>HYDERABAD INDUSTRIES LIMITED

COMPANY BRIEF: Hyderabad Industries Ltd. (HIL) is one of the leading manufacturers of
Fibre Cement Sheets in India with a market share of about 20.5%. Its key product range include Fibre Cement Roofing Sheets sold under the brand name CHARMINAR, AAC Blocks and Panels called AEROCON, and Calcium Silicate Insulation Product (thermal insulation) called HYSIL.

Highlights
⇒ HIL has an extensive presence across the country and enjoys premium brand equity in the market based on superior quality, strength and durability.

⇒ The company has diversified into value added (environmental friendly green) products, which will de‐risk its business model and diversify its revenue stream. Given the diversification into value added products, we strongly believe that HIL is due to get re‐rated and command much higher multiple in times to come.

⇒ Demand of such green building products is increasing across the world on account of serious concerns about the environment and the impact on energy consumption.

⇒ HIL is increasing the cement sheet capacity by 180000 tpa to 1079500 tpa & thermal insulation by 3000 tpa to 11500 tpa in CY11. This will help the company to keep pace with the growing demand for its products and retain significant share in the market.

⇒ Relatively speaking, HIL has far superior earnings profile and return ratios in comparison to its peers. It has a stronger balance sheet with a Debt:Equity Ratio of 0.3, ROCE of ~44%. The company has the highest operating margins in comparison to its peers.

⇒ At the current price of ` 624, the stock trades at a P/E multiple of 4.1 x FY12E earnings and P/BV multiple 1.0 x FY12E earnings. We recommend a “BUY” on the stock with a price target of ` 754, assuming a P/E multiple of 5 x FY12E earnings, an upside of 21% from the current levels, over a period of 12 months.

To read the full report: HIL

>GENUS POWER INFRASTRUCTURES LTD. (CD EQUIRESEARCH)

Company Brief
Genus Power Infrastructures Ltd is a power infrastructure company engaged in business of Turnkey T&D projects, Electronic Meters, UPS & Inverters. It is a pioneer and one of the largest electronic meter manufacturers in the country.

Highlights
■ Genus power has a strong order book position of Rs 970 crore as on Sep 09, which is around 1.7 x FY09 sales. This provides a clear revenue visibility for coming years

■ Demand for meters is increasing at a remarkable pace Genus being one of the leaders with ~ 30% market share, expects to immensely benefit out of this opportunity.

■ Genus is a play on significant investment planned in the Power sector and as the government implements its various schemes, demand for company’s products would increase.

■ The Government through its various policies is making full effort to achieve its target of complete electrification of rural households and 100% tamper proof metering. This augurs well for Genus and opens up a huge opportunity.

■ With good recognition of its products in Latin American countries, Genus sees a great business opportunity for meters in overseas market.

■ The recent erosion in market capitalisation due to fire in one of its plant offers good entry point for investors. At the current price of Rs 133, the stock trades at a P/E multiple of 6.0 x FY10E earnings and 3.4 x FY11E earnings & P/BV of 0.6 x FY10E BV and P/BV of 0.5 x FY11E BV. We recommend a “BUY” on the stock with a price target of Rs 235, assuming a P/E multiple of 6 x FY11E earnings, an upside of 76%, over a period of 12 months.

To read the full report: GENUS POWER INFRASTRUCTURE

>INDRAPRASTHA GAS LTD. (CD EQUIRESEARCH)

Company Brief
Indraprastha Gas Ltd., incorporated as a JV between GAIL, BPCL and the Delhi government, is the sole supplier of CNG to transport sector, PNG to domestic & commercial sectors & R‐LNG to industrial sector, in the National Capital Region (NCR) of Delhi.

Highlights
■ The company has a very sound business model due to its utility nature i.e fuel for the vehicles and piped natural gas for domestic and industrial consumers and hence is relatively immune from any economic downturn.

■ IGL is consolidating its presence in the NCR of Delhi by investing Rs 1,600 crore to expand its retail outlets and PNG network in and around the metropolis in the next three years.

■ IGL is looking for opportunities in the surrounding regions and has geared itself for competitive bidding being for setting up of City Gas Distribution Projects in various cities.

■ IGL has tied up for its future gas requirements by signing Gas Sale Agreements with GAIL & BPCL and the supply pact with RIL from KG D6 block, and hence will not have gas sourcing
issues over the medium term.

■ In view of forthcoming Commonwealth Games in 2010, a large number of high capacity buses and Radio Taxis running on CNG are expected to be added to the public transport fleet in the Capital, which would immensely benefit IGL.

■ IGL is a debt free company with surplus cash and investments of about Rs 250 crore and all the expansions have been undertaken with internal accruals.

■ At the current price of Rs 161, the stock trades at a P/E multiple of 11.1x FY10E earnings and 9.6x FY11E earnings. We recommend a “BUY” on the stock with a price target of Rs 205, assuming a P/E multiple of 12x FY11E earnings, an upside of 27% from the current levels, over a period of 12 months.

To see full report: INDRAPRASTHA GAS LTD

>JK LAKSHMI CEMENT LIMITED (CD EQUIRESEARCH)

Company Brief
JK Lakshmi Cement Ltd. (JKLC) is one of the established north based Cement Company, with a state of‐the‐art plant at Rajasthan and Gujarat, and having a capacity of 4.75 million tonne The
companyʹs product mix includes blended cement, ready‐mix concrete and plaster of paris, which are distributed through its large network of over 2,000 dealers across North and West India.

Highlights
■ JK Lakshmi Cement has increased its cement capacity by 30% in March 09, which should enable it to enhance its sales volume by 12% in FY10 and by 4% in FY11.

■ JKLC is further increasing its cement capacity by 67% to 7.45 mtps by Oct 2012, which will enable it to have access to central and eastern markets thus giving it a wider footprint.

■ The company has tied up with the VS Lignite for the purchase of 21 MW power every year at a price of Rs 3.3/unit, that is less than Rs 4.2/unit, at which it sources from grid, thus translating into substantial savings for the company.

■ JKLC is increasing its power capacity by 30MW. With the power purchase agreement kicking in and captive power plants coming on stream, JKLC will have surplus power capacity, which it intends to sell on merchant basis.

■ JKLC has been betting high on ready‐mix concrete (RMC) business and, with the softening of interest rates, the management believes that this segment is likely to recover.

■ At the current price of Rs 144, the stock trades at a P/E multiple of 3.1 x FY10E earnings and 3.6 x FY11E earnings. We recommend a “BUY” on the stock with a price target of Rs 199, assuming a P/E multiple of 5 x FY11E earnings, an upside of 38% from the current levels, over a period of 12 months.

To see full report: JK LAKSHMI CEMENT

>LIC HOUSING FINANCE LTD. (CD EQUIRESEARCH)

Company Brief
LIC Housing Finance Ltd. (LICHFL) is one of the largest housing finance companies in India. Almost 93% of the company’s loans are to retail customers and the balance 7% to project developers. The promoter, namely LIC of India, meets 8% of the total fund requirements, whereas 80% is funded by term loans from banks, bonds and debentures, and the remaining 12% in the form of refinance from NHB and others.

Highlights
■ LIC Housing is relying more on floating rate borrowing and lending, which will help the company to protect margins in a volatile interest rate scenario and ensure stable growth in profitability in the future.

■ The last quarter witnessed decline in both gross and net NPA levels. The net NPA fell from 0.9% in Q2FY09 to 0.7% in Q3FY09. NPA levels are expected to fall further because the company has now adopted stringent credit appraisal method and better recovery process.

■ LICHF has been steadily growing its loan book with loan sanctions and disbursal growing at a CAGR of 30% and 20% respectively in the last three financial years. Given the cost of
funds coming down and interest rate easing further, we expect LICHF to grow its loan book at a CAGR of 21% over a period of FY2008-10 (E)

■ We have valued the company using SOTP method based on the valuation of its core business at Rs 280 and 39.3% stake in LIC Mutual Fund at Rs 23 and arrived at a target price of Rs 303, implying a potential upside of 61% from current levels, over a 12 month period. The current market price discounts FY09E and FY10E adjusted book value by 0.69 x and 0.55 x respectively. The stock also provides an attractive dividend yield of 5%, assuming that status quo is maintained. We therefore recommend a BUY on LIC Housing Finance.

Risk & Concerns

■ Challenging real estate market: The real estate market in India is becoming a lot challenging. This could lead to marked slowdown in business and higher delinquencies.

■ Stiff competition: The Company could see loss of market share to commercial banks and pressure on spread due to interest rate cuts announced by PSU banks on home loans.

■ High exposure to project developers: The Company has made a deliberate strategy to increase exposure to project developers, which could also increase its NPA levels.

■ Increase in the average loan size: An increase in the average loan size might result in nonrepayment, increasing NPAs and hurting profitability.

To see full report: LIC HOUSING