>JK LAKSHMI CEMENT (ICICI DIRECT)

Company Background
JK Lakshmi Cement (JKL), a north-based cement player with a total capacity of 4.75 million tonne (MT)and has a 36 MW captive power plant at Sirohi. The company has major presence in Rajasthan, Gujarat, Maharashtra and North India markets. North India, Rajasthan and Gujarat contribute around 30% each to the total sales while Maharashtra contributes the remaining 10% of the total sales. North Indian markets include J&K, Himachal Pradesh, Punjab, Haryana, Delhi and west UP.

Investment rationale

■ Capacity addition to drive Volumes:
JKL has increased its cement capacity by 30% from 3.65MT in FY2008 to 4.75MT in March 2009 by adding two grinding units of 0.55 MT each at Sirohi, Rajasthan and Kalol, Gujarat. The company is further planning to set up a green field plant 2.7 MT plant at Durg, Chhattisgarh at project cost for the expansion is Rs 1100 crore. The plant is expected to come on stream by mid- FY13. Thus capacity addition will drive the volumes of the company.

■ Cost Savings to help cushion Margins
JKL mainly uses petcoke as a fuel for its operations. It has contracted the fuel at lower prices until October 2009 at Rs 4000 per tonne. Domestic petcoke price in June were hovering around Rs 4800 per tonne.

The company is also expanding its captive power capacity to 48 MW by setting up a 12 MW waste heat recovery plant at Sirohi, Rajasthan. The variable cost per unit will be only Rs 0.3-0.4 per unit and will generate carbon credit income. Captive Power will meet 70% of the power requirement of the company.

For balance power requirement, Company has also entered into strategic tie ups with KSK group company, VS Lignite for the purchase of 21MW power every year at a cost of Rs3.2/unit for 20 year.(JKL as of now sources power at Rs4.6/unit from grid). This would translate into a savings of Rs1.4/unit from October 2009 onwards.

Power and fuel constitute about 34% of the cost of production. Contracting of power and fuel at low cost has increased the earning visibility.

■ Presence in high growth North India market
JKL has significant presences in North India. Cement consumption in Northern region grew at impressive 14.5% as compared to all India average of 11.6%. On account strong consumption growth prices in key markets of JKL has remained firm.

Going ahead, we expect the northern region to continue to grow above the all-India average due to incremental demand that will come from the Commonwealth Games and the hydropower projects coming up in the region. In addition, the upcoming US$90-billion Delhi-Mumbai Industrial Corridor project and the 1,483-km high-speed dedicated freight corridor project will also boost cement demand in North India.

■ Healthy Balance sheet
JKL has a cash and Investments of Rs 416 crore (Rs 68 per share) It has comfortable a net debt equity ratio of 0.35X. Company is presently. The company is evaluating option of deploying cash by setting up merchant based power plant.

Risks & concerns

■ Delay in Capacity Expansions
JK Lakshmi is on the verge of capacity expansions for cement and Captive Power. Any delay in capacity expansions plans will have a Negative Impact on the earnings of the company

■ Slowdown in Demand
Any slowdown in the demand from the end user industries like Housing, construction and Infrastructure will put more than expected pressure on the prices.

Valuations
At the CMP of Rs 127 per share, the stock is trading at 4.5x its FY09 earnings and 0.99x its FY09 book value. On an EV/EBITDA basis, the stock is trading at 3.1x while on an EV/tonne basis, it is trading at $46.7 of its FY09 capacity. Since JKL is trading at less than half of its replacement cost and its large cap pears, despite having healthy return ratios (RoNW of 25.2% & RoCE of 19.5%) we expect 10% upside from the stock in 3-6 months.

Technical Outlook
The Stock is forming rising peaks and troughs on the weekly charts which define an up trend. The stock began fresh up move last week after five weeks of consolidation. Sustained trading above 127 would trigger further upsides for the stock. We place short term target of 140 and 143, with stop loss at 119.

Earlier, the Stock has corrected from its Dec’07 highs of 223 and made a good base around 35 levels. Then from mid March’09 it started its uptrend accompanied by rising volumes.

To see full report: JK LAKSHMI CEMENT

>ITC LIMITED (KREDENT FINANCE)

ITC Ltd. declared its first quarter result today. The results came in line with the street expectations. The sales were around 2.0% below Bloomberg consensus estimate, whereas the net profit was around 2.2% above, which was on account better performance of its cigarettes business.

RESULT HIGHLIGHTS:
■ The net sales for the quarter ended June 09 grew by 4.69% to Rs. 4,082.68 cr, backed by better performance of its cigarettes business

■ The cigarettes and paper business reported a 23.34% & 15.96% y-o-y growth to Rs. 2,145.60 cr and 702.62 cr respectively while other segments named Hotels and Agri- Business reported a decline of 27.68% & 48.72% y-o-y to Rs. 940.61 cr and Rs. 702.62 cr respectively

■ The EBIDTA for the quarter ended June 09 increased by 19.45% to Rs. 1,387.33 cr while the EBIDTA margin improved by 405 basis points (bps) to 33.57% as compared to 29.52% reported a year ago

■ Improve in the EBIDTA margin is mainly on account of decline the total expenditure cost. The consumption of raw material as a percentage of net sales declined by 156 bps to Rs. 1,339.34 cr as compared to Rs. 1,336.20 cr reported a year ago

■ Company’s interest expense increased by whopping 314.18% y-o-y to a level of Rs. 5.84 cr while the other income declined by 9.39% y-o-y to Rs. 87.57 cr

■ Company’s Net Profit for the quarter ended June 09 rose by significantly 17.4% to Rs. 878.7 cr as compared to Rs.748.67 cr reported a year ago while, the NPM improved by 223 bps y-o-y to 21.26% as against 19.03% reported a year ago

■ Company’s Diluted EPS grew by around 17.77%, to Rs. 2.32/ share

Looking forward, the company business might face some problem due to below than average monsoon rains. The poor monsoon is likely to put pressure on the prices of certain commodities which would indeed also result in lower disposable income for farmers. As company has significant market share in Rural India, the sales and profitability might be impacted going forward

To see full report: ITC LIMITED

>INDIA STRATEGY (MORGAN STANLEY)

QE Jun-09 Earnings Season Thus Far

■ Quick Comment – Earnings Better than MS Analysts’ Expectations: So far, 38 companies in our coverage universe have reported results. Aggregate earnings are up 3% YoY (ex-energy up 22%) against our analysts' expectation of 4% fall (ex-energy up 14%). In terms of surprise breadth, 21 of these 38 companies have reported net profit that exceeded expectations by 5% or more, while 10 trailed our expectations by 5% or less (see page 2 for details by company. Fifteen companies in the BSE Sensex have reported flat earnings ahead of MS analysts’ expectations of 8% fall. Ex-energy, aggregate earnings for Sensex companies is up 23% against MS analysts’ expectations of 13% growth. At the sector level, consumer discretionary and materials are the key positive surprises. Healthcare is the best-performing sector in terms of profit growth, followed by financials while materials is the worst-performing sector thus far.

■ EBITDA Margins Rise: EBITDA margins for the sample are up 2.6ppt. Excluding the energy sector, EBITDA margins are up 2.3ppt. Five sectors have seen margin expansion with financials leading the list. Revenuegrowth for the sample is down 1% YoY (ex-energy, up
16%) whereas for the Sensex companies, it is down 5% (ex-energy, up 16%).

■ Broader Market Earnings Lead the Narrow Market: So far, 629 companies (accounting for almost 50% of India’s market capitalization) have reported. Revenue growth for the broad market is flat, while ex-energy revenue is up 11%. Aggregate earnings for the broad market are up 9% YoY (up 16% ex-energy). Of these 629 companies, 17% or 107 reported losses for the
quarter while 25% or 160 companies have reported earnings growth in excess of 50% for the quarter ended June 2009.

To see full report: INDIA STRATEGY

>INVESTOR'S EYE (SHAREKHAN)

INDEX

• Pulse Track >> Monetary policy review
• Stock Update >> Hindustan Unilever
• Stock Update >> Grasim Industries
• Stock Update >> Sanghvi Movers
• Stock Update >> Orient Paper and Industries
• Stock Update >> Punj Lloyd
• Stock Update >> Bank of India
• Stock Update >> Bank of Baroda
• Stock Update >> Glenmark Pharmaceuticals

To see full report: INVESTOR'S EYE

>INDIA PROPERTY (CITI)

Incentives to Boost Affordable Housing – Sentiment Positive, but Financial Gains Limited

■ Sops for affordable housing — The Finance Minister yesterday announced a few incentives to boost housing, in particular the affordable housing sector: 1) 1% interest subsidy for 1-yr on housing loans up to Rs1m for properties worth < Rs2m; 2) tax holiday u/s 80IB (10) for developers on projects approved by local authorities between 1st Apr’07 to 31st Mar’08, provided these are completed before 31st Mar’2012 – more an extension of the holiday provided early on for projects approved before Mar’07 and completed before Mar’10 for houses of 1000 sf built up area within 25km of municipal limits of big cities and 1500 sf in other cities.

■ What does this mean for the sector? — 1) Renewed focus towards low-cost housing; 2) increased supply of affordable homes as most developers re-configure their projects; and 3) Higher sales volumes; however near-term profitability will be under pressure – as low-cost housing is a low margin (18-23%) business compared to current avg. housing margins of 28-35%.

■ Sentiment positive, but financial gains limited— We view these initiatives as sentiment positive. However, the financial impact is likely to be limited as – 1) subsidy is nominal and benefit is available only for a year; 2) its difficult to quantify the gains from tax holiday for developers given lack of details on no. of projects eligible for these benefits – but given the slow down had largely set-in during this period of Apr’07-Mar’08, the no. of projects approved/launched were low during this period.

■ Likely beneficiaries — Prima facie, we believe interest subsidy would benefit smaller developers, with residential bias in tier-II and tier-III cities. However DLF, Unitech and few small developers, could benefit from a tax holiday on a few of their launches in FY08 (Figure 1) subject to necessary approval/completion conditions.

To see full report: INDIA PROPERTY

>IDFC (CITI)

Sell: 1Q10 Results – Rating Downgrade Eclipses a Good Quarter

■ Profits up 26%, led by fees and margin expansion — IDFC's 1Q10 profits were in-line with estimates (up 26% yoy) driven by: a) 40bps NIM expansion to about 350bps, a historically high level, aided by low wholesale borrowing costs; and b) pickup in fee income levels. Fundamentally, a strong returns quarter (but with no growth) and overshadowed by the rating downgrade by Crisil.

■ Credit downgrades IDFC to AA+ (stable) from AAA — This was an overhang (Crisil-key rating agency, had forewarned), appears harsh and IDFC does have two other AAA ratings, but will probably hurt. It could hurt funding costs (spreads have widened 10-15bps), in cases access to some investors and possibly market standing. While the rating downgrade overhang is now possibly over (and in the price), it could pressure IDFC’s wholesale funded business model, particularly in a rising rate/tight liquidity environment (which is a risk).

■ The quarter itself was a strong one — 1Q10 was fundamentally a strong quarter (one of IDFC’s best) with higher margins, strong fee growth and stable asset quality. Earnings mix has also improved – greater annuity fees, reduced dependence on risk business and sub 5x leverage. The only offset – no meaningful growth, which management suggests should be addressed next quarter on (suggests industry level growth – we believe could lag).

■ Leverage to liquidity, capital markets is showing — IDFC's wholesale funding, asset management and capital market linked revenue stream shows through in this quarter's strong performance – we expect it to remain a key stock driver over the near term (as also the key risk). Maintain Sell (3M).

To see full report: IDFC

>FEDERAL BANK LIMITED (GEPL)

COMPANY OVERVIEW
Incorporated in 1931, Federal Bank is an old private-sector bank with a dominant presence in the southern state of Kerala. It operates 617 branches and over 630 ATMs spread across 24 states. It has a customer base of over 5 mn, concentrated in Kerala and is a key player in servicing Kerala based middle-east NRI community. At present it is the fifth largest private sector bank in terms of assets (asset size of Rs 388.5 bn as on March 31, 09).

INVESTMENT RATIONALE

■ Highest CRAR to Enable Sustainable and Quality Asset Growth
Federal bank had the highest Capital to Risk Weighted Assets (CRAR) ratio in the industry at 20.14%, with tier I capital ratio at 17.5% as on March 31, 09. As a result of a high tier I capital ratio we do not see equity dilution in immediate future. Apart from this, in case of a faster than expected economic recovery the excess cash on the bank’s balance sheet can be
deployed to ramp up its business activities. As per our conservative estimates, the bank’s business is expected to grow at a CAGR of 22.6% over FY09-FY11 with advances and deposits estimated to grow at a CAGR of 22.2% and 22.9% respectively during the same period.

■ Asset Mix Tilted Towards High Yielding Retail and SME Advances
The advances mix of Federal Bank has traditionally been tilted towards high yielding retail and SME advances (constitute around 63% of its loan book) as a result of which it has had higher than industry average Net Interest Margins (NIM) of 3.4-4.3% over FY03-FY09. It had second
highest NIMs in the industry at 4.3% in FY 09.

■ Good Low Cost Deposit Base at 34% Another Key Driver of NIMs
The bank’s low cost deposit base including its CASA deposits and low cost NRI term deposits stood at 33.5% as on March 31, 09. In our view the bank’s expanding distribution network (bank expected to add over 170 branches and 220 ATMs during FY09-FY11) and a growing retail liability and low cost NRI deposit base will help the bank maintain a lower cost of funds at 5.8-5.9% and Net Interest margin (NIM) at 3.75- 8% during FY09-FY11.

To see full report: FEDERAL BANK

>ESTER INDUSTRIES LIMITED (ANAND RATHI)

Investment Argument

Company produces PET films and Engineering plastic, for which domestic demand is growing at more than 15% p.a. Company’s utilization levels are currently more than 100% for PET film and around 100% for engineering plastic. Thus to meet growing demand, company is planning to expand capacity of PET film from 30,000 Mts to 57,000 Mts by the end of 2010 and also planning to raise Engineering plastic capacity from 3,600Mts to 11,000Mts. Expansion is mostly funded from internal accruals and debt. (No equity dilution is contemplated).

Company also has more than matching capacity of PET chips, which is and intermediate product. Last year performance was affected due to volatility and high prices of the raw material like PTA and MEG. But now the raw material prices have stabilized and better realizations are leading to healthy margins for the company. Better performance is expected to continue as the realizations are better and the input costs have come down. Most of the sales are to the domestic markets [75%] catering to FMCG segment where demand is strong at 20-22% [and least affected by any slowdown], rest is exported [25%].

Outlook for the current year and the coming year looks promising with company expected to achieve sales close to 450 crores and profit after tax close to 50 crores for 2010.

Current years earnings could be close to Rs 9 and thus discounting present stock price by around 2.4X and offers scope for appreciation looking to growth potential.

To see full report: ESTER INDUSTRIES

>ELECTRO STEEL CASTINGS LIMITED (ANAND RATHI)

Investment Rationale

Company's current working is good [with excellent Q-1 results] and its likely to perform much better in coming years.

Company is a leading Ductile Iron pipes and cast iron pipe manufacturing company. It also offers turnkey solutions in water transport and sewage management. The demand for ductile pipes comes from Govt/ Govt sponsored projects for transportation of potable water and for cast iron pipes - from irrigation / sewage disposal projects. Demand for ductile pipes is growing very fast looking to growing focus of the Govt to provide potable water not only in India but also across Asia and other developing countries. Company is fully integrated
backward, with pig iron plant, sinter plant and captive power plant, as also iron ore & coal mining rights. This kind of integration leads to superior margins for company.

It is thus very cost efficient and large player earning attractive margins. Business is mostly dependent on municipal/Govt orders and is thus immune to economic/business cycle. Under - Accelerated Rural Water Supply Program and Pradhan Mantri Gramodaya Yojana - Rural Drinking Water; significant annual demand for projects and products [pipes] is generated on sustained basis. Through an SPV [wherein company holds 40% stake] it is also setting up a 2.2 million integrated steel plant, fully backed by required iron ore & coal mines. This will
come on stream by the end of 2010. Captive mining of Ore and coal will also be operational by the same time or slightly latter, so cost of production will be always under tight control.

RISK: The key concern is Forex derivatives and forex losses. With rupee improving sharply, most of these concerns could be taken care of.

RECOMMENDATION: Buy with price target of Rs 45 in around three months. Long term investors can look for still better returns.

To see full report: ELECTRO STEEL CASTINGS

>FLASH ECONOMICS (ECONOMIC RESEARCH)

The issue of exchange-rate policy for emerging countries is not resolved

The recent period has demonstrated that there is no “right choice" in the currently available "menu" of exchange-rate policies for emerging countries:

■ countries that chose flexible exchange rates were initially faced with an excessive appreciation in their exchange rates due to capital inflows, and then a fall in the exchange rate due to drastic capital outflows (and will perhaps now be faced with a return of excessive
inflows);

■ countries that chose pegging (in one form or another - peg, currency board, etc.) of their exchange rates to a major currency were faced with inflation and excessive credit growth due to the unsuitable nature - for these countries - of the monetary policy conducted for the dollar or the euro; but also an enormous risk linked to the development of foreign-currency borrowing when exchange-rate stability called for high domestic interest rates, and not interest rates aligned on the low level of dollar and euro interest rates.

What are the solutions:
■ monetary unification? But this is difficult to imagine for countries with price and wage levels that differ significantly from those prevailing in the United States or the euro zone;

■ exchange-rate flexibility with restrictions on speculative capital flows seems to be the most robust system.

To see full report: FLASH ECONOMICS

>BANK OF INDIA (FULLERTON)

Bank of India [BOI] operates in three business segments: Treasury Operations, Wholesale
Banking and Retail Banking. The bank has presence in 4 continents and 15 countries covering
financial centers, such as London, New York, Paris, Tokyo, Singapore and Hong Kong.

· Bank of India’s strong pricing power coupled with the benefit of recent CRR cuts has helped the bank to improve its NIMs. Yield on global advances has also improved by 40bps at 8.9%.

· Bank of India’s international loan book grew 23% in FY09 to 302bn [16% of loan book]. Operating revenue from international operations grew marginally by 1% to Rs 21bn on the back of slowdown of the global economy.

· The management is targeting a 22% loan growth and 20% deposit growth for FY10 while expecting the short term NIMs at 3% as there is pressure on spreads due to high cost of funds.

· The bank’s capital adequacy ratio currently is 13.01% where as NIM has been consistent over the years at 2.4%. It has a very strong asset base of 2,255bn. The management expects global business mix of around 4000bn for FY 2009-10.

BUSINESS PROFILE
Bank of India was found in 1906 and had got nationalized in 1969. With a very minimal start, the bank today has extensive branch network spread across the country to cater the needs of the people and occupies a premier position among the nationalized banks in terms of asset size & business volume. The bank has premiered in opening branches abroad and has a notable presence in various countries. The Bank has 3,021 branches in India spread over all states/ union territories including 136 specialized branches. International business now contributes ~17.82% to overall business of the bank. The bank provides a host of commercial banking products including housing loans, loans to SMEs, personal loans etc.

To see full report: BOI

>BALKRISHNA INDUSTRIES (ICICI DIRECT)

Rubber led margin expansion…

Balkrishna Industries reported meagre 1.9% to Rs 302.9 crore for Q1FY10 as against our expectation of Rs 330 crore. The growth remain muted due to cowed demand as volume fell by 4% but thanks to rupee depreciation, realization were at Rs 160,000 per tonne Vs Rs 140,750 per tonne in Q1FY09 restricting the fall in revenues. The softening of rubber prices brought substantial expansion in EBITDA margins; EBITDA margin was at 29.3% from 23.9% in Q1FY08. The quarter reported fall in interest outgo as well as foreign exchange gain of Rs 15. 9 crore (loss of Rs 30.6 crore), muted the adverse impact of rising depreciation, net profit surged 264% to Rs 52.3 crore.

Incorporating the improved realization as well as lower rubber prices, we are revising our financial estimates for FY10 and FY11. Accordingly net sales are revised from Rs 1,281.7 crore and Rs 1,276.8 crore to Rs 1.299.2 crore and Rs 1,497.2 crore for FY10E and FY11E respectively. Net profit also revised from Rs 71.4 crore and Rs 79.8 crore for the same period to Rs 194.7 crore and Rs 213.4 crore respectively.

Valuations
Remarkable improvement in EBITDA margins as well as favourable rupee dollar/ Euro currency movement would help company improve its bottomline in coming year even though topline growth to remain subdued due to slowing global demand. According to revised earning estimates, we are revising our target price to Rs 402 (4x FY10E, cautiously lower PE multiple as currency movement has crucial role to play) and rating to PERFORMER. At CMP of Rs 344, the stock is trading at 3.4x and 3.1x its FY10E and FY11E EPS.

To see full report: BALKRISHNA INDUSTRIES

>STRATEGY FORUM (MORGAN STANLEY)

INTRODUCTION

We have generally become more constructive on the global investment outlook. This week we address the increasingly bullish outlook from our economists and strategists. With this changing stance in mind, our US economist David Greenlaw talks about the potential for upside surprises in the third quarter and other economic news. Qing Wang, our China economist, touches upon continued upgrades to his numbers. And finally, Jonathan Garner, our Asia/GEMs equity strategist, discusses his more upbeat outlook for Emerging Markets, especially China.

— Greg Peters

US ECONOMICS

Pickup in Motor-Vehicle Output Points to Potential Upside for 3Q GDP

Rethinking our haircut on motor-vehicle impact to 3Q GDP. When Dick Berner and I recently bumped up our GDP growth estimate for 3Q from 0.0% to 1.0% and cut our 4Q number by 0.5 percentage points, to +1.5%, we cited a new assumption for motor vehicle production as a source for much of the forecast change. For some time, we have been aware of automaker plans to build a lot of vehicles in 3Q. However, we were skeptical for various reasons. Thus, we applied a haircut to the impact implied by strict adherence to published assembly plans and assumed about a 2 percentage point add-on to 3Q GDP (still very large by historical standards).

We now think the impact could be even larger for three reasons: (1) Data we received last week indicated a June overbuild — the first in quite a while. This is consistent with a ramping up of output heading into 3Q. (2) Recent industry reports suggest that fleet sales may be poised to rise over the near term. And (3) data for the first few weeks of July suggest that production is running close to the original plan.

Outlook for 3Q to be revisited. At face value, the auto industry’s latest assembly schedules imply a 3Q add-on to GDP of nearly 6 percentage points — which would represent an all-time record by a very wide margin. So we believe there may be some meaningful upside risk to our +1.5% estimate for 3Q GDP. Could GDP be +3% or even +4% in the current quarter? Possibly, but because of the potential noise in the data, we're not changing our official forecast. We will revisit the issue in another week or two when more information is available.

Would a strong 3Q borrow from 4Q? The answer depends on the automotive sales picture in the next few months. We believe that inventory levels across the industry are close to normal at this point. And near-term production plans appear to be consistent with about an 11 million unit annualized sales pace. If sales are close to that rate, then motor vehicle output can probably be sustained at the 3Q pace for a while longer. Thus, we could see a neutral contribution for auto output in 4Q. However, if sales disappoint over the next few months, then production is likely to be scaled back later this year.

To see full report: STRATEGY FORUM

>PTC INDIA (ICICI DIRECT)

Sitting on a goldmine…

PTC, India’s largest power trading solutions company, is strategically poised to take advantage of the upcoming opportunities in the evolving power arena. Ruled by deficit the demand for power trading continues to grow and PTC which enjoys 46.5% market share has traded over 13,825 MU in FY09 (a growth of ~40%) maintaining a mix of 56% short term trades (STT) and 44% long term trades (LTT). PTC is set to benefit with significant value unlocking from its investment book. With stakes in several big ticket power ventures, PTC is likely to add further muscle to its existing position. We initiate coverage on the stock with an OUTPERFORMER rating.

■ Power-Full growth on the horizon for Power trading market
Power trading continues to grow in the backdrop of power deficit scenario (which stands at 11.1% for FY09) and the expanding merchant capacities. Power trading has grown at a CAGR (FY02-FY09) of 52%and is expected to cloak a growth of 20% for the next 2 years. The development of energy exchanges, materialization of Long Term Power Purchase Agreements (LTPPA) should accentuate the growth prospects. PTC with the first mover advantage initiated ~11,200 MW of PPA which should aid it in reporting a CAGR (FY08-13E) volume growth of 37.7% from 9,889 MU in FY08 to 48,937 MU by FY13E.

■ Unlocking value in PTC Financial Services (PFS) through IPO
PFS holds eminent assets like IEX and stakes in 10 other power related projects (under execution at different stages) in its portfolio. In our bull case evaluation, we expect that the stake of PFS will be worth close to Rs 45 per share for PTC. With PTC and other reputed investment banks being the promoters of PFS, we derive comfort in believing that there will be a significant value unlocking through the expected IPO.

■ Valuations
At the current market price of Rs 82, the stock is trading at P/BV of 1.2x in FY09 and 1.2x in FY10E. With the visibility emerging on big ticket projects like Teesta HEP alongwith the probable unlocking of significant value, we believe that stock is undervalued and thus we initiate the coverage on the stock with an OUTPERFORMER rating.

To see full report: PTC INDIA

>AMBUJA CEMENT LIMITED (KREDENT FINANCE)

Ambuja Ltd. declared its second quarter result today. The result came below the street expectations The sales were around 2.0% below Bloomberg consensus estimate, whereas the net profit was around 12.5% below, which was mainly on account of higher input cost

RESULT HIGHLIGHTS:
■ The net sales for the quarter ended June 09 grew by 18.16% to Rs. 1,847.41 cr, backed by higher sales volumes and better price realization

■ The average realization per bag (50kg) increased by 8.31% y-o-y to Rs. 192.44 mainly on account of price hike taken in March and April 2009 while, the volume increased by 9.09% y-o-y to 4.8 million tones

■ Though driven by benefits of prices nand higher sales volume, EBIDTA for the quarter improved by only 9.95% (it is way below the growth reported by peer companies) y-o-y to Rs. 520.77 cr while its EBIDTA margins stood at 27.58% registering a decline of 250 basis points (bps)

■ The consumption of raw material as a percentage of net sales increased by 537 bps Rs. 306.67 cr while the power and fuel cost remain the same as reported a year ago

■ Company’s interest expense declined by 8.76% y-o-y to a level of Rs. 5.21 cr while the other income declined by 21.04% y-o-y to Rs. 28.11 cr

■ Company’s Net Profit for the quarter ended June 09 cannot be compared as during the same quarter a year ago the company reported an exceptional gain of Rs. 314.19 cr

■ The company declared an interim dividend of Rs. 1.2/share

Outlook
Significant new capacity is expected to be added in the coming months, demand, led by housing, retail and infrastructure sectors is expected to remain firm. However, prices of major inputs for
the cement Industry, including coal, may rebound from recent lows because of an anticipated uptrend in the commodity business cycle. Thus, the profitability of the companies might be
impacted going forward.

To see full report: AMBUJA CEMENT