Quaterly Preview - Elara Securities - 11 January 2012

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					                          India | Strategy                                                                                                                                                            11 January 2012
                          Quarterly Preview                                                                    
                           

                          Q3FY12 Preview
                          Towards the end of the downhill ride                                                            Sensex performance
                                                                                                                            22,000
                          Elara coverage universe to show 16.2 % revenue growth
                                                                                                                            20,000
                          We expect the Elara coverage universe to report a 16.2% revenue                                   18,000
                          growth (including downstream oil and gas) with flattish margins. Ex of                            16,000
Global Markets Research




                          downstream oil and gas, there is still 170bps yoy margin dip. Though                              14,000




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                                                                                                                                                                                                                                                Dec-11
                          most of the sectors still continue to report margin dips, margin
                          expansion in consumption (FMCG and two wheelers) and cement
                          have limited the fall. Also, the rupee depreciation fillip has taken the                        Source: Bloomberg
                          wind out of the steep margin contraction on metals, pharma and IT                               Price performance (%)
                          services. Cement will continue its strong showing as higher rural                                                                                           3M                               6M                             12M
                          demand along with softer input prices is expected to result in 44.4%                            Sensex                                                     (2.4)                           (14.3)                          (15.9)
                                                                                                                          Nifty                                                      (2.6)                           (14.3)                          (15.8)
                          PAT growth. Ex of our preview numbers, our banking analyst expects                              Auto                                                       (3.6)                            (8.0)                           (9.8)
                                                                                                                          Infra                                                     (12.5)                           (28.1)                          (29.9)
                          bank earnings growth to soften led by both muted loan growth and                                FMCG                                                         3.6                              0.5                            13.1
                          stable NIMs. We believe that the asset cycle deterioration has                                  Banks                                                      (4.7)                           (22.6)                          (18.4)
                                                                                                                          IT                                                           9.2                            (5.8)                          (13.5)
                          bottomed out and focus will now shift to movement in restructured                               Metals                                                     (9.3)                           (32.6)                          (38.9)
                                                                                                                          Oil&Gas                                                    (9.7)                           (13.1)                          (23.2)
                          assets. In line with our model portfolio we expect the outperformance                           Healthcare                                                   4.3                            (5.3)                           (6.6)
                          of private over public to continue.                                                             Capital Goods                                             (17.3)                           (35.4)                          (36.5)
                                                                                                                          Power                                                     (10.6)                           (26.9)                          (32.7)
                                                                                                                          Real Estate                                               (17.5)                           (33.6)                          (42.5)
                          Heads up on the possible portfolio changes for the quarter                                      Source: Bloomberg

                          While FMCG (seasonally strong quarter), a key overweight in our                                 FII & DII flows (INR bn)
                          model portfolio, continues to show strong 21.4% PAT growth and                                     5
                                                                                                                                  1.87                           3.94                                                         2.42
                                                                                                                                                                                    0.83 0.82                                                   0.44
                          EBITDA margin expansion; we feel that full valuations might lead us to
                                                                                                                             0
                          cut the extent of our OWs. We would also cut our Infosys OW before                                         (0.10)
                                                                                                                                                                            (1.47)                    (1.21)                               (1.14)
                          the guidance but an OW on IT through TCS and HCL Tech. Other than                                 (5)                                                                                      (3.25)
                          Hindustan Zinc, we continue to be negative on both the ferrous and                                                            (5.43)
                                                                                                                           (10)
                          the non-ferrous pack. In the cement space, we prefer players using                                      Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
                          petcoke like Shree Cement, JK Lakshmi, JK Cement and Ultratech on                                                          FII DII
                          softening petcoke. Price action in ACC might also lead us to change                             Source: Bloomberg
                          our negative view post quarter numbers. Other than our recent Cairn                             Consensus EPS estimate (Monthly)
                          upgrade, we maintain our cautious medium term stance on the oil and
                                                                                                                           390                                                                                                                           460
                          gas sector with a negative view on RIL.                                                          380                                                                                                                           450
                                                                                                                           370                                                                                                                           440
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                                                                                                                           360                                                                                                                           420
                          Our top picks are across bottom up rather than sector specific                                   350                                                                                                                           410
                                                                                                                           340                                                                                                                           400
                          Our top picks include ITC, HUVL, Grasim, TCS, HCL Tech, BPCL, HPCL,
                                                                                                                                             Feb-11
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                          HMCL, Hero Motocorp, Grasim, Berger Paints, Sadbhav and ITNL.
                                                                                                                                                    Nifty FY12 consensus EPS estimates (LHS)
                                                                                                                                                    FY13 consensus estimates (RHS)
                                                                                                                          Source: Bloomberg, Elara Securities Estimates

                              Q3FY12 growth expectations
                                                              Sales growth (%)              EBITDA growth (%)            EBITDA Margins (bps)                                                               PAT growth (%)
                                                                  QoQ           YoY              QoQ           YoY           QoQ                                          YoY                                 QoQ            YoY
                              Automobiles                         (2.2)        16.5                 1.4       39.0              59                                        271                                 (1.1)          20.6
                              Cement                                8.3        16.1               53.3        40.4             648                                        382                                  64.5          44.4
                              FMCG                                  6.2        18.3               10.8        22.8              91                                         80                                   7.4          21.4
                              Hospitality                         50.4         13.8             316.1         13.8          2,021                                           2                                431.8           67.0
                              Infrastructure                      16.9         13.8                 5.1         9.7          (168)                                       (55)                                   8.1        (24.8)
                              IT Services                         14.3         30.0               17.3        26.1              65                                       (76)                                  13.8          11.6
                              Media                                 5.3          1.0                7.8       (2.4)             76                                      (116)                                   9.5          32.8
                              Mid Caps                            (1.0)          8.1            (10.9)          0.4          (233)                                      (162)                                (19.5)           4.0
                              Oil & Gas*                          (8.8)        13.5             (15.9)        (7.5)          (186)                                      (493)                                (13.8)        (10.8)
                              Pharmaceuticals                       1.8        14.4               (4.7)       15.2           (135)                                         14                                  48.0          16.9
                              Steel - Metals                      (6.5)          5.0                0.3       (3.5)             99                                      (128)                                   2.0         (9.0)
                              Paints                              12.7         22.0               15.6        16.1              34                                       (69)                                  13.6          16.9
                              Print Media                           8.7        12.2               35.8          5.7            526                                      (163)                                  46.8         (2.5)
                              Total                               (1.7)        14.1               (1.4)         5.2              8                                      (170)                                   1.4           0.9
                              Note: *Table has been computed ex of 5 downstream companies under our coverage because of negative numbers
                              Figures are of companies under our coverage Source: Elara Securities Estimates 

                                                                                              Pralay Das • pralay.das@elaracapital.com • +91 22 4062 6808
                                                                                     Mona Khetan • mona.khetan@elaracapital.com • +91 22 4062 6814
                                                                                                                                  Elara Securities (India) Private Limited
                          India

                          Elara Coverage Universe
                          In INR mn
                                                      CMP                                       Net Sales                                       EBIDTA                                         PAT                                         EPS
                                                           Target
Global Markets Research


                          No Name of company         6 Jan           Recomm
                                                            Price                Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%)                          YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%)
                                                     2012
                                                                                                                                       Automobiles
                          1 Hero Motocop             1,735 2,400 Accumulate       59,840   58,293   51,617     2.7    15.9     9,488    9,187     5,766       3.3     64.6     5,965   6,036    5,088     (1.2)    17.2      30      30          25    (1.2)    17.2
                          2 Bajaj Auto               1,457 1,783     Reduce       50,627   52,673   41,771    (3.9)   21.2    10,824 10,461       8,452       3.5     28.1     8,412   8,212    6,671      2.4     26.1      29      28          23     2.4     26.1
                          3 TVS Motors                 47     67 Accumulate       17,529   19,918   16,467   (12.0)    6.5     1,085    1,460     1,171     (25.7)    (7.4)     473     765      558     (38.1)   (15.1)      1       2          1    (38.1)   (15.1)
                                                                                                                                         Cement
                          4 JK Lakshmi                 41     70       Buy         4,082    3,541    3,153    15.3    29.5      775       412         248    88.3    212.8      222      65       46     241.4    381.7       3       1          1    241.4    381.7
                          5 JK Cement                 102    145       Buy         5,644    5,115    4,733    10.3    19.3      862       596         541    44.6     59.3      195      36       18     447.3    964.8       3       1          0    447.3    964.8
                          6 Orient paper               48     75       Buy         5,425    5,066    4,406     7.1    23.1      681       556         763    22.4    (10.8)     312     241      309      29.6      0.9       2       1          2     29.6      0.9
                          7 Shree Cement             2,140 2,350 Accumulate       12,469    8,546    7,796    45.9    59.9     3,422    2,004     1,575      70.7    117.2      515     233      275     121.4     87.3      15       7          8    121.4     87.3
                          8 India Cements              69     95       Buy         9,521   10,891    8,381   (12.6)   13.6     2,072    2,520     1,306     (17.8)    58.7      563     862      287     (34.7)    96.2       2       3          1    -34.7     96.2
                          9 ACC                      1,103 1,237     Reduce       24,259   21,500   19,576    12.8    23.9     4,146    2,204     2,800      88.1     48.1     2,565   1,229    1,784    108.7     43.8      26      12          18   108.7     43.8
                          10 Ambuja                   154    132       Sell       23,303   18,051   17,885    29.1    30.3     5,553    3,115     3,146      78.3     76.5     3,469   1,854    2,160     87.1     60.6       2       1          1     87.1     60.6
                          11 UltraTech               1,151 1,205 Accumulate       46,319   39,098   37,152    18.5    24.7     9,562    5,816     7,078      64.4     35.1     5,121   2,789    3,190     83.6     60.5      18      10          11    83.6     60.5
                          12 Grasim Industries       2,419 2,950       Buy        51,173   56,492   53,845    (9.4)   (5.0)   13,157    9,028 11,202         45.7     17.5     5,934   4,179    5,018     42.0     18.3      65      46          55    42.0     18.3
                                                                                                                                          FMCG
                          13 Hindustan Unilever       397    399 Accumulate       58,412   55,222   50,270     5.8    16.2     8,148    7,384     6,243      10.4     30.5     7,360   6,546    5,869     12.4     25.4       3       3          3     12.4     26.6
                          14 ITC                      202    241 Accumulate       64,133   59,742   54,535     7.4    17.6    23,216 21,080 19,690           10.1     17.9    15,965 15,143    13,891      5.4     14.9       2       2          2      5.4     13.5
                          15 Nestle*                 4,129 4,248     Reduce       20,144   19,631   16,710     2.6    20.6     4,250    4,103     3,298       3.6     28.9     2,764   2,612    2,034      5.8     35.9      29      27          21     5.8     35.9
                          16 Colgate                  983    983     Reduce        6,531    6,572    5,582    (0.6)   17.0     1,186    1,125         746     5.4     59.0     1,020    997      662       2.4     54.0       8       7          5      2.4     54.0
                          17 GCPL                     382    484 Accumulate       12,860   11,860    9,804     8.4    31.2     2,208    2,088     1,678       5.7     31.6     1,451   1,402    1,188      3.5     22.1       4       4          4      3.5     22.1
                          18 Tata Global Beverages     94     92     Reduce       17,627   16,120   16,024     9.3    10.0     1,775    1,175     1,781      51.0     (0.3)     909     839      720       8.3     26.2       1       1           1     8.3     26.2
                          19 Dabur                     99    120 Accumulate       13,534   12,623   10,800     7.2    25.3     2,734    2,366     2,095      15.6     30.5     1,960   1,739    1,544     12.7     26.9       1       1          1     12.7     26.8
                          20 Marico                   152    160 Accumulate       10,140    9,745    8,177     4.1    24.0     1,333    1,167         997    14.3     33.8      857     783      695       9.5     23.3       1       1          1      9.5     23.3
                                                                                                                                        Hospitality
                          21 EIH                       86    105 Accumulate        3,463    2,372    3,011    46.0    15.0     1,198      294     1,046     307.9     14.6      563     166      284     239.4     98.3       1       0          1    239.4     98.3
                          22 IHCL                      60     83 Accumulate        5,484    3,576    4,853    53.4    13.0     1,634      387     1,443     322.3     13.3      751      81      503     824.9     49.3       1       0          1    824.9     33.8
                                                                                                                                       Infrastructure
                          23 HCC                       18              Sell       10,042    8,302   10,025    20.9     0.2     1,322      954     1,259      38.7      5.0     (192)   (377)     120     (49.1) (259.6)      (0)     (1)         0    (49.1) (259.6)
                          24 Simplex Infra            171              Buy        12,750   13,220   11,667    (3.6)    9.3     1,270    1,190     1,076       6.7     18.1      195     179      232       8.9    (16.1)      4       4          5      8.9    (16.1)
                          25 IRB                      125            Reduce        6,329    7,359    6,688   (14.0)   (5.4)    2,940    3,215     2,936      (8.5)     0.2      999    1,101    1,330     (9.2)   (24.9)      3       3          4     (9.2)   (24.9)
                          26 ITNL                     158              Buy        13,170   12,555    7,337     4.9    79.5     2,933    3,567     2,207     (17.8)    32.9      753    1,162     616     (35.2)    22.1       4       6          3    (35.2)    22.1
                          27 NCC                       35            Reduce       13,708   10,903   13,355    25.7     2.6     1,339    1,032     1,276      29.8      4.9      281     114      404     146.1    (30.6)      1       0          2    146.1    (30.6)
                          28 IVRCL Infra               31           Accumulate    14,782   10,461   14,188    41.3     4.2     1,347      938     1,404      43.7     (4.0)     255      81      423     213.0    (39.7)      1       0          2    213.0    (39.7)
                          29 Sadbhav                  100              Buy         6,533    4,304    4,762    51.8    37.2      672       453         529    48.3     27.1      301     181      264      66.1     14.2       2       1          2     66.1     14.2
                          30 Madhucon                  50              Buy         4,614    4,160    3,521    10.9    31.0      522       540         448    (3.3)    16.5       43      60      115     (28.7)   (62.5)      1       1          2    (28.7)   (62.5)
                          31 J Kumar                  169           Accumulate     2,823    1,856    2,501    52.1    12.9      387       316         356    22.1      8.5      190     145      180      30.7      5.7       7       5          6     30.7      5.7
                          32 MBL Infra                116              Buy         2,499    1,504    2,653    66.2    (5.8)     310       204         400    51.9    (22.5)     118      75      228      57.1    (48.4)      7       4          13    57.1    (48.4)


                                                                                                                                                                                                     1
                                                                                                                                                                                                                    Elara Securities (India) Private Limited
                                                       CMP                                       Net Sales                                       EBIDTA                                          PAT                                          EPS
                                                            Target
                          No Name of company          6 Jan           Recomm
                                                             Price                Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%)                            YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%)
                                                      2012
Global Markets Research


                                                                                                                                         IT Services
                          33 Infosys                  2,832 2,800     Reduce       92,678   80,990   71,060    14.4     30.4    30,245 25,140 23,630           20.3     28.0    22,550 19,060    17,800      18.3     26.7      33      30          30      10.7      9.7
                          34 TCS                      1,169 1,300 Accumulate      134,058 116,335    96,634    15.2     38.7    40,957 33,841 28,997           21.0     41.2    27,663 23,010    23,698      20.2     16.7      12      12          11      (4.7)     5.9
                          35 Wipro                     406    370     Reduce       97,261   90,070   78,202     8.0     24.4    17,398 17,322 16,001            0.4      8.7    12,749 13,009    13,188      (2.0)    (3.3)      5       5           5      (2.7)     1.0
                          36 HCL Tech                  418    540       Buy        52,148   38,884   38,884    34.1     34.1     9,239   6,346     6,346       45.6     45.6     5,381   3,997    3,997      34.6     34.6       7       7           5      (3.6)    49.2
                          37 Tech Mahindra             599    600       Sell       14,924   13,333   12,111    11.9     23.2     2,368   2,043     2,498       15.9     (5.2)    2,008   1,916    2,061       4.8     (2.6)     15      11          16      44.2     (3.8)
                          38 Mphasis                   307    285       Sell       13,138   12,936   13,454     1.6     (2.3)    2,347   2,516     3,204       (6.7)   (26.7)    1,830   1,948    2,840      (6.1)   (35.6)     11      12          11     (10.0)     2.0
                                                                       Under
                          39 Patni                     466    500                   9,618    9,453    8,200     1.7     17.3     1,343   1,324     1,674        1.5    (19.8)     842    1,180    1,765     (28.6)   (52.3)      7       6          13      17.4    (44.6)
                                                                      Review
                          40 Persistent Systems        314    440       Buy         2,668    2,382    1,949    12.0     36.9      517     446          428     15.9     20.8      322     324      362       (0.6)   (11.1)      8       7           9      17.6     (9.6)
                                                                                                                                           Media
                          41 Den Networks               54     82       Buy         2,650    2,566    2,644     3.3      0.2      258     277          268     (6.9)    (3.7)     (13)    110       73     (111.7) (117.5)      (0)      1           1    (111.7) (117.5)
                          42 Dish TV                    59     87 Accumulate        5,065    4,823    3,732     5.0     35.7     1,584   1,218         667     30.0    137.6     (173)   (486)    (443)     (64.3)   (60.9)     (0)     (0)         (0)    (64.3)   (60.9)
                                                                    Under
                          43 TV 18                      31     49                   3,237    3,020    3,155     7.2      2.6      177       62         551    185.8    (67.8)     (35)    (93)     300      (62.3) (111.7)      (0)     (0)          1     (76.3) (107.3)
                                                                   Review
                          44 Sun TV Network            277    343    Buy            4,850    4,513    5,980     7.5    (18.9)    3,731   3,655     5,018        2.1    (25.6)    1,883   1,802    2,255       4.5    (16.5)      5       5           6       4.5    (16.5)
                          45 Zee Entertainment         116    150       Buy         7,481    7,183    7,549     4.1     (0.9)    2,102   2,075     1,541        1.3     36.4     1,506   1,560     200       (3.4)   653.7       2       2           1      (3.4)    67.4
                                                                                                                                          Metals
                          46 JSW Steel                 565    570     Reduce       74,210   76,251   57,714    (0.0)     0.3    13,363 12,890      9,640        0.0      0.4     5,467   6,401    3,823      (0.1)     0.4      25      29          17      (0.1)     0.4
                          47 SAIL                       84     80     Reduce      120,125 108,367 111,432       0.1      0.1    14,114 11,842 16,261            0.2     (0.1)   10,623 10,034    11,075       0.1     (0.0)      3       2           3       0.1     (0.0)
                          48 Tata Steel                364    450 Accumulate      285,091 325,075 286,062      (0.1)    (0.0)   27,741 24,596 29,413            0.1     (0.1)    8,623   2,124    8,807       3.1     (0.0)      8       2           8       3.1     (0.0)
                          49 Hindustan Zinc            124    165       Buy        20,274   26,368   26,302    (0.2)    (0.2)   11,628 14,648 15,073           (0.2)    (0.2)   10,849 13,686    12,896      (0.2)    (0.2)      3       3           3      (0.2)    (0.2)
                          50 Sterlite Industries        95           Accumulate    94,303 101,957    82,943    (0.1)     0.1    21,435 24,820 19,406           (0.1)     0.1     8,292 10,277    11,052      (0.2)    (0.2)      2       3           3      (0.2)    (0.2)
                          51 Hindalco Industries       119    146 Accumulate       58,222   62,719   59,746    (0.1)    (0.0)    6,993   6,692     7,401        0.0     (0.1)    4,830   5,025    4,603      (0.0)     0.0       3       3           2      (0.0)     0.0
                          52 National Aluminum          55     57     Reduce       17,991   16,140   14,250     0.1      0.3     2,075   1,527     3,715        0.4     (0.4)    1,221   1,394    2,560      (0.1)    (0.5)      0       1           1      (0.1)    (0.5)
                                                                                                                                          Midcap
                          53 Piramal_Glass              90    186       Buy         3,445    3,229    3,106     6.7     10.9      689     729          717     (5.5)    (3.9)     198     230      231      (13.8)   (14.5)      2       3           3     (13.8)   (15.0)
                          54 TTK Prestige             2,518 3,320       Buy         3,262    3,035    2,365     7.5     37.9      524     498          422      5.3     24.2      348     337      293        3.2     18.8      31      30          26       3.2     18.8
                          55 ENIL                      202    310       Buy          804      701     1,458    14.7    (44.9)     288     174          363     65.5    (20.7)     165      83      (52)      98.8 (415.6)        3       2          (1)     98.8 (415.6)
                          56 ESS DEE                   148    144       Buy         1,673    1,601    1,869     4.5    (10.5)     404     397          539      1.8    (25.1)     208     189      380       10.3    (45.3)      6       6          12      10.3    (45.3)
                          57 Navneet Publication        53     80       Buy          867     1,114     749    (22.2)    15.8      116     187          101    (37.8)    15.8       70     115       62      (38.8)    14.6       0       0           0     (38.8)    13.8
                          58 Techno Electric & Egg.    190    260       Buy         1,924    2,422    1,526   (20.5)    26.1      504     848          372    (40.6)    35.2      206     532      236      (61.2)   (12.6)      4       9           4     (60.6)   (18.6)
                                                                                                                                         Oil & Gas
                          59 Oil India                1,116 1,500 Accumulate       29,540   32,703   23,887    (9.7)    23.7    14,622 16,202 12,281           (9.7)    19.1     9,538 11,385     9,080     (16.2)     5.0      40      47          38     (16.2)     5.0
                          60 ONGC                      256    300 Accumulate      187,604 226,163 185,864     (17.0)     0.9 112,375 141,596 113,138          (20.6)    (0.7)   59,662 86,422    70,832     (31.0)   (15.8)      7      10           8     (31.0)   (15.8)
                          61 Reliance Industries       718    800     Reduce      735,799 785,690 597,890      (6.3)    23.1    82,037 98,440 95,450          (16.7)   (14.1)   48,759 57,030    51,360     (14.5)    (5.1)     15      17          16     (14.5)    (5.1)
                          62 Cairn India               339    365 Accumulate       29,439   26,522   30,964    11.0     (4.9)   23,451 20,651 25,418           13.6     (7.7)   19,389   7,630   20,101     154.1     (3.5)     10       4          11     154.1     (3.8)
                          63 Essar Oil                  57    100       Buy       108,274 130,260 122,330     (16.9)   (11.5)    3,152   5,440     7,590      (42.1)   (58.5)    1,081 (1,660)    2,730    (165.1)   (60.4)      1      (1)          2    (165.1)   (60.4)
                          64 MRPL                       54     58     Reduce      120,180 116,677 103,308       3.0     16.3     2,019    774      5,551      160.9    (63.6)     342     249     3,151      37.2    (89.1)      0       0           2      41.7    (89.1)
                          65 Chennai Petroleum         160    150       Sell      104,229   94,233   83,476    10.6     24.9     1,848 (2,102)     3,474     (187.9)   (46.8)    1,581    732     1,549     115.9      2.0      11       5          10     115.9      2.1


                                                                                                                                                                                                       2
                                                                                                                                                                                                                       Elara Securities (India) Private Limited
                                                         CMP                                     Net Sales                                        EBIDTA                                          PAT                                          EPS
                                                              Target
                          No Name of company            6 Jan          Recomm
                                                               Price              Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%)                             YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ (%) YoY(%)
                                                        2012
Global Markets Research


                          66 Aban Offshore               353     325   Reduce       8,364    7,626    7,780     9.7     7.5     5,027     4,588      5,166      9.6     (2.7)     996      793      620       25.7     60.6      23      18          14     25.7     60.6
                          67 Shiv-Vani Oil & Gas         183     400    Buy         4,045    3,349    3,758    20.8     7.6     1,881     1,448      1,812     29.9      3.8      510      333      700       53.4    (27.1)     11       7          15     53.4    (27.1)
                                                                                                                                                                                         (32,29
                          68 Bharat Petroleum            477     600    Buy       497,740 422,819 366,655      17.7    35.8    30,620 (27,148)       7,284   (212.8)   320.4    17,523             1,874    (154.3)   835.1      48    (89)          5    (154.3)   835.1
                                                                                                                                                                                             3)
                                                                                                                                                                                         (33,64
                          69 Hindustan Petroleum         242     300 Accumulate   389,010 370,302 339,025       5.1    14.7    14,481 (29,437)       6,267   (149.2)   131.1    10,685             2,110    (131.8)   406.3      32    (99)          6    (131.8)   406.3
                                                                                                                                                                                             4)
                                                                                                                                                                                         (74,85
                          70 Indian Oil Corporation      256     310 Accumulate   923,456 891,851 808,973       3.5    14.2    71,273 (53,222) 32,917        (233.9)   116.5    52,356            16,348    (169.9)   220.3      22    (31)          7    (169.9)   220.3
                                                                                                                                                                                             6)
                          71 JBF Industries                92     91   Reduce      19,994   18,541   17,118     7.8    16.8     1,612     2,117      3,033    (23.9)   (46.9)     304      760     1,856     (60.0)   (83.6)      4      10          26    (59.4)   (83.5)
                                                                                                                                            Paints
                          72 Asian Paints              2,660 3,058     Reduce      25,915   22,508   20,996    15.1    23.4     3,900     3,229      3,449     20.8     13.1     2,499   2,087     2,203      19.7     13.4      26      22          23     19.7     13.4
                          73 Kansai Nerolac              855     922 Accumulate     6,610    6,156    5,601     7.4    18.0      859        911       685      (5.6)    25.4      518      571      416       (9.2)    24.6      10      11          8      (9.2)    24.6
                          74 Berger Paints                 90    126    Buy         6,655    6,320    5,492     5.3    21.2      672        654       553       2.8     21.7      450      430      369        4.5     21.8       1       1          1       4.5     21.8
                          75 Akzo Nobel India            766     826   Reduce       3,630    3,015    2,991    20.4    21.4      348        209       292      67.0     19.4      342      263      271       29.8     26.1       9       7          7      29.8     26.1
                          76 HSIL                        122     260    Buy         3,425    2,966    2,769    15.5    23.7      669        528       581      26.7     15.3      295      230      276       28.2      6.9       4       3          4      28.2      6.9
                                                                                                                                        Pharmaceuticals
                          77 Aurobindo Pharma              90     80    Sell       11,200   10,753   11,922     4.2    (6.1)    1,344     1,146      3,195     17.2    (57.9)    (968)    (802)    1,886      20.8 (151.3)       (3)     (3)         6      20.8 (151.3)
                          78 Cadilla healthcare          680     760   Reduce      12,630   12,364   11,668     2.2     8.2     2,589     2,371      2,562      9.2      1.1     1,079   1,027     1,620       5.1    (33.4)      5       5          8       5.1    (33.4)
                          79 Cipla                       338     330 Accumulate    18,357   17,318   15,165     6.0    21.0     4,039     3,914      2,810      3.2     43.7     3,162   3,090     2,327       2.3     35.9       4       4          3       2.3     35.9
                          80 Dr. Reddy's               1,601 1,854 Accumulate      22,825   22,679   18,985     0.6    20.2     4,679     4,705      4,109     (0.5)    13.9     2,994   3,078     2,731      (2.7)     9.6      18      18          16     (2.7)     9.6
                          81 Glenmark                    291     360    Buy         9,500   10,554    7,508   (10.0)   26.5     1,805     2,253      1,664    (19.9)     8.5     1,046     559     1,096      87.2     (4.6)      4       2          4      87.2     (4.6)
                          82 Lupin                       443     460   Reduce      16,873   17,417   14,672    (3.1)   15.0     3,121     3,733      2,542    (16.4)    22.8     2,247   2,669     2,240     (15.8)     0.3       5       6          5     (15.8)     0.3
                          83 Ranbaxy                     439     280    Sell       23,808   20,955   21,288    13.6    11.8     3,173     1,741      2,290     82.3     38.6     2,654 (4,646)     (975)    (157.1) (372.3)       6       4          6      72.8      9.5
                          84 Sun pharma                  500     410    Sell       17,994   18,946   16,011    (5.0)   12.4     5,758     7,840      4,405    (26.6)    30.7     4,233   5,977     3,502     (29.2)    20.9       4       6          3     (29.2)    20.9
                          85 Jubilant Life Sciences      172     260    Buy        10,858   10,501    8,690     3.4    25.0     2,172     2,381      1,322     (8.8)    64.3      931      794      441       17.3    111.1       6       5          3      17.3    111.1
                                                                                                                                          Print Media
                          86 DB Corp                     184     225   Reduce       3,936    3,539    3,482    11.2    13.0     1,131       771      1,148     46.6     (1.5)     704      403      659       74.6      6.7       4       2          4      74.6      6.7
                          87 HMVL                        110     150 Accumulate     1,510    1,542    1,313    (2.1)   15.0      295        314       185      (5.9)    59.5      200      222      117       (9.7)    71.2       3       3          2      (9.7)    71.2
                          88 Jagran Prakashan              93    120    Buy         3,195    3,054    2,860     4.6    11.7      928        790       898      17.5      3.4      530      457      527       15.9      0.6       2       1          2      15.9      0.6
                          89 HT Media                    119     148   Reduce       3,621    3,141    3,269    15.3    10.8      888        513       836      73.1      6.2      677      356      862       90.1    (21.4)      3       2          4      90.1    (21.4)

                          *Note: Nestle: Y/E Dec, Starts from CY10)




                                                                                                                                                                                                        3
                                                                                                                                                                                                                        Elara Securities (India) Private Limited
                          India | IT Services                                                                                                                                                                             11 January 2012
                          Quarterly Preview

                          IT Services
                          Focus squarely on CY12 IT budgets                                                                           Stock prices vis-à-vis Sensex*
                                                                                                                                                        130
                          IT budgets likely to signal a move away from discretionary




                                                                                                                                       Rebased to 100
                                                                                                                                                        110
                          Commentary on CY12 IT budgets is likely to indicate a shift away from                                                         90
                          discretionary to getting more out of flat IT budgets. We expect
Global Markets Research




                                                                                                                                                        70
                          difference in commentary across our coverage on Infosys and HCL                                                               50
                          Tech pointing to tightening of discretionary budgets. We expect                                                               30




                                                                                                                                                              Jan-11




                                                                                                                                                                                                              Jun-11


                                                                                                                                                                                                                                 Aug-11




                                                                                                                                                                                                                                                                                  Jan-12
                                                                                                                                                                        Feb-11
                                                                                                                                                                                  Mar-11
                                                                                                                                                                                           Apr-11
                                                                                                                                                                                                    May-11


                                                                                                                                                                                                                       Jul-11


                                                                                                                                                                                                                                           Sep-11
                                                                                                                                                                                                                                                     Oct-11
                                                                                                                                                                                                                                                              Nov-11
                                                                                                                                                                                                                                                                       Dec-11
                          Infosys to cut its FY12 USD guidance range from 17.1% to 19.1% to
                          16.5% to 17.5%. With the stock price having run up beyond INR2,800,
                                                                                                                                                                       Sensex                                                                Infosys
                          we believe the stock does not price in the risk of a 110bps cut in USD                                                                       TCS                                                                   Wipro
                          guidance. The recent miss from Oracle (on middleware, database and                                                                           HCL Tech                                                              Tech Mahindra
                                                                                                                                                                       Mphasis                                                               Patni
                          application new license sales) is also likely to make managements                                                                            Persistent
                          increasingly cautious on discretionary budgets and Infosys with its                                         Source: Bloomberg

                          31% exposure is poorly placed.                                                                              Price performance (%)*                                                                    3M                        6M                    12M
                                                                                                                                      Sensex                                                                                      0.5                (15.3)                     (21.4)
                                                                                                                                      Infosys                                                                                   15.7                  (4.1)                     (18.6)
                          Negative cross currency on USD revenue; INR a tailwind
                                                                                                                                      TCS                                                                                       12.1                  (1.1)                      (0.2)
                          We expect a negative impact of 100bps to 220bps (QoQ) on the USD                                            Wipro                                                                                     23.7                  (4.5)                     (16.6)
                                                                                                                                      HCL Tech                                                                                    6.1                (16.6)                     (12.2)
                          revenue growth from cross currency headwinds. INR has depreciated                                           Tech Mahindra                                                                             12.6                 (19.2)                     (17.9)
                          by around 11% on a period average basis QoQ. INR revenue is likely to                                       Mphasis                                                                                   (2.9)                (33.5)                     (54.9)
                                                                                                                                      Patni                                                                                     61.9                   35.7                        0.6
                          be upwards of 11% QoQ across most of our coverage stocks. Across
                                                                                                                                      Persistent                                                                                  4.6                (16.9)                     (28.8)
                          the coverage, we expect QoQ volumes to grow in a range capped at                                            Source: Bloomberg
                          5%. We expect Infosys and TCS EBITDA margins to improve by 160bps                                                                                                                      Revenues (INR mn)
                                                                                                                                      Company
                          and 140 bps respectively on currency. Other than Wipro (which                                                                                                                        FY11     FY12E                                           FY13E
                                                                                                                                      Infosys                                                                275,010                      351,408                      413,355
                          reports forex above the line), all other companies will report forex                                        TCS                                                                    386,807                      489,009                      601,042
                          losses with TCS losses likely to stand at INR4.5bn. Infosys and HCL Tech                                    Wipro                                                                  310,542                      368,493                      415,986
                                                                                                                                      HCL Tech                                                               160,343                      208,339                      251,084
                          are best placed with the current currency rates on the forex losses
                                                                                                                                      Tech Mahindra                                                           51,520                       54,998                       61,059
                          front.                                                                                                      Mphasis                                                                 50,366                       50,851                       54,226
                                                                                                                                      Patni                                                                   31,689                       37,492                       39,945
                          Maintain IT as an OW; cut Infosys to a Neutral                                                              Persistent Systems                                                       7,758                       10,521                       12,710

                          We believe that the risk-reward is unfavourably stacked against Infosys                                     Company
                                                                                                                                                                                                               Adjusted PAT (INR mn)
                                                                                                                                                                                                               FY11      FY12E       FY13E
                          at current stock prices in spite of the currency tailwind and would                                         Infosys                                                                 68,230                       86,092                       97,425
                                                                                                                                      TCS                                                                     90,751                      106,818                      129,308
                          recommend cutting our OW position to Neutral. We continue to back                                           Wipro                                                                   44,099                       59,590                       67,531
                          our IT OW through TCS and HCL Tech in spite of expectations of a                                            HCL Tech                                                                68,230                       86,092                       97,464
                                                                                                                                      Tech Mahindra                                                            7,076                        6,950                        7,647
                          relatively soft quarter for HCL Tech (led by softness in enterprise                                         Mphasis                                                                 10,907                        7,844                        6,812
                                                                                                                                      Patni                                                                    6,016                        3,829                        3,996
                          applications business). We believe a slew of deal wins and low                                              Persistent Systems                                                       1,393                        1,409                        1,581
                          valuations will create a floor for the stock. TCS also remains our play on                                  Source: Company, Elara Securities Estimate
                          the ‘cost take out’ slant of the CY12 IT budgets.                                                           *(as on 6 January 2012)


                          Key Financials
                                                                 Revenues (INR mn)                                EBITDA (INR mn)                                                            Adjusted Net Profit (INR mn)
                          Company
                                                     Q3FY12E    Q2FY12 Q3FY11     QoQ(%)    YoY(%)    Q3FY12E   Q2FY12   Q3FY11     QoQ(%)               YoY(%)            Q3FY12E                  Q2FY12                Q3FY11                    QoQ(%)             YoY(%)
                          Infosys                     92,678    80,990   71,060      14.4    30.4     30,245    25,140 23,630         20.3                28.0                   22,550 19,060                            17,800                         18.3             26.7
                          TCS                        134,058   116,335   96,634      15.2    38.7     40,957    33,841 28,997         21.0                41.2                   27,663 23,010                            23,698                         20.2             16.7
                          Wipro                       97,261    90,070   78,202       8.0    24.4     18,543    17,398 16,358           6.6               13.4                   12,982 13,009                            13,057                         (0.2)           (0.6)
                          HCL Tech***                 52,148    46,513   38,884      12.1    34.1      9,239     7,949  6,346         16.2                45.6                    5,381 4,971                              3,997                           8.3            34.6
                          Tech Mahindra               14,924    13,333   12,111      11.9    23.2      2,368     2,043  2,498         15.9                (5.2)                   2,002 1,388                              2,055                         44.2            (2.6)
                          Mphasis*                    13,906    13,138   12,335       5.8    12.7      2,664     2,347  2,574         13.5                  3.5                   1,957 1,830                              2,267                           7.0          (13.7)
                          Patni**                      9,618     9,453    8,200       1.7    17.3      1,632     1,661  1,311         (1.7)               24.5                      977    842                             1,765                         16.0           (44.6)
                          Persistent Systems           2,668     2,382    1,949      12.0    36.9        517       446    428         15.9                20.8                      322    324                               362                         (0.6)          (11.1)
                          Source: Company, Elara Securities Estimate *Y/E Oct, **Y/E Dec, ***Y/E Jun

                                                                                                        Upside/
                          Company           Rating                  Mcap             CMP    Target                    EV/EBITDA (x)                                              P/E (x)                                                    ROE (%)
                                                                                                      Downside
                                                                INR bn USD mn       (INR)     (INR)         (%)    FY11    FY12E     FY13E                    FY11                FY12E               FY13E                     FY11                FY12E              FY13E
                          Infosys           Reduce               1,626 30,844      2,832     2,800        (1.1)     16.3     12.5      10.9                    23.7                 18.8                16.6                     27.8                 31.0               30.9
                          TCS               Accumulate           2,289 43,410      1,169     1,300         11.2     19.4     15.6      12.4                    25.2                 21.4                17.7                     42.0                 37.5               35.2
                          Wipro             Reduce                 997 18,917         406       370       (8.8)     14.3     11.7       9.7                    18.8                 16.7                14.8                     21.0                 22.3               20.4
                          HCL Tech          Buy                    288   5,470        418       540        29.3     10.6      7.7       6.0                    17.0                 12.9                10.7                     21.7                 22.9               22.1
                          Tech Mahindra     Sell                    76   1,447        599       600         0.2      9.8      9.3       8.0                    13.6                 14.0                12.7                     21.8                 17.6               16.3
                          Mphasis           Sell                    64   1,223        307       285       (7.2)      5.9      5.6       5.1                     8.3                  9.7                 9.5                     21.5                 15.8               13.2
                          Patni             Under Review            63   1,188        466       500         7.4      8.5      9.7       8.1                    10.4                 20.8                15.6                     18.4                 11.8               11.2
                          Persistent Sys.   Buy                     13     238        314       440        40.1      6.5      4.7       3.8                    10.7                 10.5                 9.5                     21.7                 18.6               18.1
                          1 US$= INR53 Source: Company, Elara Securities Estimate


                                                                                                      Pralay Das • pralay.das@elaracapital.com • +91 22 4062 6808
                                                                                                                                                              Elara Securities (India) Private Limited
IT Services


Company           INR mn                                                                                Comments
Infosys           Dec-11    Dec-10   YoY(%)    Sep-11 QoQ(%) Expected Guidance/Comments                     Key Issues
Revenue            92,678   71,060     30.4    80,990      14.4 Expect Infosys to touch 3.4% qoq USD        Model in about 120bps of cross
                                                                (best case) against guidance of 3.2% to     currency pressure due to EUR, GBP,
                                                                5.4%                                        AUD
EBITDA             30,245   23,630     28.0    25,140      20.3 Commentary on lateral hires will be         Guidance INR/USD rate assumption at
                                                                interesting                                 48.98 against actual at 50.8
EBITDA %             32.6     33.3   (62)bps     31.0 159 bps Margins for Q2 will be better than            Expect USD guidance cut from 17.1 to
                                                              guided by 50bps                               19.1 to 16.5 to 17.5%
Net Income         22,550   17,800     26.7    19,060      18.3 We are conservative on the margins for      Cut in guidance likely to include a small
                                                                this quarter; there could be upsides        volume impact
EPS (INR)            39.5     31.1     26.7      33.4      18.3 Expect FY12 EPS guidance to be upped        ERP/consulting business will be a
                                                                marginally on INR USD assumptions           measure of discretionary spend
                                                                from 145
TCS
Revenue           134,058   96,634     38.7 116,335        15.2 USD revenue to have the highest cross   Volume growth of around 5% qoq
                                                                currency impact of ~ 200bps (delivering modelled
                                                                3% qoq)
EBITDA             40,957   28,997     41.2    33,841      21.0 Expect utilisation to drag back this        A key risk is any negative slant in
                                                                quarter as channel checks confirm           commentary
                                                                strong hiring
EBITDA %             30.6     30.0   55 bps      29.1 146 bps Promotions this quarter might cut back        FY12 gross additions guidance stood at
                                                              the extent of margin improvement              60k
Net Income         27,663   23,698     16.7    23,010      20.2 Expect hedging losses of around INR         Specifics on the visa issue will be a key
                                                                4.5 bn                                      point and a stock prices
EPS (INR)            14.1     12.1     16.8      11.7      20.2                                             We expect confident commentary from
                                                                                                            TCS management
Wipro
Revenue            97,261   78,202     24.4    90,070       8.0
IT Services        74,213   59,486     24.8    68,294       8.7 Expect USD IT services revenue to be        USD revenue growth of around 1.2%
revenue                                                         1505 mn against top end guidance of         with a 120bps cross currency impact
                                                                1530 mn
EBITDA             18,543   16,358     13.4    17,398       6.6 Expect IT services EBIT margins to          Revision of headcount addition
                                                                improve marginally                          guidance of 14k for FY12 is the key
EBITDA %             19.1     20.9 (185)bps      19.3   (25)bps IT services EBIT margins will fall by       Guidance of above 2% qoq will be
                                                                150bps qoq on wage hike impact              required for stock price to go up
Net Income         12,982   13,057     (0.6)   13,009      (0.2) Fx losses will come into play this         Commentary on hi-tech and telecom
                                                                 quarter                                    will be crucial
EPS (INR)            5.31     5.34     (0.6)     5.31       0.0                                             We do not expect a departure from the
                                                                                                            cautious commentary
Tech Mahindra
Revenue            14,924   12,111     23.2    13,333      11.9 Baking in a flattish qoq from BT (best      BT rebids color will drive stock price;
                                                                case); upside to estimates possible from    expect negative surprises on the call
                                                                BPO
EBITDA              2,368    2,498     (0.7)    2,043      21.5 Wage hike will come in next quarter         Color on Satyam integration,
                                                                                                            acquisition of non BT account to drive
                                                                                                            stock
EBITDA %             15.9     20.6 (400)bps      15.3 130 bps                                               Color on non BT telecom business
                                                                                                            traction to drive stock price
Net Income          2,002    2,055       2.0    1,388      51.0 PAT from Satyam will be incorporated        BT rebid will dominate management
(before Satyam)                                                 with a one quarter lag                      commentary and stock price
EPS (INR)            15.2     15.8       0.7     10.5      51.0                                             We expect clarity on Satyam listing
                                                                                                            timing
HCL Tech
Revenue            52,148   38,884     34.1    46,513      12.1 Expect 3% qoq USD revenue growth            EAS could remain weak even in this
                                                                even after cross currency impact of         quarter
                                                                180bps
EBITDA              9,239    6,346     45.6     7,949      16.2 BPO margins might turn around this          Expect a slew of deal wins to be
                                                                quarter (not built into numbers)            announced in this quarter
EBITDA %             17.7     16.3 140 bps       17.1   63 bps One time bonus effect likely on margins      Positive pricing commentary on these
                                                                                                            deals will drive stock price upsides
Net Income          5,381    3,997     34.6     4,971       8.3 Expect a forex loss of around INR 0.7 bn    Europe commentary crucial to the stock
                                                                (estimated USD 15mn)                        price with 27% of revenue
EPS (INR)             7.7      5.7     34.2       7.1       8.3                                             Stock price movement will hinge on
                                                                                                            forward margin guidance
                                                                                                                                          IT Services

Company               INR mn                                                                                    Comments
Infosys               Dec-11        Dec-10   YoY(%)    Sep-11 QoQ(%) Expected Guidance/Comments                       Key Issues
Patni
Sales (USD mn)           192          183       5.1      191        0.7 Expect flat USD revenue growth on
                                                                        cross currency headwinds
Revenue                 9618         8200      17.3     9453        1.7                                               Views of the iGate on CY12 IT budgets
                                                                                                                      will be interesting for mid cap IT
EBITDA                  1632         1311      24.5     1661      (1.7)   We have taken severance cost to be a        We would look for color on deals to
                                                                          below the line item.                        marginally up estimates
EBITDA %                 17.0         16.0   99 bps      17.6   (60)bps We have adjusted for the affect of            Have modelled a reduction in
                                                                        severance costs                               integration costs qoq
Net Income               977         1,765    (44.6)     842       16.0 Have assumed forex losses on USD              Color on merger plans with iGate and
                                                                        396mn of contracts                            the 'integration roadmap'
EPS (INR)                 7.3         13.2    (44.6)      6.2      17.4                                               Color on delisting is the only stock price
                                                                                                                      driver; results will be a non-event




                                                                                                                                                                   IT Services
Mphasis               Jan-12        Jan-11   YoY(%)    Oct-11 QoQ(%)
Revenue               13,906        12,335     12.7    13,138       5.8 Entire qoq growth is a function of            HP will have a 10 day seasonal
                                                                        currency                                      shutdown in January quarter
EBITDA                 2,664         2,574      3.5     2,347      13.5                                               Management interaction indicated a
                                                                                                                      slowdown in 'owned' business
EBITDA %                 19.2         20.9 (171)bps      17.9 129 bps Direction of EBITDA margin movement             Look for any indications on repricing
                                                                      crucial to stock price                          with HP; remains a risk
Net Income             1,957         2,267    (13.7)    1,830       7.0 Net additions might be marginally             We are not modelling in any recurrence
                                                                        negative                                      of one offs
EPS (INR)                 9.2         10.8    (14.5)      8.7       5.9
Persistent            Dec-11        Dec-10   YoY(%)    Sep-11 QoQ(%)
Revenue                2,668         1,949     36.9     2,382      12.0 Organic volume growth might be                FY12 guidance of USD 220mn runs the
                                                                        higher than our estimates of 3.5%             risk of getting cut
EBITDA                   517          428      20.8      446       15.9                                               Watch out for degrowth in IP revenue
EBITDA %                 19.4         21.9 (257)bps      18.7   65 bps Currency impact on EBITDA margins              Wage hikes will come into play this
                                                                                                                      quarter
Net Income               322          362     (11.1)     324      (0.6)   Tax rate for the quarter will be close to
                                                                          30%
EPS (INR)                 8.1          9.1   (11.1)       8.1     (0.6)                                               USD 89.25 mn of hedges at 47.44 (for
                                                                                                                      next 12 months)
Source: Elara Securities Research
                          India | Oil & Gas                                                                                                                                          11 January 2012
                          Quarterly Preview                                                                                 
                           

                          Oil & Gas
                          Pains continues for PSUs, RIL; Cairn gains                                                                      Price performance (%)*
                                                                                                                                          Sensex
                                                                                                                                                                                      3M
                                                                                                                                                                                      0.5
                                                                                                                                                                                                  6M
                                                                                                                                                                                                (15.3)
                                                                                                                                                                                                             12M
                                                                                                                                                                                                            (21.4)
                                                                                                                                          Oil India                                (14.3)       (13.6)      (18.4)
                          Weak INR, rising under-recoveries to hit Oil PSUs yet again                                                     ONGC                                      (3.1)        (6.3)      (16.7)
                                                                                                                                          Reliance Industries                       (6.4)       (15.9)      (33.9)
                          The weakening INR has meant a sharp rise in under-recoveries,                                                   Cairn India                                26.8          8.3       (0.8)
                          leading to the OMCs staring at Q3FY12 under-recoveries of                                                       Essar Oil                                (23.2)       (55.0)      (58.3)
Global Markets Research




                                                                                                                                          MRPL                                     (10.2)       (34.2)      (27.4)
                          ~INR350bn. Post the price hikes and duty cuts in Jul’11, the annual                                             Chennai Petroleum                        (20.7)       (30.0)      (33.3)
                          under-recoveries were estimated to be ~INR1.2trn; however the weak                                              Aban Offshore                               4.5       (34.9)      (55.6)
                                                                                                                                          JBF Industries                           (22.1)       (44.8)      (52.4)
                          INR has single-handedly lifted this estimated figure to INR1.4trn. The                                          Shiv-Vani Oil & Gas                       (5.7)       (19.2)      (52.7)
                          Government has announced INR150bn support for OMCs in Q3FY12                                                    Bhart Petroleum                          (28.8)       (26.8)      (23.0)
                                                                                                                                          Hindustan Petroleum                      (34.9)       (39.6)      (37.6)
                          (INR300bn for FY12 so far), while upstream companies look certain at                                            Indian Oil Corp.                         (19.2)       (24.1)      (25.1)
                          take a much bigger burden than in H1FY12. The upstream PSUs would                                               Source: Bloomberg
                          have shared ~INR600bn (pre- duty cuts in Jul’11), and we believe that                                           Company
                                                                                                                                                                               Revenues (INR mn)
                                                                                                                                                                             FY11     FY12E                FY13E
                          these companies would now eventually end-up sharing this burden by                                              Oil India                         83,034        98,496            99,756
                          FY12-end anyways, implying a 42% share. This also means that ONGC                                               ONGC                           1,176,106     1,277,511         1,384,489
                                                                                                                                          Reliance Industries            2,658,110     2,686,447         2,717,889
                          and OIL will bear 55% share in H2FY12; however whether it is evenly                                             Cairn India                      102,779       123,983           196,939
                          divided in Q3/Q4 remains to be seen. Assuming the Government’s                                                  Essar Oil                        471,200       555,193           699,867
                                                                                                                                          MRPL                             390,074       520,743           614,546
                          usual pattern for Q4 adjustments, we have assumed 33% sharing for                                               Chennai Petroleum                331,078       407,243           380,175
                          upstream companies in Q3FY12 giving USD62/bbl and INR70/bbl net                                                 Aban Offshore                     33,472        30,427            31,636
                                                                                                                                          Shiv-Vani Oil & Gas               14,622        15,255            15,747
                          realizations for ONGC and OIL respectively.                                                                     Bharat Petroleum               1,536,450     1,904,140         1,777,145
                                                                                                                                          Hindustan Petroleum            1,384,928     1,690,987         1,718,876
                          Weak for RIL, strong for Cairn                                                                                  Indian Oil Corporation         3,106,254     4,597,650         4,623,098
                                                                                                                                          JBF Industries                    64,711        74,655            78,782
                          We expect a weak quarter for RIL driven mainly through soft GRMs of
                                                                                                                                                                             Adjusted PAT (INR mn)
                          ~USD7.5/bbl and lower KGD6 gas volumes at ~42mmscmd. We also                                                    Company
                                                                                                                                                                             FY11      FY12E       FY13E
                          expect weakness in petchem spreads despite better product prices due                                            Oil India                         28,837           33,635        32,371
                                                                                                                                          ONGC                             224,559          263,864       292,632
                          to INR depreciation. However, we expect a sharp rise in other income                                            Reliance Industries              192,498          230,439       239,115
                          due to the cash influx of the BP deal and estimate RIL to report an                                             Cairn India                       63,344           76,369       102,780
                                                                                                                                          Essar Oil                          6,540           11,112        44,612
                          EBITDA of ~INR82bn and net profit of INR48.7bn. Cairn India on the                                              MRPL                              11,762            3,139         9,758
                          other hand, as the sole sector beneficiary of the INR depreciation,                                             Chennai Petroleum                  5,115            2,109         2,856
                                                                                                                                          Aban Offshore                      1,567            3,378         4,031
                          should report strong Q3FY12 numbers due to higher realizations. We                                              Shiv-Vani Oil & Gas                2,294            1,864         2,126
                          also expect Cairn to come out with some positive announcements on                                               Bharat Petroleum                  16,350            5,600        12,800
                                                                                                                                          Hindustan Petroleum               17,036            2,106         9,087
                          field ramp-up/start approvals post the results in the coming months.                                            Indian Oil Corporation            78,307           14,768        57,503
                          Maintain Cairn India as our top pick, maintain Reduce on RIL.                                                   JBF Industries                     5,461            2,465         3,115
                                                                                                                                          Source: Company, Elara Securities Estimate
                                                                                                                                          *(as on 6 January 2012)

                              Key Financials
                                                                      Revenues (INR mn)                                  EBITDA (INR mn)                                 Adjusted Net Profit (INR mn)
                              Company
                                                         Q3FY12E    Q2FY12 Q3FY11 QoQ (%) YoY(%)         Q3FY12E    Q2FY12 Q3FY11 QoQ (%)           YoY(%)    Q3FY12E     Q2FY12 Q3FY11 QoQ (%) YoY(%)
                              Oil India                    29,540    32,703    23,887    (9.7)   23.7      14,622     16,202    12,281      (9.7)      19.1      9,538      11,385     9,080      (16.2)    5.0
                              ONGC                        187,604   226,163 185,864     (17.0)    0.9     112,375   141,596 113,138       (20.6)      (0.7)    59,662       86,422    70,832      (31.0) (15.8)
                              RIL                         735,799   785,690 597,890      (6.3)   23.1      82,037     98,440    95,450    (16.7)     (11.9)    48,759       57,030    51,360      (14.5)  (5.1)
                              Cairn India                  29,439    26,522    30,964     11.0  (4.9)      23,451     20,651    25,418      13.6      (7.7)    19,389        7,630    20,101       154.1  (3.5)
                              Essar Oil                   108,274   130,260 122,330     (16.9) (11.5)       3,152      5,440      7,590   (42.1)     (58.5)      1,081     (1,660)     2,730     (165.1) (60.4)
                              MRPL                        120,180   116,677 103,308        3.0   16.3       2,019        774      5,551    160.9     (63.6)        342         249     3,151        37.2 (89.1)
                              Chennai Petro               104,229    94,233    83,476     10.6   24.9       1,848    (2,102)      3,474 (187.9)      (46.8)      1,581         732     1,549       115.9    2.0
                              Aban Offshore                 8,364     7,626      7,780     9.7    7.5       5,027      4,588      5,166       9.6     (2.7)        996         793       620        25.7   60.6
                              Shiv-Vani Oil                 4,045     3,349      3,758    20.8    7.6       1,881      1,448      1,812     29.9        3.8        510         333       700        53.4 (27.1)
                              Bharat Petroleum            497,740   422,819 366,655       17.7   35.8      30,620   (27,148)      7,284 (212.8)      320.4     17,523     (32,293)     1,874     (154.3) 835.1
                              Hindustan Petroleum         389,010   370,302 339,025        5.1   14.7      14,481   (29,437)      6,267 (149.2)      131.1     10,685     (33,644)     2,110     (131.8) 406.3
                              Indian Oil Corp.            923,456   891,851 808,973        3.5   14.2      71,273   (53,222)    32,917   (233.9)     116.5     52,356     (74,856)    16,348     (169.9) 220.3
                              JBF Industries               19,994    18,541    17,118      7.8   16.8       1,612      2,117      3,033   (23.9)     (46.9)        304         760     1,856      (60.0) (83.6)
                              Source: Company, Elara Securities Estimate
                                                                                                         Upside/
                              Company               Rating            Mcap           CMP     Target                       EV/EBITDA (x)                       P/E (x)                         ROE (%)
                                                                                                        Downside
                                                                 INR bn   USD mn     (INR)     (INR)         (%)       FY11    FY12E      FY13E      FY11      FY12E      FY13E       FY11      FY12E      FY13E
                              Oil India             Accumulate      268     5,092   1,116     1,500         34.4         3.9      3.0        2.8       9.4        8.0        8.4      18.5        19.0       17.6
                              ONGC                  Accumulate    2,187    41,483      256       300        17.3         4.4      3.8        3.0       9.8        8.3        7.5      19.5        19.7       18.8
                              RIL                   Reduce        2,350    44,565      718       800        11.5       11.0      10.1        9.7       6.8        5.1        4.9      12.5        13.2       12.3
                              Cairn India           Accumulate      645    12,237      339       365          7.7        7.3      5.9        4.0     10.2         8.5        6.3      15.8        16.0       17.7
                              Essar Oil             Buy              78     1,482       57       100        74.8         8.2      8.8        4.3     10.1      135.1         4.1      10.0         5.6       19.6
                              MRPL                  Reduce           94     1,790       54        58          7.7        4.2     16.7        6.5       8.9       33.2       10.7      18.0         4.6       13.0
                              Chennai Petro         Sell             24       452      160       150        (6.3)        5.4     33.2        7.4       4.7       11.3        8.4      13.6         5.4        7.0
                              Aban Offshore         Reduce           15       291      353       325        (7.9)        6.4      7.1        6.6     13.5         4.5        3.8        8.9       13.8       14.2
                              Shiv-Vani Oil         Buy               8       160      183       400       119.2         5.1      4.6        4.6       4.2        5.4        4.6      16.1        11.6       11.7
                              Bharat Petroleum      Buy             172     3,267      477       600        25.9         7.7     12.4        8.6     10.4        30.8       13.5      10.7        10.6       12.6
                              Hindustan Petroleum   Accumulate       82     1,551      242       300        24.2         8.6     17.4       10.1       4.8       49.5       10.4      13.6         1.8        7.4
                              Indian Oil Corp.      Accumulate      621    11,777      256       310        21.2         6.4     11.4        6.9       7.5       39.8       10.2      13.6         2.5        9.5
                              JBF Industries        Reduce            7       125       92        91        (0.9)        2.3      2.8        2.7       1.2        2.8        2.2      46.9        16.0       17.7
                              1 US$= INR53 Source: Company, Elara Securities Estimate
                            
                                                                                    Alok Deshpande • alok.deshpande@elaracapital.com • +91 22 4062 6804
                                                                                         Stuart Murray • stuart.murray@elaracapital.com • +91 22 4062 6898
                                                                                                                                                    Elara Securities (India) Private Limited
                          India | Automobiles                                                                                                                                                                                      11 January 2012
                          Quarterly Preview

                          Two wheeler industry
                          Margin twist                                                                                                     Stock prices vis-à-vis Sensex*
                                                                                                                                                                 140
                          Hero Motocorp - margin expansion story continues to unfold
                          The gross margin expansion story that started in Q2FY12 for the                                                                        120




                                                                                                                                                Rebased to 100
                          company is expected to continue in Q3FY12E, as we expect stable
Global Markets Research




                                                                                                                                                                 100
                          realisations and raw material costs adding 132bps to gross margin. We
                          further note that a sequential weakness in raw material prices (though
                                                                                                                                                                 80
                          quite visible in dollar terms, but gets negated by rupee depreciation),
                          as witnessed in Q2FY12 may add to margin surprise. The company                                                                         60
                          may also surprise on lower than expected spend on advertisement




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                                                                                                                                                                                                   Apr-11
                          and brand building costs, although it would again have to take MTM
                          hit of ~300-350mn on royalty payments, due to 11.6% QoQ
                                                                                                                                                                            Sensex                                                                 Hero MotoCorp
                          depreciation in rupee.
                                                                                                                                                                            TVS Motor                                                              Bajaj Auto
                          Bajaj Auto – margin surprise in store                                                                            Source: Bloomberg

                          Similar to Q2FY12, when it surprised on its EBITDA margin on the                                                 Price performance (%)*                                                                        3M                      6M                      12M
                                                                                                                                           Sensex                                                                                        0.5                (15.3)                  (21.4)
                          upside, due to 3.4% uptick in exports realisation on rupee
                                                                                                                                           Hero Motocorp                                                                          (11.0)                      (6.9)                      (8.0)
                          depreciation, Bajaj Auto is expected to repeat the trend in Q3FY12E, if
                                                                                                                                           Bajaj Auto                                                                                (2.8)                        1.4                     9.7
                          not better its last reported margins. We expect exports realisation to
                                                                                                                                           TVS Motor                                                                              (19.5)                    (12.5)                  (29.2)
                          move up by 8% QoQ, and domestic realisation by 2.5% due to better
                                                                                                                                           Source: Bloomberg
                          product mix, leading to a 150bps improvement in EBITDA margins
                                                                                                                                                                                                                               Revenues (INR mn)
                          sequentially and a YoY earnings growth of 26%.                                                                   Company
                                                                                                                                                                                                                      FY11                        FY12E                          FY13E
                          TVS Motor – high operating leverage turns a foe                                                                  Hero Motocorp                                                      193,979                        233,333                           271,860
                                                                                                                                           Bajaj Auto                                                         165,263                        200,209                           232,511
                          With only 1% YoY improvement in volumes, TVS Motor is in for a rude
                                                                                                                                           TVS Motor                                                                 62,891                       74,593                        85,057
                          shock as high operating leverage takes toll on margins. We expect
                                                                                                                                                                                                                       Adjusted PAT (INR mn)
                          15% correction in earnings and contraction of 90bps in operating                                                 Company
                                                                                                                                                                                                                      FY11                        FY12E                          FY13E
                          margins.
                                                                                                                                           Hero Motocorp                                                             20,077                       23,016                        28,101
                          Valuation and recommendations                                                                                    Bajaj Auto                                                                26,152                       31,824                        34,404
                                                                                                                                           TVS Motor                                                                  1,962                        2,546                          2,868
                          We continue to remain positive on Hero Motocorp given comfort over
                                                                                                                                           Source: Company, Elara Securities Estimate
                          volume growth and strong possibility of margin expansion, while we
                                                                                                                                           *(as on 6 January 2012)
                          remain negative on Bajaj Auto over lack of comfort over FY13E volume
                          growth and possibility of high FY13E effective tax rate eroding
                          earnings growth. We turn cautious on TVS Motor, despite cheap
                          valuations, as volume growth appears iffy post weak Q3FY12 volume
                          growth trend.

                          Key Financials
                                                        Revenues (INR mn)                                           EBITDA (INR mn)                                                                Adjusted Net Profit (INR mn)
                          Company
                                          Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ(%)                                                       YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ(%)                                                                           YoY(%)

                          Hero Motocorp      59,840 58,293 51,617              2.7     15.9              9,488     9,187    5,766         3.3                      64.6                  5,965              6,036                   5,088                     (1.2)                      17.2

                          Bajaj Auto         50,627 52,673 41,771           (3.9)      21.2          10,824       10,461    8,452         3.5                      28.1                  8,412              8,212                   6,671                         2.4                    26.1

                          TVS Motor          17,529 19,918 16,467         (12.0)           6.5           1,085     1,460    1,171     (25.7)                      (7.4)                   473                   765                      558                (38.1)               (15.1)

                          Source: Company, Elara Securities Estimate

                                                                                                           Upside/
                          Company          Rating              Mcap                  CMP    Target                           EV/EBITDA (x)                                               P/E (x)                                                    ROE (%)
                                                                                                          Downside
                                                          INR bn USD mn          (INR)           (INR)             (%)     FY11   FY12E    FY13E                       FY11               FY12E               FY13E                      FY11               FY12E              FY13E

                          Hero Motocorp    Accumulate        346       6,571     1,735       2,400                38.3     11.8     8.3                 6.6              17.2                  15.0                  12.3                62.5                 67.0                 62.5

                          Bajaj Auto       Reduce            422       7,995     1,457       1,783                22.4     11.2     8.6                 7.0              16.0                  13.2                  12.2                66.7                 54.6                 44.3

                          TVS Motor        Accumulate         22        421           47           67             44.1      6.1     4.3                 3.4              11.7                      9.0                8.0                21.0                 23.4                 22.4

                          1 US$= INR53    Source: Company, Elara Securities Estimate
                          Note: Ratings are to be changed post Q3FY12 results

                                                                                                                 Mohan Lal•mohan.lal@elaracapital.com•+91 22 40626802
                                                                                                  Pooja Sharma•pooja.sharma@elaracapital.com•+91 22 40626819
                                                                                                                                                                       Elara Securities (India) Private Limited
                          India | Metals                                                                                                                                                                         11 January 2012
                          Quarterly Preview

                          Metals
                          Riding uncertain tides                                                                              Stock prices vis-à-vis Sensex*
                                                                                                                                                 130
                          Rupee depreciation to offset metal price declines
                                                                                                                                                 110




                                                                                                                                Rebased to 100
                          The third quarter of the FY12 was characterised by the depreciation of
                                                                                                                                                  90
                          rupee and decline in the prices of the base metals on the LME. The
Global Markets Research




                                                                                                                                                  70
                          base metal prices declined 12% to 18% QoQ as the global economic
                          uncertainty continued. However, the depreciation in the rupee (11.4%                                                    50

                          QoQ) partially offset the declines in the base metal prices. We believe,                                                30




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                                                                                                                                                                                  Apr-11
                          the performance for non ferrous players will be more or less flattish
                          during Q3FY12 while the same will show a decline YoY due to lower
                          end metal prices. On the ferrous side, we expect integrated players to                                                            Sensex                                                              JSW Steel
                                                                                                                                                            SAIL                                                                Tata Steel
                          post strong performance due to firm steel prices. JSW Steel is likely to                                                          NALCO                                                               Hindalco
                          post sequential EBITDA growth on the back of higher production as                                                                 Hindusthan Zinc                                                     Sterlite
                                                                                                                              Source: Bloomberg
                          well as better raw material security.
                                                                                                                              Price performance (%)*                                                              3M                       6M                   12M
                          Volumes not expected to provide positive surprise                                                   Sensex                                                                               0.5                   (15.3)                (21.4)
                                                                                                                              JSW Steel                                                                            2.1                   (36.5)                (48.7)
                          The domestic economy hasn’t been robust in the recent past. The                                     Tata Steel                                                                         (9.2)                   (39.2)                (46.8)
                                                                                                                              SAIL                                                                              (14.7)                   (40.4)                (54.5)
                          same has plagued the capacity utilizations in the country and the                                   NALCO                                                                             (10.8)                   (35.4)                (44.6)
                          ferrous players have been facing the lower capacity utilizations.                                   Hindalco                                                                           (1.2)                   (37.3)                (52.8)
                          However, the steel consumption has posted an increase in the third                                  Hin Zinc                                                                             9.4                    (9.0)                 (9.2)
                                                                                                                              Sterlite Ind.                                                                      (9.2)                   (44.7)                (48.3)
                          quarter of FY12 but still is lower than the previous growth rates, which                            Source: Bloomberg
                          equaled or surpassed GDP growth.                                                                                                                                        Revenues (INR mn)
                                                                                                                              Company
                                                                                                                                                                                                FY11      FY12E       FY13E
                          On the non ferrous side, we believe, the quarter will not bring any
                                                                                                                              JSW Steel                                                      238,406    313,647     340,206
                          huge positive or negative surprises. The realizations although suffered                             SAIL                                                           426,871    447,602     490,130
                          on the LME, the Indian companies should thank rupee depreciation for                                Tata Steel                                                   1,151,449 1,044,354 1,130,102
                                                                                                                              Hindustan Zinc                                                  99,121    115,464     135,939
                          offsetting the same to an extent.
                                                                                                                              Sterlite Industries                                            302,481    345,233     418,405
                                                                                                                              Hindalco Industries                                            718,008    782,992     812,153
                          Things to watch out for going ahead
                                                                                                                              National Aluminum                                               59,646     70,795      74,204
                          We believe, the metal sector companies will witness continued margin                                                                                                        Adjusted PAT (INR mn)
                                                                                                                              Company
                          pressure going ahead as well. The lack of full capacity utilizations for                                                                                                    FY11       FY12E       FY13E
                                                                                                                              JSW Steel                                                             17,540      16,729      19,993
                          the ferrous companies and steeper energy costs for the non ferrous                                  SAIL                                                                  47,558      29,527      33,922
                          companies will act as a dampener for profits in the coming years. We                                Tata Steel                                                            66,725      50,669      69,005
                                                                                                                              Hindustan Zinc                                                        46,576      54,713      69,079
                          prefer companies with completed projects and operational mining                                     Sterlite Industries                                                   43,302      65,634      83,862
                          assets in the non ferrous space (Hindustan Zinc), while we continue to                              Hindalco Industries                                                   24,564      32,147      30,338
                          be cautious on the ferrous space.                                                                   National Aluminum                                                     10,262      13,348      14,219
                                                                                                                              Source: Company, Elara Securities Estimate
                                                                                                                              *(as on 6 January 2012)


                          Key Financials
                                                             Revenues (INR mn)                              EBITDA (INR mn)                                                         Adjusted Net Profit (INR mn)
                          Company
                                                Q3FY12E    Q2FY12   Q3FY11   QoQ(%)    YoY(%) Q3FY12E    Q2FY12   Q3FY11   QoQ(%)                  YoY(%) Q3FY12E                          Q2FY12              Q3FY11                QoQ(%)                 YoY(%)
                          JSW Steel            74,210 76,251 57,714            (2.7)     28.6   13,363   12,890    9,640       3.7                   38.6            5,467                  6,401               3,823                    (14.6)               43.0
                          SAIL                120,125 108,367 111,432           10.9      7.8   14,114   11,842   16,261      19.2                 (13.2)           10,623                 10,034              11,075                       5.9              (4.1)
                          Tata Steel          304,411 325,075 286,062          (6.4)      6.4   27,741   24,596   29,413      12.8                  (5.7)            8,623                  2,124               8,807                    305.9               (2.1)
                          Hindustan Zinc       20,274 26,368 26,302           (23.1)   (22.9)   11,628   14,648   15,073    (20.6)                 (22.9)           10,849                 13,686              12,896                    (20.7)             (15.9)
                          Sterlite Industries  94,303 101,957 82,943           (7.5)     13.7   21,435   24,820   19,406    (13.6)                   10.5            8,292                 10,277              11,052                    (19.3)             (25.0)
                          Hindalco Industries 58,222 62,719 59,746             (7.2)    (2.6)    6,993    6,692    7,401       4.5                  (5.5)            4,830                  5,025               4,603                     (3.9)                4.9
                          National Aluminum 17,991 16,140 14,250                11.5     26.3    2,075    1,527    3,715      35.9                 (44.1)            1,221                  1,394               2,560                    (12.4)             (52.3)
                          Source: Company, Elara Securities Estimate

                                                                                                          Upside/
                          Company                 Rating                 Mcap          CMP Target                    EV/EBITDA (x)          P/E (x)           ROE (%)
                                                                                                         Downside
                                                                    INR bn   USD mn (INR)       (INR)         (%) FY11 FY12E FY13E FY11 FY12E FY13E FY11 FY12E FY13E
                          JSW Steel               Reduce               126     2,389 565          570          1.0  5.5    4.8     4.2  7.0    5.8   5.2 13.0    9.4  10.1
                          SAIL                    Reduce               348     6,604   84          80        (5.1)  5.0    7.8     7.5 11.8   10.2   8.3 13.5    7.8   8.5
                          Tata Steel              Accumulate           349     6,616 364          450        23.7   5.6    7.0     6.0  6.1    8.0   5.9 22.1   13.5  16.8
                          Hindustan Zinc          Buy                  522     9,909 124          165        33.4   6.8    4.2     3.2 11.2    8.4   7.5 22.9   24.6  22.2
                          Sterlite Industries     Accumulate           319     6,049   95         150        58.1   3.9    1.9     1.3  7.2    4.2   3.7  8.9   16.8  22.3
                          Hindalco Industries     Accumulate           227     4,310 119          146        23.0   6.4    5.7     5.4  9.2    7.0   7.4  9.0    9.3   7.7
                          National Aluminum       Reduce               141     2,669   55          57          4.4  6.6    5.0     4.4 14.0   10.8  10.1  9.5   11.4  11.1
                          1 US$= INR53 Source: Company, Elara Securities Estimate


                                                                       Ravindra Deshpande •ravindra.deshpande@elaracapital.com•+91 224062 6805
                                                                                                                                                       Elara Securities (India) Private Limited
                          India | FMCG                                                                                                                                                                                             11 January 2012
                          Quarterly Preview

                          FMCG
                          Growth not under question                                                                                         Stock prices vis-à-vis Sensex*
                                                                                                                                                              150
                          Coverage universe expected to report 18% topline growth




                                                                                                                                             Rebased to 100
                                                                                                                                                              125
                          We expect our FMCG universe to register robust topline growth of
                          ~18% YoY in Q3FY12, driven by healthy volumes and price hikes. In                                                                   100
Global Markets Research




                          our large cap coverage, companies like Hindustan Unilever, ITC and                                                                   75
                          Nestle are expected to post YoY sales growth of 16.2%, 17.6%, and
                                                                                                                                                               50
                          20.6% respectively; while mid-caps should see Dabur (25%) and




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                          Marico (24%) in the vanguard. Godrej Consumer would likely post
                          31% growth on the back of the Darling group acquisition.
                                                                                                                                                                         Sensex                                                                    Hindustan Uni.
                                                                                                                                                                         ITC                                                                       Nestle
                          Price hikes, benign raw material spur margins                                                                                                  Colgate                                                                   Godrej Cons. Pro.
                                                                                                                                                                         Tata Global Bev.                                                          Dabur
                          Price hikes, benign raw materials (baring few like palm oil and Mentha                                                                         Marico
                          oil) are expected to boost margins on YoY basis to most players in                                                Source: Bloomberg

                          Q3FY12. We expect our coverage universe EBITDA margin to expand                                                   Price performance (%)*                                                                        3M                         6M                  12M
                                                                                                                                            Sensex                                                                                         0.5              (15.3)                      (21.4)
                          by 119bps YoY to 15.5% (excluding ITC) in Q3FY12. The biggest                                                     Hindustan Unilever                                                                           23.3                 20.3                        23.7
                          contributors to EBITDA margin expansion are expected to be HUL                                                    ITC                                                                                            4.1                 2.7                        13.9
                                                                                                                                            Nestle                                                                                       (1.7)               (3.5)                         7.7
                          (153bps), Nestle (136bps) and Colgate (479bps) on lower ad spend vs
                                                                                                                                            Colgate                                                                                      (1.4)               (1.6)                        14.9
                          Sensitive launch related high expenses in Q3FY11). Average palm oil                                               Godrej Consumer Pro.                                                                         (4.9)              (14.4)                       (3.0)
                          price, used for soaps, was up by 1.3% over the past three months and                                              Tata Global Beverages                                                                        15.3                (9.4)                      (15.8)
                                                                                                                                            Dabur                                                                                        (1.2)              (11.6)                       (2.6)
                          is on a firm footing with continuing rupee depreciation. Higher palm                                              Marico                                                                                         5.3                 0.7                        19.1
                          oil price could impact HUL’s and GCPL’s margins in Q4FY12; however                                                Source: Bloomberg
                                                                                                                                                                                                                           Revenues (INR mn)
                          judicious price hikes and stable LAB (Linear Alkyle Benzene) prices                                               Company
                                                                                                                                                                                                                        FY11        FY12E        FY13E
                          (used for detergent) is expected to arrest margin contraction. Copra                                              Hindustan Unilever                                                       194,011      224,828      257,714
                                                                                                                                            ITC                                                                      211,676      249,739      286,160
                          (coconut oil), cocoa (chocolate), high-density polyethylene (HDPE) and                                            Nestle**                                                                  62,547       75,505       90,838
                          coffee have declined by 10%, 18.4%, 4% and ~10.4% respectively over                                               Colgate                                                                   22,206       26,057       29,846
                                                                                                                                            Godrej Cons. Products                                                     36,430       47,263       61,711
                          the past three months. Marico, Nestle, and Tata Global Beverage are                                               Tata Global Beverages                                                     59,824       65,560       71,150
                                                                                                                                            Dabur                                                                     40,774       51,646       59,554
                          expected to gain from the correction going ahead.                                                                 Marico                                                                    31,283       39,808       45,563
                                                                                                                                                                                                                         Adjusted PAT (INR mn)
                          Net profit surges by 21%; top picks–HUL, Nestle, Marico & Dabur                                                   Company
                                                                                                                                                                                                                        FY11        FY12E        FY13E
                                                                                                                                            Hindustan Unilever                                                        21,838       26,016       31,894
                          Net profit for our coverage universe is expected to grow by 21.4% YoY                                             ITC                                                                       49,876       59,932       69,822
                          in Q3FY12. The rupee depreciation of 11.6% QoQ could impact                                                       Nestle**                                                                   8,187       10,132       12,100
                                                                                                                                            Colgate                                                                    4,026         4,292       5,098
                          earnings of GCPL by 14.4% due to MTM loss of INR 261.5mn arising on                                               Godrej Cons. Products                                                      4,883         5,260       7,025
                                                                                                                                            Tata Global Beverages                                                      2,487         3,549       3,688
                          US$50mn inter-company loans in overseas subsidiaries. After recent                                                Dabur                                                                      5,686         6,717       8,113
                          price correction, we find comfort in valuations and earnings growth                                               Marico                                                                     2,486         3,110       4,048

                          prospects of HUL, Nestle, ITC, Marico and Dabur.                                                                  Source: Company, Elara Securities Estimate
                                                                                                                                            *(as on 6 January 2012)                                    **Note: Y/E Dec, Starts from CY10




                          Key Financials
                                                                       Revenues (INR mn)                                   EBITDA (INR mn)                                                                   Adjusted Net Profit (INR mn)
                          Company
                                                           Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%)                 Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%)                                       Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%)
                          Hindustan Unilever                58,412   55,222   50,270          5.8       16.2     8,148    7,384     6,243                     10.4            30.5                 7,360               6,546               5,869                     12.4               25.4
                          ITC                               64,133   59,742   54,535          7.4       17.6    23,216   21,080    19,690                     10.1            17.9                15,965              15,143              13,891                      5.4               14.9
                          Nestle*                           20,144   19,631   16,710          2.6       20.6     4,250    4,103     3,298                      3.6            28.9                 2,764               2,612               2,034                      5.8               35.9
                          Colgate                            6,531    6,572    5,582        (0.6)       17.0     1,186    1,125       746                      5.4            59.0                 1,020                 997                 662                      2.4               54.0
                          Godrej Consumer Products          12,860   11,860    9,804          8.4       31.2     2,208    2,088     1,678                      5.7            31.6                 1,451               1,402               1,188                      3.5               22.1
                          Tata Global Beverages             17,627   16,120   16,024          9.3       10.0     1,775    1,175     1,781                     51.0            (0.3)                  909                 839                 720                      8.3               26.2
                          Dabur                             13,534   12,623   10,800          7.2       25.3     2,734    2,366     2,095                     15.6            30.5                 1,960               1,739               1,544                     12.7               26.9
                          Marico                            10,140    9,745    8,177          4.1       24.0     1,333    1,167       997                     14.3            33.8                   857                 783                 695                      9.5               23.3
                          Source: Company, Elara Securities Estimate
                                                                                                             Upside/
                          Company                 Rating             Mcap           CMP       Target                        EV/EBITDA (x)                                                P/E (x)                                                       ROE (%)
                                                                                                           Downside
                                                               INR bn USD mn        (INR)       (INR)            (%)     FY11     FY12E     FY13E                      FY11                 FY12E                FY13E                    FY11              FY12E               FY13E
                          Hindustan Unilever      Accumulate      858  16,264         397         399            0.5     35.4       28.5      23.4                     39.3                   33.0                 26.9                   83.7                89.0                88.5
                          ITC                     Accumulate    1,576  29,883         202         241           19.3     21.4       17.8      15.0                     31.3                   26.2                 22.5                   33.2                34.5                34.5
                          Nestle*                 Reduce          398   7,551      4,129       4,248             2.9     31.6       25.3      20.6                     48.6                   39.3                 32.9                  114.0                97.9                84.6
                          Colgate                 Reduce          134   2,535         983         983               -    28.8       26.1      21.3                    33.21                 31.15                26.22                   113.4              107.4               116.0
                          GCPL                    Accumulate      124   2,346         382         484           26.7     22.1       18.3      13.1                     25.3                   23.5                 17.6                   36.4                27.7                30.2
                          Tata Global Beverages   Reduce           58   1,097          94          92          (2.1)     11.8       11.9       9.8                     23.3                   16.4                 15.7                     6.5                8.7                 8.6
                          Dabur                   Accumulate      172   3,264          99         120           21.2     23.3       18.6      15.6                     30.3                   25.7                 21.3                   48.9                42.1                39.5
                          Marico                  Accumulate       93   1,773         152         160            5.3     24.0       19.6      15.6                     37.6                   30.0                 23.1                   31.7                29.7                30.0
                          *Note: Y/E Dec, Starts from CY10 1 US$= INR53         Source: Company, Elara Securities Estimate


                                                                                         Himani Singh • himani.singh@elaracapital.com • +91 22 4062 6801
                                                                                       Sumant Kumar • sumant.kumar@elaracapital.com • +91 22 4062 6803
                                                                                                                                                                     Elara Securities (India) Private Limited
                          India | Pharmaceuticals                                                                                                                                                                                  11 January 2012
                          Quarterly Preview

                          Pharmaceuticals
                          Mixed bag                                                                                                              Stock prices vis-à-vis Sensex*
                                                                                                                                                                   150
                          Domestic slowdown and US launches to play out in topline




                                                                                                                                                  Rebased to 100
                                                                                                                                                                   125
                          We expect 14% YoY growth and 3% QoQ growth in our coverage                                                                               100
                                                                                                                                                                    75
                          universe in Q3FY12. The growth in the sector to have major
Global Markets Research




                                                                                                                                                                    50
                          contributions from higher USD conversion value, launches in US and                                                                        25




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                          expansion in semi-regulated market. The benefits from USD
                          appreciation would be partially mitigated by declining currencies of
                                                                                                                                                          Sensex                                                                               Cadilla healthcare
                          emerging market exports, significant import of raw materials and                                                                Cipla                                                                                Dr. Reddy's
                          slowdown in India formulations. We however expect improvement in                                                                Glenmark                                                                             Lupin
                                                                                                                                                          Ranbaxy                                                                              Sun pharma
                          domestic sales for Dr Reddys’ Lab, Glenmark, and Cipla in Q3FY12. The                                                           Aurobindo                                                                            Jubilant Life Sciences
                          growth in operating margin however, has to cope with higher                                                            Source: Bloomberg

                          increase in key costs items. The lag effect of higher raw material prices,                                             Price performance (%)*                                                              3M                       6M                   12M
                                                                                                                                                 Sensex                                                                              0.5                    (15.3)                (21.4)
                          rising employee costs with sticky inflation, and increasing forex debt                                                 Aurobindo Pharma                                                                 (24.2)                    (47.7)                (66.9)
                          with higher interest costs would increase operating and financial                                                      Cadilla healthcare                                                               (11.8)                    (27.1)                (11.5)
                                                                                                                                                 Cipla                                                                              20.4                       3.4                 (6.9)
                          leverage in the sector. Ranbaxy and Lupin would benefit from para-IV                                                   Dr. Reddy's                                                                         7.8                       4.7                 (6.7)
                                                                                                                                                 Glenmark                                                                          (2.3)                     (5.7)                (20.9)
                          launches and inorganic growth.                                                                                         Lupin                                                                             (5.7)                     (1.6)                 (9.5)
                                                                                                                                                 Ranbaxy                                                                          (15.7)                    (18.2)                (27.5)
                          EBITDA to be maintained sequentially, forex to play spoilsport                                                         Sun pharma                                                                          8.4                       0.6                 (0.0)
                                                                                                                                                 Jubilant Life Sciences                                                            (8.4)                    (18.6)                (38.4)
                          With high inflation rate and crude prices, we expect 15% YoY growth                                                    Source: Bloomberg
                          and 5% QoQ decline in EBITDA in Q3FY12. Ranbaxy, Sun Pharma,                                                                                                                                   Revenues (INR mn)
                                                                                                                                                 Company
                          Cipla, and Dr Reddy’s Lab are major contributors of sector EBITDA. Sun                                                                                                                       FY11     FY12E                                          FY13E
                                                                                                                                                 Aurobindo Pharma                                                      43,815                      43,120                      47,822
                          Pharma’s robust contribution is attributed to Taro’s growth in US while                                                Cadilla healthcare                                                    44,647                      54,507                      65,303
                          others are expected to grow from para-IV launches in US.                                                               Cipla                                                                 63,346                      69,946                      79,183
                                                                                                                                                 Dr. Reddy's                                                           74,233                      86,551                      91,982
                                                                                                                                                 Glenmark                                                              29,491                      33,723                      38,734
                          Valuation remains high in comparison with core EPS                                                                     Lupin                                                                 58,069                      69,467                      82,999
                                                                                                                                                 Ranbaxy                                                               89,608                      87,499                     107,260
                          We are underweight on the sector as core-EPS valuations remain high                                                    Sun pharma                                                            57,214                      72,610                      83,062
                                                                                                                                                 Jubilant Life Sciences                                                34,334                      37,814                      42,247
                          despite price correction. With aggravation of macro fundamentals in
                                                                                                                                                                                                                       Adjusted PAT (INR mn)
                          India, we expect PEx compression for the sector, though it would                                                       Company
                                                                                                                                                                                                                       FY11      FY12E       FY13E
                          maintain premium valuation vis-à-vis other sectors due to inherent                                                     Aurobindo Pharma                                                       5,635                         136                        2,438
                                                                                                                                                 Cadilla healthcare                                                     7,612                       9,825                       12,308
                          defensive nature. The majority of large-cap companies have faced                                                       Cipla                                                                  9,896                       9,853                       12,116
                          stagnation in price appreciation over the last six months. We observe                                                  Dr. Reddy's                                                            9,989                      12,944                       13,646
                                                                                                                                                 Glenmark                                                               4,578                       3,917                        4,842
                          that majority companies in our coverage have moderate price                                                            Lupin                                                                  8,626                      10,011                       13,119
                          correction except Ranbaxy and Cipla as expected. While risk-return                                                     Ranbaxy                                                               14,968                       3,485                       15,662
                                                                                                                                                 Sun pharma                                                            18,161                      21,410                       23,845
                          matrix remains unfavourable for overall sector, we believe that CRAMS                                                  Jubilant Life Sciences                                                 2,297                       2,685                        3,117
                          companies, of which Jubilant is in the forefront, have an edge in                                                      Source: Company, Elara Securities Estimate
                          valuations.                                                                                                            *(as on 6 January 2012)

                          Key Financials
                                                                    Revenues (INR mn)                                     EBITDA (INR mn)                                                                     Adjusted Net Profit (INR mn)
                          Company
                                                        Q3FY12E   Q2FY12   Q3FY11 QoQ (%)        YoY(%)    Q3FY12E      Q2FY12     Q3FY11 QoQ (%)                    YoY(%)                Q3FY12E              Q2FY12                   Q3FY11 QoQ (%)                        YoY(%)
                          Cipla                          18,357   17,318     15,165        6.0     21.0      4,039       3,914       2,810          3.2                43.7                      3,162              3,090                 2,327                  2.3              35.9
                          Aurobindo Pharma               11,200   10,753     11,922        4.2     (6.1)     1,344       1,146       3,195         17.2              (57.9)                      (968)               -802                 1,886                 20.8           (151.3)
                          Dr Reddy's Laboratories        22,825   22,679     18,985        0.6     20.2      4,679       4,705       4,109        (0.5)                13.9                      2,994              3,078                 2,731                (2.7)                9.6
                          Glenmark Pharma                 9,500    9,370      7,508        1.4     26.5      1,805       2,253       1,664       (19.9)                 8.5                      1,046                559                 1,096                 87.2              (4.6)
                          Jubilant Organosys             10,858   10,501      8,690        3.4     25.0      2,172       2,381       1,322        (8.8)                64.3                        931                794                   441                 17.3             111.1
                          Lupin                          16,873   17,417     14,672      (3.1)     15.0      3,121       3,733       2,542       (16.4)                22.8                      2,247              2,669                 2,240               (15.8)                0.3
                          Ranbaxy Laboratories *         23,808   20,955     21,288      13.6      11.8      3,173       1,741       2,290         82.3                38.6                      2,654            (4,646)                 (975)              (157.1)           (372.3)
                          Sun Pharmaceuticals            17,994   18,946     16,011      (5.0)     12.4      5,758       7,840       4,405       (26.6)                30.7                      4,233              5,977                 3,502               (29.2)              20.9
                          Zydus Cadila                   12,630   12,364     11,668        2.2       8.2     2,589       2,371       2,562          9.2                 1.1                      1,079              1,027                 1,620                  5.1            (33.4)

                          * Q3 2011 Source: Company, Elara Securities Estimate
                                                                                                             Upside/
                          Company              Rating                 Mcap              CMP      Target                          EV/EBITDA (x)                                             P/E (x)                                                    ROE (%)
                                                                                                            Downside
                                                                  INR bn   USD bn       (INR)     (INR)           (%)      FY11      FY12E       FY13E                    FY11                FY12E                FY13E                  FY11              FY12E             FY13E
                          Cipla                Accumulate            272      5.5         338       346           2.2      19.6        18.9        15.6                   27.5                  27.6                 22.4                 14.5                13.3              14.3
                          Aurobindo Pharma     Sell                   26      0.5          90        52        (42.5)        4.9       10.5        10.3                     4.7                 10.7                 10.5                 23.0                 0.6               9.3
                          Dr Reddy's Lab       Accumulate            271      5.5       1601      1866           16.5      19.3        14.9        14.0                   27.1                  20.9                 19.9                 24.8                24.9              21.2
                          Glenmark Pharma      Accumulate             79      1.6         291       327          12.4      16.7        15.5        12.9                   17.2                  20.1                 16.2                 22.5                13.3              14.2
                          Jubilant Life Sci.   Buy                    28      0.6         173       233          34.3      10.4         9.2         7.8                   12.0                  10.3                  8.9                 10.6                11.2              11.6
                          Lupin                Reduce                197      4.0         443       467           5.4      17.4        14.1        11.5                   22.9                  19.7                 15.1                 26.0                24.0              24.6
                          Ranbaxy Lab*         Sell                  185      3.8         439       281        (36.0)      10.2        19.7        10.6                  129.3                  46.0                 34.3                 16.7                15.5              21.6
                          Sun Pharma           Sell                  516     10.5         498       409        (17.9)      25.1        21.2        18.6                   28.4                  24.1                 21.6                 19.2                19.6              18.5
                          Zydus Cadila         Reduce                139      2.8         681       674         (1.0)      17.2        11.6         9.4                   19.9                  14.2                 11.3                 32.7                33.3              30.8
                          1 US$= INR53 *Q3 2011 Source: Company, Elara Securities Estimate

                                                                                                            Surajit Pal • surajit.pal@elaracapital.com • +91 22 4062 6810
                                                                                                                                                                         Elara Securities (India) Private Limited
                          India | Cement                                                                                                                                                                                   11 January 2012
                          Quarterly Preview

                          Cement
                          Higher prices to cement earnings                                                                            Stock prices vis-à-vis Sensex*
                                                                                                                                                        130
                          Favourable margin scenario to drive earnings




                                                                                                                                       Rebased to 100
                                                                                                                                                        110
                          We expect most cement players to report QoQ and YoY improvement
                          in profits from an increase in cement prices, higher volume and
Global Markets Research




                                                                                                                                                         90
                          positive impact of operating leverage. Improvement in profitability is
                                                                                                                                                         70
                          expected to be much higher for players having presence in northern
                          region (viz Shree Cement) and Gujarat (viz: JK Lakshmi) due to                                                                 50




                                                                                                                                                                                Mar-11
                                                                                                                                                                                         Apr-11
                                                                                                                                                                                                    May-11
                                                                                                                                                                                                               Jun-11
                                                                                                                                                                                                                        Jul-11


                                                                                                                                                                                                                                          Sep-11
                                                                                                                                                                                                                                                   Oct-11
                                                                                                                                                                                                                                                             Nov-11
                                                                                                                                                                       Feb-11
                                                                                                                                                              Jan-11




                                                                                                                                                                                                                                                                      Dec-11
                                                                                                                                                                                                                                 Aug-11




                                                                                                                                                                                                                                                                                 Jan-12
                          significant increase in cement prices and strong demand in these
                          regions. Players in the South (viz: Orient Paper & India Cement) are
                          likely to report modest improvement in earnings due to weak demand                                                      Sensex                                                                                     JK Lakshmi
                                                                                                                                                  JK Cement                                                                                  Orient paper
                          and stable prices.                                                                                                      Shree Cement                                                                               India Cements
                                                                                                                                                  ACC                                                                                        Ambuja
                                                                                                                                                  Grasim                                                                                     UltraTech
                          Q3 volume likely to be up by ~10% YoY                                                                       Source: Bloomberg
                          In Q3FY12, cement industry is expected to report growth in volumes                                          Price performance (%)*                                                                     3M                         6M                  12M
                          of 10% YoY. Even on sequential basis cement volumes are likely to                                           Sensex                                                                                   0.5                 (15.3)                      (21.4)
                                                                                                                                      UltraTech                                                                                4.0                   19.7                        13.8
                          grow by ~9%. Improvement in demand is also attributed to high                                               Ambuja                                                                                   3.1                   21.2                        15.1
                                                                                                                                      ACC                                                                                    (0.4)                   14.5                         8.7
                          spending by the state government (such as UP and Gujarat) prior to                                          India Cements                                                                          (1.6)                  (5.7)                      (35.1)
                          election and strong rural demand.                                                                           Shree Cements                                                                           16.4                   25.8                         9.0
                                                                                                                                      JK Cement                                                                              (6.8)                  (4.7)                      (29.9)
                          Cement prices up ~13.1% YoY                                                                                 Orient paper                                                                          (20.4)                 (14.0)                      (11.0)
                                                                                                                                      JK Lakshmi                                                                               3.6                  (6.6)                      (30.8)
                          All India average cement prices are expected to improve 13.1% YoY                                           Grasim                                                                                   4.1                    9.2                         1.6
                                                                                                                                      Source: Bloomberg
                          due to series of price hikes taken by cement players during Oct-
                                                                                                                                                                                                                   Revenues (INR mn)
                          Nov’11. On QoQ basis we expect cement realisations to improve by                                            Company
                                                                                                                                                                                                                FY11        FY12E                                       FY13E
                                                                                                                                      JK Lakshmi                                                              13,188       15,982                                      19,082
                          ~9% from sharp increase in prices in northern, eastern and central                                          JK Cement                                                               20,831       24,873                                      27,630
                          regions.                                                                                                    Orient paper                                                            19,590       22,768                                      24,895
                                                                                                                                      Shree Cement                                                            35,119       45,591                                      54,177
                                                                                                                                      India Cements                                                           36,224       49,090                                      51,064
                          Cost like to show mix trend                                                                                 ACC                                                                     77,173       94,613                                     109,844
                                                                                                                                      Ambuja                                                                  73,902       83,181                                      98,456
                          We expect players dependent on petcoke (viz Shree Cement, JK                                                UltraTech                                                              136,912     189,146                                      212,558
                                                                                                                                      Grasim Industries                                                      212,690     242,097                                      272,324
                          Cement, JK Lakshmi) to report decline in power& fuel cost due to                                                                                                                       Adjusted PAT (INR mn)
                                                                                                                                      Company
                          softening in petcoke prices on account of slowdown in Europe.                                                                                                                         FY11        FY12E                                      FY13E
                                                                                                                                      JK Lakshmi                                                                 591           879                                      1,487
                          However, players dependent on domestic coal are likely to report                                            JK Cement                                                                  580         1,149                                      1,297
                                                                                                                                      Orient paper                                                             1,431         1,910                                      2,378
                          increase in power& fuel cost due to lower availability of linkage coal                                      Shree Cement                                                             2,440         3,753                                      5,980
                                                                                                                                      India Cements                                                            639.0       4,068.0                                    4,146.3
                          and increase in e-auction prices.                                                                           ACC                                                                     10,425       10,737                                     11,791
                                                                                                                                      Ambuja                                                                  12,350       12,292                                     14,219
                          Net profit to surge                                                                                         UltraTech                                                               13,611       20,067                                     22,514
                                                                                                                                      Grasim Industries                                                       22,789       19,713                                     22,036
                          Increase in revenue and margins of our coverage universe is expected                                        Source: Company, Elara Securities Estimate
                          to translate into ~64.5% QoQ and 44.4% YoY growth in profits.                                               *(as on 6 January 2012)


                          Key Financials
                                                             Revenues (INR mn)                                  EBITDA (INR mn)                                                                   Adjusted Net Profit (INR mn)
                          Company
                                               Q3FY12E     Q2FY12 Q3FY11 QoQ (%)        YoY(%)    Q3FY12E    Q2FY12 Q3FY11 QoQ (%)                      YoY(%)          Q3FY12E                    Q2FY12 Q3FY11 QoQ (%)                                              YoY(%)
                          JK Lakshmi              4,082      3,541    3,153      15.3     29.5         775      412        248    88.3                   212.8               222                         65         46      241.4                                      381.7
                          JK Cement               5,644      5,115    4,733      10.3     19.3         862      596        541    44.6                     59.3              195                         36         18      447.3                                      964.8
                          Orient paper            5,425      5,066    4,406       7.1     23.1         681      556        763    22.4                   (10.8)              312                       241        309         29.6                                       0.9
                          Shree Cement          12,469       8,546    7,796      45.9     59.9       3,422    2,004      1,575    70.7                   117.2               515                       233        275       121.4                                       87.3
                          India Cements           9,521     10,891    8,381    (12.6)     13.6       2,072    2,520      1,306  (17.8)                     58.7              563                       862        287       (34.7)                                      96.2
                          ACC                   24,259      21,500   19,576      12.8     23.9       4,146    2,204      2,800    88.1                     48.1            2,565                     1,229      1,784       108.7                                       43.8
                          Ambuja                23,303      18,051   17,885      29.1     30.3       5,553    3,115      3,146    78.3                     76.5            3,469                     1,854      2,160         87.1                                      60.6
                          UltraTech             46,319      39,098   37,152      18.5     24.7       9,562    5,816      7,078    64.4                     35.1            5,121                     2,789      3,190         83.6                                      60.5
                          Grasim Industries     51,173      56,492   53,845     (9.4)     (5.0)    13,157     9,028    11,202     45.7                     17.5            5,934                     4,179      5,018         42.0                                      18.3
                          Source: Company, Elara Securities Estimate
                                                                                                       Upside/
                          Company             Rating                Mcap           CMP      Target                   EV/Tonne (USD)                                             P/E (x)                                                     ROE (%)
                                                                                                      Downside
                                                               INR bn   USD mn     (INR)      (INR)         (%)     FY11   FY12E      FY13E                    FY11              FY12E                  FY13E                    FY11              FY12E              FY13E
                          JK Lakshmi          Buy                   5        95       41         70        71.1     39.2     44.4       53.8                     8.5                5.7                       -                    5.8                9.8                5.8
                          JK Cement           Buy                  11       201      101        145        43.5     38.5     32.9       32.4                   12.2                 6.1                    3.5                     7.0               11.6               12.6
                          Orient paper        Buy                  10       181       49         75        51.7     53.2     47.9       46.7                     6.7                5.3                    3.1                   18.5                21.2               23.7
                          Shree Cement        Accumulate           73     1,384   2,096      2,350         12.1    115.2   106.6        86.8                   29.9                19.9                    8.8                     8.3               16.3               23.1
                          India Cements       Buy                  21       402       69         95        37.7     59.2     58.5       54.5                   33.2                 5.5                    4.4                     9.4               35.9               29.0
                          ACC                 Reduce              207     3,924   1,102      1,237         12.3    125.2   120.4      113.2                    19.9                18.9                   13.7                   21.3                21.9               22.0
                          Ambuja              Sell                234     4,428      153        132      (13.6)    175.5   173.6      164.2                    18.9                19.0                   12.9                   22.4                22.3               24.1
                          UltraTech           Accumulate          318     6,034   1,142      1,205          5.5    133.3   131.2      116.8                    20.2                15.9                   12.7                   18.2                19.5               21.2
                          Grasim Industries   Buy                 223     4,218   2,428      2,950         21.5    123.3   108.3        79.5                     9.8               11.3                    8.6                   16.5                16.4               16.7
                          1 US$= INR53 Source: Company, Elara Securities Estimate



                                                                     Ravindra Deshpande • ravindra.deshpande@elaracapital.com • +91 22 4062 6805
                                                                                     Ravi Sodah • ravi.sodah@elaracapital.com • +91 22 4062 6817
                                                                                                                                                              Elara Securities (India) Private Limited
    Cement

                                                                                                         Exhibit 2: Fall in petcoke prices to reduce cost
    Outlook & Recommendations
                                                                                                         pressure
    All-India average cement prices have moved up by 13%
                                                                                                                       150                                                                                                                55
    YoY from a series of price hikes administered by players
    post monsoon. With industry entering into busy season,                                                             130                                                                                                                50




                                                                                                                                                                                                                                               (INR/USD)
                                                                                                          (USD/tonn)
    dispatches are also likely to improve. Softening in                                                                110                                                                                                                45
    petcoke prices is also likely to reduce cost pressures for
                                                                                                                        90                                                                                                                40
    certain cement players. All these factors are expected to
    boost cement players’ earnings. However given the                                                                   70                                                                                                                35




                                                                                                                                                                                             Aug-11
                                                                                                                                      Feb-11




                                                                                                                                                                                                      Sep-11
                                                                                                                                                                  May-11




                                                                                                                                                                                                                                 Dec-11
                                                                                                                                                        Apr-11


                                                                                                                                                                           Jun-11




                                                                                                                                                                                                                        Nov-11
                                                                                                                             Jan-11


                                                                                                                                               Mar-11




                                                                                                                                                                                    Jul-11




                                                                                                                                                                                                               Oct-11
    sharp run up in some of the frontline cement stocks we
    remain optimistic on selective stocks. We like Grasim in
    large cap, Shree Cement in mid cap and JK Cement & JK                                                                                                        Richards Bay Coal Spot(LHS)
    Lakshmi in small cap due to their attractive valuations,                                                                                                     Petcoke(LHS)
    cost competency and healthy balance sheets.                                                                                                                  INR/USD(RHS)
                                                                                                         Source: Bloomberg, Elara Securities Research
    Exhibit 1: Cement prices move up post monsoon
                  280
                  270
                  260
     (INR /bag)




                  250
                  240
                  230
                  220
                                 May-11




                                                                                                Dec-11
                        Apr-11




                                                            Aug-11
                                          Jun-11

                                                   Jul-11




                                                                     Sep-11

                                                                              Oct-11

                                                                                       Nov-11




    Source: Elara Securities Research




2
                          India | Media & Entertainment                                                                                                                           11 January 2012
                          Quarterly Preview

                          Media
                          Limited surprises                                                                                              Price performance (%)*
                                                                                                                                         Sensex
                                                                                                                                                                                   3M
                                                                                                                                                                                   0.5
                                                                                                                                                                                                6M
                                                                                                                                                                                             (15.3)
                                                                                                                                                                                                        12M
                                                                                                                                                                                                       (21.4)
                          Only Zee Entertainment to post earnings growth                                                                 HT media                               (17.9)       (28.0)    (19.4)

                          We see limited revenue growth momentum in Q3FY12E for                                                          Dish TV                                (19.5)       (34.3)    (13.6)
                                                                                                                                         Zee                                       2.6       (10.8)    (15.9)
                          broadcasters, notwithstanding the recently concluded festival season,
Global Markets Research




                                                                                                                                         Sun TV                                   19.6       (17.0)    (49.2)
                          as ad growth pick-up post festival season remains weak, even as
                                                                                                                                         TV18                                   (24.4)       (60.3)    (66.8)
                          subscription growth pick-up waits to happen post first phase of                                                Jagran                                 (11.6)       (23.2)    (26.6)
                          digitization (June, 30th). However, base effect is expected to help Zee                                        Den Networks                           (19.8)       (37.2)    (69.8)
                          Entertainment positively, as earnings in Q3FY11E were highly                                                   HMVL                                   (12.5)       (18.9)    (36.3)
                          depressed on sports business losses. On the other hand, Sun TV                                                 DB Corp                                  (7.0)      (20.2)    (29.7)
                          Network will be impacted adversely by the base effect as it released its                                       Source: Bloomberg
                                                                                                                                                                                Revenues (INR mn)
                          successful movie ‘Endhiran’ in the same quarter last year. TV18                                                Company
                                                                                                                                                                           FY11            FY12E       FY13E
                          Broadcast is expected to post minor loss due to launch of new
                                                                                                                                         HT media                       12,142            13,476      15,096
                          channels during the quarter, even as ad growth may pick-up
                                                                                                                                         Dish TV                        14,366            19,829      25,545
                          sequentially.                                                                                                  Zee                            30,136            29,558      34,062

                          Another painful quarter for print media                                                                        Sun TV                         20,135            20,144      23,082
                                                                                                                                         New TV18                       11,115            12,034      14,414
                          Though print players would see low double digit ad revenue growth                                              Jagran                         12,211            13,688      15,330
                          for the quarter, elevated newsprint prices on steep rupee depreciation                                         Den Networks                   10,221            11,736      12,105
                          are expected to offset any operating leverage. All print players except                                        HMVL                             5,204            6,036       6,777
                          HMVL are expected to post moderate to negative earnings growth.                                                DB Corp                        12,652            14,274      17,018
                          We expect HMVL to post another quarter of robust earnings growth                                                                                        PAT (INR mn)
                                                                                                                                         Company
                          on low base and HT media to post a steep fall in earnings on a high                                                                              FY11            FY12E       FY13E
                          base. Further investment in circulation would be a key observable                                              HT media                         1,776            1,884       2,120
                          event post results.                                                                                            Dish TV                        (1,898)            (263)       1,321
                                                                                                                                         Zee                              5,913            6,029       6,869
                          Valuation                                                                                                      Sun TV                           7,698            7,351       8,453
                          While most media stocks are trading at attractive valuations, Q3FY12E                                          New TV18                          219             (139)        626
                          results are expected to provide limited triggers to stock prices, as                                           Jagran                           2,103            2,074       2,398
                                                                                                                                         Den Networks                      375              412         154
                          modest ad revenue growth trend is now expected to spread into
                                                                                                                                         HMVL                              536              797         888
                          FY13E as well. We continue to like players with high exposure to
                                                                                                                                         DB Corp                          2,354            2,107       2,572
                          distribution revenues and strong presence in the value chain, as we
                                                                                                                                         Source: Company, Elara Securities Estimate
                          expect subscription revenues in the pay TV space to pick up from                                               *(as on 6 January 2012)
                          Q1FY13E onwards, even as ad revenue growth remains doubtful.
                          Trend in newsprint prices would be another trigger for print stocks.



                                  n
                          Key Financials
                                                        Revenues (INR mn)                                        EBITDA (INR mn)                                     Adjusted Net Profit (INR mn)
                          Company
                                            Q3FY12E   Q2FY12 Q3FY11 QoQ(%)              YoY(%)   Q3FY12E      Q2FY12 Q3FY11 QoQ(%)             YoY(%)    Q3FY12E      Q2FY12 Q3FY11 QoQ(%)            YoY(%)
                          HT media            3,621     3,141       3,269       15.3      10.8         888       513        836        73.1        6.2       677         356         862        90.1 (21.4)
                          Dish TV             5,065     4,823       3,732         5.0     35.7       1,584     1,218        667        30.0     137.6      (173)       (486)       (443)      (64.3) (60.9)
                          Zee                 7,481     7,183       7,549         4.1    (0.9)       2,102     2,075      1,541          1.3      36.4     1,506       1,560         200       (3.4) 653.7
                          Sun TV              4,850     4,513       5,980         7.5   (18.9)       3,731     3,655      5,018          2.1    (25.6)     1,883       1,802       2,255         4.5 (16.5)
                          New TV18            3,237     3,020       3,155         7.2      2.6         177        62        551       185.8     (67.8)       (35)        (93)        300      (62.3) (111.7)
                          Jagran              3,195     3,054       2,860         4.6     11.7         928       790        898        17.5        3.4       530         457         527        15.9     0.6
                          Den Networks        2,650     2,566       2,644         3.3      0.2         258       277        268        (6.9)     (3.7)       (13)        110          73     (111.7) (117.5)
                          HMVL                1,510     1,542       1,313       (2.1)     15.0         295       314        185        (5.9)      59.5       200         222         117       (9.7)    71.2
                          DB Corp             3,936     3,539       3,482       11.2      13.0       1,131       771      1,148        46.6      (1.5)       704         403         659        74.6     6.7
                          Source: Company, Elara Securities Estimate
                                                                                                        Upside/
                          Company        Rating                 Mcap               CMP      Target                       EV/EBITDA (x)                     P/E (x)                          ROE (%)
                                                                                                      Downside
                                                           INR bn      USD mn      (INR)     (INR)          (%)        FY11   FY12E      FY13E      FY11    FY12E       FY13E      FY11       FY12E   FY13E
                          HT media       Reduce               28          530      119       148             24.5      10.6    9.7         7.7      15.7     14.8        13.2      16.3       14.9     14.5
                          Dish TV        Accumulate           63        1,191       59        87             47.5      25.8   11.2         8.0       NA       NA         40.3       NA         NA      40.3
                          Zee            Buy                 113        2,151      116       150             29.4      13.2   13.7        11.8      20.7     19.1        16.7      16.5       17.2     19.5
                          Sun TV         Buy                 109        2,068      277       343             24.0       6.6    6.9         6.0      14.3     15.0        13.0      37.7       32.2     33.8
                          TV18           Under Review         11          213       31        49             58.3      10.3   18.3         8.8      52.4      NM         19.6       3.8       (2.3)     7.4
                          Jagran         Buy                  29          558       93       120             29.0       8.7    8.6         7.4      14.3     14.3        12.4      33.8       30.0     29.5
                          Den Networks   Buy                   7          134       54        82             51.9       9.2    5.3         5.7      19.1     17.4        46.4       5.0         5.2     2.0
                          HMVL           Accumulate            8          154      110       150             35.9       7.8    6.0         4.6      15.7     10.6         9.5      22.6       18.1     17.0
                          DB Corp        Buy                  34          640      184       225             22.3       8.5    9.0         7.2      14.1     15.8        12.9      31.9       23.3     23.8
                          1 US$= INR53 Source: Company, Elara Securities Estimate


                                                                                                       Mohan Lal•mohan.lal@elaracapital.com • +91 22 4062 6802
                                                                                                                                                   Elara Securities (India) Private Limited
                          India | Infrastructure                                                                                                                                                 11 January 2012
                          Quarterly Preview

                          Infrastructure
                          Base effect respite                                                                                                       Recommendation
                                                                                                                                                    Company                  Elara                   Distress           Upside
                                                                                                                                                                                          CMP
                          Earnings to remain weak despite a seasonally strong quarter                                                               Name                    Rating                      case       Potential (%)
                                                                                                                                                    IRB              Reduce                   125           126                0.8
                          Construction and infrastructure stocks are expected to persist with
                          their poor performance amidst a still challenging macro environment.                                                      ITNL             Buy                      158           160                1.3
Global Markets Research




                          Despite being a strong quarter seasonally, earnings are expected to                                                       Sadbhav          Buy                      102           106                3.9
                          nosedive YoY as a majority of companies remain trapped in the vicious                                                     HCC              Sell                     17             11             (35.3)
                          cycle of higher working capital needsÆ higher borrowingsÆ higher                                                          NCC              Reduce                    35            23             (34.3)
                          interest outgoÆ low profitability, poor return ratios, stretched balance
                                                                                                                                                    IVRCL            Accumulate                31            22             (29.0)
                          sheetsÆ decline in overall industry attractiveness.
                                                                                                                                                    Simplex Infra Buy                         170           129             (24.1)
                          Amidst our coverage universe, revenues are set to register a moderate                                                     Madhucon         Buy                       50            38             (24.0)
                          growth of 16.9% QoQ and 13.8% YoY, led primarily by the base effect.
                                                                                                                                                    J Kumar          Accumulate               168           121             (28.0)
                          While on the operating front, we estimate 5.1%/9.7% QoQ/YoY rise in
                                                                                                                                                    MBL Infra        Buy                      117            99             (15.4)
                          EBIDTA for our universe (OPMs (168bps)/(56bps) QoQ/YoY); on the
                                                                                                                                                    Source: Bloomberg (06 Jan’12), Elara Securities
                          earnings front, rising interest costs and quantum of borrowings are
                          expected to take a heavy toll on the anticipated performance. We
                                                                                                                                                    Price performance (%)                            3M            6M         12M
                          estimate a depressing 24.8% YoY de-growth in earnings for the
                                                                                                                                                    CNX Infra                                   (12.7)         (29.4)       (36.6)
                          quarter; earnings growth however, is expected to be 8.1% QoQ.
                                                                                                                                                    IRB                                         (21.5)         (27.7)       (44.0)
                          Headwinds to persist till Sep’12, pick up in order flows decisive
                                                                                                                                                    ITNL                                        (19.3)         (25.6)       (46.3)
                          The infrastructure sector continues to reel under severe strain given
                                                                                                                                                    Sadbhav                                     (19.1)         (25.4)       (14.5)
                          inconsistent order flows from the public sector coupled with gradual
                                                                                                                                                    HCC                                         (35.1)         (47.3)       (63.7)
                          but continuously declining inflows from the private sector. This
                          coupled with the usual lacunas in basic policy framework relating to                                                      NCC                                         (40.4)         (58.8)       (76.6)

                          the PPP format has dented the developer/investor confidence severely.                                                     IVRCL                                           (9.8)      (56.0)       (75.9)

                                                                                                                                                    Simplex Infra                               (22.6)         (35.0)       (58.0)
                           We re-iterate our sectoral stance that even if the broader operating
                          environment commences easing up, core construction companies may                                                          Madhucon                                    (29.2)         (44.9)       (58.4)

                          take at least a year to repair their balance sheets and come out of the                                                   J Kumar                                         35.8          25.5        (3.1)
                          existing slump. Our Distress Case scenario indicates further possible                                                     MBL Infra                                       (9.5)      (23.7)       (45.2)
                          downsides (assuming continuation of existing operating and financing                                                      Source: Bloomberg
                          challenges till Mar’13) besides identifying potential investment
                          opportunities. We continue to back structurally strong road
                          infrastructure plays in Sadbhav, ITNL and IRB Infra and recommend
                          adding long positions on dips.

                           Key Financials
                                                          Revenues (INR mn)                                              EBITDA (INR mn)                                         Adjusted Net Profits (INR mn)
                           Company
                                           Q3FY12E Q2FY12      Q3FY11       QoQ (%)        YoY (%)    Q3FY12E         Q2FY12     Q3FY11      QoQ (%)     YoY (%)    Q3FY12E       Q2FY12        Q3FY11        QoQ (%)      YoY (%)
                           IRB               6,329     7,359     6,688           (14.0)       (5.4)        2,940       3,215      2,936         (8.5)        0.2        999          1,101          1,330          (9.2)    (24.9)
                           ITNL             13,170    12,555     7,337             4.9        79.5         2,933       3,567      2,207        (17.8)      32.9         753          1,162           616          (35.2)      22.1
                           NCC              13,708    10,903    13,355            25.7         2.6         1,339       1,032      1,276          29.8       4.9         281            114           404          146.1     (30.6)
                           HCC              10,042     8,302    10,025            20.9         0.2         1,322         954      1,259         38.7         5.0       (192)          (377)          120          (49.1)   (259.6)
                           IVRCL Infra      14,782    10,461    14,188            41.3         4.2         1,347         938      1,404         43.7       (4.0)        255             81           423          213.0     (39.7)
                           Simplex Infra    12,750    13,220    11,667            (3.6)        9.3         1,270       1,190      1,076          6.7       18.1         195            179           232             8.9    (16.1)
                           Sadbhav           6,533     4,304     4,762            51.8        37.2          672          453        529         48.3       27.1         301            181           264           66.1      14.2
                           Madhucon          4,614     4,160     3,521            10.9        31.0          522          540        448         (3.3)      16.5             43          60           115          (28.7)    (62.5)
                           J Kumar           2,823     1,856     2,501            52.1        12.9          387          316        356         22.1         8.5        190            145           180           30.7        5.7
                           MBL Infra         2,499     1,504     2,653            66.2        (5.8)         310          204        400         51.9      (22.5)        118             75           228           57.1     (48.4)
                           Total            87,249    74,625    76,696            16.9        13.8        13,042      12,408     11,890          5.1         9.7      2,941          2,722          3,912            8.1    (24.8)

                           Source: Company, Elara Securities Estimates
                           Company                   Revenues (INR mn)               Adjusted PAT (INR mn)                 Adjusted EPS (INR)                       ROE (%)                                 ROCE (%)
                                                 FY12E      FY13E        FY14E      FY12E        FY13E       FY14E       FY12E      FY13E       FY14E       FY12E     FY13E          FY14E      FY12E         FY13E        FY14E
                           IRB                  24,381     28,872    36,179          4,524        4,459      4,286        13.6       13.4        12.9        20.2       17.0          14.3          21.5          17.3      15.2
                           ITNL                 40,482     56,411    69,836          4,329        4,824      5,821        22.3       24.8        30.0        21.3       19.1          19.5          17.9          14.4      12.4
                           Sadbhav              22,092     26,765    31,170          1,196        1,302      1,475         8.0         8.7         9.8       23.5       18.9          17.4          23.4          20.7      18.3
                           HCC                  40,932     42,232    47,300            652        (493)        (94)        1.1       (0.8)       (0.2)        4.3       (3.3)         (0.7)          8.5           7.1       7.3
                           NCC                  50,737     52,780    60,460          1,635        1,060      1,034         6.4         4.1         4.0        7.1         4.4           4.2         10.1           8.6       8.6
                           IVRCL                56,515     58,658    67,560          1,579        1,051      1,197         5.9         3.9         4.5        8.2         5.2           5.6         12.0          10.1      10.4
                           Simplex Infra        47,624     52,392    59,142          1,232          852      1,110        24.8       17.2        22.3        12.0         7.6           9.2         12.6          11.0      11.4
                           Madhucon             17,129     20,269    24,588            324          289        452         4.4         3.9         6.1        5.5         4.7           6.9         11.6          10.6      11.0
                           J Kumar               9,492     10,180    12,956            739          722        817        26.6       26.0        29.4        21.4       17.6          17.0          31.3          25.2      24.7
                           MBL Infra             9,915     10,552    13,009            603          555        594        34.4       31.7        33.9        24.1       18.3          16.7          25.3          19.9      17.8

                           Consolidated numbers for IRB, ITNL and J Kumar                 Source: Elara Securities Estimates

                                                                                                  Abhinav Bhandari•abhinav.bhandari@elaracapital.com • +91 22 4062 6807
                                                                                                                                  Elara Securities (India) Private Limited
                          India | Hospitality                                                                                                                                                                          11 January 2012
                          Quarterly Preview

                          Hospitality
                          Season begins on a positive note                                                                        Stock prices vis-à-vis Sensex*
                                                                                                                                                    110
                          FY12 season begins with 9.6% growth in foreign tourist arrivals
                          Foreign tourist arrivals in Oct-Dec ‘11 were strong, up by 9.6% to




                                                                                                                                   Rebased to 100
                          1.9mn. Although the hospitality business is very sensitive to the overall                                                 90
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                          economic well being, the sector sees strong demand coming from
                          overall buoyant tourist arrivals, up 10% for the year to 6.1mn. INR
                                                                                                                                                    70
                          depreciation of 11.6% in Q3FY12 has been another positive with India
                          emerging as more affordable. During the quarter the average
                          occupancy rate (OR) in six major destinations (Mumbai, Delhi, Kolkata,                                                    50




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                          Chennai, Bengaluru and Goa) remained flattish at 70% YoY while the
                          average room rates (ARRs) dropped 9%YoY to INR9100. Consequently,
                          the average RevPAR (revenue per adjusted room) for premium                                                                                            Sensex                                       EIH                                   IHCL
                          segment hotels was down by 8% to INR6400. We expect Q4FY12 to                                           Source: Bloomberg
                          ring in better occupancies and thereby improvement in ARRs. The                                         Price performance (%)*                                                                     3M                     6M                      12M
                          hospitality sector has slowly but surely recovered in FY12, although                                    Sensex                                                                                     0.5                (15.3)                 (21.4)
                          the global economic sentiment would determine the speed of
                                                                                                                                  EIH                                                                                    (0.5)                       0.2               (14.5)
                          recovery going forward.
                                                                                                                                  Indian Hotels                                                                       (13.3)                    (24.9)                 (40.2)
                          Coverage universe to report 13.8% sales growth in Q3FY12                                                Source: Bloomberg

                          We expect our hospitality universe to register sales growth of ~13.8%                                                                                                                    Revenues (INR mn)
                                                                                                                                  Company
                          YoY in Q3FY12, driven by improved ARR and OR. Both Indian Hotels                                                                                                                FY11                        FY12E                         FY13E
                          and EIH are expected to benefit from the robust demand by reporting                                     EIH                                                                    11,263                       13,967                       14,874
                          topline growth of 13% and 15% respectively. We expect EBIDTA
                                                                                                                                  Indian Hotels                                                          28,625                       32,740                       37,477
                          margins of our coverage spectrum to expand marginally by ~2bps YoY
                          to 31.7% in Q3FY12.                                                                                                                                                              Adjusted PAT (INR mn)
                                                                                                                                  Company
                                                                                                                                                                                                          FY11                        FY12E                         FY13E
                          Valuations compelling for IHCL
                                                                                                                                  EIH                                                                        (52)                      1,349                         1,892
                          We expect the hospitality sector to maintain the demand momentum
                                                                                                                                  Indian Hotels                                                           (873)                             433                      2,318
                          with an improvement in global macros. The ARR and OR are expected
                                                                                                                                  Source: Company, Elara Securities Estimate
                          to retain their expansion in H2FY12. The focus in FY12 and H1FY13                                       *(as on 6 January 2012)
                          would clearly be on new properties be it Pierre for IHCL and Trident
                          BKC, Oberoi Mumbai for EIH. We are positive on the sector, as it
                          revives with strong macro support, and maintain IHCL as our top pick.



                          Key Financials
                                                      Revenues (INR mn)                                   EBIDTA (INR mn)                                                              Adjusted Net Profits (INR mn)
                          Company
                                                                                       F                                   F
                                         Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%) Q3FY12E Q2FY12 Q3FY11 QoQ(%) YoY(%)

                          EIH               3,463    2,372     3,011      46.0       15.0       1,198      294     1,046      307.9                  14.6                    563                     166                     284                239.4                       N.A

                          IHCL              5,484    3,576     4,853      53.4       13.0       1,634      387     1,443      322.3                  13.3                    751                         81                  503                824.9                       N.A

                          Source: Company, Elara Securities Estimate

                                                                                                     Upside/                                                       "EV/Adj. Room
                          Company          Rating              Mcap              CMP     Target                    EV/EBITDA (x)                                                                                                         ROE (%)
                                                                                                    Downside                                                         (INR mn)"
                                                          INR bn USD mn          (INR)      (INR)        (%)     FY11   FY12E     FY13E                   FY11               FY12E                 FY13E                     FY11               FY12E              FY13E

                          EIH              Accumulate         49       933         86        105        21.7     37.8      14.0    12.2                     19.6                      18.9               18.2                (0.2)                       5.2                7.1

                          IHCL             Accumulate         46       871         60         83        38.6     15.1      12.2             8.0                    8.1                 8.1                7.8                (3.1)                       1.3                6.5

                          1 US$= INR53    Source: Company, Elara Securities Estimate




                                                                                       Himani Singh • himani.singh@elaracapital.com • +91 22 4062 6801
                                                                                     Sumant Kumar • sumant.kumar@elaracapital.com • +91 22 4062 6803
                                                                                                                                                          Elara Securities (India) Private Limited
                          India | Paints                                                                                                                                                                                       11 January 2012
                          Quarterly Preview

                          Paints
                          Decisive quarter for volumes                                                                                  Stock prices vis-à-vis Sensex*
                                                                                                                                                             140
                          Volumes likely to hold steady at ~11-12%
                          Post a weak Q2, due to shifting of volumes on account of extended                                                                  120




                                                                                                                                            Rebased to 100
                          monsoons, we expect volume off-take to hold steady at ~11-12% YoY,
Global Markets Research




                                                                                                                                                             100
                          partially hit by high base (last year too sales had shifted to Q3). Despite
                          overall macro-slowdown, volumes have held up for paint companies,
                                                                                                                                                              80
                          though we expect moderation in FY13E and await cues from current
                          quarter. Value growth will continue to remain strong at ~10% YoY                                                                    60
                          driven by sustained price hikes (~10-11% price hikes in FY12YTD, most




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                          recent hike of ~2% taken in Dec, 2011). We expect Asian Paints to post
                          a revenue growth of ~23% YoY in the domestic business while Kansai                                                                           Sensex                                                                  Asian Paints
                                                                                                                                                                       Kansai Nerolac                                                          Berger Paints
                          will post the weakest growth of ~18% YoY due to weak growth in
                                                                                                                                                                       Akzo Nobel India
                          auto particularly passenger vehicles.
                                                                                                                                        Source: Bloomberg
                          Expect sequential dip in gross margins due to currency movement                                               Price performance (%)*                                                                       3M                       6M                      12M
                                                                                                                                        Sensex                                                                                       0.5                 (15.3)                  (21.4)
                          Due to adverse currency movement (~10% rupee depreciation), we
                                                                                                                                        Asian Paints                                                                          (12.2)                     (17.9)                       (6.7)
                          expect gross margins to contract ~50bps QoQ (~30% of inputs are
                                                                                                                                        Kansai Nerolac                                                                               1.8                   (6.7)                      (5.0)
                          imported). However, we highlight, raw material prices, particularly                                           Berger Paints                                                                            (8.8)                   (12.3)                  (10.4)
                          crude oil (~30-40% of inputs are crude derivatives) and Tio2 (~20% of                                         Akzo Nobel                                                                            (15.9)                     (20.2)                       (4.7)
                          total input costs) have started stabilising. Our Paint RM Index indicates                                     Source: Bloomberg
                          a QoQ inflation of ~2% (excluding rupee impact) down from ~7-8%                                                                                                                                  Revenues (INR mn)
                                                                                                                                        Company
                          QoQ inflation in Q1FY12/Q2FY12. Further, ~10-11% price hikes YTD in                                                                                                                     FY11                            FY12                        FY13E
                          FY2012 coupled with favourable base in H2FY12E should curtail gross                                           Asian Paints#                                                            77,062                        94,869                       111,373
                          margin contraction to ~50-100bps in H2FY12E.                                                                  Kansai Nerolac                                                           21,387                        25,538                        29,710
                                                                                                                                        Berger Paints                                                            20,962                        26,418                        31,304
                          Maintain Reduce on Asian Paints and re-iterate Berger as top pick                                             Akzo Nobel                                                               10,876                        13,208                        15,488

                          We wait Q3 quarter for cues/commentary on volume growth and                                                                                                                              Adjusted PAT (INR mn)
                                                                                                                                        Company
                          impact of currency movement and inventory management on gross                                                                                                                           FY11                            FY12                        FY13E
                          margins before taking cuts in our estimates. We maintain Reduce on                                            Asian Paints#                                                             8,432                         9,773                        12,222

                          Asian Paints due to rich valuation and lack of any near term catalysts,                                       Kansai Nerolac                                                            1,806                         2,221                           2,739
                                                                                                                                        Berger Paints                                                             1,483                         1,767                           2,291
                          while we re-iterate Berger Paints as our top pick owing to its superior
                                                                                                                                        Akzo Nobel                                                                1,431                         1,753                           2,047
                          margin management, market share gains driving steady volume
                                                                                                                                        Source: Company, Elara Securities Estimate
                          growth, potential incremental gains in margins likely to play out with                                        Note: # Consolidated Financials
                          product mix enrichment (higher contribution from premium                                                      *(as on 6 January 2012)
                          emulsions) and attractive valuations.




                          Key Financials
                                                         Revenues (INR mn)                                    EBITDA (INR mn)                                                                  Adjusted Net Profit (INR mn)
                          Company
                                             3   2   2   2
                                            Q3FY12E Q2FY12 Q3FY11 QoQ (%)
                                                               1                    YoY (%)    3   2
                                                                                              Q3FY12E       Q2FY12 Q3FY11 QoQ (%)
                                                                                                             2   2     1                                              3   2
                                                                                                                                                             YoY (%) Q3FY12E Q2FY12
                                                                                                                                                                              2   2                                            1
                                                                                                                                                                                                                           Q3FY11 QoQ (%)                                   YoY (%)
                          Asian Paints*       25,915 22,508 20,996        15.1        23.4          3,900    3,229     3,449      20.8                         13.1              2,499                  2,087                   2,203                      19.7                   13.4
                          Kansai Nerolac       6,610   6,156    5,601        7.4      18.0           859       911       685      (5.6)                        25.4                   518                  571                       416                   (9.2)                  24.6
                          Berger Paints        6,655   6,320    5,492        5.3      21.2           672       654       553          2.8                      21.7                   450                  430                       369                       4.5                21.8
                          Akzo Nobel           3,630   3,015    2,991     20.4        21.4           348       209       292      67.0                         19.4                   342                  263                       271                   29.8                   26.1
                          Source: Company, Elara Securities Estimate

                                                                                                  Upside/
                          Company           Rating               Mcap              CMP   Target                        EV/EBITDA (x)                                                 P/E (x)                                                     ROE (%)
                                                                                                 Downside
                                                            INR bn USD mn       (INR)      (INR)      (%)            FY11    FY12E        3
                                                                                                                                       FY13E                       FY11              FY12E                   3
                                                                                                                                                                                                          FY13E                      FY11                FY12E                 3
                                                                                                                                                                                                                                                                            FY13E
                          Asian Paints*     Reduce           255.4   4,820     2,663      3,058      14.8             19.1     17.0      13.5                       30.3               26.1                 20.9                      43.3                 37.5               37.4
                          Kansai Nerolac    Reduce             46.2     871        856        922            7.7     14.8      11.9                 9.8              25.6                  20.8                  16.9                21.4                  22.2                 23.0
                          Berger Paints     Buy                31.0     584         90        126           40.8     14.1      11.4                 8.8              20.8                  17.5                  13.6                22.0                  22.0                 23.8
                          Akzo Nobel        Accumulate         28.5     538        774        826            6.7     14.8      12.7         10.0                     19.9                  16.3                  13.9                13.7                  14.9                 16.2
                          1 US$= INR53     Source: Company, Elara Securities Estimate
                          Note: * Consolidated Financials



                                                                                              Anand Shah • anand.shah@elaracapital.com • +91 22 4062 6821
                                                                                                                                                                   Elara Securities (India) Private Limited
                          India | Midcaps                                                                                                                                                                               11 January 2012
                          Quarterly Preview

                          Midcaps
                          Earnings risk mitigated                                                                                Stock prices vis-à-vis Sensex*
                                                                                                                                                      250
                          Navneet Publications– low earnings beta
                                                                                                                                                      200
                          The current macro risk, pose limited risk to Navneet with 60% revenues




                                                                                                                                     Rebased to 100
                          derived from school publications. We expect topline and bottomline to                                                       150
Global Markets Research




                          grow at CAGR of 18% and 25% respectively over FY11-13E, on the                                                              100
                          back of curriculum changes in Maharashtra and Gujaratstate boards.
                                                                                                                                                      50
                          Further new initiatives like e-learning, school management business
                          and diversification in other states are gaining traction. Q3FY12 is                                                           0
                          seasonally an insignificant quarter; in FY12E it contributed only 14% of




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                          revenues. We expect topline and bottomline to grow at 16% and 15%
                          respectively. At 11x one year forward earnings, it looks attractive,                                                              Sensex                                                                  Piramal_Glass
                                                                                                                                                            Ess Dee                                                                 TTK Prestige
                          considering a healthy ROC of 25%, high competitive barriers and                                                                   ENIL                                                                    Navneet Publication
                                                                                                                                                            Techno Electric & Egg.
                          limited revenue risk.
                                                                                                                                 Source: Bloomberg
                          TTK Prestige – No sharp slowdown                                                                       Price performance (%)*                                                                  3M                        6M                    12M
                                                                                                                                 Sensex                                                                                   0.5                    (15.3)                 (21.4)
                          There is anticipation of sharp deceleration of growth in consumer                                      TTK Prestige                                                                             5.2                     (9.1)                   53.7
                          durables space, butour channel checks with sales heads and company                                     ENIL                                                                                  (19.4)                    (23.5)                 (10.1)
                                                                                                                                 Navneet Publication                                                                   (17.4)                    (19.0)                 (15.0)
                          management indicate brown goods have witnessed minimal impact.                                         Piramal Glass                                                                         (25.5)                    (33.4)                 (22.1)
                          We expect Q3FY12 sales to remain steady with 34% growth on YoY.                                        Techno Electric                                                                        (6.9)                    (16.2)                 (41.8)
                                                                                                                                 ESS DEE                                                                               (18.4)                    (58.6)                 (67.3)
                          However, sharp currency movement will impact Chinese imported raw
                                                                                                                                 Source: Bloomberg
                          material cost. Also the newly commenced capacities will inflate fixed                                                                                                               Revenues (INR mn)
                          cost. In Q3FY11,TTK achieved peak EBITDA margins of 17.9%, thus on                                     Company
                                                                                                                                                                                                            FY11     FY12E                                           FY13E
                          YoY, we expect margins to dip 180bps, leading to PAT growth of 19%.                                    TTK Prestige                                                               7,636                       11,069                        14,637
                                                                                                                                 ENIL                                                                       4,635                        3,264                         3,690
                          Growth of below 20% may correct stock price 10%-15%, which should                                      Navneet Publication                                                        5,494                        6,182                         7,500
                          be a good level to accumulate with long term target of INR3,320.                                       Piramal Glass                                                             12,185                       13,510                        16,303
                                                                                                                                 Techno Electric                                                            7,166                        8,692                        10,588
                          Techno Electric and Engineering – Derisking business                                                   ESS DEE                                                                    6,807                        6,830                         7,837

                                                                                                                                                                                                             Adjusted PAT (INR mn)
                          Techno’s relatively healthy order book of 1.5x sales vis-à-vis peers and                               Company
                                                                                                                                                                                                            FY11                        FY12E                        FY13E
                          diversification in wind business will stand in good stead in the current
                                                                                                                                 TTK Prestige                                                                    837                      1,172                          1,589
                          environment. While EPC is no longer the flavour of the market,                                         ENIL                                                                            349                             581                         644
                          Techno’s wind business has gained traction. The newly commenced                                        Navneet Publication                                                             781                             908                     1,124
                                                                                                                                 Piramal Glass                                                                   930                      1,180                          1,652
                          100MWcapacity and REC offtake at robust prices on the exchange are
                                                                                                                                 Techno Electric                                                            1,128                         1,306                          1,404
                          positives. Over Q3FY12, the EPC is expected to report 13% revenue                                      ESS DEE                                                                    1,180                                816                         902
                          growth while wind business revenue should grow at 50% considering                                      Source: Company, Elara Securities Estimate
                          corporate revenues in Q1FY11.                                                                          *(as on 6January 2012)




                            y
                          Key Financials
                                                       Revenues (INR mn)                               EBITDA (INR mn)                                                                  Adjusted Net Profit (INR mn)
                          Company
                                            Q3FY12E Q2FY12 Q3FY11      QoQ(%)     YoY(%)   Q3FY12E    Q2FY12 Q3FY11      QoQ(%)                       YoY(%)         Q3FY12E                     Q2FY12              Q3FY11                  QoQ(%)                 YoY(%)
                          TTK Prestige        3,262   3,035    2,365       7.5     37.9         524     498       422          5.3                     24.2                    348                   337                      293                      3.2               18.8
                          ENIL                  804    701     1,458     14.7     (44.9)        288     174       363      65.5                       (20.7)                   165                         83                 (52)                 98.8 (415.6)
                          Navneet               867   1,114     749     (22.2)     15.8         116     187       101     (37.8)                       15.8                       70                 115                        62               (38.8)                  14.6
                          Piramal Glass       3,445   3,229    3,106       6.7     10.9         689     729       717      (5.5)                       (3.9)                   198                   230                      231                (13.8)              (14.5)
                          Techno Electric     1,924   2,422    1,526    (20.5)     26.1         504     848       372     (40.6)                       35.2                    206                   532                      236                (61.2)              (12.6)
                          ESS DEE             1,673   1,601    1,869       4.5    (10.5)        404     397       539          1.8                    (25.1)                   208                   189                      380                  10.3              (45.3)
                          Source: Company, Elara Securities Estimate

                                                                                                 Upside/
                          Company           Rating            Mcap               CMP   Target                   EV/EBITDA (x)                                                 P/E (x)                                                    ROE (%)
                                                                                                Downside
                                                          INR bn USD mn       (INR)     (INR)        (%)      FY111   FY12EE       3
                                                                                                                                FY13E                       FY111             FY12EE                   3
                                                                                                                                                                                                    FY13E                     FY111              FY12EE                3
                                                                                                                                                                                                                                                                    FY13E
                          TTK Prestige      Buy               29    541      2,505     3,320        32.6       23.6     16.3      11.8                       33.8               24.1                  17.8                     43.7                40.7               38.2
                          ENIL              Buy               10    182         202       310       53.5        9.3      9.1       7.4                       61.6               18.2                  16.4                     15.2                15.9               18.9
                          Navneet           Buy               13    237          53        80       52.2       12.6     10.8       8.4                       21.4               17.9                  13.7                     22.1                22.6               24.7
                          Piramal Glass     Buy                7    139         123       186       51.7        7.3      6.0       4.7                       10.6                8.4                   6.0                     24.2                24.2               25.4
                          Techno Electric   Buy               11    206         195       260       33.4        7.2      4.9       4.0                       10.2                9.0                   8.2                     20.1                19.3               17.5
                          ESS DEE           Buy                5     90         147       144       (2.4)       3.0      3.1       2.9                        3.7                5.4                   4.9                     16.9                10.6               10.6
                          1 US$= INR53 Source: Company, Elara Securities Estimate



                                                                                   Aliasgar Shakir • aliasgar.shakir@elaracapital.com • +91 22 4062 6816
                                                                                                                                                            Elara Securities (India) Private Limited
                          India

                          Elara Coverage Universe
                          In INR mn


                                                              CMP    Current Mkt Cap                                         Net Sales                      EBIDTA                      PAT                    EPS                   BVPS                      ROE (%)                 ROCE (%)
Global Markets Research


                          No. Name of company                                          Target Price    Recomm
                                                        6 Jan 2012          (INR mn)                                 FY11      FY12E      FY13E     FY11     FY12E   FY13E     FY11    FY12E    FY13E FY11 FY12E FY13E       FY11 FY12E       FY13E   FY11 FY12E FY13E            FY11 FY12E FY13E
                                                                                                                                                    Automobiles
                          1 Hero Motocop                    1,735           346,459          2,400    Accumulate   193,979   233,333     271,860   26,132 35,961     41,555   20,077   23,016   28,101   101   115    141    148.0   195.9    254.3    62.5      67.0     62.5     59.3     58.5    68.0
                          2 Bajaj Auto                      1,457           421,535          1,783      Reduce     165,263   200,209     232,511   33,023 40,389     46,423   26,152   31,824   34,404   90    110    119    169.7   233.0    303.5    66.7      54.6     44.3     66.7     63.1    55.3
                          3 TVS Motors                         47            22,187             67    Accumulate    62,891     74,593     85,057    3,927    5,121    5,897    1,962    2,546    2,868    4      5      6     21.0    24.8     29.1    21.0      23.4     22.4     14.8     19.6    21.9

                                                                                                                                                      Cement
                          4 JK Lakshmi                         41             4,968             70       Buy        13,188     15,982     19,082    1,832    2,700    3,291     591      879     1,487    5      7     12     84.3    89.3     97.8     5.9       8.3      5.9      5.8      9.8     5.8
                          5 JK Cement                         102             7,124           145        Buy        20,831     24,873     27,630    2,642    4,195    4,352     580     1,149    1,297    8     16     19    163.9   177.4    191.9     5.2       9.6     10.0      7.0     11.6    12.6
                          6 Orient paper                       48             9,210             75       Buy        19,590     22,768     24,895    2,951    3,792    4,775    1,431    1,910    2,378    7      9     12     44.4    51.3     61.8    17.2      19.5     20.4     18.5     21.2    23.7
                          7 Shree Cement                    2,140            74,551          2,350    Accumulate    35,119     45,591     54,177    8,856 12,300     14,939    2,440    3,753    5,980   70    105    172    570.1   657.3    799.3    12.8      17.2     23.6      8.3     16.3    23.1
                          8 India Cements                      69            21,226             95       Buy        36,224     49,090     51,064    4,344 11,304     11,752     639     4,068    4,146    0      2      2     33.2     5.5      5.1     1.9      11.4     11.1      9.4     35.9    29.0
                          9 ACC                             1,103           207,102          1,237      Reduce      77,173     94,613    109,844   16,251 17,796     19,142   10,425   10,737   11,791   55     58     63    332.2   361.4    396.4    16.7      16.1     15.8     21.3     21.9    22.0
                          10 Ambuja                           154           235,710           132        Sell       73,902     83,181     98,456   18,236 19,742     23,131   12,350   12,292   14,219    8      8      9     47.9    52.7     58.3    17.9      16.0     16.7     22.4     22.3    24.1
                          11 UltraTech                      1,151           315,333          1,205    Accumulate   136,912   189,146     212,558   25,705 37,156     41,460   13,611   20,067   22,514   57     72     81    381.8   448.3    523.5    17.8      17.3     16.6     18.2     19.5    21.2
                          12 Grasim Industries              2,419           221,794          2,950       Buy       212,690   242,097     272,324   46,832 45,677     51,830   22,789   19,713   22,036   248   215    240 1,573.2 1,766.7 1,985.0      16.9      12.8     12.7     16.5     16.4    16.7
                                                                                                                                                       FMCG
                          13 Hindustan Unilever               397           857,503           399     Accumulate   194,011   224,828     257,714   23,652 29,250     35,459   21,838   26,016   31,894   10     12     15     12.1    14.7     18.3    83.7      89.0     88.5    114.7    126.1   127.4
                          14 ITC                              202         1,575,604           241     Accumulate   211,676   249,739     286,160   71,534 86,200 101,401      49,876   59,932   69,822    6      8      9     20.5    24.1     27.9    33.2      34.5     34.5     46.0     48.4    48.9
                          15 Nestle*                        4,129           398,140          4,248      Reduce      62,547     75,505     90,838   12,497 15,711     19,253    8,187 10,132     12,100   85    105    125     88.7   125.9    170.7   114.0      97.9     84.6    155.1    114.1    93.8
                          16 Colgate                          983           133,640           983       Reduce      22,206     26,057     29,846    4,507    4,965    6,027    4,026    4,292    5,098   30     32     37     28.2    30.6     34.1   113.4     107.4    116.0    153.9    147.1   157.1
                          17 Godrej Consumer Products         382           123,708           484     Accumulate    36,430     47,263     61,711    6,407    7,854   10,807    4,883    5,260    7,025   15     16     22     53.3    64.3     79.4    36.4      27.7     30.2     27.9     18.9    22.3
                          18 Tata Global Beverages             94            57,820             92      Reduce      59,824     65,560     71,150    5,859    5,616    6,697    2,487    3,549    3,688    4      6      6     64.1    68.1     71.2     6.5       8.7      8.6      8.4      8.9    10.0
                          19 Dabur                             99           172,114           120     Accumulate    40,774     51,646     59,554    7,547    9,437   11,047    5,686    6,717    8,113    3      4      5      8.0    10.3     13.3    48.9      42.1     39.5     41.1     34.0    36.0
                          20 Marico                           152            93,457           160     Accumulate    31,283     39,808     45,563    4,098    4,969    6,073    2,486    3,110    4,048    4      5      7     14.9    19.1     24.9    31.7      29.7     30.0     26.9     25.8    28.7

                                                                                                                                                     Hospitality
                          21 EIH                               86            49,184           105     Accumulate    11,263     13,967     14,874    1,396    3,650    4,020     (52)    1,349    1,892   (0)     2      3     64.8    65.8     67.9    (0.2)      5.2      7.1     (6.0)     5.6     6.8
                          22 IHCL                              60            45,910             83    Accumulate    28,625     32,740     37,477    4,379    5,743    8,784    (873)     433     2,318   (1)     1      3     36.7    39.9     44.2    (3.1)      1.3      6.5    (13.7)     2.3     4.8
                                                                                                                                                    Infrastructure
                          23 HCC                               18            10,616                      Sell       40,932     42,232     47,300    5,398    5,406    5,912     652     (493)     (94)    1     (1)    (0)    25.1    23.8     23.2     4.3      (3.3)    (0.7)     8.5      7.1     7.3
                          24 Simplex Infra                    171             8,435                      Buy        47,624     52,392     59,142    4,707    5,038    5,797    1,232     852     1,110   25     17     22    217.0   231.8    251.8    12.0       7.6      9.2     12.6     11.0    11.4
                          25 IRB                              125            41,379                     Reduce      24,381     28,872     36,179   10,939 12,480     14,287    4,524    4,459    4,286   14     13     13     73.2    84.9     96.0    20.2      17.0     14.3     21.5     17.3    15.2
                          26 ITNL                             158            30,597                      Buy        40,482     56,411     69,836   11,549 14,210     16,347    4,329    4,824    5,821   22     25     30    119.7   140.4    166.3    21.3      19.1     19.5     17.9     14.4    12.4
                          27 NCC                               35             9,057                     Reduce      50,737     52,780     60,460    4,876    5,172    5,925    1,635    1,060    1,034    6      4      4     92.7    95.7     98.5     7.1       4.4      4.2     10.1      8.6     8.6
                          28 IVRCL Infra                       31             8,250                   Accumulate    56,515     58,658     67,560    5,146    5,162    6,080    1,579    1,051    1,197    6      4      4     74.4    77.7     81.4     8.2       5.2      5.6     12.0     10.1    10.4
                          29 Sadbhav                          100            15,028                      Buy        22,092     26,765     31,170    2,260    2,810    3,335    1,196    1,302    1,475    8      9     10     41.8    50.4     62.4    23.5      18.9     17.4     23.4     20.7    18.3
                          30 Madhucon                          50             3,653                      Buy        17,129     20,269     24,588    1,723    2,128    2,631     324      289      452     4      4      6     82.2    85.8     91.6     5.5       4.7      6.9     11.6     10.6    11.0
                          31 J Kumar                          169             4,685                   Accumulate     9,492     10,180     12,956    1,434    1,486    1,840     739      722      817    27     26     29    136.0   159.4    186.1    21.4      17.6     17.0     31.3     25.2    24.7
                          32 MBL Infra                        116             2,031                      Buy         9,915     10,552     13,009    1,275    1,351    1,626     603      555      594    34     32     34    158.4   187.2    218.2    24.1      18.3     16.7     25.3     19.9    17.8



                                                                                                                                                                                                                      1
                                                                                                                                                                                                                                             Elara Securities (India) Private Limited
                                                                   CMP    Current Mkt Cap                                          Net Sales                      EBIDTA                        PAT                    EPS                  BVPS                    ROE (%)              ROCE (%)
                          No. Name of company                                               Target Price    Recomm
                                                             6 Jan 2012          (INR mn)                                   FY11     FY12E      FY13E     FY11     FY12E    FY13E      FY11    FY12E    FY13E FY11 FY12E FY13E      FY11 FY12E       FY13E   FY11 FY12E FY13E        FY11 FY12E FY13E
Global Markets Research


                                                                                                                                                           IT Services
                          33 Infosys                             2,832         1,626,275          2,800     Reduce       275,010   351,408     413,355   89,785 113,070 127,223      68,230    86,092   97,425   119   151    170   454.8   518.0    585.5   27.8     31.0    30.9   35.9    40.6    40.7
                          34 TCS                                 1,169         2,288,774          1,300    Accumulate    386,807   489,009     601,042 115,653 140,996 173,248       90,751 106,818 129,308      46     55    66    128.9   167.3    213.7   42.0     37.5    35.2   50.8    47.8    45.8
                          35 Wipro                                 406           997,406           370      Reduce       310,542   368,493     415,986   65,803 77,391      88,198   44,099    59,590   67,531   22     24    27     97.7   121.5    148.9   21.0     22.3    20.4   21.4    22.8    21.7
                          36 HCL Tech                              418           288,431           540        Buy        160,343   208,339     251,084   89,785 113,070 127,279      68,230    86,092   97,464   119   151    171   454.8   518.0    585.6   27.8     31.0    30.9   35.9    40.6    40.7
                          37 Tech Mahindra                         599            76,275           600        Sell        51,520     54,998     61,059    9,739 10,021      10,977    7,076     6,950    7,647   54     53    58    276.7   326.8    385.0   21.8     17.6    16.3   21.6    21.3    21.3
                          38 Mphasis                               307            64,492           285        Sell        50,366     50,851     54,226   12,649    9,935     9,349   10,907     7,844    6,812   52     37    32    156.7   188.8    216.0   38.6     21.5    15.8   38.3    21.5    16.0
                          39 Patni                                 466            62,613           500 Under Review       31,689     37,492     39,945    6,775    5,557     6,170    6,016     3,829    3,996   45     22    30    228.6   256.5    274.5   18.4     11.8    11.2   21.1    13.4    13.8
                          40 Persistent Systems                    314            12,560           440        Buy          7,758     10,521     12,710    1,583    1,992     2,286    1,393     1,409    1,581   35     35    39    200.1   228.9    263.7   21.7     18.6    18.1   16.5    17.2    16.7
                                                                                                                                                             Media
                          41 Den Networks                           54             7,046             82       Buy         10,221     11,736     12,105     914     1,604     1,487      375      412      154     3      3     1     58.5    60.6     58.5    5.0      5.2     2.0    8.8    12.8     7.4
                          42 Dish TV                                59            62,801             87    Accumulate     14,366     19,829     25,545    2,389    5,491     7,694   (1,898)    (263)    1,321   (2)    (0)    1      0.5     1.8      3.1    NA       NA     40.3   (8.6)    9.0    21.4
                          43 TV 18                                  31            11,208             49 Under Review      11,115     12,034     14,414    1,323       746    1,544      219     (139)     626     1     (0)    2     N/A     N/A      N/A     3.8     (2.3)    7.4    6.7     2.0     5.1
                          44 Sun TV Network                        277           109,024           343        Buy         20,135     20,144     23,082   15,779 15,092      17,281    7,698     7,351    8,453   20     19    21     55.7    60.3     66.5   37.7     32.2    33.8   52.2    45.9    48.8
                          45 Zee Entertainment Enterprises         116           113,416           150        Buy         30,136     29,558     34,062    8,266    7,938     9,252    5,913     6,029    6,869    6      6     7     31.6    39.6     41.1   16.5     17.2    19.5   17.0    17.0    17.1

                                                                                                                                                             Metals
                          46 JSW Steel                             565           125,972           570      Reduce       238,406   313,647     340,206   46,627 51,863      58,730   17,540    16,729   19,993   79     75    90    738.9   848.1    922.6   13.0      9.4    10.1   11.9    10.2    10.9
                          47 SAIL                                   84           348,193             80     Reduce       426,871   447,602     490,130   74,400 58,591      76,058   47,558    29,527   33,922   12      7     8      4.9    24.9     53.0   13.5      7.8     8.5   14.0     9.2     9.8
                          48 Tata Steel                            364           348,818           450     Accumulate   1,151,449 1,044,354 1,130,102 159,956 140,316 164,371        66,725    50,669   69,005   59     45    61    202.5   312.8    340.0   22.1     13.5    16.8   14.8    11.5    13.3
                          49 Hindustan Zinc                        124           522,461           165        Buy         99,121   115,464     135,939   54,956 66,708      82,989   46,576    54,713   69,079   11     13    16     53.3    64.5     79.1   22.9     22.0    22.8   28.2    28.2    29.2
                          50 Sterlite Industries                    95           318,930                   Accumulate    302,481   345,233     418,405   78,690 115,106 143,187      43,302    65,634   83,862   13     20    25    153.9   106.3    115.8    8.9     15.0    22.5   14.8    21.2    29.7
                          51 Hindalco Industries                   119           227,255           146     Accumulate    718,008   782,992     812,153   80,017 89,029      93,240   24,564    32,147   30,338   13     17    16    163.2   199.7    210.9    9.0      9.3     7.7   12.1    11.2    10.1
                          52 National Aluminum                      55           140,717             57     Reduce        59,646     70,795     74,204   15,941 20,894      21,984   10,262    13,348   14,219    4      5     6     43.3    47.5     51.9    9.5     11.4    11.1   17.0    22.9    23.0

                                                                                                                                                             Midcap
                          53 Piramal_Glass                          90             7,307           186        Buy         12,185     13,510     16,303    2,786    3,264     4,127      930     1,180    1,652   12     15    20     47.8    60.3     80.3   24.2     24.2    25.4   13.5    15.7    19.2
                          54 TTK Prestige                        2,518            28,506          3,320       Buy          7,636     11,069     14,637    1,217    1,754     2,427      837     1,172    1,589   74    104    140   169.2   254.6    367.0   43.7     40.7    38.2   61.8    50.7    49.8
                          55 ENIL                                  202             9,614           310        Buy          4,635      3,264      3,690    1,016    1,037     1,288      349      581      644     4     12    14     80.2    92.4    105.9    4.6     13.2    12.8   15.2    15.9    18.9
                          56 ESS DEE                               148             4,751           144        Buy          6,807      6,830      7,837    1,706    1,650     1,796    1,180      816      902    37     25    28    217.8   241.0    266.8   16.9     10.6    10.6   16.5    13.3    11.6
                          57 Navneet Publication                    53            12,506             80       Buy          5,494      6,182      7,500    1,261    1,441     1,767      781      908     1,124    3      4     5     14.6    16.8     19.6   22.1     22.6    24.7   27.0    27.6    31.2
                          58 Techno Electric & Egg.                190            10,847           260        Buy          7,166      8,692     10,588    1,635    2,419     2,952    1,128     1,306    1,404   20     22    25     98.5   118.5    140.8   20.1     19.3    17.5   15.6    14.3    16.4

                                                                                                                                                            Oil & Gas
                          59 Oil India                           1,116           268,455          1,500    Accumulate     83,034     98,496     99,756   41,706 49,074      47,384   28,837    33,635   32,371   120   140    135   648.7   735.9    829.6   18.5     19.0    17.6   26.5    27.0    25.6
                          60 ONGC                                  256         2,187,211           300     Accumulate   1,176,106 1,277,511 1,384,489 484,363 531,231 599,642 224,559 263,864 292,632            26     31    34    137.1   159.5    185.2   19.5     19.7    18.8   28.1    24.4    25.7
                          61 Reliance Industries                   718         2,349,706           800      Reduce      2,658,110 2,686,447 2,717,889 389,610 426,261 443,656 192,498 230,439 239,115            65     70    73    470.9   531.7    595.4   12.5     13.2    12.3   11.1    13.9    13.3
                          62 Cairn India                           339           645,201           365     Accumulate    102,779   123,983     196,939   83,562 98,008 143,662       63,344    76,369 102,780    33     40    54    211.5   251.6    305.7   15.8     16.0    17.7   17.0    17.2    20.8
                          63 Essar Oil                              57            78,116           100        Buy        471,200   555,193     699,867   25,570 23,555      44,612    6,540 11,112      44,612    5      8    31     46.2    46.5     57.8   10.0      5.6    19.6    9.7     6.6    16.5
                          64 MRPL                                   54            94,377             58     Reduce       390,074   520,743     614,546   20,480    7,804    24,790   11,762     3,139    9,758    6      2     5     39.2    40.2     44.4   18.0      4.6    13.0   22.8     6.1    12.5
                          65 Chennai Petroleum                     160            23,826           150        Sell       331,078   407,243     380,175   12,164    2,177     9,802    5,115     2,109    2,856   34     14    19    293.5   302.7    315.1   13.6      5.4     7.0   12.7    (1.4)    7.2
                          66 Aban Offshore                         353            15,335           325      Reduce        33,472     30,427     31,636   21,869 18,363      19,760    1,567     3,378    4,031   26     78    93    490.5   563.1    651.6    8.9     13.8    14.2    8.8     9.4    10.9


                                                                                                                                                                                                                              2
                                                                                                                                                                                                                                                    Elara Securities (India) Private Limited
                                                              CMP    Current Mkt Cap                                          Net Sales                      EBIDTA                      PAT                   EPS                 BVPS                    ROE (%)             ROCE (%)
                          No. Name of company                                          Target Price    Recomm
                                                        6 Jan 2012          (INR mn)                                   FY11     FY12E      FY13E     FY11     FY12E   FY13E     FY11    FY12E    FY13E FY11 FY12E FY13E    FY11 FY12E       FY13E   FY11 FY12E FY13E        FY11 FY12E FY13E
Global Markets Research


                          67 Shiv-Vani Oil & Gas              183             8,461           400        Buy         14,622     15,255     15,747    6,872    6,980    7,122    2,294    1,864    2,126   44    35   41    307.1   346.1    390.8   16.1     11.6    11.7   12.3   12.6   13.2
                          68 Bharat Petroleum                 477           172,272           600        Buy       1,536,450 1,904,140 1,777,145    42,612 46,801     55,588   16,350    5,600   12,800   45    15   35    425.0   437.0    448.0   10.7     10.6    12.6    9.9   10.0   10.1
                          69 Hindustan Petroleum              242            81,795           300     Accumulate   1,384,928 1,690,987 1,718,876    35,541 26,546     34,543   17,036    2,106    9,087   50     6   27    392.2   352.0    364.9   13.6      1.8     7.4    9.2    3.7    6.8
                          70 Indian Oil Corporation           256           620,949           310     Accumulate   3,106,254 4,597,650 4,623,098 150,243 131,245 185,432       78,307   14,768   57,503   32     6   24    235.2   231.2    245.0   13.6      2.5     9.5   11.2    8.6   11.9
                          71 JBF Industries                    92             6,605             91      Reduce       64,711     74,655     78,782    9,585    7,622    7,809    5,461    2,465    3,115   78    34   43    202.8   227.8    261.9   46.9     16.0    17.7   26.0   16.2   13.7

                                                                                                                                                        Paints
                          72 Asian Paints                   2,660           255,014          3,058      Reduce       77,062     94,869    111,373   13,130 15,030     18,637    8,432    9,773   12,222   88   102   127   228.0   286.1    357.9   43.3     37.5    37.4   51.0   47.7   49.0
                          73 Kansai Nerolac                   855            46,078           922     Accumulate     21,387     25,538     29,710    2,905    3,588    4,379    1,806    2,221    2,739   34    41   51    170.0   193.9    221.3   21.4     22.2    23.0   26.0   27.9   29.4
                          74 Berger Paints                     90            31,015           126        Buy         20,962     26,418     31,304    2,128    2,637    3,419    1,483    1,767    2,291    4     5    7     20.9    23.8     27.7   22.0     22.0    23.8   24.9   25.7   29.1
                          75 Akzo Nobel India                 766            28,224           826       Reduce       10,876     13,208     15,488    1,239    1,447    1,826    1,431    1,753    2,047   39    48   56    296.6   316.3    336.8   13.7     14.9    16.2    9.8   10.5   12.4
                          76 HSIL                             122             8,035           260        Buy         10,353     13,562     18,072    1,961    2,668    3,767     875     1,229    1,784   13    19   27    106.2   120.1    141.2   14.7     16.4    20.7   13.0   15.5   18.8

                                                                                                                                                    Pharmaceuticals
                          77 Aurobindo Pharma                  90            26,143           80         Sell        43,815     43,120     47,822    9,804    5,346    5,801    5,635     136     2,438   18     8    8     84.0    83.2     87.7   23.0      0.6     9.6   19.7    9.5    9.6
                          78 Cadilla healthcare               680           139,311          760       Reduce        44,647     54,507     65,303    8,633 12,755     15,673    7,612    9,825   12,308   34    48    60   106.1   144.0    195.1   32.7     33.3    30.8   25.0   30.4   30.1
                          79 Cipla                            338           271,749          330      Accumulate     63,346     69,946     79,183   14,096 14,766     17,791    9,896    9,853   12,116   12    12    15    83.0    92.6    105.3   14.5     13.3    14.3   18.9   17.4   18.9
                          80 Dr. Reddy's                    1,601           271,238        1,854      Accumulate     74,233     86,551     91,982   14,999 18,980     20,093    9,989   12,944   13,646   59    76    81   238.2   307.4    380.7   24.8     24.9    21.2   23.5   28.4   25.6
                          81 Glenmark                         291            78,787          360         Buy         29,491     33,723     38,734    5,923    6,239    7,476    4,578    3,917    4,842   17    14    18    75.4   108.9    126.5   22.5     13.3    14.2   13.7   11.6   12.6
                          82 Lupin                            443           197,798          460       Reduce        58,069     69,467     82,999   11,761 14,408     17,442    8,626   10,011   13,119   19    22    29    74.7    93.6    119.5   26.0     24.0    24.6   25.2   26.7   27.6
                          83 Ranbaxy                          439           185,047          280         Sell        89,608     87,499    107,260   19,209 10,762     19,650   14,968    3,485   15,662    3    10    13   132.6   136.9    171.7   16.7     15.5    21.6   19.2   11.5   17.1
                          84 Sun pharma                       500           514,902          410         Sell        57,214     72,610     83,062   19,672 23,409     26,170   18,161   21,410   23,845   18    21    23    91.6   105.6    124.6   19.2     19.6    18.5   18.9   19.4   18.5
                          85 Jubilant Life Sciences           172            27,420          260         Buy         34,334     37,814     42,247    5,607    6,996    8,449    2,297    2,685    3,117   14    17    20   136.4   150.9    168.2   10.6     11.2    11.6    8.9    9.3   11.0
                                                                                                                                                      Print Media
                          86 DB Corp                          184            33,728           225       Reduce       12,652     14,274     17,018    4,030    3,670    4,411    2,354    2,107    2,572   13    12   14     45.5    54.1     64.7   31.9     23.3    23.8   36.3   29.3   30.8
                          87 Hindustan Media Ventures         110             8,102           150     Accumulate      5,204      6,036      6,777     893     1,159    1,325     536      797      888     7    11   12     54.4    65.2     77.3   22.6     18.1    17.0   23.9   21.8   20.3
                          88 Jagran Prakashan                  93            29,397           120        Buy         12,211     13,688     15,330    3,567    3,549    4,011    2,103    2,074    2,398    7     7    8     19.6    24.2     27.3   33.8     30.0    29.5   40.0   35.6   35.2
                          89 HT Media                         119            27,944           148       Reduce       12,142     13,476     15,096    2,825    2,806    3,261    1,776    1,884    2,120    8     8    9     49.7    57.8     66.2   16.3     14.9    14.5   17.4   14.8   15.5

                          *Note: Nestle: Y/E Dec




                                                                                                                                                                                                                     3
                                                                                                                                                                                                                                           Elara Securities (India) Private Limited
Elara Securities (India) Private Limited

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 particular situation.
                                                                 Elara Securities (India) Private Limited

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                                                                                                                                    Global Markets Research
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Elara Securities (India) Private Limited

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Ashish Kumar                Economist                                              ashish.kumar@elaracapital.com           +91 22 4062 6836
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Mona Khetan                 Associate      Strategy                                mona.khetan@elaracapital.com            +91 22 4062 6814
Pooja Sharma                Associate      Automobiles                             pooja.sharma@elaracapital.com           +91 22 4062 6819
Stuart Murray               Associate      Oil & Gas                               stuart.murray@elaracapital.com          +91 22 4062 6898

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