Wednesday, May 30, 2012


FIIs invested in HDFC, ITC and Tata Motors.

FIIs divested in Bharti Airtel, Patni Computer and United Spirits.

To read report in detail: STRATEGY

>VOLTAS: Update on Sidra Project

  Margin improvement drive earnings surprise: Voltas reported numbers which was ahead of our and street estimate by reporting better-than-expected margin for the quarter. It reported EBIT margin of 8.3% in the MEP segment (100bps improvement QoQ). The improved margins were primarily driven by improved follow-up, leading to recovery of variation claims in few old projects. Sales reported de-growth of 5.8% YoY at Rs15.7bn lower than our expectation of Rs17.1bn. PAT was up 7% YoY to Rs1.04bn.

  Update on Sidra Project: Sidra Medical and Research Centre Hospital project in Qatar is ~67% complete. Voltas has taken a hit of Rs3.2bn in FY12 on this project. The company believes that the execution of the Sidra project will get extended beyond FY13 as client continues to make changes in the project design. Voltas will conduct a techno commercial study in July-August (similar to one done in Q3FY12) to assess if any further provisions are required in the project.

  Outlook on ordering: Voltas ended the year with an order book of Rs42.3bn, down 12% YoY. It bagged orders worth ~Rs23bn in FY12 and Rs4.5bn in Q4FY12. In the international markets, the company has started seeing some signs of revival, especially in the Dubai markets and expects to see more traction over the next six months. In Abu Dhabi, the airport order has been awarded to the main contractor. We expect the sub contractor to get finalised by October (Voltas along with JV partner bid for the same). The Joint Venture established in the new geography of KSA has begun to make progress and expects traction in Qatar and the KSA markets (already bagged orders worth Rs3.6bn in Qatar though a private JV). In domestic markets, the commercial real estate and IT/ITES continues to be slow. However, hospital and hotels have seen some
traction. Entry into in new segment in industrial space like Power, water and MEP project for automotive industry will help widen the scope of business and support growth in orders.

To read the full report in detail: VOLTAS

>AXIS BANK: Robust in FY13 with slippages/restructuring remaining inline with FY12

Axis bank’s top management ressured that they expect asset quality to remain robust in FY13 with slippages/restructuring remaining inline with FY12 levels and limited risk from growing Infra book in the near term. Retail focus will help mitigate some growth pressures but fee income will moderate. We continue to believe that market is dis‐regarding recent corporate asset quality performance and stable asset quality trends will surprise in the near term. Valuations at 1.6x FY13 book is undemanding; Axis/ICICI continue to remain top picks.

􀂄 Key Takeaways from the Management roundtable:
(1) Retail credit – Key focus: Axis re-emphasised their thrust on increasing share of retail to 30% from 22% currently. Liability customers constitute ~45-50% of incremental sourcing which we believe is a credit positive.
Management is seeing significant pricing competition in mortgages but believes competitive landscape is relatively better in auto lending.

(2) Corporate asset quality/Infra portfolio relatively comfortable:
Delinquency/restructuring in expected to remain in line with FY12 levels v/s consensus expectations of a pick up in slippages/credit costs. Axis does not expect any material near term pressure on Infra portfolio with very limited exposure to imported coal and gas projects. Power portfolio remains unseasoned (at currently 25% project commissioned) but management expects ~45% of their portfolio to be commissioned by FY14.

􀂄 Key Annual report takeaways: (1) Growth in stress sectors exposures (ex Infra) moderated to 14% y/y with contraction in non fund exposure. Infra exposure expanded by +33% y/y with power portfolio expanding by ~60% y/y largely driven by increase in non-fund exposure (2) Accretion to RIDF book of Rs10bn continue to remain low with total RIDF book equivalent of ~3% of loan book

(3) In line with industry trends, retail NPAs showed significant improvement from 1.4% to 0.8% in FY12 . Large and SME NPAs have also contracted except for services which has seen an increase in NPA levels.

To read report in detail: AXIS BANK


Quick Comment: Reliance Infrastructure reported

F4Q12 standalone revenue of Rs57.3bn (up 142% YoY), 
EBITDA of Rs6.2bn (up 136% YoY), PBT of Rs5.3 bn 
(up 30% YoY) and PAT of Rs6.6bn (up 84% YoY). 
Revenue was 30% higher than our estimate, but 
EBITDA was 9% below and PBT 11% below. The strong 
revenue growth, fueled primarily by EPC revenue of 
Rs43.8bn vs. our forecast of Rs28bn, was muted by the 
150 bps QoQ fall in EPC EBIT margins. While negative 
tax in F4Q (deferred tax assets created and previous 
year taxes included) pushed up PAT, full-year PBT of Rs 
23.3 bn was 3% below our estimate.

Consolidated revenue for the quarter was Rs71.4bn (up 
81% YoY), EBITDA was Rs5bn (up 48% YoY), and PAT 
was Rs4.1bn (up 28% YoY). Interest expense for the 
quarter was high; the infrastructure segment continued 
to contribute negative EBIT to the consolidated results. 
Consolidated book value was Rs918/sh at end F2012.

Key highlights:
• EPC: F2012 EPC revenue was Rs117bn (up 245%  
YoY). We believe significant progress made in 
Reliance Power’s Sasan and Samalkot projects was 
the key reason for the ramp-up in EPC revenue. The 
company expects similar revenue in F2013. The 
EPC order book currently stands at Rs173bn.

• Infrastructure: Infrastructure revenue for the quarter was Rs925mn (up 85% YoY). However, the

segment remained loss-aking with a negative EBIT  
margin of about 29% in the quarter. The company 
has invested Rs43.6 bn in the infra SPVs 

0.5x trailing consolidated P/B is undemanding, but  
lack of earnings triggers keeps us Equal-weight: 
Execution on Reliance Power and infrastructure projects 
will be critical for stock performance along with an 
improvement in the macro environment.


>PAGE INDUSTRIES: Tie-up with Speedo

Page Industries Ltd (Page), promoted by the Genomal Brothers in 1995, is the exclusive
licensee of Jockey International Inc (US) for manufacture and distribution of the Jockey brand
innerwear/leisure wear for men and women in India, Sri Lanka, Bangladesh, Nepal and UAE. The
agreement is in place till 2030. The company paid a royalty of 4.9% of sales. Page has also been
appointed the India franchisee for Speedo, a swimwear brand.

Leading Global branded Innerwear Company: - Jockey is an established & well know inner
ware brand. Page is the sole licensee of the Jockey brand in India and is the leader in the
India innerwear (undergarments) market. We expect the branded innerwear market to
continue to grow at CAGR of 15-20% over the medium term, driven by increasing consumer
aspirations and the shift from the unorganized segment to branded goods.

Shift from unorganized to organized segment to aid overall growth: - Indian apparel
market has been witnessing a shift to organized segment over the past couple of years. The
share of the organized segment in the overall pie has increased from 13% in 2005 to 16% in
2010 and the same is expected to go up to 40% in 2020E. It is expected to grow more rapidly
at a CAGR of ~22% during 2010-2020E as compared to the apparel industry which is
expected to grow as 10.6%. This is an advantage for organized players.

Tie-up with Speedo to boost up the top line going ahead: - Page has tied up with
swimwear brand Speedo International to manufacture market and distribute the brand in
India. Under the exclusive licensing agreement, effective from July 2011, the company will
make swimwear, water shorts, apparel, equipment and footwear in India. Page will be able to
leverage the strong distribution network created for the innerwear products to market this
range of swimwear products also.

To read report in detail: PAGE INDUSTRIES


Incorporated in 2003, Talwalkars Better Value Fitness Ltd (TBVFL) is the largest fitness chains in India offering a diverse suite of services including gyms, spas, aerobics and health counseling under the brand “Talwalkars”. It has pioneered the concept of gyms in India and today is a recognized name in the health and fitness industry. The company has grown rapidly since its inception and as on date operates 128 health clubs in 68 cities belonging to 18 states of the country serving over 1,25,000 members.

Pan India presence: Holds highest market share in the Organised health club market
TBVFL has pan India presence and holds highest market share in the organised health club market in India (~ 10%). In a fragmented health and fitness industry, where the demand for quality services is high while the supply is largely unorganized (primarily from singly city operators) and non-standardized, TBVFL has an edge over its peers.

Zero Capex model of “HI FI” gyms: results in accelerated expansion
The newly launched “HIFI” format has accelerated TBVFL’ penetration into the smaller markets. With a small sized format, “HI FI” health club can be rolled out in 8-10 weeks against 14-16 weeks for a typical “Talwalkars” health club. For FY13E, management has guided for ~25-30 additional gym roll out (including owned gyms/subsidiaries, franchises and JVs) taking the total number of gyms to ~160.

Focus on Franchisee/subsidiary model to improve return ratios
TBFVL is now focusing on adding more franchisees and also adopting a JVs/subsidiary model which we believe will result in lower capex (due to 51% holdings in subsidiary health club) and improve return ratios (as TBVFL receives a royalty of 6% of revenues for 1st 3 yrs which is 8% thereafter).

Broaden its scope from being a gym player to a fitness player: “Nu Form” Gym Studios
TBVFL has broadened its scope from being a gym player to a fitness player by introducing ‘Nu Form’ Gym studios (high product EBITDA) with a focus on weight loss using the EMS (Electric Muscle Stimulation) method. “Nu Form” is priced at a significantly higher premium for people who are more conscious of weight loss than only of health and fitness in gyming. Currently 6 ‘Nu Form’ Studios are operational in Mumbai. “Nu Form” studios opened in April 2012 received a great response with ~140 members in less than one month of its inauguration.

Consistent financial performance

  •  Number of Health Clubs has increased at a CAGR of 28% over FY07-FY13E.
  • Number of Members has increased at a CAGR of 29% over FY07-FY13E.
  • Achieved 4 year CAGR (FY’08-12) of 30% in Revenues, 35% in EBITDA & 44% in PAT.
  • The company continues to maintain debt equity of ~ 1:1. The company has properties which has current market values considerably higher than the book value.

At the CMP of `159.50, the stock is trading at 10.9x its FY14E EPS of `14.68. We recommend BUY on the stock with a 12-18 months target price of `220, providing an upside of 38% from the current levels.

To read report in detail: TBVFL
To read full report: TBVFL