Kotak - Ranbaxy, Nagarjuna Constructions, VSNL, Mahindra & Mahindra, Indian Oil Corporation

Kotak Instutional Recommendations

Indian Oil Corporation

IOCL reported 4QFY07 standalone adjusted net income at Rs29.1 bn (reported Rs16.1 bn) versus our estimated Rs30.7 bn. The difference between adjusted and reported net incomereflects decrease in value of investments in IBP (Rs13.2 bn), which has been merged withIOCL. 4QFY07 results include FY2007 financials of IBP and thus are not comparable withresults of 3QFY07 or 4QFY06. FY2007 reported net income is Rs75 bn (Rs56.2 bnadjusted) versus Rs49.2 bn (without IBP). We see little merit in analyzing quarterly resultsgiven (1) merger of IBP with IOCL and (2) quarterly volatility in the amount of oil bondsand payment from upstream companies. We have fine-tuned FY2008, FY2009 andFY2010 consolidated EPS estimates to Rs63.6, Rs62.7 and Rs55.2 versus Rs62.8, Rs62.1and Rs59.7, respectively, previously. We retain our 12-month target price of Rs500, whichis based on a 30% discount to our 5X normalized EBITDA. Key downside risk is higherthan-expected subsidy losses.

Mahindra & Mahindra

M&M reported 4Q recurring net profit at Rs2.3 bn ' a 33% yoy growth in-line with our estimate of Rs2.6 bn. Net sales for the quarter at Rs27.5bn increased 20% yoy. This was on account of a 15% increase in volumes and 5% increase in realisations. 4Q EBITDA margins at 11.4% declined 30 bps yoy and 60 bps qoq. There was an exceptional profit of Rs100mn during the quarter on account of sale of certain long term investments. We maintain our consolidated fully diluted EPS estimates for M&M for FY2008 at Rs67.8 and for FY2009 at Rs85.0. We maintain our OP rating on the stock with a SOTP based target
price of Rs1,000 based on Rs613 for M&M stand-alone at 7.1X FY2009 EV/EBITDA equivalent to 11.4X FY2009 P/E and Rs387 for value in key subsidiaries of the company (valued at 20% discount to market value of holding). We shall be revising our numbers shortly.

VSNL


VSNL's 4QFY07 reported net income (standalone) of Rs1.31 bn was 4% ahead of our estimates of Rs1.26 bn. EBITDA declined 6% qoq to Rs2.4 bn, 6% lower than our estimate of Rs2.6 bn. Year-end seasonality along with one-off items to the tune of Rs600 mn such as provision for doubtful debts, legal and professional charges and R&M costs impacted EBITDA performance. Voice and data business demonstrated robust performance. We have fine-tuned FY2008E and FY2009E EBITDA to Rs10.4 bn and Rs11.7 bn from Rs10.4 bn and Rs11.2 bn, respectively previously. We will wait for FY2007 annual report and full consolidated accounts to convert our earnings model to consolidated basis. Our 12-month SOTP-based target price of Rs560 faces risk from continued delay in unlocking of land value and aggressive pricing competition

Nagarjuna Constructions

Nagarjuna construction has reported revenues of Rs8.7 bn in 4QFY07 versus our expectation of Rs10.5 bn and EBITDA (before other income) of Rs737 mn versus our expectation of Rs901mn respectively. EBITDA margin at 8.4% was about 20 bps lower
than our expectations. Order backlog at the end of FY2007 was Rs73 bn, providing a visibility of 1.8 years based on forward 12 month revenues. We revise our FY2008 EPS estimated downwards based on lower execution versus our earlier expectations. We revise our DCF based target price to Rs204/share from Rs198 earlir based on higher valuation of investment in Land bank/BOT projects. We maintain out perform rating based on strong macro outlook and value unlocking in real estate and infrastructure holding subsidiary.

Ranbaxy

Ranbaxy has acquired from Bristol-Myers Squibb (BMS) the US rights to a group of 13 dermatol/asaogy products. These brands have revenues of US$15 mn and have been acquired for US$26 mn. Clearly, these are small tail-end brands, which were not being promoted by BMS. Ranbaxy hopes to grow these brands by promoting them (through its existing dermatology sales force) and thereby improving profitability. The acquisition will add about 4% to US revenues (1% to total revenues) and is likely to be EPS neutral for the next two years, assuming that deal price will be amortised over ten-years. We have an OP rating on the stock.

Indian Banks

Key highlights of the financial results of Indian banks for 4QFY07 are:
a) Most banks maintain margins, despite fall in CASA for a few
b) Credit growth remained robust and led to increased reliance on bulk deposits for most
banks,
c) Non-interest income remained robust aided by fee income and loan loss recoveries,
d) Higher provisions (NPL, standard asset and investment depreciation losses) impacted
overall PAT growth.
e) Some banks like Indian Bank, PNB and Federal Bank made higher provisions than
mandated by RBI regulations to strengthen their balance sheets.

We continue to maintain preference for banks focusing on moderate asset expansion and funding their loan growth through core deposits. PNB, IOB, Andhra Bank, SBI, Federal Bank and J&K Bank are our favored stocks in this space given their valuations and growth outlook.

Trading Calls

Buy Gokaldas Exports with stop loss of Rs 190 for a target of Rs 242, 284
Buy Crompton Greaves with stop loss of Rs 215 for a target of Rs 295

Buy Unitech with stop loss below Rs 587 for target of Rs 613 & 624. This is a day-trading recommendation.
Buy GAIL with stop loss below Rs 294 for a target of Rs 307 & 311. This is a day-trading recommendation.

Buy Alphageo with stop loss of Rs 275 (On closing basis), for a short-term target of Rs 305.
Buy SMS Pharmaceuticals with stop loss of Rs 337(On closing basis), for a short-term target of Rs 394 and a medium term target of 425.

Citigroup - Unitech, Mahindra & Mahindra, Nagarjuna Construction

Citigroup in their report on Nagarjuna Constructions,

Revenues up 36% YoY, but below expectations — Nagarjuna reported Q407 revenues of Rs8.7bn up 36% YoY, but 16% below our expectations. Full-year revenues of Rs28.7bn were below CIR expectations and their target of Rs30bn.

Positive guidance — Management has guided for FY08 revenues of Rs40bn (~39% growth), EBITDA and net profit margins of 9.5% and 5.5% respectively.

Our sum-of-the-parts-based target price for NJCC of Rs272 per share is based on its four distinct parts: cash contract business, BOT projects, real estate projects, and landbank. We value the core construction business at a P/E of 19x FY08E FD EPS to derive a value of Rs221 per share. We value its BOT projects at Rs19 per share, using the P/BV method to value its share in these projects. We then value its real estate projects at Rs22 per share based on book value. Finally, we value its 130-acre and 248 acres NCC Urban landbank at Rs11 per share, using management's estimates of its current market value.

Citigroup in their report on Unitech,

Results beat expectations — Unitech's consolidated FY07 revenues of Rs33bn and net profit of Rs13bn were ahead of estimates, largely due to higher-thanexpected one-time profit of Rs~6.5bn from 60% stake sale in six IT Parks to Unitech Corporate Parks (UCP), listed on AIM, and increased other income.

Our target price of Rs430 is based on 10% premium to our NAV value of Rs391 (excluding SEZs). The premium is attributed to: 1) Unitech's competitive advantage of large diversified land bank, while peers are still aggregating land; 2) dynamic business model with thrust on recycling capital faster; 3) strong brand positioning and proven track record. Our assumptions are: a) current market price levels to sustain with no price inflation; b) development volume of 471m sq.ft (~19mn recognized as revenue in FY07); c) all projects undertaken will be completed largely as per schedule though given the scale of the roll-out, we expect risk of delays; d) average cost of capital of 14%; e) tax rate of 28%; and f) does not include any value attributed towards SEZs.

Citigroup in their report on Mahindra & Mahindra

4Q results — Adjusted PAT (excluding one-time prior-period adjustment and exceptional items) at Rs2.36 bn (up +35% YoY) was in line with our estimates. Higher other income and lower-than-expected tax rate offset the weak operating performance. EBITDA margins at 11.4% (60 bps below our expectations) declined 60 bps q/q indicating impact of rise in commodity costs and higher other expenses.

Our target price of Rs1,032 is based on a sum-of-parts methodology. We value M&M's core business at Rs543 (11x FY08E core CEPS). We also incorporate value for M&M's listed subsidiaries (Rs402/share), its auto component business (Rs57/share) and M&M's investments in other subsidiaries (including Mahindra Holidays at Rs30/share). Our core multiple of 11x, is supported by an 18% CAGR in core cash earnings (excluding dividends from group companies) for M&M over FY07E-09E. We value the key subsidiaries / associates / auto component initiatives at Rs459/share. At our core target price (of Rs543) the stock would trade at around 13.6x FY08E core EPS (excluding dividends from subsidiaries) and should be supported by 16% CAGR in earnings over FY07E- 09E. We have chosen to use P/CEPS as our primary valuation metric to ensure proper comparison with historical trading bands — the company is undertaking a significant product development and capital expenditure program, and also undertook a restructuring of the balance sheet in FY02. We believe valuations will also be supported by: a) management’s continued
efforts to unleash value from investments in group concerns (we believe that the listing of the group's hotel / resorts venture is next on the anvil); and b) new initiatives announced in the passenger cars, commercial vehicles and auto components segments, which should fructify over the next 2-3 years.

Futures & Options Strategy

The NIFTY futures saw a decline in OI to the 14.71% with prices coming down from high indicating liquidation of long positions, which built up during the day and built up of fresh short positions indicating market participants may see some weakness in the market led by profit booking after a sharp rally in the market. The premium in nifty futures disappeared during the closing of the session indicating lack of confidence among market participants to carry the positions. Market if it goes below 4220 levels then we may see further short positions built up in the market and longs liquidating their positions. The FII were buyers of index futures to the tune of 346 crs and buyers of index options to the tune of 220 crs. The PCR has come down from 1.43 to 1.41 indicates some consolidation may be seen in the market. The IV is around 26.50 levels indicating some volatile trading sessions ahead.

Among the Big guns, ONGC saw 13.341% drop in OI with prices remaining in a dull range suggesting some liquidation might be seen in the counter before taking any sharp direction on either side. Whereas RELIANCE saw drop of 14.25% in OI with prices coming down from high and closing near day's low indicating liquidation of long positions in the counter thus suggesting some caution to be taken while making positions in the counter.

In the TECH counters, TCS, INFOSYSTCH, SATYAMCOMP & WIPRO saw liquidation of positions with prices coming down and closing near low suggesting lack of confidence among market participants in the overall IT pack led by lack of clarity regarding currency rate. One should not take aggressive positions in IT pack unless some clarity comes therein.

In the BANKING counters, SBIN saw significant drop in OI with prices coming down from high indicating liquidation of long positions and built up of fresh short positions suggesting weakness in the counter. ICICIBANK saw drop in OI to the tune of 10.00 % with prices coming down from high indicating liquidation of long positions in the counter. HDFCBANK saw 13.34% drop in OI with prices moving up and closing high indicating fresh long positions built up in the counter suggesting further strength in the counter.

In the Metal pack, TATASTEEL saw significant drop in OI with prices coming down indicating long positions liquidating in the counter-suggesting one should book profits in the counter. SAIL saw drop in OI with prices down indicating profit booking seen in the counter. HINDALCO saw drop in OI with prices coming down indicating long positions liquidated in the counter whereas NALCO saw drop in OI with prices flat indicating built up of aggressive positions in the counter.

We feel that the volume and built up in OI suggests that market may show some profit booking in the coming few days so one should not take aggressive positions in the market. Market may show further strength and we may see fresh buying emerging in the market if market goes above 4280 levels One should trade with strict stop losses to be adhered too.

Sharekhan Investor's Eye dated May 29, 2007

Aurobindo Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs684

Betting big on formulation growth

Key points

Formulation business grows at 62.2% CAGR: Aurobindo Pharma (Aurobindo) has created a robust product pipeline of 1,172 formulation dossiers for various markets and expects major growth in its speciality generic formulation business. The formulation sales are expected to gallop at a CAGR of 62.2% over FY2006-09.

Robust product pipeline: During FY2007, Aurobindo filed 32 ANDAs and 41 DMFs, taking the cumulative DMF filings to 110 and ANDA filings to 82 in the US market. With the recent USFDA approval for products like Bisoprolol, Simvastatin and Zolpidem tartarate, we estimate incremental revenue of Rs100 crore from the US generic business during FY2008.

European business to expand at over 50%: Aurobindo expects to deliver over 50% growth in Europe on the back of increased product registrations and synergetic benefits flowing from the recent acquisitions of Milpharm in the UK and Pharmacin in the Netherlands. It is also contemplating a couple of mid-sized acquisitions in Europe.

Steady growth in ARV business: With most of the registrations taking place in the recent past, we expect Aurobindo to see steady growth in its ARV formulation revenues. We estimate the ARV formulation business would generate revenues worth $99 million and $128.7 million in FY2008 and FY2009 respectively.

Consolidated PAT to grow at 70% CAGR: Going forward, the increasing traction in formulation exports would help the consolidated revenue to grow at a 24.3% CAGR during FY2006-09E (Rs3,143.1 crore in FY2009E). The adjusted net profit would gallop at a CAGR of 70% during FY2006-09 (Rs348.4 crore in FY2009E), translating into earnings of Rs57.1 per share.

Buy with price target of Rs914: At the current market price of Rs684, Aurobindo is trading at 14.9x its FY2008E and 12.0x its FY2009E earnings. We initiate coverage on Aurobindo with a Buy recommendation and a one-year price target of Rs914 (an upside of 34% from the current levels). The price target discounts the FY2009E earnings by 16x.

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STOCK UPDATE

Bharat Heavy Electricals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs3,125
Current market price: Rs2,724

Price target revised to Rs3,125

Result highlights

At Rs1,150 crore the Q4FY2007 net profit of Bharat Heavy Electricals Ltd (BHEL) saw a growth of 33%. The same is in line with our estimates. The turnover for the quarter grew by 25% to Rs7,576 crore driven by higher order backlog of Rs46,700 crore at the end of Q3FY2007.

The order backlog during the quarter grew by an impressive 45% to Rs55,000 crore driven by a strong 56% increase in order inflows of Rs16,300 crore on a year-on-year (y-o-y) basis.

The power division registered a 23% growth in revenues whereas the industry division recorded a growth of 30% in revenue.

The operating profit margin (OPM) for the quarter improved by 135 basis points year on year (yoy). Consequently the operating profit for the quarter grew by 33% to Rs1,587 crore.

The other income increased by 34% to Rs286 crore mainly on account of the rising yields on the huge cash reserves of the company.

On a full year basis, the turnover for FY2007 grew by 29% to Rs18,702 crore and the net profit grew by 42% to Rs2,385 crore.

Order inflows during the year grew by a whopping 88% to Rs35,633 crore. In the power segment, BHEL secured orders worth Rs27,722 crore. In the industry business BHEL secured the biggest ever order worth Rs6,008 crore during the year. The order backlog at the end of March 31, 2007 stood at Rs55,000 crore, which is around 3x its FY2007 sales.

In international business, BHEL secured export orders of Rs1,903 crore during the year in comparison with an average yearly order book of Rs1,275 crore in the last five years.

Morning Murmur - May 29 2007

Markets opened with a flourish Monday but lost momentum in the afternoon. The strength in the rupee spooked the IT stocks. Apparent intervention by the banks to shore up the dollar did result in Rupee depreciation but that failed to lift the
IT stocks back to the morning levels. The current settlement seems to have run into a wall of 4300 level in the Nifty. The markets are likely to consolidate in the 4200-4300 region. The Rupee-dollar gyrations will be the key driving factor for the markets. We do not advice rolling over to the existing settlement at this point of time.

HONGKONG AUTHORITIES WORRIED

The Hong Kong Monetary Authority, the Chinese territory's de facto central bank, added its voice to the growing chorus of concern about the risk of an asset bubble in China. "Excess liquidity may help create an asset-price bubble in China. The situation is worrying," the monetary authority said in a document it sent to the Legislative Council ahead of a meeting with legislators next week.
The HKMA said while Hong Kong may be affected by fluctuations in the Chinese economy caused by monetary tightening, it believes Hong Kong can withstand the impact on its economy and consumer prices.

DEAL POSSIBILITIES BUOYA AVAYA
Telecommunications-equipment maker Avaya Inc, in the US, is in talks with private-equity and strategic bidders about selling part or all of the company, according to people familiar with the matter, the latest sign that there could be a new round of mergers and acquisitions in the telecommunicationsequipment industry.
The Indian stock hit the upper circuit of 20% on this news.

After Market Hours

Elder Pharmac has entered into an agreement with Cymbiotics of USA for in-licensing arrangement for marketing of their pharmaceutical formulations for Diabetes, Chronic Pain, Skin Care, etc. Rico Auto and Zhejiang Jinfei Co. of China have signed a joint venture agreement for establishing joint venture company in India to manufacture Aluminium Alloy Wheels for two wheelers.
SEBI banned promoters of Adani Group from dealing in stock markets for two years for their involvement in Ketan Parekh securities scam. TCS announces formation of TCS Financial Solutions, a new strategic business unit to consolidate its
financial products business.

During Market Hours

Bharati Shipyard secured an order worth Rs 418 crore for supply of two platform supply vessels from Germany's Man Ferrostaal AG.
Cambridge Technology board approved the acquisition of US based ComCreation Inc. for US $ 3.5 million. Crompton Greaves to acquire Ireland-based Microsol Holdings for an enterprise value of around 10.50 million euro (over Rs 57 crore).
Era Constructions board approved to Issue 55 lakh warrants convertible into equal number of Equity Shares on preferential basis to the Promoter Group and Non Promoter Group.
Glenmark Pharma Swiss subsidiary Glenmark Pharmaceuticals S.A. (GPSA),has completed Phase I clinical trials for GRC 6211 in Europe. GRC 6211 is its lead Vanniloid Receptor (VR1) antagonist compound for a range of pain indications like naturopathic pain, osteoarthritis and urinary incontinence.
Hindustan Zinc cuts zinc prices by Rs 6,600/t to Rs 171300
ICI India has recommended to buy-back its own shares at a price not exceeding Rs 575 per share from minority shareholders through market operations.
Jain Irrigation has signed definitive agreements through a wholly owned subsidiary in Netherlands to acquire 50.01 % of the share capital of Na'anDan Irrigation Systems, Israel for US $ 21.5 mn.

Modison Metals Board to meet on June 04, 2007 to consider stock split.

Northgate Technologies board approves 1:1 Bonus Issue.

OM Metals Infraprojects Board approved to sell/dispose off the shares held by the Company in JV

Companies to a newly incorporated 100% subsidiary & to Hikes FII limit to 49 %.

Omax Auto board approved selling a part of its stake in subsidiary Omax Steels Ltd.

Caution should be maintained

After the broad-based national stock exchange Nifty hitting the all time high yesterday, buying interest can be seen in today's trades. However, caution should be exercised as the market may move in tandem with global indices. Except Nikkei index almost all the key Asian indices have lost ground in the ongoing trades. Investors should also take into account the prevalence of strong intra-day volatility. Among the key local indices, the Nifty in short term could test higher levels at 4300 while it has a support at 4245. The Sensex has a likely support at 14300 and may face resistance at 14500.

Daily Technical Note

BSE Sensex and Nifty have exhibited a Gravestone Doji candlestick as it has a long upper shadow which implies trend reversal following the weekly Doji. This indicates that there is a cautious approach in markets emerging at higher level. Technically, caution is advised in the market for the time being. Based on the chart pattern developed to date, one may use the level of 4200 (Nifty) and 14,200 in Sensex as the stop loss level for long positions. Breach of these support levels may lead to a deeper correction.

On the resistance front, the Nifty faces resistance at around 4,320-4350 level and the Sensex at around 14,550-14,750 levels.

Strong FII inflow may support share prices

FII inflow has been robust over the past few days. As per provisional data, FIIs were net buyers to the tune of Rs 180.65 crore on Monday, 28 May 2007, the day when Sensex had risen 59 points. Domestic institutions were net buyers to the tune of Rs 74.74 crore on Monday, 28 May 2007.

FII inflow aggregated Rs 4015 crore in 6 trading sessions from 17 May 2007 to 24 May 2007. But they had turned net sellers on Friday 25 May 2007. FIIs sold shares worth a net Rs 147 crore on that day.

Volatility may remain high this week in the run-up to expiry of May 2007 derivatives contracts on Thursday, 31 May 2007.

The Q4 corporate earnings were strong which helped trigger a solid surge in domestic bourses since early last month. The Q1 June 2007 corporate earnings season will kickstart from about a month and a half and, over the next few days, traders are likely to build positions based on Q1 results expectations

South Korean stocks extended their record-breaking run on Tuesday, 29 May 2007, while gains for major miners amid firmer metals prices helped nudge Australian shares higher. But other Asia-Pacific markets were mixed, with few cues from overseas as markets in the United States, Britain and Germany were shut on Monday, 28 May 2007, for public holidays.

Intraday Stock Ideas

NIFTY (4271) SUP 4233 RES 4272

BUY TVTODAY (162.05)
SL 158 T 170, 172

BUY KTKBANK (177.05)
SL 173 T 185, 187

BUY IBREALEST (373.9)
SL 368 T 383, 386

SELL GHCL (127.75)
@ 130 SL 133 T 122, 119

SELL AMTEKINDIA (156.45)
@ 158 SL 162 T 149, 146

STRATEGY INPUTS FOR THE DAY

Subdued opening likely

Open your mouth and purse cautiously, and your stock of wealth and reputation shall, at least in repute, be great.

Profit booking and weakness in IT shares dragged the main indices down from intra-day peaks yesterday. The sudden and sharp pullback in the afternoon session just goes to show the vulnerability of the market at all-time highs. The Sensex has gained some 2,000 points from the lows hit in March. As a result, valuations, especially that of the large cap stocks, appear to be much higher than historical average. The benchmark BSE index still needs around 325-330 points to make a new historic high. It may take a while to reach there as the market will be choppy ahead of Thursday's derivative settlement. Investors and traders should remain cautious at this juncture. Big-time fresh buying should be avoided though select stock picking after proper home work can be done.

Today, we don't have much in the way of global cues as the markets in the US, UK and Europe were shut for holidays. Asian markets are mixed this morning with the Nikkei in Tokyo advancing and the Hang Seng in Hong Kong losing a little bit of ground. Oil prices are hovering above the $64 per barrel mark. We expect the market to open on a cautious note. It will remain rangebound and volatile with lots of stock specific action to go with it. Small-Cap and Mid-Cap shares may continue to attract attention with the frontline counters looking a bit tired. Though there is no big threat to the ongoing secular bull run, returns may not be as high as in the past. The market will continue to witness alternate bouts of buying and selling with a slightly positive bias.

Reliance Industries may come under some pressure amid reports of inspection at its proposed multi-product SEZ at Jamnagar by Directorate of Revenue Intelligence. Hero Honda may be in action as it has launched two new variants of the Splendour. Sobha Developers has forayed into the booming retail segment with the launch of Sobha Lifestyle. With the rupee breaching the 40.50 mark yesterday, IT shares will continue to feel the heat. Cellular mobile service providers like Reliance Communications, Idea and Bharti Airtel may attract some buying amid reports of value unlocking from the infrastructure business.

Adani Enterprises is likely to crash after SEBI banned its promoters for two years due to the alleged price manipulation. Sugar stocks will remain weak as a host of brokerages have come out with negative calls on the sector. ICI India may rise as its Board will consider a higher buyback price of Rs575 per share instead of Rs350 a share earlier. Rico Auto Industries and Zhejiang Jinfei Co. Ltd. of China have signed an agreement for establishing a JV in India to manufacture aluminium alloy wheels for two wheelers. Easun Reyrolle's Board will meet on May 30 to consider results and a stock split.

Markets managed to end in positive terrain as selling pressure set in towards the end of the session. IT stocks were the major laggards led by heavy weights like Infosys, Wipro and Satyam Computer. The Mid-Cap and small cap stocks were in momentum as both the index gained nearly by 1% each. Finally, the 30-share Sensex ended higher by 49 points to close at 14387. NSE-50 Nifty gained 8 points to close at 4256.

Unitech rallied by over 9% to Rs595 after the company declared that hey would give bonus shares in the ratio of 1:1. The scrip touched intra-day of Rs604 and a low of Rs545 and recorded volumes of over 79,00,000 shares on NSE.

Bharti Shipyard gained by over by 3% to Rs437 after the company received order worth Rs4.18bn. The scrip touched intra-day of Rs450 and a low of Rs423 and recorded volumes of over 62,000 shares on NSE.

Ranbaxy edged higher by 0.4% to Rs382 after the company declared that they have purchased 13 Bristol-Myers Squibb Brands. The scrip touched intra-day of Rs390 and a low of Rs381 and recorded volumes of over 8,00,000 shares on NSE.

IOC gained by 1.4% to Rs481 after the company announced its result with net profit at Rs75bn (up 52%) and sales at Rs1994bn (up 20.5%). The scrip touched intra-day of Rs494 and a low of Rs476 and recorded volumes of over 2,00,000 shares on NSE.

Jain Irrigation surged by over 3% to Rs465 after the company announced that they would buy 50% stake in Israel's Naandan for $21.5mn. The scrip has touched intra- of Rs475 and a low of Rs451 and has recorded volumes of over 48,000 shares on NSE.

Banking stocks were among the major gainers. HDFC Bank surged by over 5.5% to Rs1127, SBI was up 0.7% to Rs1308 and ICICI Bank added 1.1% to Rs922. bank of Baroda, Canara bank and Bank of India were the major gainers among the Mid-Cap stocks.

Oil exploration stocks were a mixed bag. Reliance Industries pared its gains on back of profit booking the scrip edged lower 0.4% to Rs1723 and ONGC edged higher 0.5% to Rs911. Oil Refinery stocks gained as HPCL advanced 0.32% to Rs280 and IOC added 1.4% to Rs481.

Pharma stocks were in good health. Glaxo surged by over 3.5% to Rs1270, Cipla was up by 1.7% to Rs208, Dr Reddy’s Lab gained 0.8% to Rs655 and Lupin added 1.5% to Rs700.

Technology stocks were on the receiving end as Indian Rupee is trading at a nine year high at Rs40.50 per dollar. Infosys declined by 1% to Rs1971, Wipro was down by 0.8% to Rs539 and Satyam Computer slipped by 0.5% to Rs469.

Insider Trades:
UFLEX Limited: Anshika Consultants Private Limited (part of the promoters' group) has purchased from open market 44026 equity shares of UFLEX Limited on 25th May, 2007.

The Great Eastern Shipping Co. Limited: Bharat k. Seth, Deputy Chairman & Managing Director has purchased from open market 25000 equity shares of The Great Eastern Shipping Co. Limited on 22nd May, 2007.

Educomp Solutions Limited: Reliance Growth Fund has sold from open market 91476 equity shares of Educomp Solutions Limited on 23rd May, 2007.

Volume Toppers:
RNRL, RPL, Nagarjuna Fertilizers, Idea, Dish TV, SAIL, Unitech, Dena bank, R Com, IVRCL Infrastructure, IDFC, ITC, Satyam Computer, Zee News, Welspun Gujarat, NTPC, Ahishek Mills and Reliance Capital

Upper Circuit:
United Breweries, KEW Industries, Tele Data, Raj Tele, Avaya Global, Unity Infrastructure, Eicher Motors, Karut Network, KEI Industries, Rasoi, Tripex Industries, Sujana Metal, Flawless Diamond, Nirma, ION Exchange and Infomedia

Delivery Delight:
Andhra Bank, Arvind Mills, ACC, Bank of Baroda, BEML, BHEL, Chambal Fertilisers, Cipla, Deepak Fertilizers, Kesoram Industries, National Aluminium, OBC, Ranbaxy Laboratories, SCI, Siemens and TVS Motors.

Abnormal Delivery:
VSNL, ABB, APIL, SCI, ITC, McDowell, Tata Tea, Union Bank of India, SAIL, ICICI Bank, Bombay Dyeing, SBI and Federal Bank.

Results Today:
ACE, Adhunik Metaliks, Bajaj Electricals, Britannia, HPCL, India Hume Pipe, L&T, Pricol, Sanghvi Movers, Savita Chemicals, Shasun Chemicals, Sunil Hitech, Tata Coffee, Thermax and Torrent Power.

Results Corner:
M&M Q4 net profit at Rs10.68bn (up 25%) and total income (net of excise) at Rs102.45bn (up 23%)

Dwarikesh Sugar Q2 loss of Rs2.86mn against profit of Rs85.74mn, net sales at Rs638mn (up 24%)

IOC full year profit is at Rs75bn (up 52%) and sales at Rs1994bn (up 20.5%)

Brokers Recommendations:
ITC - Underperform from CLSA with target of Rs150

Ramkrishna Forgings – Buy from Man Financial with target of Rs197.

Long Term investment:
Gayatri Projects

Major News Headlines:

Monsoon hits Kerala four days earlier than normal, says MET

M&M to combine all engineering services into one unit

IOC, Suntera, Oil India acquire stake in Nigerian field

GMR Infra to acquire 100% stake in GMR Aviation

Jain Irrigation to buy 50% stake in Israel's Naandan for $21.5mn

Ranbaxy buys 13 Bristol-Myers Squibb Brands

Northgate Technologies announces 1:1 bonus issue

Bharti Shipyard receives order worth Rs4.18bn

Crompton Greaves to buy Ireland’s Microsol holdings

Morgan Stanley - ICICI Bank

Morgan Stanley in analyzing ICICI Bank's holdings say,

We also analyze the period for which US$5 bn will fund ICICI Bank’s growth. In the last two capital raisings, almost 50% of capital raised was used for investments in subsidiaries or higher risk weights. Going ahead, we expect the regulatory environment to be relatively benign and also no significant investment will be required in subsidiaries. We expect the current issue to fund ICICI Bank’s loan growth for the next 4-5 years. The key on profitability will be whether the bank increases capital consumption significantly or not – for example the bank’s return on risk-weighted assets has declined from 1.8% to 1.2% in the last two years. We expect average ROE for F2008 – F2011 at 13%

Raising fair value, maintain Equal-weight. We are incorporating the announced capital issuance in our numbers. This results in some increase in value for the banking business. This, coupled with higher value for ICICI Holdings, takes the fair value to Rs900. The stock is trading at 21x F2008e earnings on a core basis.

House Chitter Chatter - May 29 2007

UBS on Suzlon Energy

We estimate the payment over three years of the estimated acquisition cost of Rs52bn would enable Suzlon Energy (SUEL) to sustain its ROIC over next three years even after Suzlon's estimated capex of Rs36bn over 2008-10E. This is despite, at full acquisition cost, the acquisition could yield a 7.1% EBITDA ROIC in FY09E and 11.6% in FY10E.

We increase our price target from Rs1,100 (on 18x FY09E EPS) to Rs1,250 (which is based on 19x our 12m forward EPS), to reflect a 5% discount to BHEL's price target. We maintain our Reduce 2 rating.


SSKI on IVRCL

IVRCL's 4QFY07 net profit was above our estimates at Rs732mn (+67% yoy) primarily due to higher than estimated revenues and operating margins. The operating margins expanded by 140bps to 10.8% during the quarter led by execution of higher margin orders during the quarter. Moreover, IVRCL has provided tax during FY07 accounting for 80IA tax benefits mainly to preserve its claims with IT Tribunal. We have upgraded 8.8% and by 6.6% for FY08 and FY09 respectively (after factoring a tax rate of 34%) led by higher than estimated operating margins. Going forward, IVRCL is planning to unlock value in its real estate business by listing the real estate subsidiary (IVR Prime- IPUD) over the next 2 months. We have valued the 2300 acres land bank of IVRCL¿s 80% subsidiary IPUD at Rs168/share. The stock is currently trading at 9.9x on FY09E earnings (adjusted for BOT, real estate and HDOL value of Rs201/share). We believe the stock is attractively valued considering its strong order book, healthy balance sheet and strong earnings growth coupled with the likely trigger of value unlocking in its real estate business. We maintain our Outperformer rating on the stock.

SSKI on Nagarjuna Constructions

Nagarjuna Construction Company (NCC) reported 4QFY07 results higher than our estimates led by higher than estimated other income and lower tax rate. Revenues grew by 36% yoy to Rs8.7bn, while operating margins improved marginally by 10bps to 8.4% during the quarter led by higher margin real estate division revenues. As a
result, net profit grew by 43% yoy to Rs499mn in 4QFY07. The order backlog grew by 34% yoy to Rs73bn driven by order booking of Rs11.4bn (+4% yoy) during the quarter. However, we have downgraded our earnings estimate by 2% and 4% for FY08 and FY09 respectively led by lower than estimated operating margins. The stock is currently trading at 10.9x FY09E earnings (net of BOT and real estate valuation of Rs41/share), which we believe is attractive considering its strong order book and resultant visibility of strong earnings growth over FY07-09. We maintain our Outperformer rating on the stock.

SSKI on Unitech

Unitech reported a 308% yoy growth in Q4FY07 standalone revenues to Rs8.5bn, marginally below estimates. EBITDA increased by 766% yoy to Rs5.1bn, led by strong realisations in the company's key markets in the NCR. Consequently, EBITDA margins improved to 60.1% in the current quarter from 28.3% in Q4FY06. For FY07, Unitech reported a 168% yoy growth in consolidated revenues to Rs32.8bn, driven by strong realisations across key markets like NCR and Kolkata. The strong realisations and sale of stake in IT parks to Unitech Corporate Parks also resulted in a strong 1087% yoy growth in EBITDA to Rs20bn. We are not changing our FY08 earnings estimates and expect Unitech's profits to rise by 118%yoy to Rs27.4bn. We like Unitech's strategy of pan India presence, focus on residential development and outright sale / exit from non-residential properties, which improves its capital utilisation and enables it to grow its land bank rapidly. We maintain our Outperformer rating on the stock.

SSKI on Jain Irrigation

Taking a big leap in its pursuit to increase presence in the key MIS markets globally (India, US, Israel and Africa), Jain Irrigation has acquired majority stake (50% + 1 share) in Israel based irrigation company - NaanDan for US $ 21.5m. This is the largest acquisition by Jain Irrigation. NaanDan (a co-operative) enjoys a strong equity in the Israel market and does revenue of around US $ 75m annually. We see immense merit in the deal, as JISL gets a foothold into one of the largest MIS markets (Israel), opportunity to introduce its sprinklers systems in Israel, access to NaanDan's manufacturing and distribution network in USA, Africa, Europe, Latin America and Australia and attractive valuations of less than 0.6x revenues (Plastro, Israel was sold at 1x revenues to John Deere). We continue to maintain our positive stance on JISL, given the high growth traction in the existing operations and appetite to operate in global market through inorganic route. Reiterate Outperformer.


SSKI on HDFC

HDFC has announced a preferential allotment of 18m equity shares at Rs1,730 per share (aggregating Rs31.14bn) to the Carlyle group and Citigroup Strategic Holdings Mauritius Ltd . Post the transaction, Carlyle would own a 5.6% stake in HDFC while Citigroup's holding would be maintained at 12.3%. The capital is being raised primarily to finance the rapid expansion of HDFC Bank and HDFC Standard Life Insurance Company. To factor in the equity dilution, we are downgrading our EPS estimates for HDFC by 4.2% and 3.8% for FY08 and FY09 respectively (while upgrading profit estimates by ~ 3% for FY08 and FY09). Considering the significant infusion in the life insurance venture, we are revising our value of life insurance subsidiary from Rs273 per share for FY09 to Rs297 per share. Adjusting for the strategic investment valuation of Rs570 per share for FY09, the stock is available at 2.75x FY09E adjusted book value (diluted basis). We reiterate Outperformer with a revised price target of Rs2,200 after factoring in the impact of equity dilution.

Motilal Oswal on United Spirits

We estimate that Whyte & MacKay will contribute £0.6m (before exceptional one-time costs of £7m-£10m) and £13m to the consolidated profits after interest payments in FY08 and FY09 respectively. We expect United Spirits to pay back debt taken in the SPV up to £200m from the sale of treasury stock after the merger of Shaw Wallace which can result in profits and EPS being higher than our estimates. We maintain Buy.

Motilal Oswal on PNB

While higher delinquencies is concerning and would require higher provisions going forward, a high CASA of 46%, would result in stable margins for PNB. Growing fee income at a strong rate is commendable. Going forward, we expect consistent trend in NII coupled with a lower risk on the bond portfolio. The stock trades at 1.2x FY09E BV and 6.7x FY09E EPS. Maintain Buy.

Man Financial maintains Neutral on BPCL

Citigroup on Nifty

The index opened on a strong note but was unable to hold onto its opening trade gains. It posted an intra-day high at 4296 then drifted down through the entire trading session to end the day up 5 points.

The index has support around the 10dma at 4222 and 4200 -(62% retracement of the past two trading sessions' gains from a low of 4141 to a high of 4296. Intra-day dips should find support in the 4222- 4200 band.

The index faces resistance at 4291 (high of 23 May 07),while consolidation in the 4291 and 4200 band can be expected until it1 remains below 4291 on a closing basis.

Expect intra-day range-bound movement in the 4191-4222 band.


EQM on P&G

At the current price of Rs 760, the stock trades at a price-to-earnings multiple of 18.4 times its trailing 12-month earnings. Capitalizing on the opportunity existing in the hygiene segment, PGHH is likely to benefit from the same going forward. It is now a focused two-product company, with both these brands in the lifestyle segment. The move to divest the low margin segment of contract manufacturing has also paid off and will contribute to the margin expansion. However, increasing competition will continue to remain a cause for concern.

EQM on ITC

At the current price of Rs 168, the stock is trading at a price to earnings multiple of 23.4 times its 12-months trailing earnings. The strong performance of the non-cigarette business is positive for the company. With duties on cigarettes increasing, the volumes could be impacted to a certain extent. Hence, lower dependence on this segment would benefit the company in the long term. We derive comfort from the fact that the company has been able to run its other businesses rather successfully and are positive on the company from a long-term perspective. Valuations from a medium term perspective though, look stretched.


Geojit on Usha Martin

At current market price of Rs. 244.75, the share (Rs. 5/- paid up) is trading at 9.3 times FY 2007 consolidated EPS of Rs. 26.3 and 6.2 times FY 2008 expected consolidated earnings of Rs. 40/-; Company¿s earnings will receive major boost with progress / completion of above expansion plans. In view of excellent prospects, we recommend to 'BUY' the share at CMP.

Religare - PNB, Shringar Cinema, Tulip IT,

Religare on PNB

We are positive on PNB considering that core operational performance remains
robust and the lower-than-expected profitability in FY07 was largely on account of
one-off items. Further, PNB’s initiative to create provisions towards AS-15 guidelines
ahead of their implementation would safeguard future profitability, while the BPLR
hike in April would protect margins. The robust growth in fee income is also a positive
sign. While the continuous increase in NPAs and the unexpected announcement of an
equity offering are concerns, we expect the bank to maintain its steady growth
trajectory in the coming year.

Recommend Buy with target of Rs 610

The stock currently trades at 1.3x on FY09E ABV. We recommend Buy on the stock

Religare on Shringar Cinemas

At the current level the stock is quoting at 15.9x and 10.1x its FY08 and FY09
expected earnings respectively. The following table depicts the comparative analysis
of various multiplex players.

DCF valuation yields fair value of Rs 75; HoldWe have undertaken a DCF valuation in order to capture the growth momentum of the company.
Our DCF model estimates a fair value of Rs 75/share for Shringar, based
initiated coverage; Hold on a terminal growth rate of 4%, beta of 1.01 and a weighted average cost of capital (WACC) of 15.1%. The stock has appreciated 17% since we initiated coverage on 22 May 2007. We now recommend a Hold with a target price of Rs 75.


Religare on Tulip IT


We have valued the company using a sum-of-the-parts (SOTP) valuation model that
An attractive long-term employs the two-stage discounted cash flow (DCF) and EV/EBIT multiple valuation investment; Buy methods. Taking the average of target prices arrived at using the two methods, we have a March 2008 target of Rs 932 for the stock. At the CMP of Rs 875, the upside is limited to 6%, but we believe the company offers a good opportunity for long-term investment. We recommend a Buy on the stock.

ENAM - India Strategy

ENAM in their recently released India Strategy report say

Near term Macro environment remains challenging

Growth necessitates end of tightening cycle. Despite some moderation in consumption &exports, Base Case for FY08 GDP growth at ~8.6%, if RBI manages inflation despite surging liquidity

Sensex at 17x FY08E EPS of Rs 848 not so cheap. But EPS growth of 20% in FY 09 sets base for 2009+ acceleration on Secular factors

Top Absolute Buys*: ONGC, SAIL, L&T, HDFC, HLL, Sterlite, Satyam, Hindustan Zinc, Tata Motors, GAIL, PFC, Nalco, BEL, Concor, REL, Crompton Greaves

Top Absolute Sells*: Unitech, ACC, Tata Power, Titan Industries

Short term relative outperformance would be in Visibile Growth sectors ie IT & Telecom.

However, don’t over-allocate:

Telecom: Growth tapering in 2 yrs to depress PE in FY09
IT: INR to secularly appreciate, tax exemption withdrawal in FY09