rs297 and Balaji Telefilms lost 4.05% at Rs213.

Consumer durable stocks, however, held ground and ended at higher levels. Videocon Industries flared up by 5.10% at Rs459, Classic Diamonds added 3.45% at Rs390, Samtel Color advanced by 2.48% at Rs17, LLoyd Electric moved up by 2.36% at Rs163 and Whirlpool gained 1.15% at Rs35.

Over 1.45 crore MIC Electric shares changed hands on the BSE followed by Reliance Natural Resources (1.41 crore shares), IFCI (71.78 lakh shares), JP Hydro (69.94 lakh shares) and Orbit Corporation (60.12 lakh shares).

Value-wise MIC Electric registered a turnover of Rs492 crore on the BSE followed by L&T (Rs218 crore), Orbit Corporation (Rs150 crore), Reliance Industries (Rs150 crore) and Infosys (Rs120 crore).

Sensex snaps three-day rally

The BSE Sensex settled with losses today, after three straight days of rally, as selling pressute emerged at higher levels. The Sensex had surged 290 days in the past three sessions, from 14,218.11 on 24 May 2007 to 14,508.21 on 29 May 2007.

The benchmark index was trading firm in afternoon trade, suddenly lost steam due to heavy unwinding of long positions in last 45 minutes of trade. Weak Asian and European markets also spoiled the sentiment. Sensex lost 96.83 points or 0.67% at 14,411.38.

The market saw intense volatility throughout the day’s trading session. Earlier today, it opened lower at 14,501.46, tracking weak Asian markets. However, it recovered from there and advanced to strike a high of 14,576.37 in early afternoon trade, its highest level in 3-½ months since 9 February 2007. It slipped to a low of 14,379.21, during fag end of the trading session.

The S&P CNX Nifty which had crossed 4,300 mark to strike an all-time high of 4,301.60 earlier during the day, slumped 43.60 points or 1.02% at 4,249.65

Market breadth, which indicates overall health of the market, was weak as a host of small and mid-cap stocks came under selling pressure. 1608 shares declined on BSE as compared to 1006 that advanced. 61 remained unchanged. This was in sharp contrast to that in the morning session, when 1187 shares advanced as compared to 980 that declined.

The BSE Mid-Cap index was down 1.01% to 6,191.61 while the BSE Small-Cap index was down 0.52% to 7,349.56

The total turnover on BSE amounted to Rs 4737 crore.

Among the Sensex pack, 24 declined while the rest advanced.

Engineering and construction major Larsen & Toubro surged 6.44% to Rs 1976, on 11.03 lakh shares. It struck a fresh an all time high of Rs 2009, in intra-day trade. It reported 50% rise in net profit to Rs 701 crore in Q4 March 2007 from Rs 467 crore in Q4 March 2006, during market hours on 29 May 2007. Sales rose 35.01% to Rs 6248.24 crore in the Q4 March 2007 as against Rs 4627.87 crore in previous Q4 March 2006.

The net profit rose 38.62% to Rs 1403.02 crore in the year ended March 2007 as against Rs 1012.14 crore in FY 2006. Sales rose 19.31% to Rs 17578.84 crore (Rs 14733.85 crore). The company’s order book stands at over Rs 35000 crore.

Larsen & Toubro (L&T) is betting big on ship-building and power equipment manufacturing. The country’s largest engineering company aims at generating Rs 8,000 crore in five years from these businesses. The company is also gearing up to tap the potential in railways.

Led by L&T, the BSE Capital Goods Index advanced 1.68% at 11,079.43. Thermax (up 4.50% to Rs 490), Alstom Projects (up 3.58% to Rs 566), Gammon India (up 1.87% to Rs 386) and Bharat Electronics (up 3.83% to Rs 1804.75) gained.

Hero Honda (up 1.49% to Rs 696), Gujarat Ambuja Cements (up 0.61% to Rs 115.50), and HDFC (up 1.08% to Rs 1833), were the other gainers.

Reliance Energy slumped 4.08% to Rs 532.65, and was the top loser among the Sensex pack.

Reliance Communications (down 3.89% to Rs 500.90), HDFC Bank (down 3.61% to Rs 1104), and Hindalco (down 2.85% to Rs 140.40), were the other losers.

State run engineering major Bhel, which galloped to an all time high of Rs 2922.50 in intra-day trade, slipped on profit booking. It lost 3.12% to Rs 2767, on 2.83 lakh shares. It had reported 32.54% rise in net profit in Q4 March 2007 to Rs 1150.37 crore from Rs 867.95 crore in Q4 March 2006, after trading hours on 25 May 2007. Sales rose to Rs 6919.68 crore, from Rs 5515.69 crore in March 2006. The results were announced after trading hours on 25 May 2007. Earlier, Bhel had set 1 June 2007 as record date for a liberal 1:1 bonus issue.

Index heavyweight Reliance Industries (RIL) declined 0.27% to Rs 1750 on 8.54 lakh shares. The stock had slipped to a low of Rs 1742 in early trade, before recovering in early afternoon trade. The stock lost ground again in late trade. Its all time high is Rs 1785.

IT pivotals slipped on renewed selling. IT stocks have not participated in the recent rally, due to concerns of stronger rupee. The BSE IT index lost 1.92% to 4,814.09. It was the top loser among the sectoral indices on BSE.

Satyam Computers (down 1.27% to Rs 466), TCS (down 1.42% to Rs 1213.95), Infosys (down 2.39% to Rs 1905) and Wipro (down 0.26% to Rs 538) declined. A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion’s share of revenue from exports to the US.

Rupee eased away from a recent nine-year high on Wednesday, 30 May 2007, as investors pared positions in the local unit on concerns over central bank intervention, and on dollar demand from oil refiners for month-end payments.

The rupee is Asia's best performing currency against the dollar this calendar year, gaining more than 9% on strong capital inflows into the fast-growing economy.

Pharma stocks, which had advanced in morning trade, pared gains, as the day progressed, and settled lower. Cipla (down 1.51% to Rs 215.25), Ranbaxy Laboratories (down 0.78% to Rs 387.40), and Dr Reddy’s (down 0.24% to Rs 654), declined.

As per reports, the Norwegian Appeals Court handed down a favorable decision for Ranbaxy in its case against Pfizer, involving key Norwegian patents on Atorvastatin in Norway. Atorvastatin is a cholesterol-lowering drug which is marketed by Pfizer as Lipitor.

Insecticides India settled at Rs 109.50, a discount of almost 5% over IPO price of Rs 115. The scrip debuted at Rs 105, hit a high of Rs 117, and low of Rs 101.15. The counter saw volumes of 47.06 lakh shares on BSE. The company had priced its IPO at the top end of the Rs 97 to Rs 115 price band.

MIC Electronics settled at Rs 335.65 on BSE, a premium of nearly 124% over IPO price of Rs 150 per share. The stock debuted at Rs 210.25, which also its low of the day. It surged to a high of Rs 367.80. The counter saw huge volumes of 1.45 crore shares on BSE.

McDowell Holdings jumped 20% to 195.60, compared to base price of Rs 163, on its listing on BSE today. On BSE, only 1442 shares were traded on the counter, with pending buy order of 1.37 lakh shares at maximum limit. The listing McDowell Holdings (MHL) on the bourses follows a restructuring scheme undertaken at United Spirits (USL) whereby investment business of USL was transferred to MHL as a going concern.

MHL had allotted equity shares to the shareholders of USL, in the ratio of 1 equity share for every five shares held in USL.

Debutante MIC Electronics was the top traded counter on BSE with total turnover of Rs 492.60 crore followed by Larsen & Toubro (Rs 218 crore), Orbit Corporation (Rs 150.40 crore), Reliance Industries (Rs 150.40 crore) and Infosys (Rs 120.70 crore).

MIC Electronics also topped the volume chart with total volumes of 1.45 crore shares followed by Reliance Natural Resources (1.42 crore shares), IFCI (71.80 lakh shares), JP HydroPower (70 lakh shares) and Orbit Corporation (60 lakh shares).

Crompton Greaves slumped 6.45% to Rs 235.50 even after it reported 24.6% growth in net profit in Q4 March 2007 to Rs 69.92 crore as against Rs 56.10 crore in Q4 March 2006. Sales rose 34.93% to Rs 1077.17 crore (Rs 798.31 crore). The net profit rose 17.98% to Rs 192.37 crore in the year ended March 2007 as against Rs 163.05 crore in FY 2006. Sales rose 45.20% to Rs 3659.98 crore (Rs 2520.59 crore).

Redington India surged 10% to Rs 234.50 on high total volumes of 33.66 lakh shares on BSE, after a block deal of 2.26 lakh shares was executed on NSE at Rs 235.20 per share.

Lakshmi Machine Works declined 1.80% to Rs 2700, after it today reported 18% fall in net profit in Q4 March 2007 to Rs 68.62 crore as against Rs 83.50 crore in Q4 March 2006. Sales rose 39.12% to Rs 549.18 crore (Rs 394.75 crore).

Bharati Shipyard gained 2.63% to Rs 457 after 1.20 lakh shares changed hands in a single block deal on BSE at Rs 459.

Britannia Industries edged lower by 2.80% to Rs 1559.75 its net profit declined 26.50% to Rs 107.60 crore in the year ended March 2007 as against Rs 146.40 crore in FY 2006. Sales rose 28.28% to Rs 2199.30 crore (Rs 1714.50 crore). It reported 43% growth in net profit in Q4 March 2007 to Rs 39.80 crore as against Rs 27.80 crore in Q4 March 2006. Sales rose 31.98% to Rs 599.20 crore (Rs 454.00 crore).

Action Construction Equipment vaulted 5% to Rs 272.60, on the back of a 116% surge in net profit in Q4 March 2007 to Rs 7.01 crore as against Rs 3.24 crore in Q4 March 2006. Sales rose 84.40% to Rs 83.48 crore (Rs 45.27 crore). The net profit rose 57.05% to Rs 19.93 crore in the year ended March 2007 as against Rs 12.69 crore in FY 2006. Sales rose 48.04% to Rs 245.28 crore (Rs 165.68 crore).

Chinese stocks tumbled 6.50% or 281.36 points to 4,053.08 on Wednesday, 30 May 2007, after China tripled a share-trading tax to cool its red-hot market, buffeting Asian and European markets but failing to trigger the broad rout some had feared.

Investors have feared a sharp fall in China could ripple through financial markets as it did in late February 2007. China's Ministry of Finance raised stamp duty on share transactions to 0.3% from 0.1% in what was seen as the strongest attempt yet to curb speculation in a market that had risen more than 60% so far this year.

All the Asian and European markets were trading weak, except Seoul Composite, which rose 0.06%. The Nikkei average fell 0.48% or 84.30 points to 17,588.26. The Hang Seng index lost 0.86% or 175.83 points to 20,293.76

Wall Street eked out a modest gain yesterday, 29 May 2007, as investors, wary about the upcoming release of the Federal Reserve minutes, bought cautiously amid a series of new takeover deals and upbeat consumer confidence figures. The Dow Jones industrial average rose 14.06 points, or 0.10%, to 13,521.34. The Standard & Poor's 500 index gained 2.38 points, or 0.16%, to 1,518.11, while the Nasdaq composite index advanced 14.87 points, or 0.58%, to 2,572.06.

As per reports, the marketwide rollover stands at 48%, while Nifty rollover was 43%, ahead of the derivative expiry for May 2007 series scheduled on Thursday, 31 May 2007. Volatility is expected to remain high ahead of it.

Oil prices held at $68 a barrel on Wednesday in London ahead of U.S. inventory data expected to show rising crude and fuel stocks. London Brent crude traded up 14 cents at $68.27 a barrel, after tumbling $1.58 on Tuesday on U.S. refinery restarts and easing concerns over Nigerian shipments. U.S. crude was up 10 cents at $63.25, after a $2.05 plunge on Tuesday.

Trading Calls

Buy L&T with stop loss of Rs 1750 for a target of Rs 2100.
Buy L&T with stop loss below Rs 1832 for target of Rs 1880 & 1902. This is a day-trading recommendation.
Sell Bajaj Auto above Rs 2185 with stop loss at Rs 2220. This is a day-trading recommendation.
Buy Cipla with stop loss of Rs 200 for a target of Rs 260.
Buy Orbit Corporation with stop loss below Rs 241 for target of Rs 264 & 273. This is a day-trading recommendation.
Buy Hindustan Oil Exploration with stop loss of Rs 97 for a short-term target of Rs 127
Sell Ambuja Cement above Rs 114.5 with stop loss at Rs 116.5. This is a day-trading recommendation.
Buy Bata India with stop loss of Rs 163 for a short-term target of Rs 201 and medium-term target of Rs 235.

HPCL, IVRCL, IOC, Larsen Tourbo, BHEL

Merrill Lynch in their report on HPCL,

Attractive dividend yield, P/BV of 0.99; retain Buy HPCL's FY07 EPS, at Rs46.4, is almost 4x FY06 EPS of Rs12. Quality of FY07 earnings is admittedly poor as it is entirely attributable to oil bonds. There is also uncertainty on FY08E earnings. However, recent government decisions suggest bond issue may be generous even in FY08. HPCL's dividend yield is attractive - 6.5% for FY07 and 5.4% for FY08E. It is also cheaper than peers on PE and is trading marginally below estimated NAV. We retain our Buy rating on HPCL.

Merrill Lynch on IVRCL

Key Triggers: Growth, Margin Expansion & IVR Prime IPO IVRCL, our top pick in the mid-cap E&C space, reported solid 4QFY07 on all fronts. Sales were up Rs10bn +67%YoY; EBITDA margin expanded by 140bpsYoY & PAT of Rs732mn, +67%YoY. PAT was ahead of MLe due to better margins & non-prov of full tax (25% v/s MLe 32%) pending appeal in tribunal. Order backlog remains robust at ~3x FY07 sales. Value creation through the listing of IVR Prime, and 42% earnings CAGR in core business are potential triggers ahead. Buy, PO Rs450.

ENAM on Mahindra & Mahindra

While outlook for the subsidiaries remains buoyant, we are concerned about a likely moderation in the core business and the high capex outlined by M&M and its JVs (details on pg2). We continue to maintain our sector Neutral rating on the stock. At CMP of Rs 765, the stock trades at 10x FY08E and 9.2x FY09E core EPS of Rs 34.6 and Rs 38.5 respectively. Our target price of Rs 825 is based on 12x FY08 core EPS + value of subsidiaries at Rs 410/ share.

ENAM on Larsen and Tourbo

L&T’s management has guided for 25-30% revenues as well as order intake growth and 11% margins for the E&C business. Further, its tie up for supercritical technology in thermal power, foray into shipbuilding, defense and aerospace are likely to drive long term growth for L&T. Value unlocking of its IDPL and Infotech subsidiaries will be the icing on the cake. We maintain our earnings estimates. At CMP (Rs 1,857), the stock trades at 12.0x FY08E and 8.5x FY09E EV/EBIDTA (adj. for investments Rs 218). Maintain sector Outperformer and a target of Rs 2200


Maintain Outperformer, retain price target IOC in our opinion is a low risk play in the OMC pack, given its diversified revenue stream. Also, given its relatively low regulatory
exposure to earnings, its valuations are likely to be at a premium to its domestic peers. We maintain our sector Outperformer rating and a target of Rs 525


HPCL reported profits largely on the back of oil bonds and upstream subsidiary assistance. Going ahead in FY08 profits remain leveraged to - (1) issuance of oil bonds and (2) sustained assistance from the upstream subsidiary. We still await clarity on the subsidy sharing mechanism as well as on the issuance of oil bonds. Given this weak
regulatory outlook, earnings uncertainty remains high and therefore HPCL is likely to trade at a discount to regional peers. HPCL has declared a final dividend of Rs12/share (in addition to an interim dividend of Rs 6/share) thereby offering a yield of 4.5% on the final dividend. This is likely to offer support for the stock. We maintain our
sector Underperformer rating. Target of Rs 280.


A healthy order backlog of Rs 550bn provides a strong near-term growth visibility. BHEL has an estimated outlay of Rs 44bn over FY08-09E taking its total capacity from 6000MW to 15000MW. Factoring in the higher than estimated order inflows in Q4FY07, we raise our FY08 earnings estimates by 10% to Rs 31.2bn and introduce a FY09 earnings estimate of Rs 36.3bn. We believe that order intake traction is likely to significantly slow down going forward due to increasing competitive intensity, technology gaps in the high rating hydro, nuclear and 765kv T&D space, and limited visibility in the fast growing super-critical technology space. Despite this, BHEL has set a target of doubling revenues in 3 years and reaching USD 10bn in revenues by FY12. This implies that BHEL may end up servicing unfavorable international contracts.
Hence, we believe that a premium in valuations is not justified given the uncertainties cited above. At CMP (Rs 2,856) the stock trades at a 13.2x FY08E EV/ EBIDTA. We maintain our sector Underperformer with a target of Rs 2500

Kotak - L&T, HPCL

Kotak Institutional in their report on L&T,

L&T has reported standalone revenues of Rs62.5 bn (our expectation of Rs69.9 bn) and profit after tax of Rs7 bn (v/s our expectation of Rs5.6 bn) for 4QFY07. Reported operating margin of 9.9% for the full year FY2007 is ahead of our expectation of 9.3%. Order backlog at end of FY2007 stands at Rs369 bn, which provides a visibility of 1.6X FY2008E revenues. We revise our FY2008E earnings estimates upwards by 3% to Rs73.3 EPS (from Rs71 earlier) and revise our target price to Rs2,125 as we roll over to March 09 basis. Our target price is based on DCF for core company valuation and SOTP to account for subsidiaries and associates. Reiterate outperform based on strong positive momentum in infrastructure as well as corporate investments.

Kotak Institutional in their report on HPCL,

HPCL reported 4QFY07 net income at Rs5.5 bn versus our expected Rs6.5 bn with lower taxation compensating for moderately higher depreciation, staff cost and inventory loss. HPCL's FY2007 reported net income is Rs15.7 bn (Rs50.1 EPS; adjusted EPS is Rs40). We have made modest earnings revisions for FY2008-FY2010E EPS based on FY2007 results. Our revised FY2008, FY2009 and FY2009 EPS estimates are Rs52.6, Rs59.5 and Rs61.1, respectively versus Rs48.9, Rs55.8 and Rs61.1, respectively, previously. We currently assume that the government will follow the same system for distribution of underrecoveries as it has done in FY2007. However, we will have to wait for more clarity on the vital issues of oil bonds and share of upstream companies; these variables can swing earnings of R&M companies dramatically. We retain our 12-month target price of Rs375 based on 30% discount to 5X normalized EBITDA plus value of investments. Key downside risks stem from higher-than-expected subsidy losses.

Kotak - Unity Infraprojects

Kotak in their report on Unity Infraprojects say

Unity Infraprojects is one of the leading players in the infrastructure segment with its key expertise in civil construction projects. The company has also diversified its presence in irrigation and transportation related projects. With the continued focus of the government on infrastructure development, Unity Infraprojects is expected to benefit from increased order inflows in the civil infrastructure, roads and irrigation segment. With the current order book of Rs.21 bn, we expect Unity Infraprojects's revenues to grow at a CAGR of 42% and profits to grow at a CAGR of 36% over the next two years. At the current price of Rs.465, the stock is trading at 10.3x and 8.3x P/E multiples on FY08 and FY09 estimates, respectively. We recommend a BUY call with a price target of
Rs.636, over a one year time frame, providing an upside of 37% from current levels.

Edelweiss - Sanghvi Motors

Edelweiss on Sanghvi Motors say,

To manage higher growth with the ongoing investment in infrastructure sector, the
company incurred a total capex of INR 1.9 bn in FY07 and ended the year with a gross
block of INR 5.6 bn. Going forward, it plans to add cranes worth INR 1.5-1.6 bn. Based
on the continuous capacity expansion, we expect the company’s revenues to register a
CAGR of 26% (to reach INR 3.0 bn) and EPS CAGR of 37.2% (to reach INR 797 mn)
during FY06-09. On our EPS of INR 78 and INR 101.7, the stock trades at a PE of 10.5x
and 8.1x our estimates for FY08E and FY09E, respectively. We maintain our ‘BUY’
recommendation on the stock.

Derivatives Call

Nifty (May) futures’ premium decreased to 3.1 from 4.35 and shed around 33 lakh shares in open interest while Nifty (June) futures added around 46 lakh shares in open interest.

The total open interest in the market was 69,684 crore and added around 2284 crore in open interest.

Nifty calls added 14,550 shares and puts added 14.34 lakh shares in open interest.

Crompton Greaves (64%), Nagarjuna Construction (41%), GE Ship (35%), VSNL (17%) and IFCI (14%) were the top interest gainers in the market.

Unitech (-23%) and M&M Ship (-11%) were the top open interest losers in the market.

TTML (93%), IDBI (92%), JP Hydro (91%), IFCI (90%), Jindal Stainless (89%), Parsvnath (89%), Arvind Mill (86%) and SRF (86%) are very close to their market wide position limits.

The market opened on a strong note and witnessed some weakness in the morning trades. It recovered from the low of 4250 to give an all-time high closing just below the 4300 mark at 4293.25, with a gain of around 1%. Buying was seen in very selective stocks, mainly the heavyweight counters. Volumes in Nifty futures were higher than the average and added around 12.4 lakh shares in open interest with an increase in the cost of carry, indicating short selling. On the option front, we have seen implied volatility of options has increased and a lot of activity was seen in 4200 June strike price, indicating strong support area around that level. The market is likely to open on a flat to positive note and global cues will play a crucial role in giving market a direction from these levels. Key support levels for the Nifty are 4230 and 4270 whereas
resistance will be around 4320.

Market may remain under pressure

The market is likely to remain under pressure on account of unwinding of position ahead of May series derivative contracts. Weakness in most of the Asian indices in the ongoing trades may add further pressure on the local bourses. However, the market is expected to remain positive with a sideways movement during intra-day trades on account of prevalence strong bullish sentiment, early monsoon showers in south and strong FII inflows in last couple of sessions. Among the local indices, the Nifty is waiting to cross the 4300 level and once it crosses and sustains at that level, it can target 4320 to 4350 in the short term, while it has a likely support at 4273 on the downside and a break below this level could see the index slip to 4246. The Sensex has a likely support at 14400 and may face resistance at 14600.

US indices advanced Tuesday, influenced by deal news and rumors, falling oil prices, a strong consumer confidence report and news that China is looking to cool its booming stock market. While the Dow Jones gained 14 points to close at 13521, the Nasdaq advanced by 15 points at 2572.

Except select few most of the Indian ADRs gained on US bourses. VSNL lost 4.13% while Wipro slipped by 1.99% and Infosys shed around 1% while Satyam, Tata motors, Dr Reddy's, ICICI Bank, HDFC Bank, MTNL and Rediff were up around 1-3% each.

In the crude oil front, the Nymex light crude oil for July series lost $2.05 to close at $63.15 per barrel. The bullion Comex gold for August delivery moved up by $2 to settle at $663.40 a troy ounce.

Morning Call - May 30 2007

Markets did well Tuesday to absorb any selling pressure that emanated out of the markets inability to pierce the 4300 cordon in the morning. Afternoon saw buoyancy returning to the market leaders Reliance and SBI, which saw positions being built. The engineering giants, L&T and BHEL too were seen flexing their muscles as they entered uncharted waters.

The Roll over in this series has been smooth, with 48% of the positions already being rolled over as compared to 45% last series for a comparable period. The reduction in the premium in the Nifty indicates that the punters will try and hold the Nifty Futures to the 4300 mark. We would advice using the days buoyancy to close the May series contracts by booking profits and will suggest roll over in only the two engineering stocks mentioned above

Profit booking expected in later half

After a steady rally in the past few sessions, profit booking is expected in later half of the day’s trading session.

Asian shares shrugged off US market gains on deal news and were mostly lower today, as worse-than-forecast industrial output data weighed on Japan. Hong Kong's Hang Seng slipped 0.49% or 99.92 points at 20,369.67 while the Japanese Nikkei 225 index declined 0.23% or 41 points at 17,631.56.

Taiwan's Taiwan Weighted (down 0.55% or 44.70 points at 8,136.79), Singapore's Straits Times (down 0.73% or 25.90 points at 3,501.18) and South Korea's Seoul Composite (down 0.71% or 11.88 points at 1,649.92) also slipped lower.

Wall Street eked out a modest gain yesterday as investors, wary about the upcoming release of the Federal Reserve minutes, bought cautiously amid a series of new takeover deals and upbeat consumer confidence figures. The Dow Jones industrial average rose 14.06 points, or 0.10%, to 13,521.34. The Standard & Poor's 500 index gained 2.38 points, or 0.16%, to 1,518.11, while the Nasdaq composite index advanced 14.87 points, or 0.58%, to 2,572.06.

As per reports, the marketwide rollover stands at 48%, while Nifty rollover was 43%, ahead of the derivative expiry for May 2007 series scheduled on Thursday, 31 May 2007. Volatility is expected to remain high ahead of it.

Oil prices held at $68 a barrel on Wednesday in London ahead of U.S. inventory data expected to show rising crude and fuel stocks. London Brent crude traded up 14 cents at $68.27 a barrel, after tumbling $1.58 on Tuesday on U.S. refinery restarts and easing concerns over Nigerian shipments. U.S. crude was up 10 cents at $63.25, after a $2.05 plunge on Tuesday.

Morning Murmur - May 30 2007

Yesterday, Nifty opened positive but it was unable to sustain and fell sharply. It took support at 4248, after that it started recovering gradually and broke the Monday’s high of 4295, it made a new high of 4298 and finally gave a all time high closing at 4293 with a gain of 0.86%. The BSE CG, BSE CD, BSE HC and BSE Oil&Gas indices outperformed the markets, However, the BSE FMCG and BSE IT index closed with marginal losses. The Advance Decline ratio was in the favour of bulls at 5:4 yesterday.

Yesterday, after taking support at 4248, Nifty started recovering, it was continuously making higher tops and higher bottoms and in last hour of trade it cleared its resistance range of 4290- 4295 with good volumes and made a high of 4298. It finally gave a all time high closing at 4293 with a gain of 0.86%. We maintain bullish view on Nifty for short term as well as for long term. Today, Nifty can test our immediate target of 4336. However, we maintain short-term target of 4454 for Nifty. For intra-day Nifty has support at 4264 and below that 4242.

The BSE CG index outperformed the broader markets yesterday. It closed strong at 10896 with a gain of 2.81% & is still looking very strong on the charts. We maintain bullish view for this index with the target of 11128 and long-term target of
12107. Stocks like BHEL, LT , Siemens, ABB, Crompton greaves and Punj Lloyd are still showing strength on the charts.

Yesterday, The BSE HC index has broken five-month-old trendline with very good volumes and closed at 3857 with a gain of 1.70%. Now it can come up to 3991 and if it sustains above 3995 then it can test 4111 in the coming days. However, the
level of 3881 will play as a resistance for this index. Stocks like Cipla, Sun Pharma, Sterling Bio and Orchid Chem are looking strong on the charts.

Emkay - Bharat Forge

We see BFL as one of the major beneficiaries of the automotive component outsourcing boom from India in the next five years. We expect overall domestic auto demand to remain weak in H1FY08E and it would impact the domestic revenue
growth of BFL in FY08E. But we believe BFL to do well on export front and incremental
capacity would play a major role in it and due to it we are downgrading our FY08E
estimates downward and introducing the FY09E estimates as follows. But we believe
FY09E will be a remarkable year for BFL mainly due to ramp of non-auto business
which enjoys higher margins compared to traditional auto business.
We believe still BFL has enough scope to improve its EBITDA margins on a
consolidated basis. The management has guided to improve the margins of subsidiaries from 9% currently to 14% in the long term. Apart from it we also expect BFL to get price hikes on its products mainly due to rising raw material costs and we expect BFL to improve its EBITDA margins on a year-on-year basis for next two years.

We believe, considering BFL’s strong domestic market share, and strong export visibility plans going ahead over the next 2 years make us feel that the best is yet to come from BFL.

The BFL stock currently trades at 20x FY08E and 14x FY09E. We maintain a positive
outlook on the BFL stock and recommend a BUY with a target price of Rs 416.

Intraday Stock Ideas

Buy M&M at Rs766 with SL of Rs760 and target of Rs778, 782

Buy Patni at Rs566 with SL of Rs561 and target of Rs576, 580

Buy Siemens at Rs1290 with SL of Rs1280 and target of Rs1315, 1325

Buy RCom at Rs521 with SL of Rs516 and target of Rs531, 534

Sell Bajaj Hind at Rs175 with SL of Rs179 and target of Rs167, 164


Weak open...choppy day in store

Opportunity often comes in disguised in the form of misfortune, or temporary defeat.

We may see a weak opening thanks to the meltdown in China. The bulls may look at using this as an opportunity to still buy. The choppiness on account of F&O expiry tomorrow will also keep cause a see saw on the bourses. The Chinese government has tripled the stamp duty on securities transactions. The Shanghai Composite index is down 4%. Other Asian markets are also down with the Hang Seng down over 200 points.

US stocks resumed trading after an extended weekend with the main indices clocking modest gains. Oil has cooled off a little is now under $64 per barrel. With the derivative settlement tomorrow, and no major concerns, the bulls may try to retain their edge over the bears. As usual, there will be a lot of stock specific action. One stock that could take a hit would be real estate firm Orbit Corp amid reports of some accounting mismanagement. On the other hand, Ranbaxy might gain after having won a legal battle against Pfizer in Norway.

MIC Electronics, Insecticides India and McDowell Holdings will make their debut on the bourses today.

The inflow of money has been persistent of late, both overseas as well as local institutions. The undertone has improved over the past few weeks on the back of strong corporate earnings, lower inflation and firm global markets. There have been some worries over the state of the economies in the US, China and Japan, but even those have not dented the confidence of the local bulls. The liquidity factor has improved over the past couple of months. As a result, the key indices have rebounded from the lows struck in the Feb-March crash.

Even the small-cap and mid-cap shares have started rising in the last several days. Traded volume and market breadth have been better, though it could be due to the squaring of positions ahead of Thursday's F&O expiry. The fact that big-ticket issues like DLF and ICICI Bank are hitting the market in the next few weeks has also given a fillip to the investor sentiment. A big worry at this moment is the unprecedented appreciation in the rupee versus the dollar and its fallout on export-oriented sectors like IT.

US stocks rose on Tuesday at the end of a tumultuous session influenced by more M&A news, falling oil prices, a strong consumer confidence report and news that China was looking to cool its booming stock market.

The S&P 500 rose 2.38, or 0.2%, to 1518.11. The index set a record close of 1527.46 in March 2000. The Dow Jones Industrial Average added 14.06, or 0.1%, to 13,521.34. The Nasdaq Composite Index climbed 14.87, or 0.6%, to 2572.06. US markets were closed yesterday for the Memorial Day holiday.

Real estate shares surged on the $13.5bn takeover of Archstone-Smith Trust. Avaya, the world's biggest maker of corporate telephone equipment, climbed the most in almost two years on a report it may be acquired.

US light crude oil for July delivery slumped $2.05 to settle at $63.15 a barrel on the New York Mercantile Exchange, sliding as supply concerns waned. COMEX gold rose $2 to settle at $663.40 an ounce. Treasury prices slipped, raising the yield on the 10-year note to 4.88% from 4.86% on Friday. In currency trading, the dollar was little changed versus the euro and the yen.

Chinese stocks have plunged this morning from a record after the government tripled the stamp duty on securities transactions, a move seen as an attempt to slow the booming stock market. The CSI 300 Index fell 110.61, or 2.7%, to 4057.68 as of 10:30 a.m. in Shanghai, after initially tumbling as much as 6.3%. The measure has almost doubled this year, the best performance of 90 global benchmarks.

Markets registered strong closing towards the end. Subdued Asian markets compelled the key indices to open on a flat note, however buying interest in the frontline stocks like BHEL, R Com, Reliance Industries, Tata Motors and L&T lifted the markets as the day moved along. Finally, the 30-share Sensex ended higher by 110 points to close at 14508. NSE-50 Nifty gained 36 points to close at 4293. Nocil, GE Shipping, Ashapura Minechem, Nirma and PFC were the star performers of the day.

Satyam Computer gained by 1% to Rs474 after the company forms strategic partnership in Asia Pacific with Oracle. The scrip touched intra-day high of Rs475 and a low of Rs452 and recorded volumes of over 22,00,000 shares on NSE.

Bajaj Electrical rallied by over 10% to Rs588 after the company recommended bonus issue in ratio of 1:1. The scrip touched intra-day high of Rs625 and a low of Rs545 and recorded volumes of over 1,00,000 shares on BSE.

3i Infotech gained by 1% to Rs310 after the company announced that they would acquire 50.5% stake in AOK IN-House BPO Service. The scrip touched intra-day high of Rs314 and a low of Rs301 and recorded volumes of over 12,00,000 shares on NSE.

Tata Steel edged higher by 0.7% to Rs630, after the company declared that they would build 4.5mn Ton Factory in Vietnam. The scrip touched intra-day high of Rs633 and a low of Rs621 and recorded volumes of over 16,00,000 shares on NSE.

Bharti Airtel dropped sharply on report of Vodafone stake sale however the stocks recovered gaining 1% to Rs836. The scrip has touched intra-day high of Rs846 and a low of Rs805 and has recorded volumes of over 14,00,000 shares on NSE.

Capital Good stocks ended with smart gains. BHEL advanced by 4.5% to Rs2857; L&T gained by 4% to Rs1856, Punj Lloyd surged by over 2.8% to Rs196 and ABB gained 2.8% to Rs4580.

The Pharma stocks look to be in pink of health. Lupin surged by over 2.5% to Rs720, Ranbaxy was up by 2.1% to Rs391, Sun Pharma advanced 3.5% to Rs1106 and Cipla spurred 4.8% to Rs218.

Auto stocks also recorded smart gains. Tata Motors gained by 1.1% to Rs740, Hero Honda advanced 1% to Rs688 and Ashok Leyland added 0.4% to Rs37.

Sectoral Movement:
BSE Capital Good index was the major gainer and gained 2.81%. BSE Pharma index (up 1.70%), BSE Consumer Durable index (up 1.59%), BSE Oil & Gas index (up 1.17%) were among the other major gainers. However BSE FMCG index lost 0.22%.

Volume Toppers:
RNRL, IFCI, Nagarjuna Fertilizers, RPL, Orbit Corp, TTML, Unitech, Dish TV, Petronet LNG, R COM, PFC, Idea, SAIL, Binani Cement, ITC, Hotel Leela, Cipla, JP Hydro and Redington India.

Upper Circuit:
Hindustan Oil, Zensar Technology, Shree Ashtavinyak, Ashapura Minechem, Redington India, Godrej Industries, Eicher Motors, UTV Software, RIIL, Karuturi Network, Hindustan Dorr, Gemini Communication, Shree Precoated and UTV Software.

Delivery Delight:
ABB, BEL, Bombay Dyeing, CEAT, Crompton Greaves, Gujarat Alkalies, HLL, Jain Irrigation, Lupin, M&M, ONGC and Wipro

Abnormal Delivery:
Bajaj Auto, Titan Industries, HCL Technologies, CEAT, Nicholas Piramal, Jindal Steel & Power Ltd, Associated Cement Co, Hindalco, ICICI Bank and Tata Chemicals.

Results Today:
Crompton Greaves, Engineers India, Hindustan Motors, Lloyd Steel, Kamat Hotels, NTPC, Rain Calcining, Tata Chemicals, Tata Power, Ucal Fuel and Welspun India.

Results Corner:
L&T Full year profit at Rs14.03bn (up 38%), Full year net sales at Rs175.79bn (up 19.1%) and to pay Rs2 as final dividend

HPCL Q4 net down (72%) at Rs5.5bn, total income (net of excise) at Rs220.46bn (up 5.2%) and a recommends a final dividend of 120%

Thermax Q4 net profit at Rs697.3mn, revenue at Rs8.32bn (up 73%)

Brokers Recommendation:
IOC – Outperformer from Man Financial with target of Rs550

Long Term investment:
R Com

Major News Headlines:

Govt may consider removing levies for exporters

Easun Reyrolle's Board to meet on May 30 to consider results, stock split

Tata Steel to build 4.5mn Ton Factory in Vietnam

Donear Industries to meet on 4th June to consider GDR/ADR issue

3i Infotech acquires stake in three local BPO firms

Tantia Constructions gets orders worth Rs1.78bn

Satyam & Oracle forms strategic partnership in Asia Pacific

Vodafone to sell Bharti stake by March for $1.6bn: reports

Bajaj Electrical recommends 1:1 bonus

Ansal Properties signs MOU with India Realty and Noor Capital of UAE

PTC signs MoU with Infrastructure Finance Company Ltd. (IIFC)

Aurobindo Pharma gets US FDA approval for Cefprozil Tablets

Sanghvi movers to split each share in to five

Indraprastha Gas Ltd (Q4 FY07) - Investment Update

Indraprastha Gas Ltd reported a stellar performance in Q4 FY07 on back of stronger than expected volume growth in the CNG segment. The PNG segment too witnessed robust growth on increased domestic connections. Going ahead with expansion into new territories such as Greater Noida, Ghaziabad, Sonepat and Panipat, the volumes of both CNG and PNG could spur up. We are revising our estimates to build in higher growth expectations of CNG volumes, lower growth expectations of PNG volumes and better efficiency in operations leading to better operating margins. We maintain our BUY rating with a target price of Rs154, based on 12x P/E multiple on FY09 estimated earnings of Rs12.8, yielding an upside of 26.1%.

Anand Rathi - Technical Call

Nifty and Sensex have exhibited a bullish candlestick.

Technically, one may use the level of 4240 (Nifty) and 14300 (Sensex) as the stop loss level.

Nifty faces resistance at 4340 and Sensex at 14600.

BSE Smallcap and BSE Midcap exhibited a bullish candlestick.

CNX IT has gained ground.

In the Punter's zone we have a BUY in NDTV , Birla Corp & L&T.

In the Technical call section, we have a BUY in TV18 , Cadila & Reliance Industries.

Market Outlook, Technicals

Finally, after days of consolidation and swings in both directions, nifty futures was able to make inroads in the 4300 zone though it failed to sustain above that level. It managed to cross the 4300 level, albeit momentarily, and has closed at record high with a gain of 33.65 points. The target of 4325 now seems close though closer still is the resistance at 4313. The Nifty spot, which has yet to penetrate the 4300 level also moved on to a record high. The feat has yet to be matched by the BSE Sensex though the closing has been on an optimistic note. The critical level for futures today is 4276 and as long as this level is sustained on dips, the outlook remains bullish. It will gain fresh momentum once the 4325 level is decisively crossed and then will be the next interim target. A decisive breach of 4217, however, will negate the bullish outlook.

Resistance: 4285 – 4292, 4313, 4325, 4379
Support: 4276, 4252, 4217, 4198 – 4202

3I infotech (310.35): Long positions may be taken in this counter with a stop below 305 for a conservative target of 322 and an optimistic target of 328
Resistance: 317, 323, 328,
Support: 308, 302, 295

DLF's $2 bn issue gets off the ground

Real estate firm DLF launched India’s largest IPO of over $2 billion on Tuesday amid rising investor wariness over real estate stocks and regulatory fears of a bubble in this large, but loosely-organised sector.

The Gurgaon, Haryana-based DLF will offer 175 million shares to investors at a price band of Rs 500-550 per share. The issue will open for subscription on June 11, one year after the company first made its plans public. At the lower end of the band, the issue will raise Rs 8,750 crore, while at the upper end it will garner Rs 9,625 crore.

The issue is a landmark event for both DLF and the Indian capital markets. At the upper end of the band of Rs 550, DLF will command a valuation of Rs 93,800 crore, making it the eighth largest company by market value after Reliance Communications but before ICICI Bank.

The move also signals the rapid maturing of the stock markets. In the past two years, the stock markets have seen greater liquidity, stronger FII participation and greater investor confidence, enabling companies with strong financials to raise large amounts of money through IPOs. Reliance Petroleum mopped up Rs 8,100 crore in April last year, a record that DLF is hoping to beat.

But there is salt to this strawberry. Interest rates are rising, property prices are falling and regulators have cracked the whip on loose and risky practices by real estate promoters and banks. The government has tightened lending to the sector, while the Securities and Exchange Board of India (Sebi) has warned companies not to indulge in aggressive methods of land valuation.

Real estate stocks have been extremely volatile in the recent months. For instance, Parsvnath Developers, which was listed in late 2006, was trading at Rs 450 plus levels at the beginning of 2007. It fell to a low of Rs 226.75 by early March — the recent weeks have seen it recover to Rs 320.

Unitech, which is the largest listed real estate player right now, was close to Rs 500 at the beginning of the year, a level from which it dropped 35% by early March. The current market price is Rs 600 — coming on back of strong results and a bonus issue.

The DLF management, however, sounded upbeat and confident. “About two-thirds of the money raised from the issue will go for acquisition of land and development rights and for existing projects. We may use the remainder for repayment of debt,” said Rajiv Singh, vice-chairman. He added that the company has been transparent and open in all its dealings and that all economic interests from its various ventures are being captured in DLF Ltd

DLF has total loans of Rs 9,932 crore. The company has not gone in for an IPO grading. “The process is new, and we will go for it as and when it becomes mandatory. We feel it is premature and not required at this point,” he added.

“We have development rights for 574 million square feet of land, which gives us earnings visibility for 10 years,” Mr Singh added. DLF delivered 10.3 million square feet to customers during FY08 — it needs to scale up operations manifold to justify the valuations it is asking for.

DLF recorded total income of Rs 4,034 crore during FY07, more than three times the figure for previous year. Net profit for the year stood at Rs 1,941 crore, almost ten times the value for the year before. However, 54% of the sales and 60% of the profit before tax were due to sale of assets to promoter group companies. DLF says this is a part of their business model, where instead of selling commercial property, they will be leasing it out, which will generate steady cash flow.

In addition to leasing property, the company is also getting into new business segments like hotels, SEZ and insurance. It plans to be present in all segments of the hotel industry — budget, luxury and business. It has recently tied up with Hilton for setting up a chain of business hotels around the country. Another JV for developing a large township has been entered into with Nakheel, a Dubai-based developer.

DLF had originally filed its draft prospectus with the markets regulator in May 2006, The issue size was pegged at Rs 13,600 crore, though there was no official confirmation from the company. However, the stock market went into a correction almost immediately and fell 30% in the next few weeks.

Stocks of other realty companies like Mahindra Gesco and Ansal fell even sharply, by over 50%. This wasn’t the only setback for the company. The announcement of the offering also resulted in a bitter dispute with the minority shareholders of the company. They filed a complaint with Sebi alleging that they did not receive the letter of offer of the debenture that the company issued in December 2005.

Each debenture entitled the holder to ten shares of the company. That issue has been resolved since. Another problem for the company has been the Reserve Bank tightening the liquidity screws, especially for the real estate sector. Sebi has also come down on real estate companies with regard to disclosures relating to valuation and titles of land holdings. Under the new set of rules, real estate companies have to disclose the exact details of ownership of the land-bank to which they claim development rights.

Economic Times!

Citigroup - India Technicals

Citigroup in their daily technicals say,

The index opened on a flat note and traded sideways in morning trade, after which it rose for the remaining part of the day’s trading. It posted an intra-day high at 4299, ending the day up 36 points.

The index is trading in an upward sloping channel, finding support at the lower end and resistance at the upper end. Channel projection on the upside is around 4355.

The index has support around 4245 and 4239 (10dma). Intraday dips are likely to find support around the 4245-4239 band.

IGL, IOC, Suzlon Energy, Unitech, Mahindra & Mahindra, Nagarjuna Constructions, IVRCL


IGL's Q4FY07 result (EBIDTA growth of 22.5%yoy at Rs 712m) was in line with our estimates of Rs 728m. Robust growth across CNG and PNG (volume growth of 11.6%yoy and 44.4%yoy) led to earnings growth of 34.6%yoy to Rs 401m. Driven by widening cost comparison between CNG and competing fuels, the customer base continues to expand. An established regulated consumption base provides IGL the ideal launch pad to pursue growth in piped gas and private vehicles as also for geographic expansion. We expect a steep jump in CNG volumes as ~1,000 new buses and taxis are deployed in NCR ahead of the Commonwealth Games 2010. The resultant volume growth would drive 14.2% earnings CAGR over FY07-09E as high pricing power (stemming from favorable economics) would enbale IGL to pass on any price hike. Reiterate Outperformer.


Indian Oil Corporation's (IOC) Q4FY07 results – net profit of Rs 29bn –were ahead of our estimates even though numbers are strictly not comparable because of inclusion of IBP numbers. During the quarter, IOC received Rs 30.7bn in the form of oil bonds and Rs 42.4bn as upstream share that more than compensated for the negative impact of total under recoveries of ~46.7bn. We upgrade the stock to Outperformer to factor in an expected improvement in fuel marketing margins driven by lower crude prices. Reiterate outperformer

Macquarie on Unitech

Unitech announced a strong set of FY3/07 results, with top-line revenue rising 255% to Rs33.9bn from the FY3/06 level, and net profit up 15x at Rs13.05bn; implying an EPS of Rs16.09 for the full FY3/07.

We strongly reiterate our Outperform rating. We believe Unitech is a very good proxy for the Indian property sector as it is the most diversified property company both geographically and in terms of business segments.

We also see Unitech getting re-rated with DLF soon looking to hit the capital markets. Our best-case scenario (which includes option value of future projects like the 38,000-acre Kolkata project) suggests a potential price of Rs750–800.

Macquarie on Suzlon Energy

The announcement by Areva, Suzlon’s competitor in its bid for REpower, that it has signed a cooperation agreement with Suzlon agreeing to vote with it means the bidding war is over and that Suzlon has emerged as the winner.

We expect Suzlon to achieve around 76% control of REpower – some of the remaining 39% independent holders of REpower shares may tender their acceptances before the Friday deadline.

We expect this ‘three step’ acquisition to add Rs105 to Suzlon’s valuation and as a result we have upgraded our target for Suzlon to Rs1,125.

Although the transaction brings Rs105 value to Suzlon, we retain our Underperform on the stock due to our continuing concerns for Suzlon’s margins in its core business and risk of investors’ exuberance being overdone. The REpower acquisition accelerates Suzlon’s globalisation which also increases execution risks, at least in the near term.

Macquarie on Nagarjuna Constructions

NJCC reported 4Q FY3/07 numbers which were below both our and consensus estimates. Management has reconfirmed plans to raise US$180m to fund investments in core business, BOT projects and real estate forays.

We have increased FY08 earnings by 5% to account for lower tax rate at 30.5% due to residual tax benefits under Sec 80IB. FY09 estimates are unchanged.

12-month price target: Rs174.00 based on a Sum of Parts methodology

A large impending dilution would impact earnings growth in the core business. Upside from investments in recently awarded BOT and real estate projects is uncertain given the lack of clarity on demand and pricing. We maintain a Neutral rating.

Merrill Lynch on IVRCL

IVRCL, our top pick in the mid-cap E&C space, reported solid 4QFY07 on all fronts. Sales were up Rs10bn +67%YoY; EBITDA margin expanded by 140bpsYoY & PAT of Rs732mn, +67%YoY. PAT was ahead of MLe due to better margins & non-prov of full tax (25% v/s MLe 32%) pending appeal in tribunal. Order backlog remains robust at ~3x FY07 sales. Value creation through the listing of IVR Prime, and 42% earnings CAGR in core business are potential triggers ahead. Buy, PO Rs450.

Our PO of Rs450 is based on an SOTP approach. We have valued IVRCL's core construction business at PER 14x FY09E - a 30% discount to E&C majors despite its faster growth. Risk: Unrelated acquisitions (oil & gas), project execution.

Merrill Lynch on Mahindra & Mahindra

Q4 net profit grew 20.9% to Rs 2.3bn (MLe Rs 2.53bn), as margins declined more sharply than expected, by ~50bps to 11.4%. For the fiscal, standalone net profit grew 35.1%, and margins held up at 12%, mainly due to strong front-ended performance in the preceding quarters.

Our sum of parts value, which is based on FY09E financials, is at Rs791. Key subsidiaries account for 50% of imputed value, and the muted prospects of the tractor and auto business limits core value to the balance Rs 397.

Nifty on verge of breaking 4300

The Nifty opened on a flat to positive note and traded with high volatility in today's session. In the last hour it picked up momentum to close at an all-time high of 4293.
The index is now on the verge of breaking the psychological level of 4300 after which it should target our short-term target of 4320-4350 levels on the upside. In the short
term, only on breaching and sustaining above 4300, can one expect any major upside that can lead the market to 4320-4350 levels. So tomorrow's session would be
crucial for the index, which shall have to sustain above 4300.

The Nifty could again go into consolidation mode if it maintains below 4300. On any intra-day dip the Nifty should find strong support at 4270 and below that at its
10-day moving average, which is at 4240. On the momentum indicators, KST, which had shown a sell signal yesterday, showed a convergence today. Once the Nifty
crosses the 4300 mark, KST could again whipsaw into buy mode. As long as the Nifty is maintained above 4220 on a closing basis, our bias remains up with short-term target of 4320 and medium-term target of 4350.

Intra-day or on hourly chart, the Nifty made a new high of 4299 and even closed at an all-time high. On intra-day chart, the Nifty is trading in a broader channel and is
waiting to cross the 4300 level. Once it crosses and sustains at that level, it can target 4320 to 4350 in the short term. On the downside, on any intra-day consolidation it should find strong support at its 10-hour moving average and 20-hour moving average, which are at 4273 and 4246 respectively. These support levels should
be considered as buying opportunities with reversal point of 4220 and target of 4320.
Godrej Consumers can test Rs150 with support at Rs140. UTI Bank looks good and should test Rs575 with support at Rs550. OBC is at its support level of Rs228 and can
test Rs240 in the short term.

UltraTech Cement–Buy
CMP: Rs816.1
Buy UltraTech Cement at the current market price of Rs816.10
with a stop loss of Rs754.4 for the target of Rs1,034. The
stock has completed a triangular consolidation and next move
should be swift.