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  • 8/4/2019 Unicon Quarterly Earnings Preview - Q2FY12

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    Wealth Research, Unicon Financial Intermediaries Pvt. Ltd.Email: [email protected]

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    QUARTERLY EARNINGS PREVIEWQ2 - FY12

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    Executive Summary

    Indian market continued to face challenges and the markets fell by more than 12% in thequarter ended September 2011 which was one of the highest fall after October -Decemberquarter 2008. This was contributed majorly by global headwinds in terms of downgradingof US sovereign debt and Euro crisis leading to large scale FII outflow. Lack of strongleadership in Europe and the politics in Washington are further denting the investor confidencein the region. Greece is on the verge of default and the steps taken by the Euro zone nationsto bail it out have not worked. Greece has a debt of close to USD 400 bn and now has a debtgreater than its GDP.

    In addition to this the domestic economy also registered a slower growth of 7.7% in Q1FY12vs 9.3 in Q1FY11 & Industrial production fell by 3.3% in July 11. On the political front, last

    quarter saw major anti-corruption movement taking a front seat along with unfolding ofmajor scams, which affected the political stability in the country. Lack of reforms in thecountry was also one of the main reasons for slower growth. Another major challenge forthe economy has been the elevated levels of inflation. High inflation has been putting pressureon RBI to take anti inflationary measures (increasing the interest rates) at the cost of economicgrowth. Investments in industries and credit growth thus been hampered in this high interestrate regime.

    Going forward, we expect certain solutions by the world governments, international agenciesto control global economic crisis. Debt reduction plans of the Obama administration &future plans of the FED could be decisive in engaging confidence of the global investors.

    Rebalancing of global currencies and EU' decision on Euro bonds along with other cooperativemeasures would lay the foundation for stable global fundamentals. The slower global growthwill drag down the commodity prices going ahead. This will help the domestic inflation totaper down from current high levels. On domestic front we expect the government continueto take corrective actions on a) high inflation, b) high fiscal deficit, c) erratic FII flows d)changes in the FDI policy.

    Redressal of these issues will provide much needed stability to economic growth. We believe,the rural economy would continue to remain robust on the back of good monsoon in 2011supporting the consumption led demand. Thus, we expect the Indian economy to registergrowth of 7.5% in 2011-12.

    We believe that cooling of commodity prices and strengthening of the US dollar could bethe driving factors for Indian markets. The markets would continue to be range bound tillthe global concerns are addressed properly & domestic economy stabilizes. The last quarterof FY 12 would give a clearer picture wherein the corporate earnings should improve withlower raw material prices. Thereafter the rerating would lead to expansion of P/Es on selectivebasis. In the short term till uncertainty prevails sectors like FMCG, IT and Agri shouldoutperform the index but for medium to long term one should start accumulating interestsensitive's like Banks, Infrastructure and automobiles.

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    Table of Content

    Sr. No. Sector / Company Name Rating CMP 52 Week H / L

    I Power1 BGR Energy Systems Ltd Hold 322 830 / 296

    2 CESC Ltd Buy 278 430 / 252

    3 KEC International Buy 60 109 / 55

    4 Diamond Pow er Infr ast ructur e Lt d Buy 104 265 / 100

    II Auto and Auto Ancillary

    1 Tata Motors Ltd Buy 156 276 / 138

    2 Exide Industries Ltd Buy 130 188 / 110

    III Metal and Mining

    1 Tata Steel Ltd Buy 415 737 / 414

    2 JSW Steel Ltd Hold 592 1400 / 552

    3 Adhunik Metaliks Ltd Buy 47 116 / 47

    4 Visa Steel Ltd Buy 59 65 / 33

    5 Hindalco Industries Ltd Buy 131 253 / 125

    6 NMDC Ltd Buy 227 305 / 204

    IV Banking & Finance

    1 Union Bank Of India Accumulate 245 427 / 224

    2 Development Credit Bank Buy 44 77 / 39

    3 HDFC Bank Ltd Hold 468 520 / 3964 IDBI Bank Ltd Buy 103 202 / 101

    5 Axis Bank Ltd Buy 1019 1609 / 992

    6 Allahabad Bank Buy 158 272 / 150

    7 Yes Bank Ltd Buy 273 388 / 234

    8 Indusind Bank Ltd Accumulate 262 309 / 181

    9 Corporation Bank Buy 422 815 / 410

    10 Indian Bank Buy 214 317 / 185

    V Media

    1 Zee Ent er tainment Enter pr ises Ltd Accumulate 118 155 / 106

    2 D.B. Corp Ltd Buy 205 310 / 200

    3 Jagran Prakashan Ltd Buy 109 157 / 96

    4 HT Media Ltd Accumulate 148 186 / 125

    VI Pharmaceuticals

    1 Biocon Ltd Buy 338 473 / 301

    2 Glenmark Ltd Buy 323 390 / 241

    3 Lupin Ltd. (India) Hold 474 520 / 363

    4 Div i's Lab or at or ies Lt d (India) Hold 736 843 / 582

    5 Dishman Pharmaceuticals & Chemicals Ltd (India Buy 58 194 / 57

    6 Apollo Hospitals Enterprise Ltd (India) Hold 520 600 / 4327 Sun Phar maceuticals Indust ries Ltd Hold 463 540 / 390

    8 Ranbaxy Laboratories Ltd Buy 514 625 / 414

    9 Opto Circuit (India) Ltd Buy 221 324 / 212

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    Sr. No. Sector / Company Name Rating CMP 52 Week H / L

    VII Food Processing

    1 Shree Renuka Sugars Ltd Buy 55 108 / 51

    2 Rei Agro Ltd Accumulate 25 30 / 21

    VIII Fertiliser

    1 Chamb al fer tiliser & Chemicals Lt d Buy 94 119 / 66

    2 Deepak Fertilizers & Petrochemicals Corp Ltd Buy 166 213 / 133

    3 Coromandal Inter national Ltd Buy 305 376 / 215

    IX Agri Chem

    1 Rallis India Ltd Accumulate 173 183 / 117

    2 Tata Chemicals Buy 316 447 / 302

    3 United Phosphorus Ltd Buy 138 220 / 125

    X IT

    1 Tata Consultancy Ser vices Ltd Accumulate 1,037 1247 / 869

    2 Infosys Ltd Accumulate 2,533 3499 / 2162

    3 HCL Technologies Ltd Buy 409 528 / 360

    4 Rolta India Ltd Buy 83 189 / 81

    5 Persistent Systems Ltd Buy 305 465 / 281

    6 KPIT Cummins Infosystems Ltd Accumulate 151 199 / 113

    7 Hexaw ar e Technologies Ltd Accumulate 84 94 / 37

    XI Others

    1 Mundra Port & SEZ Ltd Accumulate 164 185 / 110

    * Most of the stocks are rated on 12-18 months basis, though in the near term v aluation remain rich.

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    Power

    We are Neutral on the sector given the delays in setting up capacity. Shortage of fuel and environmental clearances remain amajor concern for the sector. Imported coal blending in existing plants are facing limitations - technically and due to inflationary

    concerns and this may lead to lower PLFs despite capacity addition. The power ancillary companies are expected to post robustearnings on the back of strong order book. However new order inflows for these companies remains slow. Powergrid (PGCIL) isexpected to come out with large tenders in CY11 as it goes in for capacity expansion. We expect transmission & distribution EPCcompanies to do well on the back of expected PGCIL & SEB contracts but competition will remain strong. The investment by thecentral transmission company is on track to achieve their 11th plan targets.

    Our top picks are CESC Ltd and KEC International.

    BGR Energy Systems Ltd (BGR)

    Valuation & OutlookBGR continues to face challenging times despite becoming a L1 in the 9 x 800MW NTPC bulk tender. Its current order book standsat INR 36bn which is lower than its greenfield capex of INR 44bn. Besides, aggressive bidding and import of supercriticaltechnology would shrink margins for the company. Macro economic concerns like coal price hike and increase in funding costwould continue to impact the sector growth. Stock is trading at a PER of 6.2x its FY13E earnings. We downgrade BGR to HOLDwith a reduced price target of INR 355.

    CMP: INR 326

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,991 11,337 7,312 5.8 64.0 12,423 -3.5

    Operating Expenses 10,648 10,014 6,351 6.3 67.7 10,969 -2.9

    EBITDA 1,343 1,323 961 1.5 39.8 1,454 -7.6

    EBITDA (%) 11.2 11.7 13.1 -47 bps -194 bps 11.7 -50 bps

    Reported PAT 782 778 503 0.5 55.6 848.0 -7.8

    PAT (%) 6.5 6.9 6.9 -34 bps -35 bps 6.8 -31 bps

    EPS 10.8 10.8 7.0 0.7 55.9 11.8 -8.2

    Market Cap: 23,400*Standalone Financials

    P/E (FY13E): 6.2x

    HOLD

    (INR in Mn)

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    CESC Ltd.

    Valuation & OutlookShortage in fuel availability would impact the PLF at CESC's Chandrapur project. Limited coal supply assurance, only 50%, byCoal India continues to be a major concern. Delay in break-even of retail business would further dent the margins. However,considering decent cash flows and revenue visibility till FY13 we believe the stock is trading at an attractive valuation of 6.4x itsFY13E earnings. Hence, we maintain BUY on the stock with a reduced price target of INR 350.

    KEC International Ltd

    Valuation & OutlookKEC holds a healthy order book of INR 81bn, diversified across continents. Hence, macro economic concerns like reduced avail-ability of coal and increase in interest rate would not severely impact the topline of the company. Margin for new segments likecable, railways & telecom are low and are expected to pick up only in FY13. Domestic order book is expected to pick in H2FY12.Any improvement in sector outlook could trigger this stock and hence we recommend BUY with a revised price target of INR 73,showing an upside potential of 28% from current valuation of 4.6x FY13E earnings.

    CMP: INR 57

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 12,253 10,001 10,225 22.5 19.8 NA NA

    Operating Expenses 10,926 8,992 9,265 21.5 17.9 NA NA

    EBITDA 1,328 1,009 960 31.7 38.3 NA NA

    EBITDA (%) 10.8 10.1 9.4 75 bps 145 bps NA NA

    Reported PAT 578 427 331 35.3 74.8 NA NA

    PAT (%) 4.7 4.3 3.2 45 bps 148 bps NA NA

    EPS 2.2 1.7 1.3 35.3 74.3 NA NA

    Market Cap: 14,650

    *Co nso lidated Financials

    P/E (FY13E): 4.6x

    BUY

    (INR in Mn)

    CMP: INR 277

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,629 10,900 11,690 6.7 -0.5 11,620 0.1

    Operating Expenses 8,869 7,720 9,020 14.9 -1.7 8,782 1.0

    EBITDA 2,760 3,180 2,670 -13.2 3.4 2,838 -2.7

    EBITDA (%) 23.7 29.2 22.8 -544 bps 89 bps 24.4 -69 bps

    Reported PAT 1,361 1,550 1,110 -12.2 22.6 1295.5 5.1

    PAT (%) 11.7 14.2 9.5 -251 bps 221 bps 11.1 56 bps

    EPS 10.9 12.4 8.9 -12.2 22.3 9.2 18.4

    Market Cap: 34,200

    *Standalone Financials

    (INR in Mn)

    BUY

    P/E (FY13E): 6.4x

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    Diamond Power Infrastructure Ltd (DPIL)

    Valuation & Outlook

    Diamond Power (DP) holds an order book of INR 17bn or 1.2x its FY11 revenues. The company needs pick up in order activity frommajor players like Power Grid and State Electricity boards. Revenue from the transformer segment are expected to improve goingforward. Stock is trading at 3.3x its FY13E earnings and we recommend a BUY rating on the stock with a price target of INR 130.

    CMP: INR 104

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,970 3,501 3,698 13.4 7.4 NA NA

    Operating Expenses 3,402 3,005 3,196 13.2 6.4 NA NA

    EBITDA 569 496 503 14.6 13.1 NA NA

    EBITDA (%) 14.3 14.2 13.6 15 bps 73 bps NA NA

    Reported PAT 289 278 296 4.2 -2.4 NA NA

    PAT (%) 7.3 7.9 8.0 -65 bps -73 bps NA NA

    EPS 7.8 7.5 8.0 4.2 -2.4 NA NA

    Market Cap: 3,600

    *Standalone Financials

    (INR in Mn)

    P/E (FY13E): 3.3x

    BUY

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    Exide Industries Ltd

    Valuation & OutlookDuring this quarter the company has entered to the price battle with price reduction of few of its product in the market. We expectthat the top line of the company would be affected due lower realization. In addition to this the company has initiated steps toreduce inventory (cut down its production of most automobile products barring two wheeler, by 10%-15% in September, up from

    a 5% cut in August) considering slowing in demand for automobiles. Moreover replacement market for batteries is going strongand company having leadership will be on strong growth path going forward. The company's valuation seems to be attractive atthis point of time considering the ongoing developments. At CMP the stock is trading at a PE multiple of 8x its FY13e earnings. Werecommend a BUY on the stock with a price target of INR 165.

    Auto & Auto Ancillaries

    Tata Motors Ltd

    Valuation & OutlookThe overall growth story of TATA Motors remained intact as the company's JLR arm has shown robust growth. There are someconcerns related to the increase in raw material costs which have adversely affected the EBITDA margin but we expect volumegrowth to offset the same. Company's domestic business in PV is expected to show some deceleration due to the higher inflationand high interest rate regime but CV segment is expected to show a steady growth. At consolidated level the over all business isexpected to do well as the JLR which contribute 65% of the total revenue continues to grow at a rapid pace. The new launch, theLand Rover Evoque, should lead to volume growth going forward. At CMP the stock is trading at PE of 3.7x its FY13e earnings. Werecommend BUY with a target price of INR 200.

    CMP: INR 156

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 372,453 285,727 333,818 30.4 11.6 333,401 11.7

    Operating Expenses 322,810 258,468 291,557 24.9 10.7 292,995 10.2

    EBITDA 49,643 27,259 42,261 82.1 17.5 44,221 12.3

    EBITDA (%) 13.3 9.5 12.7 379 bps 5.3 13.9 (3.9)

    Reported PAT 26,532 22,230 19,996 19.4 32.7 21,657 22.5

    PAT (%) 7.1 7.4 7.4 -28 bps -31 bps 6.3 12.4

    EPS 49.3 34.8 41.4 41.6 19.2 39 26.4

    Market Cap: 420,140

    * Co nso l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    P/E (FY12E): 5.8x

    CMP: INR 130

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 13,376 11,267 12,437 18.7 7.6 14,609 (8.4)

    Operating Expenses 10,512 8,812 10,214 19.3 2.9 11,929 (11.9)

    EBITDA 2,864 2,455 2,223 16.7 28.9 2,678 7.0

    EBITDA (%) 21.4 21.8 17.9 -38 bps 354 bps 19.3 10.7

    Reported PAT 1,853 2,129 1,632 -13.0 13.5 1,730 7.1PAT (%) 13.9 18.9 13.1 -504 bps 73 bps 12.6 9.9

    EPS 2.2 2.5 1.9 -12.8 13.0 2.0 6.9

    Market Cap: 109,690

    * Sta nda l o ne F i na nc ia l s

    BUY

    (INR in Mn)

    P/E (FY12E): 14.9x

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    Metal

    The Macro economic concerns and Global slowdown has subdued the demand for base metals, whereas supply side constraintshave put the key raw material prices at the higher levels. Despite slowdown in the demand which resulted in the lower

    realization has squeezed the operating margin of the entire metal industry and mostly of the non integrated players. The playersn the ferrous metal like steel are struggling due continued uncertainty regarding the demand for steel and the higher iron ore

    prices along with mining ban at the Bellary region at Karnataka. At the Non ferrous front, Aluminium, Copper & Zinc, which arebasically Dollar denominated, have been adversely affected on the back of consumption concerns on the industrial front, continuedrupee depreciation compared to Dollar along with liquidation of investor holding positions due to the price safety measure. Webelieve that the short term demand concerns along with higher raw material prices would dent the operating margins of theentire metal industry. Furthermore Q2 tends to be a slower quarter for the in industry; we do not expect an improved performancefrom the industry. However, prices are expected to pick up post Q3, and would provide some relief to the industry.

    Our top picks of the sectors are TATA Steel, Hindalco, and Adhunik Metaliks & NMDC.

    TATA Steel

    Valuation & OutlookDuring the Q2FY12 the entire metal industry suffered as the base metal prices have corrected by more than 15-20% on theexpectation of sluggish demand. Tata steel being the global player would be most affected as major of its operations is located inUK which is not expected to do well. Company's domestic operation would be less affected compared to the other players from theongoing raw material crunch due to company's significant backward integration. Though TATA steel's Q1FY12 performance wasabove expectation on the back of few divestment plan made by the company but the Q2FY12 results seems to be affected due to

    slow down in demand and seasonal factors. Company's initiation towards strategic investment and product line would help thecompany on a long term basis. At CMP the stock is trading at 4.6x of its FY13e EV/EBITDA. We remain positive on the stock butreduce our price target of INR 520.

    CMP: INR 415

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 302,520 280,909 328,399 7.7 -7.9 317,634 (4.8)

    Operating Expenses 269,848 244,186 289,766 10.5 -6.9 220,274 22.5

    EBITDA 32,672 36,723 44,229 -11.0 -26.1 37,397 (12.6)

    EBITDA (%) 10.8 13.1 13.5 -227 bps -267 bps 11.8 (8.3)

    Reported PAT 10,588 19,788 53,466 -46.5 -80.2 11,790 (10.2)

    PAT (%) 3.5 7.0 16.3 -354 bps -1278 bps 3.7 (5.7)

    EPS 9.0 22.0 55.8 -59.2 -83.9 10.0 (10.2)

    Market Cap: 398,074

    * Co nso l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    P/E (FY12E): 5.7x

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    JSW Steel Ltd (JSW)

    Valuation & OutlookThough the company has successfully operationalized its brown field expansion at its Vijaynagar plant, the current iron oremining ban in the Bellary region has urged JSW steel to cut down its production to 30% capacity. If Government of India would notbe able to provide any immediate solution to the problem then JSW steel would be most affected, being not fully backwardntegrated. Considering the recent turmoil the company would miss the annual guidance of 9 mn tonnes of steel production

    which would ultimately affect company bottom line. In addition, due to seasonal effect the company is not expected to performwell in the Q2FY12. Material sourcing would be the major concern for the company going ahead where lot of uncertainty is there.At CMP of INR 590 the stock is trading at 5.2x of its FY13e EV/EBITDA. Considering the current uncertainty regarding the rawmaterial sourcing and demand growth, we recommend hold on the stock with price target of INR 650.

    Adhunik Metaliks Ltd

    Valuation & OutlookAdhunik Metaliks has executed its captive iron ore mines during the quarter which would help the company lowering its rawmaterial cost. Being located at the eastern region of the country it would not be majorly affected by the ongoing controversy ofron ore mining at the southern part of India. Company's continuous focus to shift its major concentration toward the mining

    segment would help it to resist major downside due to the global slowdown in demand. Again due to the seasonal problem

    coupled with global correction in the base metal prices would affect the mining business of the company to a certain extent in thisquarter. Moreover the recent plan to divest its stake at Neepaz V Forge to strategic investor may help the company to deleveragethe balance sheet. At CMP the stock is trading at 4x of its FY13e EV/EBITDA. Considering all these aspect we remain positive onthe stock with a price target of INR 80.

    CMP: INR 592

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 70,450 59,081 74,324 19.2 -5.2 79,659 (11.6)

    Operating Expenses 61,200 48,854 289,766 25.3 -78.9 220,274 (72.2)

    EBITDA 9,250 10,227 14,348 -9.6 -35.5 10,828 (14.6)

    EBITDA (%) 13.1 17.3 19.3 -418 bps -618 bps 13.6 (3.4)

    Reported PAT 2,925 3,733 4,852 -21.6 -39.7 3,395 (13.8)

    PAT (%) 4.2 6.3 6.5 -217 bps -238 bps 4.3 (2.6)

    EPS 16.2 19.5 21.4 -16.9 -24.2 18.8 (13.8)

    Market Cap: 132,085

    * Co nso l ida te d F i na nc i a l s

    P/E (FY12E): 4.9x

    HOLD

    (INR in Mn)

    CMP: INR 47

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 4,480 3,786 4,635 18.3 -3.3 4,289 4.5

    Operating Expenses 3,330 2,720 3,174 22.4 4.9 3,028 10.0

    EBITDA 1,150 1,066 1,460 7.9 -21.2 1,261 (8.8)

    EBITDA (%) 25.7 28.2 31.5 -248 bps -584 bps 29.4 (12.7)

    Reported PAT 157 365 284 -56.9 -44.7 164 (4.0)

    PAT (%) 3.5 9.6 6.1 -613 bps -262 bps 3.8 (8.1)EPS 0.7 3.0 2.3 -77.2 -70.8 0.7 (4.0)

    Market Cap: 5,804

    * Co nso l ida te d F i na nc i a l s

    P/E (FY12E): 2.8x

    BUY

    (INR in Mn)

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    VISA Steel

    Valuation & OutlookQ2 being the slow moving quarter coupled with non availability of raw materials has adversely affected to the mid cap compa-nies. During the quarter VISA steel was forced to shut down its plant on the back of non availability of iron ore. The company wasdependent on Gandhamardan and Daitari Iron Ore Mines of Orissa Mining Corporation (OMC) for its iron ore sourcing which hasstopped supplying iron ore to the entire industry. Considering this, we do not expect the company to deliver good sets of numbersthough the company's recent commencement of the bar & wire rod mill is expected to boost the financials of the company as theyare value added products. At CMP of INR 58 stock is trading at EV/EBITDA of 6x its FY13e. We remain positive on the stock witha price target of INR 75.

    Valuation & OutlookThe company's financials have been impacted in Q2 due to the global slowdown, correction in the prices of base metals andgradual rupee depreciation against the dollar. Further, company's competitive edge of low cost manufacturing has been offset dueto increased cost and issues over the availability of coal and bauxite resulting from the policy impasse. Although we expectNovelis to perform well on the back of improved product mix, cost reduction initiatives, and increased conversion margins. Allthe negative news has already been factored in the current price and valuation seems to be attractive. At CMP of INR 131, thestock is trading at EV/EBITDA of 4.5x its FY13e. We recommend buy at a target price of INR 193.

    Hindalco Industries Ltd.CMP: INR 131

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 59,250 58,028 59,790 2.1 -0.9 99,598 (40.5)

    Operating Expenses 51,548 51,044 51,120 1.0 0.8 91,006 (43.4)

    EBITDA 7,703 6,984 8,671 10.3 -11.2 8,592 (10.4)

    EBITDA (%) 13.0 12.0 14.5 97 bps -150 bps 8.6 50.7

    Reported PAT 4,148 4,338 6,440 -4.4 -35.6 6,642 (37.6)

    PAT (%) 7.0 7.5 10.8 -48 bps -377 bps 6.7 5.0

    EPS 2.5 2.3 3.4 8.6 -26.6 3.9 (37.6)

    Market Cap: 250,789

    * Sta nda lo ne F i na nc ia l s

    BUY

    P/E (FY12E): 9.3x

    (INR in Mn)

    CMP: INR 59

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,725 3,248 3,652 14.7 2.0 NA NA

    Operating Expenses 3,250 2,815 3,204 15.5 1.4 NA NA

    EBITDA 475 433 448 9.7 5.9 NA NA

    EBITDA (%) 12.8 13.3 12.3 -58 bps 47 bps NA NA

    Reported PAT 113 103 101 9.6 11.5 NA NA

    PAT (%) 3.0 3.2 2.8 -14 bps 26 bps NA NA

    EPS 1.0 0.9 0.9 9.3 11.7 NA NA

    Market Cap: 6,490

    * Co nso l ida te d F i na nc i a l s

    P/E (FY12E): 5.4x

    BUY

    (INR in Mn)

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    Valuation & OutlookNMDC is the major beneficiary (higher off-take with better realization) of the ongoing mining controversy at the Bellary region.Considering the demand supply gap along with government's directive to fulfill the demand, the company has initiated steps toncrease its mining capacity from 1 mn tonnes/pm to 1.5 mn tonnes/pm. Though there is slowdown expected in demand for steel,

    the rush for iron ore in the market is expected to boost the top line as well as bottom-line of the company. We expect company'smargin to be above average for the ongoing quarter due to higher realization. At CMP the stock is trading at 6.5x its FY13e. Werecommend BUY on the stock with a price target of INR 260.

    NMDC

    CMP: INR 227

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 28,422 25,180 37,698 12.9 -24.6 NA NA

    Operating Expenses 2,582 4,669 10,307 -44.7 -75.0 NA NA

    EBITDA 25,840 20,511 27,390 26.0 -5.7 NA NA

    EBITDA (%) 90.9 81.5 72.7 946 bps 1826 bps NA NA

    Reported PAT 17,622 15,040 20,986 17.2 -16.0 NA NA

    PAT (%) 62.0 59.7 55.7 227 bps 633 bps NA NA

    EPS 4.9 3.8 5.3 28.5 -7.9 NA NA

    Market Cap: 899,991

    * Co nso l ida te d F i na nc i a l s

    (INR in Mn)

    P/E (FY12E): 11.7x

    BUY

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    Banking

    The credit growth of ~24% witnessed in FY11 is likely to slowdown in FY12 due to high interest rate regime. However, we believethat the interest rates are near its peak levels as most of the commodity prices have already started to correct which would lead

    to softer inflation. Thus banking industry is expected to register a credit growth of approx. 18%. This growth will be primarily ledby non-infra & retail loan book which has higher risk to asset quality of banks & can lead to higher provisioning affecting theprofitability. Public sector banks are more vulnerable given the asset quality concerns as compared to private sector banks.Growth in deposits which has been lagging till now will see a revival going forward, due to high deposit rates.This along withmore focus on branch expansion will help the banks in garnering more CASA, and maintain its NIMs.The Bank Nifty Index has corrected by 22% since April 2011 till date pricing in the near term challenges and expected dip inearnings due to lower GDP forecast. However, the correction in public sector banks especially mid cap psus was more than theprivate sector banks. We remain positive on selective banks which have a) robust deposit franchise, b) diversified loan book &growth visibility, c) healthy capital adequacy and d) comfortable valuation. Our preferred picks are 1) Axis Bank 2) IDBI Bank 3)YES Bank 4) Indian Bank 5) DCB

    Union Bank of India

    Valuation & OutlookUnion Bank of India is expected to grow deposits & credit ~20% & ~22% in FY12E respectively and fee-based income in line withthe loan-book thus overall profitability should be up by 22% in FY12E. Going forward margins are likely to witness somepressure, largely in line with the industry trend. On the other hand, we expect slippages to remain elevated in the coming fewquarters due to migration to system based NPL recognition method. We have BUY rating on stock for the price target of INR 270.

    CMP: 243 ACCUMULATE

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 52,107 39,522 49,157 31.8 6.0 NA NA

    Interest Expense 35,916 24,164 33,255 48.6 8.0 NA NA

    Net Interest Income 16,191 15,358 15,902 5.4 1.8 NA NA

    Operating Profit 11,281 11,306 11,658 -0.2 -3.2 NA NA

    Operating Profit Margin 19.7 25.4 21.5 -22 bps -8 bps NA NA

    Reported PAT 3,433 3,034 4,644 13.2 -26.1 NA NA

    PAT Margin 6.0 6.8 11.4 -80 bps -540 bps NA NA

    EPS 5.40 6.00 7.30 -10.00 -26.03 NA NA

    Market Cap: 127,413

    *Standa lone Financials

    (INR in Mn)

    P/BV (FY12E): 1.0x

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    Valuation & OutlookThe management has maintained its strategy of slower loan book growth, in favour of a higher CASA share and higher NIMs &ndicated to take branch network to about 1100 by end of FY12. While the present 810 branches are predominantly urban-

    concentrated (67%), the bank intends to increase its presence in semi-urban areas going forward. We believe this would continueto increase the contribution of retail deposits in the banks funding mix and drive strong CASA. In wake of lower NIMs, the bankhas indicated a strategy of lower advances growth (~15% for FY12) than the system to concentrate on increasing the percentageof low-cost CASA deposits and consciously shifting focus from large corporate lending to retail and MSME lending to bring inhigher-yielding loans. In our view, IDBI will return to growth trajectory over medium to long period as it has now strategicallyopted for low business growth and improving performance. This would enable the bank to bring its perormance in line with

    ndustry average. We value the stock at 1.2x and maintain BUY recommendation with a price target of INR 196.

    IDBI Bank

    Axis Bank

    Outlook & valuationAxis bank (Axis) is targeting a credit growth of ~30% in FY12, much higher than 20% system growth anticipated by RBI. On back

    of branch expansion (250 branches in FY12) the cost-income ratio is expected to gradually move up to 44-45%. In tighter monetarypolicy regime banks NIMs are cushioned with higher CASA ratio. We remain positive on the bank, owing to its attractive CASAfranchise, rapid branch expansion, and multiple sources of sustainable fee income, strong growth outlook. We have BUY rating onthe stock for a target price of INR 1349.

    CMP: 1,030 BUY

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 53,695 36,243 48,814 48.2 10.0 NA NA

    Interest Expense 36,309 20,092 31,573 80.7 15.0 NA NA

    Net Interest Income 17,386 16,151 17,241 7.6 0.8 NA NA

    Operating Profit 15,430 14,864 15,585 3.8 -1.0 NA NA

    Operating Profit Margin 23.5 31.9 25.7 -840 bps -220 bps NA NA

    Reported PAT 8,653 7,351 9,424 17.7 -8.2 NA NA

    PAT Margin 13.1 15.7 15.5 -260 bps -240 bps NA NA

    EPS 21.01 17.98 22.88 16.85 -8.17 NA NA

    Market Cap: 424,237

    *Standa lone Financials

    (INR in Mn)

    P/BV (FY12E): 1.9x

    CMP: 102 BUY

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 64,733 45,773 56,289 41.4 15.0 NA NA

    Interest Expense 50,137 34,092 44,765 47.1 12.0 NA NA

    Net Interest Income 14,596 11,680 11,524 25.0 26.7 NA NA

    Operating Profit 13,578 10,256 10,308 32.4 31.7 NA NA

    Operating Profit Margin 19.4 20.2 17.0 -80 bps 239 bps NA NA

    Reported PAT 4,436 4,291 3,352 3.4 32.3 NA NA

    PAT Margin 6.3 8.5 5.5 -216 bps 77 bps NA NA

    EPS 4.51 4.36 3.40 3.44 32.65 NA NA

    Market Cap: 100,431*Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 0.6x

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    Indusind Bank

    Valuation & OutlookIndusind Bank is planning to increase its branch network thereby aiding growth in CASA ratio ~28-30%, which will help the bankncrease its NIMs ~3.5% further in FY12. Bank is expected to deliver healthy bottomline growth in FY12 and also to expand its

    product suite and services. We have ACCUMULATE rating on the stock with target price of INR 306.

    Corporation Bank

    Valuation & OutlookCorporation Bank is improving interms of its business. We expect credit growth of ~24% in FY12E. Margin improvement is goingto be a challenge in increasing interest rate cycle; however, margins are likely to be cushioned with higher CASA ratio of ~27% inFY12E. We have BUY rating on the stock for a target of INR 522.

    CMP: 260 ACCUMULATE

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 12,461 8,541 11,646 45.9 7.0 NA NA

    Interest Expense 8,520 5,244 7,746 62.5 10.0 NA NA

    Net Interest Income 3,941 3,297 3,900 19.5 1.1 NA NA

    Operating Profit 3,226 2,619 3,117 23.2 3.5 NA NA

    Operating Profit Margin 21.7 25.4 22.5 -370 bps -80 bps NA NA

    Reported PAT 1,823 1,331 1,802 37.0 1.2 NA NA

    PAT Margin 12.2 12.9 13.1 -70 bps -86 bps NA NA

    EPS 3.91 2.89 3.86 35.29 1.30 NA NA

    Market Cap: 121,152*Standa lone Financials

    (INR in Mn)

    P/BV (FY12E): 2.7x

    CMP: 422 BUY

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 33,357 21,581 29,783 54.6 12.0 NA NA

    Interest Expense 26,114 14,429 22,708 81.0 15.0 NA NA

    Net Interest Income 7,243 7,152 7,076 1.3 2.4 NA NA

    Operating Profit 5,908 5,735 5,764 3.0 2.5 NA NA

    Operating Profit Margin 16.2 24.1 17.6 -790 bps -140 bps NA NA

    Reported PAT 3,518 3,517 3,515 0.0 0.1 NA NA

    PAT Margin 9.7 14.8 10.8 -510 bps -110 bps NA NA

    EPS 23.70 24.50 23.70 -3.27 0.00 NA NA

    Market Cap: 62,512

    *Standa lone Financials

    (INR in Mn)

    P/BV (FY12E): 0.8x

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    Indian Bank

    Outook & ValuationIndian Banks loan book is skewed towards high yielding segments such as SME, retail and agriculture, which form about 43% ofthe banks advances. As a result, despite having a moderate CASA ratio of 32%, the banks NIMs are the highest amongst its peerset at around 3.7% as compared to ~3.1% for its peers. Best in class NIMs coupled with sound asset quality and cost efficiencies hased to superior ROAs for the bank ~1.7%. Managements strategy of moderating growth with focus on margins & asset quality

    would be positive for the bank from long term perspective. We have BUY rating on the stock for target price of INR 275.

    CMP: 213 BUY

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 30,040 22,756 27,814 32.0 8.0 NA NA

    Interest Expense 19,266 12,924 17,514 49.1 10.0 NA NA

    Net Interest Income 10,774 9,832 10,300 9.6 4.6 NA NA

    Operating Profit 8,235 7,389 7,811 11.4 5.4 NA NA

    Operating Profit Margin 25.2 30.7 25.7 -550 bps -50 bps NA NA

    Reported PAT 4,031 4,158 4,069 -3.1 -0.9 NA NA

    PAT Margin 12.3 16.2 13.4 -390 bps -110 bps NA NA

    EPS 9.38 9.67 9.47 -3.00 -0.95 NA NA

    Market Cap: 91,541*Standa lone Financials

    (INR in Mn)

    P/BV (FY12E): 0.9x

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    Media and Entertainment

    The overall sentiment continues to remain cautious in media and entertainment industry on account of the weaker growthoutlook coupled with margin pressures witnessed by FMCG companies due to higher commodity prices which is holding back

    their advertisment spendings. Print media companies are expected to report lower double digit ad revenue growth and couldwitness pressure on the cost side due to firming up of newsprint prices, increasing competition and rupee depreciation. TV adrevenue growth is also expected to remain muted till the start of festive season. However, the subscription revenue is expectedto drive the top line, backed by DTH and increasing digitization by the cable companies. As per FICCI-KPMG India, Media andEntertainment Industry is expected to grow at CAGR of 14% to reach INR 1275 bn in 2015 backed by growing media consumption,ncreasing penetration and growing digitization.

    Zee Entertainment Enterprises Ltd

    Valuation & OutlookZee Entertainment Enterprises Ltd (ZEEL) ad revenue growth is expected to remain flat in FY12, on account of reduction in adspend by FMCG, Real Estate, Banking players. Zee TV the flagship channel of ZEEL has been affected by the non-fiction high costshows in other channels and has moved to the No.4 slot behind Star, Colors and Sony. However, the subscription revenue isexpected to grow largely, driven by DTH and increasing digitilization. The Star-Zee distribution JV is also expected to providean edge to boost the subscription revenue. At the CMP stock trades at 17x and 15x for FY12E and FY13E respectively. Wemaintain ACCUMULATE on the stock with a target price of 140.

    CMP: INR 117

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue 7,458 7,116 6,983 4.8 6.8 7,553 -1.26

    Operating Expenses 5,743 5,230 5,423 9.8 5.9 5,518 4.07

    EBITDA 1,715 1,885 1,560 -9.0 9.9 2,035 -15.71

    EBITDA (%) 23 26 22 -349 bps 65 bps 27 -394 bps

    Reported PAT 1,479 1,257 1,336 17.7 10.7 1,553 -4.76

    PAT (%) 20 18 19 217 bps 70 bps 21 -73 bps

    EPS 1.5 2.5 1.4 -39.5 10.4 1.52 -0.52

    Market Cap: 114,670

    * Co nso l ida te d F i na nc i a l s

    P/E (FY12E): 17.5x

    ACCUMULATE

    (INR in Mn)

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    D.B.Corp Ltd.

    Valuation & OutlookDB Corp's flagship Hindi daily Dainik Bhaskar (DB) demonstrated steady performance and maintained its second position with14.17 mn Average Issue Readership in Q22011 registering 1.1% growth from Q12011 IRS survey. It maintained its dominantposition in Chandigarh, Chattisgarh, and Haryana. With the launch of its Marathi news paper DB corp has become the mostregionally diversified print media company. Moreover, Dainik Divya Marathi is gaining movement in terms of Average IssueReadership (AIR), which is expected to add to revenue going forward. But the margins can be affected by the higher newsprintprices and launch expenses. We have BUY rating on the stock with target price of INR 250.

    agran Prakashan Ltd

    Valuation & OutlookDainik Jagran the flagship newspaper of Jagran Prakashan Ltd (JPL) registered a growth of ~3% in Q22011 IRS survey in termsof Average Issue Readership (AIR) from Q12011. JPL has maintained its leadership position in the UP market and has focused indeveloping its existing territories which is expected to add to the growth momentum. However, increase in news print pricesand print order is expected to affect the earnings going forward. We believe that the company is well placed to capture the highgrowth story in the existing Hindi/Regional print markets. We maintain BUY on the stock with a target price of INR 150.

    CMP: INR 110

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue 3,128 2,769 3,047 13.0 2.7 3,218 -2.80

    Operating Expenses 2,252 1,860 2,227 21.1 1.1 2,294 -1.82

    EBITDA 876 908 820 -3.6 6.8 924 -5.21

    EBITDA (%) 28 33 27 -481 bps 109 bps 29 -71 bps

    Reported PAT 518 555 497 -6.7 4.2 545 -4.90

    PAT (%) 17 20 16 -349 bps 24 bps 17 -37 bpsEPS 1.6 1.8 1.6 -11.0 4.3 1.86 -11.94

    Market Cap: 34,780

    (INR in Mn)

    P/E (FY12E): 14.3x

    BUY

    CMP: INR 203

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue 3,596 3,010 3,537 19.5 1.7 3,417 5.24

    Operating Expenses 2,589 2,059 2,534 25.8 2.2 2,453 5.55

    EBITDA 1,007 951 1,003 5.8 0.4 964 4.45

    EBITDA (%) 28 32 28 -361 bps -35 bps 28 -21 bps

    Reported PAT 650 551 611 18.0 6.4 568 14.44

    PAT (%) 18.1 18 17 -22 bps 81 bps 17 145 bps

    EPS 3.5 3.0 3.3 17.0 6.5 3.12 13.66

    Market Cap: 37,280

    * Co ns o l ida te d F i na nc i a l s

    (INR in Mn)

    P/E (FY12E): 14.x

    BUY

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    HT Media Ltd

    Valuation & OutlookHT Media continued with its strong performance in Hindi & English segments. According to IRS Q1 2011, HTMLs flagshipEnglish daily, Hindustan Times, grew its readership by 1.2% QoQ for Q22011. Hindustan, the third-largest Hindi daily inIndia published by HMVL, 77% subsidiary posted a growth of 1.5% QoQ. The companys expansion plans are intact howeverrising newsprint prices could hinder margin growth. We maintain ACCUMULATE on the stock with target price INR 170.

    CMP: INR 148

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue 4,950 4,455 4,970 11.1 -0.4 4,960 -0.21

    Operating Expenses 4,038 3,665 4,066 10.2 -0.7 4,046 -0.20

    EBITDA 912 791 903 15.4 1.0 914 -0.26

    EBITDA (%) 18 18 18 68 bps 25 bps 18 -1 bps

    Reported PAT 428 388 515 10.3 -16.9 492 -12.95

    PAT (%) 9 9 10 -6 bps -172 bps 10 -127 bps

    EPS 1.8 1.7 2.2 10.4 -16.8 2.12 -14.09

    Market Cap: 34,780

    * Co nso l ida te d F i na nc i a l s

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 19.2x

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    Pharma - Sector

    Indian Pharma market has been growing at a CAGR of 15% (FY09-11). However a slowdown in the growth has been observedduring past few quarters due to the slow economic growth and factors like high inflation & price competition. The companies

    that have a high domestic exposure are expected to be affected the most due to increasing competition in certain therapeuticsegments. However companies with a strong R&D pipeline and significant FTF opportunities on their product list are expectedto generate better growth numbers. Ranbaxy, Glenmark, Sun & Lupin are some of the companies that would benefit most fromthese opportunies.

    After a weak performance of CRAMS space in FY10-11, the segment seems to be recovering in terms of revenue generation andncreasing number of orders from the innovators. Companies like Divi's & Dishman from the CRAMS space are expected to

    deliver healthy set of numbers.

    Top Picks in the Pharma space would be Biocon, Lupin, Glenmark, Sun, Divi's & Ranbaxy.

    Biocon Ltd

    Valuation & OutlookBiocon is expected to perform better in Q2FY12 with a strong growth in the revenue as it is expected to initiated the supply ofFidoxamicin API to its US partener Optimer. Also supply of Insulin to Pfizer will add to the revenue generation. We expect thecompany to continue its growth momentum. Currently the stock is trading at 14.4x its FY13E earnings. We recomment BUYwith the target price of INR 480.

    CMP: INR 337

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 4,866 6,788 4,420 -28.3 10.1 NA NA

    Operating Expenses 3,441 5,352 3,210 -35.7 7.2 NA NA

    EBITDA 1,426 1,436 1,210 -0.7 17.8 NA NA

    EBITDA (%) 29.3 21.2 27.4 815 bps 192 bps NA NA

    Reported PAT 808 891 700 -9.3 15.4 NA NA

    PAT (%) 16.6 13.1 15.8 347 bps 76 bps NA NA

    EPS 4.1 4.5 3.5 -9.3 16.6 NA NA

    Market Cap: 67,390

    * Co ns o l ida te d F i na nc i a l s

    BUY(INR in Mn)

    P/E (FY12E): 17 .6x

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    Lupin Ltd

    Valuation & OutlookLupin expects to launch 10 products in US during FY12 of which a few are FTFs which shall add a boost to the companysearnings. Going ahead the company has a high potential in achieving its target sales of USD 3 bn by FY13-14. Currently the stocks trading at 21.4x FY12E earnings. We recomeend HOLD with the price target of INR 520.

    Glenmark Ltd

    Valuation & OutlookWith a consistent growth in its domestic formulation business and a strong performance expected from US generic business werate Glenmark to be a potentially high value stock. Currently Glenmark is trading at 14.5x FY12E earnings. We recommend BUYwith the target price of INR 385

    CMP: INR 322

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 9,133 7,414 8,685 23.2 5.2 9,110 0.3

    Operating Expenses 5,909 5,544 5,716 6.6 3.4 5,852 1.0

    EBITDA 3,224 1,870 2,969 72.4 8.6 3,258 (1.0)

    EBITDA (%) 35.3 25.2 34.2 1008 bps 112 bps 35.8 46.4

    Reported PAT 2,247 1,116 2,101 101.3 6.9 1,803 24.6

    PAT (%) 24.6 15.1 24.2 954 bps 41 bps 19.8 (481.4)

    EPS 8.3 4.1 7.8 104.6 6.9 5.3 56.8

    Market Cap: 86,990

    * Co ns o l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    P/E (FY12E): 14 .5x

    CMP: INR 473

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 16,677 14,340 15,677 16.3 6.4 16,639 0.2

    Operating Expenses 13,308 11,353 12,734 17.2 4.5 13,124 1.4

    EBITDA 3,369 2,987 2,944 12.8 14.4 3,515 (4.2)

    EBITDA (%) 20.2 20.8 18.8 -63 bps 142 bps 21.1 92.5

    Reported PAT 2,485 2,150 2,140 15.6 16.1 2,569 (3.3)

    PAT (%) 14.9 15.0 13.7 -9 bps 125 bps 15.4 53.8

    EPS 5.5 4.8 4.7 13.2 16.1 5.5 (0.6)

    Market Cap: 211,080

    * Co nso l ida te d F i na nc i a l s

    HOLD

    (INR in Mn)

    P/E (FY12E): 21.4x

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    Divi's Laboratories

    Valuation & OutlookDivi's laboratories has recently restructred its business mix which is expected to improve the operating margins of the company.It has also initiated the production at its new multi purpose plant at Vizag which is expected to add a significant amount to therevenue. Currently the stock is trading at 19.4x FY12E earnings. We recommend HOLD with the target price of INR 801.

    Dishman Pharma

    Valuation & OutlookDishman Pharma is expected to see a marginal growth in its revenue lead by the growth in its Quats & vitamin D business. Thesetwo being a high margin segments, the EBITDA margin is expected to improve and come in at 19.5% levels. In the CRAMSsegment we expect the Carbogen Amcis business to remain flattish, however expected commencement of a few contracts inIndian CRAMS business, will give a boost to the segment revenue. Currently the stock is trading at a very attractive valuationof 5.3x FY12E earnings. We recommend BUY with the price target of INR 69.

    CMP: INR 728

    Particulars Q2FY12E Q2FY11 YoY(%) Bloomberg* Dev (%)Revenue from Operations 3,237 2,589 25.0 3,593 -9.9

    Operating Expenses 2,133 1,711 24.7 2,361 -9.6

    EBITDA 1,104 878 25.6 1,232 -10.4

    EBITDA (%) 34.1 33.9 17 bps 34.3 19.4

    Reported PAT 913 719 26.9 1,050 -13.1

    PAT (%) 28.2 27.8 42 bps 29.2 102.8

    EPS 6.9 5.4 26.9 8.6 -20.3

    Market Cap: 96,600

    * Co n s o l id a t e d F i n a n c i a l s

    HOLD

    (INR in Mn)

    P/E (FY12E): 19.4x

    CMP: INR 57

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 2,250 2,128 2,372 5.7 -5.2 NA NA

    Operating Expenses 1,811 1,759 1,935 3.0 -6.4 NA NA

    EBITDA 439 369 437 18.8 0.4 NA NA

    EBITDA (%) 19.5 17.4 18 214 bps 108 bps NA NA

    Reported PAT 161 283 151 -43.3 6.1 NA NA

    PAT (%) 7.1 13.3 6.4 -616 bps 76 bps NA NA

    EPS 2.0 3.7 1.9 -45.5 6.1 NA NA

    Market Cap: 4,610

    * Co ns o l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    P/E (FY12E): 5.3x

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    Apollo Hospitals

    Valuation & OutlookApollo Hospitals is expected to deliver a healthy growth in its Pharmacy segment in this quarter as well. However Pharmacybusiness being a low margin business shall lead to a slower margin growth. The company has steadily focussed on costrationalisation of the pharmacy vertical and was able to reduce losses over a period of time. Similarly, the company has beenable to lower its rental costs as a percentage of sales in Q1FY12. These factors shall help Apollo to improve its growth trend incoming quarter. Currently the stock is trading at an EV/EBITDA of 16.4x FY12E earnings. We recommend HOLD with the targetprice of INR 600.

    Sun Pharmaceuticals Ltd

    Valuation & OutlookSun Pharma has a leader position in the Chronic segment business. The company has significant FTF opportunities lined upwhich can generate a meaning contribution to the revenue. Resolutions of issues with Caraco would be an added advantage. SunPharma is increasing its concentration in emerging market which could lead to a healthy growth. Currently the stock is tradingat 20.9x FY12E. We recommend HOLD with the target price of INR 520.

    CMP: INR 519

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 7,037 5,864 6,410 20.0 9.8 NA NA

    Operating Expenses 5,819 4,868 5,351 19.5 8.8 NA NA

    EBITDA 1,217 996 1,059 22.2 14.9 NA NA

    EBITDA (%) 17.3 17.0 17 32 bps 77 bps NA NA

    Reported PAT 591 496 513 19.3 15.3 NA NA

    PAT (%) 8.4 8.4 8.0 -5 bps 40 bps NA NA

    EPS 4.7 4.0 4.1 18.2 15.3 NA NA

    Market Cap: 68,130

    * Sta nda l o ne F i na nc i a ls

    HOLD

    (INR in Mn)

    P/E (FY12E): 31.5x

    CMP: INR 462

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 16,729 13,701 16,357 22.1 2.3 17,596 (4.9)

    Operating Expenses 10,940 9,030 10,883 21.2 0.5 12,699 (13.8)

    EBITDA 5,788 4,670 5,474 23.9 5.7 4,897 18.2

    EBITDA (%) 34.6 34.1 33.5 51 bps 113 bps 27.8 (677.0)

    Reported PAT 5,403 5,037 5,010 7.3 7.9 4,697 15.0

    PAT (%) 32.3 36.8 30.6 -446 bps 167 bps 26.7 (561.0)

    EPS 5.2 24.3 4.8 -78.7 7.9 4.4 17.7

    Market Cap: 478,110

    * Co nso l ida te d F i na nc i a l s

    HOLD

    (INR in Mn)

    P/E (FY12E): 20.9x

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    CMP: INR 514

    Particulars Q3FY11E Q3FY10 Q2FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 21,066 19,452 20,931 8.3 0.6 22,090 (4.6)

    Operating Expenses 18,475 16,863 19,299 9.6 -4.3 18,767 (1.6)

    EBITDA 2,591 2,589 1,632 0.1 58.8 3,322 (22.0)

    EBITDA (%) 12.3 13.3 7.8 -101 bps 450 bps 15.0 274.0

    Reported PAT 2,507 3,079 2,432 -18.6 3.1 1,705 47.0

    PAT (%) 11.9 15.8 11.6 -393 bps 28 bps 7.7 (418.0)

    EPS 5.9 7.3 5.8 -18.8 3.1 11.4 (47.8)

    Market Cap: 216,610

    * Co ns o l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    P/E (FY12E): 22.7x

    Ranbaxy Ltd

    Valuation & OutlookRanbaxy has been performing under stress in past 2 quarters. The domestic business is expected to have a healthy upsidebacked by revenue from project Viraat. Competition feom peers is expected to hamper certain therapeutic segments like AntiInfectives & Gastro. Currently the stock is trading at 22.7x FY12E earnings. We recommend BUY with the target price of INR 620.

    CMP: INR 221

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 4,639 3,314 5,208 40.0 -10.9 NA NA

    Operating Expenses 3,234 2,257 3,776 43.3 -14.4 NA NA

    EBITDA 1,406 1,057 1,432 33.0 -1.8 NA NA

    EBITDA (%) 30.3 31.9 27.5 -160 bps 280 bps NA NA

    Reported PAT 1,095 774 1,164 41.5 -5.9 NA NA

    PAT (%) 23.6 23.3 22.3 25 bps 125 bps NA NA

    EPS 5.9 3.7 6.2 60.8 -5.9 NA NA

    Market Cap: 41,200

    * Co ns o l ida te d F i na nc i a l s

    BUY

    (INR in Mn)

    EV/EBITDA FY12E :9.5x

    Opto Circuits Ltd

    Valuation & OutlookOpto Circuits is expected to perform a health set of numbers backed by the growth in Invasive segment. Also a large number ofcontracts earned by Opto in previous quarter are expected to boost the sales. After restructuring of its Cardiac Science businesswe see a significant jump in the revenue. Currently the stock is trading at 9.5x EV/Ebitda of FY12E. We recommend a BUY ratingwith the target price of INR 330.

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    Food Processing

    Shree Renuka Sugars Ltd (SHRS)

    Valuation & OutlookShree Renuka Sugars (SHRS) would benefit from stable sugar prices, around INR 28-30 per kg, in domestic markets. In globalmarkets, higher realisation of sugar and ethanol would contribute to SHRS' topline growth. Brazilian & Indian operations areexpected to show traction on the back of healthy volumes this season. Reduction in debt and company's vision towards furtherdebt reduction would improve margins going forward. At CMP of INR 55, the stock is trading at 5.6x its SY12E earnings. Werecommend BUY on the stock with a reduced price target of INR 68.

    Valuation & OutlookBasmati industry is set to post a strong growth trajectory on account of rapid increase in production, healthy demand innternational markets and possibility of realisation improvement. REI Agro, the leader in Basmati processing, is positioningtself to capitalize the growth opportunity by increasing the utilisation rate, improving its head rice yield and better positioning

    of its brands. The impact of higher interest cost would be partially offset by reduction in working capital requirment. Stock istrading at 4.5x its FY13E earnings. We recommend ACCUMULATE on the stock with a reduced price target of INR 28.

    REI AgroCMP: INR 25

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 10,476 8,377 7,847 25.1 33.5 NA NA

    Operating Expenses 8,292 6,738 2,573 23.1 222.2 NA NA

    EBITDA 2,184 1,639 5,274 33.3 -58.6 NA NA

    EBITDA (%) 20.9 19.6 67.2 128 bps -4636 bps NA NA

    Reported PAT 1,071 717 902 49.5 18.8 NA NA

    PAT (%) 10.2 8.6 11.5 167 bps -127 bps NA NA

    EPS 1.1 0.8 0.8 49.1 34.7 NA NA

    Market Cap: 23,470

    *Standalone Financials

    (INR in Mn)

    ACCUMULATE

    P/E (FY13E): 4.5x

    CMP: INR 55

    Particulars Q4SY12E Q4SY11 Q3SY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 21,291 24,598 22,401 -13.4 -5.0 NA NA

    Operating Expenses 17,312 21,626 18,077 -19.9 -4.2 NA NA

    EBITDA 3,979 2,972 4,324 33.9 -8.0 NA NA

    EBITDA (%) 18.7 12.1 19.3 660 bps -62 bps NA NA

    Reported PAT 1,563 1,278 1,860 22.3 -16.0 NA NA

    PAT (%) 7.3 5.2 8.3 214 bps -96 bps NA NA

    EPS 2.3 1.9 2.8 21.9 -16.9 NA NA

    Market Cap: 36,720

    *Co nso lidated Financials, SY- Sugar Year

    P/E (SY12E): 5.6x

    (INR in Mn)

    BUY

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    Chambal Fertilizers Ltd

    Valuation & OutlookChambal Fertilisers would continue to gain from strong growth in Urea consumption. Change in Urea investment policyprovides further opportunity for expansion. Besides, possible decontrol of urea prices could trigger sector growth. Demerger ofshipping business would further strengthen the financial position of the company. Stock is trading at 10.2x its FY13E earnings.We recommend BUY on the stock with a price target of INR 113.

    Fertilizer

    Healthy monsoon in the Indian subcontinent region (1% above 50 year average in June-September season) have lead to exorbitantsales of various fertilisers. Globally, this season has observed a dramatic rise in fertiliser prices, especially in P & K type of

    fertilisers. Volumes for DAP, MOP, SSP and other NPK fertilisers have reduced by 18% YoY in Apr-Aug 2011 period. This drop involume was accustomed by reduction in fertiliser imports while the volume of manufactured P & K fertilisers increased by 3%YoY. Urea also registered a YoY increase of 11% in its sales thereby occupying 54% portion in the pie of fertiliser sales. We expectfertiliser companies to post an increase in margins due to their ability to pass on the rise in raw material prices to the farmers.However, increase in realisation is expected to hamper growth in sales volume.

    Our top picks are Coromandel International and Chambal Fertilisers.

    CMP: INR 92

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 12,032 15,351 11,503 -21.6 4.6 NA NA

    Operating Expenses 10,321 13,220 9,799 -21.9 5.3 NA NA

    EBITDA 1,711 2,131 1,704 -19.7 0.4 NA NA

    EBITDA (%) 14.2 13.9 14.8 34 bps -59 bps NA NA

    Reported PAT 840 861 637 -2.3 32.0 NA NA

    PAT (%) 7.0 5.6 5.5 138 bps 145 bps NA NA

    EPS 2.0 2.1 1.5 -2.4 32.0 NA NA

    Market Cap: 38,240

    *Standalone Financials

    BUY

    (INR in Mn)

    P/E (FY13E): 10.2x

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    Coromandel International Ltd.

    Valuation & OutlookCoromandel's (CRIN) recent acquisition of Gujarat based agrochemical company Sabero Organics would strengthen its toplinegrowth. Sabero has a wide portfolio of 8-9 products across various categories like insecticide, herbicide and fungicide. Strongsynergy benefits are expected from this acquisition going forward. The company would also gain from strong consumption ofagrochemical in CY11 on account of healthy monsoons. CRIN is also expected to increase its manufacturing capacity of P & Ktype fertilisers (through its subsidiaries) by FY13. Stock is trading at 11.9x its FY13E earnings. We maintain BUY on the stockwith a reduced price target of INR 378.

    Deepak Fertilisers & Petrochemicals Ltd.

    Valuation & OutlookLack of competition, switching of major mining & infrastructure players to technical grade AN (from fertiliser grade AN) andstrong growth in infrastructure in Southeast Asia (especially India in 12th Five Year Plan) would support TAN growth. Betterutilisation of ANP unit and healthy performance by chemical segment provide strong revenue visibility for the company.Contribution from bentonite sulphur is expected to rise stably till FY13. Stock is trading at 5.8x its FY13E earnings. We maintainBUY with a long term price target of INR 202.

    CMP: INR 308

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 25,149 27,573 17,901 -8.8 40.5 NA NA

    Operating Expenses 21,433 22,261 15,406 -3.7 39.1 NA NA

    EBITDA 3,717 5,312 2,496 -30.0 48.9 NA NA

    EBITDA (%) 14.8 19.3 13.9 -449 bps 84 bps NA NA

    Reported PAT 2,119 3,523 1,589 -39.9 33.3 NA NA

    PAT (%) 8.4 12.8 8.9 -435 bps -45 bps NA NA

    EPS 7.5 NA 5.6 NA 34.2 NA NA

    Market Cap: 86,870

    *Co nso lidated Financials

    (INR in Mn)

    P/E (FY13E): 11.9x

    BUY

    CMP: INR 161

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 5,285 4,058 4,720 30.2 12.0 NA NA

    Operating Expenses 4,152 3,313 3,611 25.3 15.0 NA NA

    EBITDA 1,133 745 1,109 52.0 2.2 NA NA

    EBITDA (%) 21.4 18.4 23.5 307 bps -206 bps NA NA

    Reported PAT 612 414 689 47.6 -11.3 NA NA

    PAT (%) 11.6 10.2 14.6 136 bps -304 bps NA NA

    EPS 6.9 4.7 7.3 47.5 -4.4 NA NA

    Market Cap: 14,430

    *Standalone Financials

    BUY

    P/E (FY13E): 5.8x

    (INR in Mn)

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    Agrochemicals

    Indian agrochemical industry is the fourth largest market in the world with a total estimated market size of USD 1.4bn, after theUnited States, Japan, and China. Of this, ~50% market share is held by MNCs and the rest by Indian companies who are largely

    nto off-patent generic formulations. This industry (USD 1.4bn in size) is expected to grow at 12-15% compared to 3.6% expectedfrom global market (USD 43bn) till 2014 (Domestic industry grew by 11% in 2009). 40 ingredients are going off-patent by 2013,which will throw up opportunities for existing established players. Indian agrochemical market is dominated by Insecticideswith 58% market share, followed by herbicides and fungicides with 21% and 19% share respectively. Nearly 50% of the totalpesticide produced is consumed by only two crops i.e. paddy and cotton. This sector would continue to outperform othersectors, despite uncertainties in global macro economic environment, hence agrochemical companies would continue to trade ata premium over market.

    Our top picks are Rallis India, Tata Chemicals and United Phosphorus.

    Valuation & OutlookRallis is expected to register 22% and 29% growth in topline and bottomline respectively in FY12. It has strengthened its grip onthe seed business by acquisition of Metahelix Life Sciences a seed research company having 13 products in market and 17products in pipeline. Rallis is poised for strong growth on account of strong product mix, ability to launch new productssuccessfully, commissioning of Dahej facility, strong distribution channel and contract manufacturing alliance with severalmultinational agrochemical companies. Stock is trading at 14.9x its FY13E earnings. We recommend ACCUMULATE with a longterm price target of INR 205.

    Rallis India Ltd. (RALI)

    CMP: INR 173

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,849 3,631 2,327 6.0 65.4 NA NA

    Operating Expenses 3,095 2,749 2,015 12.6 53.6 NA NA

    EBITDA 754 883 312 -14.6 141.4 NA NA

    EBITDA (%) 19.6 24.3 13.4 -472 bps 617 bps NA NA

    Reported PAT 478 587 166 -18.5 188.7 NA NA

    PAT (%) 12.4 16.2 7.1 -374 bps 531 bps NA NA

    EPS 2.5 3.0 0.9 -18.5 188.7 NA NA

    Market Cap: 33,720

    *Standalone Financials

    P/E (FY13E): 14.9x

    ACCUMULATE

    (INR in Mn)

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    Valuation & OutlookTata Chemicals' fertiliser segment is expected to benefit on account of healthy monsoon in CY11. Revenue growth would bebacked by healthy chemical sales in India and US. Healthy contribution from British Salt and Rallis India would strengthen theperformance of the company. Margins are also expected to improve by 260bps in FY12. Stock is trading at 8.8x its FY13Eearnings. We recommend BUY on the stock with a long term target of INR 387.

    Tata Chemicals

    Valuation & OutlookUPL's (United Phosphorus) is one of the largest generic players in the global agrochemical market and it is well positioned tocapture the growth in Indian and Brazilian markets. UPL's recent acquisition of 50% stake in Sipcam Isagro Brazil providemmense opportunity to expand its international operations. The management expects 25-30% topline growth in FY12. Slowdownn global economy wouldn't affect the consumption of agrochemicals. UPL is currently trading at 8.6x its FY13E earnings. We

    recommend BUY on the stock with a reduced price target of INR 172.

    United Phosphorus Ltd. (UPL)CMP: INR 139

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 17,663 12,247 18,220 44.2 -3.1 16,286 8.5

    Operating Expenses 14,193 9,921 14,771 43.1 -3.9 13,053 8.7

    EBITDA 3,470 2,326 3,449 49.2 0.6 3,234 7.3

    EBITDA (%) 19.6 19.0 18.9 65 bps 72 bps 19.9 -21 bps

    Reported PAT 1,732 1,147 1,843 51.0 -6.0 1397.5 23.9

    PAT (%) 9.8 9.4 10.1 44 bps -31 bps 8.6 122 bps

    EPS 3.7 2.5 4.0 51.2 -6.0 NA NA

    Market Cap: 64,000

    *Co nso lidated Financials

    BUY

    P/E (FY13E): 8.6x

    (INR in Mn)

    CMP: INR 317

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 29,965 29,347 29,237 2.1 2.5 28,631 4.7

    Operating Expenses 24,091 25,166 23,969 -4.3 0.5 NA NA

    EBITDA 5,875 4,182 5,268 40.5 11.5 NA NA

    EBITDA (%) 19.6 14.2 18.0 536 bps 159 bps NA NA

    Reported PAT 2,264 1,271 1,999 78.2 13.3 2167.0 4.5

    PAT (%) 7.6 4.3 6.8 323 bps 72 bps 7.6 -1 bps

    EPS 8.9 5.1 7.9 73.9 13.2 8.5 4.6

    Market Cap: 80,899

    *Co nso lidated Financials

    BUY

    (INR in Mn)

    P/E (FY13E): 8.8x

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    Information Technology

    The depreciation of the INR will have significant benefits to the top and bottom lines of export driven companies and particularlythe IT services space. The INR has depreciated by ~5.6% over the last month and is currently close to 49.5 INR/USD levels. The

    revenue for IT companies in terms of INR will be close to 1% higher which translates to an increase in the operating margin by~30-40 bps. For Q2FY12, IT companies will most likely see an increase in their margins by ~40-50 bps. The FY13 earningsestimate will be 7-11% higher if the INR remains at current levels close to the 49 mark.

    In the near term we expect cuts in discretionary spending by IT companies clients as they may cut corners in anticipation of apoor business environment in the next few quarters. We dont expect CY11 budgets to be reviewed as S&P 500 companies havereported good financial results in the recent past and banks are well capitalized as compared to the 2008 crisis. We expect CY12budgets to reduce by around 10-15% in anticipation of economic slowdown. This would impact revenues and bottom lines of ITcompanies in Q4FY12 and FY13.

    Our top picks for the sector are HCL Technologies, Tata Consultancy Services Ltd, Rolta Ltd, and Persistent Systems Ltd.

    Tata Consultancy Services (TCS)

    Valuation & OutlookTCS continued to give out stellar performance on the back of strong volume growth and should be in a position to maintainndustry-leading growth. According to the management, there should not be any material impact expected from the ongoing

    macro weakness. On the back of sustained outperformance, TCS has been consistently performing over the last few quarters ands considered a safe bet within the IT space. We think investors should buy on decline. Hence we recommend ACCUMULATE with

    a price target of INR 1200.

    CMP: INR 1037

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 117,356 92,864 107,970 26.4 8.7 115,380 1.7

    Operating Expenses 82,149 65,520 77,641 25.4 5.8 81,512 0.8

    EBITDA 35,207 27,344 30,328 28.8 16.1 33,868 3.8

    EBITDA (%) 30.0 29.4 28.1 55 bps 191 bps 29.4 2.2

    Reported PAT 25,232 21,990 24,405 14.7 3.4 25,455 (0.9)

    PAT (%) 21.5 23.7 22.6 -218 bps -110 bps 22.1 (2.6)

    EPS 12.9 11.1 12.3 16.3 4.5 13 (0.3)

    *Co nso lidated Financials

    P/E (FY12E): 19.8x

    ACCUMULATE

    (INR in Mn)

    Market Cap: 2,030,595

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    HCL Technologies

    Valuation & OutlookPost the downturn in 2008, HCL has adopted a fairly aggressive strategy in increasing its market share and thus has been able toshow greater volume growth as compared to its peer. This growth momentum may moderate to a certain extent moving forwardbut the company will still show strong revenues due to increased market share. They are in the best position to benefit from thedepreciation of the INR v/s USD due to thier low forex hedged position(~ USD 390 mn) as compared to thier peers. At CMP of INR408 the stock seems attractive with a potential upside of 21% We recommend a BUY with a price target of INR 495.

    Infosys Ltd

    Valuation & OutlookOver the last year, Infosys corrected sharply due to larger global economic concers, as well as management concers. The stock fell~30% from FY11 high. Those issues have now been calmed with a re-jig in the management and with a more stable organizationalstructure that has been put in place. The company can also potentially see an upside in its topline and bottom line by ~(6-10%) dueto the depreciation in the INR v/s USD moving forward. We know believe the stock is well priced at current levels of INR 2533 andwe do see a potential upside of ~14%. Hence we recommend ACCUMULATE with a price target of INR 2900.

    CMP: INR 2533

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 87,263 69,470 74,850 25.6 16.6 86,796 0.5

    Operating Expenses 63,025 48,490 55,330 30.0 13.9 63,577 (0.9)

    EBITDA 24,238 20,980 19,520 15.5 24.2 23,219 4.2

    EBITDA (%) 27.8 30.2 26.1 -242 bps 170 bps 26.8 3.7

    Reported PAT 20,070 17,370 17,220 15.5 16.6 19,696 1.9

    PAT (%) 23.0 25.0 23.0 -200 bps -1 bps 22.7 1.3

    EPS 35.0 30.4 30.1 15.1 16.1 34.0 2.6

    *Co nso lidated Financials

    Market Cap: 1,454,908

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 18.4x

    CMP: INR 408

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 45,623 37,081 42,995 23.0 6.1 45,514 0.2

    Operating Expenses 37,834 31,889 35,221 18.6 7.4 37,912 (0.2)

    EBITDA 7,789 5,192 7,774 50.0 0.2 7,602 2.4

    EBITDA (%) 17.1 14.0 18.1 307 bps -101 bps 16.7 2.2

    Reported PAT 5,247 3,309 5,108 58.6 2.7 4,823 8.1

    PAT (%) 11.5 8.9 11.9 258 bps -38 bps 10.6 7.9

    EPS 7.6 19.5 7.4 -60.9 2.8 6.8 11.3

    Market Cap: 281,645

    *Co nso lidated Financials

    P/E (FY12E): 12.8x

    BUY

    (INR in Mn)

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    Rolta India Ltd.

    Valuation & OutlookGoing forward, we expect wage hikes to increase pressure on margins in the near term. However, IP driven revenues could givemargins the much needed boost as the industry encounters uncertain economic conditions in the coming future. In the coming 3 5 year period, revenue from IP business is expected to rise from the current 15% to nearly 25% - 30% range. With the companysstrong order-book, dominant position in the geospatial imaging space and increasing IP driven business, we believe Rolta isavailable at cheap valuations relative to its peers. At the current market price, the stock is trading at 3.7x its FY12 earningsestimate. We maintain our BUY recommendation on this stock with a revised price target of INR 105.

    Persistent Systems Ltd (PSL)

    Valuation & OutlookWe believe PSL, given its niche offerings and higher than average operating margins, deserves a premium in comparison to itsisted peers. The stock is currently trading at 9.8x and 8.5x its FY12 E and FY13 E earnings. Historically, the stock has traded at

    11.3x its Trailing Twelve Months (TTM) earnings. We value the company at 10.5x its FY13 earnings estimate arriving at a pricetarget of INR 381 per share.We recommend a BUY rating on PSL, indicating an upside of 25% from current levels.

    CMP: INR 83

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 5,105 4,276 4,765 19.4 7.1 4,841 5.2

    Operating Expenses 2,854 2,579 2,831 10.7 0.8 NA NA

    EBITDA 2,251 1,697 1,934 32.6 16.4 NA NA

    EBITDA (%) 44.1 39.7 40.6 441 bps 351 bps NA NA

    Reported PAT 980 747 887 31.2 10.5 NA NA

    PAT (%) 19.2 17.5 18.6 173 bps 59 bps NA NA

    EPS 6.1 4.6 5.5 30.9 10.6 NA NA

    Market Cap: 13,339

    *Co nso lidated Financials

    BUY

    (INR in Mn)

    P/E (FY12E): 3.6x

    CMP: INR 304

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 2,410 1,870 2,238 28.9 7.7 2,430 (0.8)

    Operating Expenses 2,020 1,440 77,641 40.3 -97.4 2,042 (1.1)

    EBITDA 390 430 389 -9.3 0.3 389 0.4

    EBITDA (%) 16.2 23.0 17.4 -681 bps -120 bps 16.0 1.2

    Reported PAT 337 358 276 -5.8 22.4 259 23.1

    PAT (%) 14.0 19.2 12.3 -516 bps 169 bps 10.7 23.8

    EPS 8.4 9.0 6.9 -5.9 22.4 6.7 21.0

    Market Cap: 12,144*Co nso lidated Financials

    BUY

    (INR in Mn)

    P/E (FY12E): 9.7x

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    Valuation & OutlookThe company is expected to launch Revolo, which should help boost sentiment. At the current market price, the stock is tradingat 12.4x its FY12 earnings estimate and moving forward we see a potential upside of ~18% from its current levels. We maintain ourACCUMULATE recommendation on this stock with a revised price target of INR 178.

    KPIT Cummins Infosystems Ltd.

    Valuation & OutlookThe company's performance in Q2FY11 was above the industry average considering the recent headwinds faced by the ITndustry in India. The company also expects to benefit from recovery owing to their discretionary spending. Marginal growth in

    revenues is expected from the US in upcoming quarters. At the current market price, the stock is trading at 11.1x its FY12 earningsestimate and we see a potential upside of ~19% from current levels. Hence we recommend ACCUMULATE on the stock with a pricetarget of INR 95.

    Hexaware Technologies Ltd

    CMP: INR 150

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,266 2,349 3,161 39.0 3.3 3,254 0.4

    Operating Expenses 2,811 2,000 2,766 40.6 1.6 NA NA

    EBITDA 455 349 395 30.4 15.1 NA NA

    EBITDA (%) 13.9 14.9 12.5 -93 bps 143 bps NA NA

    Reported PAT 289 237 244 21.7 18.5 286 1.0

    PAT (%) 8.8 10.1 7.7 -126 bps 113 bps 8.8 0.7

    EPS 3.3 3.0 2.7 9.4 19.8 3.3 (0.5)

    Market Cap: 13,232

    *Co nso lidated Financials

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 12.4x

    CMP: INR 83

    Particulars Q3FY11E Q3FY10 Q2FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,510 2,817 3,340 24.6 5.1 3,526 (0.5)

    Operating Expenses 2,965 2,660 2,837 11.5 4.5 NA NA

    EBITDA 545 157 504 246.5 8.1 NA NA

    EBITDA (%) 15.5 5.6 15.1 994 bps 44 bps NA NA

    Reported PAT 621 420 602 47.8 3.2 NA NA

    PAT (%) 17.7 14.9 18.0 278 bps -32 bps NA NA

    EPS 2.1 1.5 2.1 46.4 3.1 NA NA

    Market Cap: 24,219

    *Co nso lidated Financials

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 10.6x

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    Other

    Valuation & OutlookMundra Port (MPL) is expected to post strong growth in bulk and crude cargo volumes due to increase in coal requirements byUltra Mega Power Projects and rise in refining capacities of IOC & HPCL Mittal Energy Ltd. Cargo traffic is expected to fall unlessong term contracts with leading domestic players are revised. The company has acquired Abbot Point Coal Terminal and hencets debt is expected to rise post completion of consolidation procedures. Stock is trading at 19.8x its FY13E earnings. We recom-

    mend ACCUMULATE on the stock with a price target of INR 178.

    Mundra Port

    CMP: INR 160

    Particulars Q2FY12E Q2FY11 Q1FY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 6,529 4,135 5,296 57.9 23.3 5,321 22.7

    Operating Expenses 2,014 1,196 1,667 68.4 20.8 1,547 30.2

    EBITDA 4,515 2,939 3,629 53.6 24.4 3,775 19.6

    EBITDA (%) 69.2 71.1 68.5 -192 bps 63 bps 70.9 -178 bps

    Reported PAT 3,122 2,117 2,544 47.5 22.7 2687.0 16.2

    PAT (%) 47.8 51.2 48.0 -338 bps -22 bps 50.5 NA

    EPS 1.6 1.1 NA 47.0 NA 1.3 17.6

    Market Cap: 320,140

    *Co nso lidated Financials, Standalone Financials

    P/E (FY13E): 19.8x

    ACCUMULATE

    (INR in Mn)

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    Research RecommendationDate of

    RecommendationCompany Name Report Type Sector Recommendation

    Recommended

    PriceTarget

    24-S ep-11 Development Credit Bank Ltd. Initiating Coverag e Banking Buy 46.0 64.0

    15-S ep-11 S upreme Infrastruc ture India Ltd. Investment Idea Construc tions Buy 230.0 280.030-Aug -11 Persistent S y stems Ltd. Initiating Coverag e Informatio n Techno logy Buy 309.0 381.0

    2-Aug-11 Tamil Nadu News Print Ltd. Initiating Coverag e Paper & Paperboard Buy 117.0 161.0

    18-Jul-11 KEC International Ltd. Initiating Coverag e Power Transmission Buy 79.0 104.0

    12-Jul-11 V isa S teel Ltd. Investment Idea Metal Buy 59.0 75.0

    30-Jun-11 Tecpro S ystems Ltd. Investment Idea Material Handling Buy 250.0 300.0

    16-May-11 Camson Bio techno lo gies Ltd. Investment Idea Ag ri Bio tech Buy 116.0 156.0

    4-May-11 Ganesh Po lytex Ltd. Initiating Coverag e Waste Rec yc ling Buy 62.0 102.0

    28-Apr-11 CES C Ltd. Initiating Coverag e Power Buy 311.0 411.0

    1-Apr-11 Unity Infrapro jec ts Ltd. Investment Idea Infrastruc ture Buy 69.0 86.0

    31-Mar-11 Rolta India Ltd. Investment Idea IT / ITES Buy 139.0 191.0

    29-Mar-11 West Co ast Paper Mills Ltd. Investment Idea Paper & Paperboard Buy 77.0 95.0

    7-Mar-11 Hindusthan Natio nal Glass & Industries Ltd. Initiating Coverag e Glass Buy 212.0 351.028-Feb-11 Deepak Fertilisers & Petroc hemic als Ltd. Initiating Coverag e Fertilisers Buy 152.0 202.0

    3-Feb-11 Ceat Ltd. Investment Idea Auto Anc illaries Buy 109.0 149.0

    31-Jan-11 MIC Elec tronic s Ltd. Initiating Coverage Led Display & Lighting Buy 31.6 51.0

    12-Jan-11 Diamo nd Power & Infrastruc ture Ltd. Initiating Coverag e Power Buy 193.0 257.0

    31-Dec -10 Hathway Cable & Datac om Ltd. Initiating Coverag e Media Buy 164.0 227.0

    31-Dec -10 Jindal Po ly Films Ltd. Investment Idea Pac kaging Ac c umulate 525.0 620.0

    31-Dec -10 Allahabad Bank Investment Idea Banking Buy 225.0 304.0

    22-Dec -10 S asken Communic atio n Tec h. Ltd. Investment Idea IT / ITES Buy 168.0 226.0

    30-Nov-10 Banc o Produc t Initiating Coverage Auto Buy 93.0 149.0

    30-Nov-10 Allcarg o Global Log istic s Investment Idea S hipping & Logistic s Buy 155.0 233.0

    18-Nov-10 Jyo ti S truc ture Investment Idea Power Buy 137.0 171.0

    16-Nov-10 Pennar Industries Investment Idea S teel Buy 49.0 63.0

    3-Nov-10 HS IL Ltd. Initiating Coverag e Building Produc t Buy 141.0 171.0

    27-Oct-10 IDBI Bank Initiating Coverag e Banking Buy 171.0 228.0

    26-Oct-10 MS P S teel and Power Initiating Coverag e S teel Buy 72.0 114.0

    29-S ep-10 Nakoda Textiles Investment Idea Textiles Buy 15.0 23.0

    16-S ep-10 Kajaria Ceramic s Investment Idea Ceramic Tiles Buy 70.0 88.0

    15-S ep-10 Gokul Refo ils Investment Idea Fo od Pro cessing Ac c umulate 97.3 109.0

    14-S ep-10 Aqua Lo gistic Investment Idea Log istic Hold 59.1 60.8

    31-Aug -10 Lakshmi Prec isio n S crews Investment Idea Fastner Ac c umulate 79.8 91.8

    27-Aug -10 BGR Energy S ystem Initiating Coverag e Power Buy 786.0 1020.0

    30-Jul-10 Patel Engineering Initiating Coverag e Infrastruc ture Buy 416.0 480.0

    26-Jul-10 KPR Mills Ltd. Investment Idea Textiles Acc umulate 156.0 181.0

    14-Jul-10 IDBI Bank Investment Idea Banking Ac c umulate 125.0 142.09-Jul-10 Opto Circ uit Initiating Coverag e Healthcare Buy 243.0 293.0

    26-Jun-10 BGR Energy S ystem Ltd. Investment Idea Capital Goods Ac c umulate 697.0 820.0

    23-Jun-10 Bio con Ltd. Investment Idea Pharmaceutic als Buy 321.0 387.0

    19-Jun-10 Emmbi Po lyarns Investment Idea Pac kaging Buy 15.6 26.0

    18-Jun-10 Indian Bank Investment Idea Banking Buy 221.0 276.0

    17-Jun-10 Diamo nd Power & Infrastruc ture Ltd. Investment Idea Power Anc illary Ac c umulate 196.0 226.0

    12-Jun-10 Man Industries Investment Idea S teel Pipes Buy 85.0 102.0

    5-Jun-10 Usher Ag ro Investment Idea Fo od Pro cessing Buy 79.0 110.0

    10-May-10 Greaves Co tton Investment Idea Construc tion Buy 67.0 82.0

    30-Apr-10 Indraprastha Gas Ltd. Initiating Coverag e Gas Distribution Buy 233.0 290.0

    16-Apr-10 Heidelburg Cement Investment Idea Cement Ac c umulate 59.0 60.0

    16-Apr-10 KEC International Ltd. Investment Idea Power Transmission Acc umulate 570.0 655.516-Apr-10 Piramal Glass Ltd. Investment Idea Pac kaging Ac c umulate 97.0 111.6

    7-Apr-10 S etc o Automative Investment Idea Auto Anc illaries Buy 90.0 135.0

    6-Apr-10 Den Networks Investment Idea Media Acc umulate 197.0 226.6

    5-Apr-10 Arshiya Internatio nal Investment Idea Log istic Buy 204.0 291.0

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    DisclaimerThis document has been issued by Unicon Financial Intermediaries Pvt Ltd. (UNICON) for the information of its customers only. UNICON is governed

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