>PAGE INDUSTRIES

"Best fit on the consumer discretionary space‟ 
Revenues have grown at~35% CAGR between FY04-12, supported by volume and realization improvement. Jockey brand has been positioned in the premium segment, which accounts for ~37% of the Indian Innerwear market. We believe rising income level, under penetrated market and growing urbanization will lead to up-trading from mass market brands to premium brands. We expect the premium segment to grow faster than the overall innerwear market. We believe Page Industries is best suited to benefit from this trend, as it holds a long term exclusivity to manufacture and distribute the Jockey brand (CY2030) and Speedo brand. Given its focus on branding (ASP cost: ~5% of revenue), high return ratio, high payout ratio with a decade of dividend paying history makes Page industries a „Best fit on the consumer discretionary space‟. We expect Page Industries top line and bottom line to grow at a CAGR of 22.9% and 30.2% between FY12-14E respectively. 

Strong top line growth 
Page Industries revenue grew at CAGR of 42% from INR 3,393mn in FY10 to INR 6,834mn in FY12. The growth was driven by volume (~23% CAGR) and realization improvement (~15% CAGR). Volumes in men‟s wear, women‟s wear and leisurewear segment grew 19%, 27% and 41% CAGR respectively. Going forward, we expect Page Industries to grow at ~23% CAGR over FY12-14E supported by volume growth of 16.8% and 5.3% blended realization improvement. 

Outlook & Valuation 
Page Industries, at CMP trades at 28.2X and 22.3X to its FY13 & FY14 earnings respectively. Though the valuation appears high on a P/E basis, it is supported by high EPS growth. We assign a target multiple of 25X FY14E (PEG of 0.83) and rate Page Industries as an “OUTPERFORMER” with a target price of INR 3,420. We believe the valuation is justified given the immense potential of India‟s consumption story, fast growing market, strong brand recall and healthy financial position. Key Risks to our recommendation include company not being able to pass on the cost increase on a timely basis, leading to crunch in margin and consumers down trading due to uncertainty in the economy and job environment.

RISH TRADER

>EQUITY STRATEGY: Mixed earnings scorecard by biggies

Second rung stocks continue to outperform
For the second month in a row the markets closed on a positive note. February witnessed a secular rally, however, unlike January profit booking in the fag end of February clipped gains. The BSE Sensex closed with a gain of 3.3% while S&P CNX Nifty closed with a gain of 186 points at 5,385. Small and midcap stocks continued to outperform their large cap peers. The BSE Midcap and BSE Smallcap indices closed with gains of 8.8% and 6.1% respectively. Delisting candidates Oracle Financial Services, Alfa Laval and Goodyear India attracted buying interest.


Secular uptrend; realty leads rally
Most sector‐oriented indices on the BSE closed on a positive note, the BSE Healthcare index bucked the trend to close on a flat note. The Realty and Consumer Durables indices closed with double digit gains. The S&P CNX 500 gained 4.7%. Markets were skewed in favour of gainers with the advances‐declines ratio at 4:1. This was particularly strong in finance, industrials and utilities. Second rung stocks in the banking, NBFC and realty spaces played catch up with larger peers. Bargain hunting continued to be at play in the realty space; however, a slowdown in momentum was noted.


Global Markets
Major stock indices across the globe closed in the green, Asian indices were amongst the top gainers. In the commodity space bullion prices gold on a mixed note, while energy prices moved upwards. Steady HSBC PMI numbers from China augured well for industrial metals in the non‐ferrous space that closed on a mixed pack. European debt markets closed on a mixed note with yields on Italian paper dropping lower while that of Greece moved up.


Growth continues to falter, core inflation eases
GDP growth (on a quarterly basis) slipped to its lowest point in 11 quarters. For the December quarter of FY 2012, growth was reported at 6.1% YoY. As depicted by the sluggish IIP, the industrial sector was flat with utilities being the only silver lining. Services sector continued to be resilient at 8.7%YoY while the growth in the agriculture sector was reported at 2.7% (despite a high base in grain production). Output figures of the eight core industries for the month
of January were flat; IIP for the month of December was flat with electricity continuing to drive growth. Inflation continued to slide; for the month of January it was reported at 6.6% YoY. This was largely driven by a moderation in both the food and core‐inflation pack. The fuel component, however, continued to wreak havoc at 14% YoY.


 Fiscal pressure leads to novelty
Just as with necessity being the mother of all innovation; pressure on fiscal finances has led the government down the path of novelty. As a first of sorts the Government launched an offer for sale in ONGC through the secondary market. Central PSUs are estimated to have declared a 40% increase in dividend doll out for the year till date. The Government has also cleared a buyback policy for Central PSUs to shore up its fiscal position. The government has yet another weapon its armor via SUUTI’s (Special Undertaking of UTI) stake in Axis Bank, Larsen & Toubro


Chorus for a rate cut on the rise
The CRR cut that was carried out in January did not have much of an impact in the financial system. Liquidity continues to remain tight with the net reverse repo in the negative zone at Rs 1,920 bn (way beyond the RBI’s comfort zone). A further cut in the CRR is unlikely to trickle down into lower corporate borrowing costs; at best it could ease some of the pressure on liquidity. With the advance tax date (March 15th) approaching pressure on liquidity is set to get even tighter. Public debt has crowded out private sector debt; the banking system is sitting on excess SLR (appears to be rising with every passing fortnight). The down tick in GDP growth and sliding core inflation provides more room for a rate cut. The chorus for a rate cut appears to be getting louder.


Fuel likely to lay pressure on inflation
For quite awhile crude oil has been ruling at elevated levels; a further a rise in crude oil prices could throw a spanner in the works; however, such a move appears unlikely in the near term. However, we need to brace ourselves for higher fuel prices as suppressed prices have taken a toll on finances of oil marketing companies. Hike in prices of petrol and diesel would trim benefits of moderating food and core inflation.


To read full report: EQUITY STRATEGY
RISH TRADER

>INDIAN BANK features among the midsized banks in the public sector space

Background: Indian Bank features among the midsized banks in the public sector space. Through the years FY96 to FY01, the bank experienced a series of financial setbacks. Under a capital restructuring plan carried out in FY06 the bank had written off its accumulated losses. The bank operates a network of about 1970 offices in India. As of December 31, 2011 the bank had business of about Rs 2064bn. The bank’s footprint is largely skewed towards the southern states of Tamil Nadu, Karnataka, Andhra Pradesh and Kerala.



Tax reversal comes to the rescue
Indian Bank’s revenues and operating profit were along expected lines. PAT, however, was higher than expected; led by tax reversal. PAT was up 7%YoY at Rs 5.26bn. Net interest income continued to drive operating profits; non-interest income also chipped in with a 13.1%YoY growth.


Quarterly Highlights
• Credit growth stumbles, alternate credit (investments) up ~50%
• CASA stable at about 25%
• Asset quality healthy, net NPLs at 0.8%
• Margins under pressure
• Net interest income up 12.8%YoY
• Operating profits growth curbed at 12.3%YoY


Valuation
At current levels the stock trades at 0.97X FY13E adjusted book value (standalone) and 4.08X FY13E EPS (standalone). Buoyed by superior net interest margins and aided by a higher leverage on equity, Indian Bank enjoys a laudable return on equity in the PSU space. We expect the bank to be among the outperformers in the PSU banking space. With valuation having run up we rate the stock a MARKETPERFORMER on the stock with a target price of Rs 256. Key risks include a less than expected loan book expansion and a significant variation in spreads.



Credit growth tempered
Indian Bank continued to grow its balance sheet front in healthy double-digits; however, a downtick was seen with an 18.7%YoY growth at Rs 1,388.49bn. The bank outperformed the industry by reporting an 18.7%YoY growth in the loan book vis-à-vis the system growth of 15.9%. However, moderation was witnessed with a 1.8%QoQ growth as against 6%QoQ growth in the December 2010 quarter. Loan book was reported at Rs 873.37bn. Deposit growth also better at 17.8%YoY as against the industry growth of 16.9%. Deposits were reported at Rs 118.97bn. The credit-deposit ratio was reported at 73.4%. Indian Bank has retained the CASA ratio (24.8%) well compared to its peers; higher composition of savings deposits made for the slip in current account deposits. On the lines of industry leaders, Indian Bank expanded its investment book at a faster pace (19.1%YoY) as compared to the loan book. The investment book was reported at Rs 349.25bn.


Pressure on margins
In tune with that of the industry yields and costs were higher; the bank appears to have absorbed a portion of the higher cost of funds contributing to a downtick in margins. An uptick in borrowings and lower yielding investments contributed to pressure on margins. Net interest margins were reported at 3.58% as against 3.84% in the December 2010 quarter. Led by an 18.7%YoY growth in balance sheet net interest income was 12.8%YoY. Cost of deposits was reported at 6.9% vs 5.4% in the December2010.



Growth in operating profits curbed
Indian Bank reported a 13.1%YoY growth in non-interest income to Rs 2.81bn. Lower credit off-take appears to have dented fee income growth contributing to a lower non-interest income growth. Revenues for the bank were up 12.8%YoY. Operating costs were up 13.8%YoY led by both staff costs and other operating expenses. Operating profits were up 13.8%, cost income ratio was stable at 37.2%.



Asset quality comfortable
Asset quality continued to remain strong with gross NPLs and net NPLs remaining steady at Rs 11.9bn and Rs.6.95bn, respectively. With net NPLs at 0.8%, despite higher slippages, asset quality continues at comfortable levels. Net slippage was reported at Rs 1.43bn.



Outlook & Valuations
Balance sheet expansion is expected to drive net interest income growth; spreads are likely to remain under pressure over the next couple of quarters as the bank is likely to absorb a section of the costs.


Indian Bank is likely to report a PAT of Rs 19.2bn for FY12 and Rs 24.34bn for FY13. A chunk of earnings growth is expected to accrue from top line which is expected to be driven by a 20% growth in the balance sheet.


At current levels the stock trades at 0.97X FY13E adjusted book value (standalone) and 4.08X FY13E EPS (standalone). Buoyed by superior net interest margins and aided by a higher leverage on equity Indian Bank enjoys a laudable return on equity in the PSU space. We expect the bank to be among the outperformers in the PSU banking space. With valuation having run up we rate the stock a MARKETPERFORMER on the stock with a target price of Rs 256. Key risks include a less than expected loan book expansion and a significant variation in spreads.


RISH TRADER

>IDBI BANK: has strategic stakes in NSE, CARE and several other unlisted entities in the financial services space

Margins under pressure
IDBI Bank’s revenues and operating profit were lower than expected. Slow credit growth and rise in cost of fund contributed to the decline in profits. Chunky slippages also saw a decline in asset quality.


Quarterly Highlights
• Top-line lower than expected
• PAT down 9.7% YoY at Rs 4.1bn
• Credit growth at 16.2%YoY
• Deposit growth healthy at 17.9%YoY
• CASA improves to 19.2% up 414bps
• Asset quality healthy deteriorates, net NPLs at 2%
• Chunk of slippage from a single account
• Spreads under pressure
• Net interest down 12%YoY
• Operating profits down 27.3%YoY


Valuation
At current levels the stock trades at 0.8X FY13E adjusted book value and 6.95X FY13E EPS. We rate the stock an OUTPERFORMER with a target price of Rs 151. The bank has strategic stakes in NSE, CARE and several other unlisted entities in the financial services space. These investments are expected to provide down-side cushion. Key risks include a lower than expected CASA composition and greater than expected slippages.


Balance sheet consolidation
In line with its objective of capital conservation IDBI Bank reported muted balance sheet growth. Loan book was reported at Rs 1,562.17bn up 0.2%QoQ. Moderation in growth was witnessed with a 16.2%YoY growth as against 19.7% in the September 2011 quarter. Deposit growth was reported at Rs 1,771.23bn up 17.9%YoY and 1.5%QoQ. The credit-deposit ratio was reported at 88.2%. IDBI Bank improved its deposit franchisee, despite intense competition from new age private sector banks. CASA deposits were up 54.1% YoY and 4.1% QoQ; CASA composition improved to 19.2% vs. 15.1% in December 2010. Investment book growth was muted at 2.1%YoY and 7.9%YoY. IDBI Bank reported a balance sheet size of Rs 2,558.89bn a 2.2%QoQ growth.


Spreads under pressure as yields lag cost of funds
Sharp rise in cost of funds by ~150bps (YoY) to 8.6% hampered spreads as yields failed to keep pace. Yields inched up ~70bps (YoY) to 10.1%. Spreads dropped about ~80bps (YoY) to 1.7%, amongst the lowest in a series of several quarters. Tight liquidity conditions since May 2011 has seen the banks spreads decline, as the bank relies on bulk deposits. With the bank absorbed a portion of the rise in cost of funds net interest margins were down ~60bps (YoY) at 2.4%. Net interest income was down 12%YoY at Rs 10.6bn.




To read the full report: IDBI BANK
RISH TRADER

>WIPRO: IT budgets are likely to be flattish in FY13

Restructuring initiative started to payoff
Wipro revenue grew 9.9% QoQ to Rs. 99,972mn, which is above our estimate (est. Rs. 98,395mn). In constant currency terms revenue grew 4.5% sequentially, which is ahead of HCL Tech 3.7% growth and inline with Infosys (4.4%) & TCS (4.5%) growth. This indicates that its restructuring initiative has started to pay off.


Revenue from IT services grew 11.4% QoQ to Rs. 76,076mn, IT Product revenue de grew by 10% and Consumer care and Lighting grew 9.8% QoQ. Currency and realization had a positive impact on margins, during the quarter, EBIT margin expanded by 80 bps to 17.2%; which can be explained as follows; Currency (+70bps), Realization (+170 bps), SG&A (-80 bps) and others (-80bps). Wipro has declared an interim dividend of Rs. 2 per share


IT budgets are likely to be flattish in FY13
IT budgets are likely to be finalized in February 2012; initial indications show that the budgets are likely to be flattish. IT spending curb has been witnessed in Investment banking, retail and consulting space in energy space; however, upstream energy business will help kick in growth. Realignment of budget has been happening in retail banking with significant spend happening in analytics, regulatory and mobility space.


Outlook & Valuation:
At the CMP Rs. 417.85, the stock trades at 18.1X and 15.8X to FY12E and FY13E of Rs. 23.1 and Rs. 26.5 respectively. We value Wipro at 15X to FY13E earnings (~15% discount to Infosys forward earnings multiple) to arrive at a 12-month target price of Rs.398.




Top client grew faster than company
Wipro’s top client during the quarter grew 7.8% sequentially to US$59mn. Up-selling and cross-selling initiatives were witnessed across client verticals. US$100mn clients have improved from 1 in Q3FY11 to 6 in Q3FY12 and similar pattern were witnessed across the clients pyramid.


To read the full report: WIPRO
RISH TRADER

>SOUTH INDIAN BANK: Q3FY12 Earnings Review

Background: South Indian Bank (SIB), among the midsized banks in the private sector space, operates a network of about 674branches and about 614 ATMs. With about half of its branches located in Kerala the bank’s business is largely skewed towards the Southern state.
SIB has established a strong brand recall among the Keralite-NRI diaspora. The bank plans to foray into newer geographies by expanding its footprint in the Northern and North - Eastern regions. With no identifiable promoters SIB is run by a team of professionals. A slew of FII’s hold a 42% stake in the bank.


■ Net interest income leads growth
South Indian Bank's (SIB's) topline and operating profit were along expected lines. PAT was up 35.7%YoY at Rs 1.02bn the highest in the bank’s history. Credit growth continued to drive topline. Net interest income continued to drive operating profits; non-interest income also chipped in with a 20%YoY growth. Asset quality continued to be resilient despite the aggressive credit growth in the recent quarters.


■ Valuation
At current levels the stock trades at 1.2X times its FY13E book value and 5.4X times its FY13E EPS. We reiterate our MARKETPERFOMER rating on the stock with a target price of Rs 26.3. Key risks include a surge in delinquencies. South Indian Bank is among the inexpensive stocks in the private banking space with a commendable return on assets and return on equity.


■ Business growth outpaces that of system
South Indian Bank continued to maintain momentum on the balance sheet front. The bank outperformed the industry by reporting a 30.8% YoY growth in the loan book vis-à-vis the system growth of 15.9%. Loan book was reported at Rs 250.50bn. Deposit growth also was strong at 25.3%YoY as against the industry growth of 16.9%. Deposits were reported at Rs 338.34bn. Credit appears to have grown at the cost of the investment book. The credit-deposit ratio was reported at 74%, amongst the highest in recent quarters. CASA ratios continued to remain under strain; a slowdown in growth of demand deposits was noted. Term deposits were
up 26.8% at Rs 265.54bn. Balance sheet continued to grow at a healthy pace of ~25%YoY.


■ Net interest margin stays put at 3% 
Yields and costs were higher, while margins improved to 3.05%. A 5 bps rise in margins along with a ~25%YoY balance sheet growth contributed to a 33.5%YoY growth in net interest income. The bank appears to have passed on much of the higher cost of funds contributing to healthy spreads. Yield on the loan book was reported at 12.3% vs 10.7% in the December 2010 quarter, while cost of deposits was reported at 7.8% vs 6.4%.


To read the full report: SIB
RISH TRADER

>TCS: Tailwind pushed revenue growth higher

Exchange tailwind pushed the revenue growth higher…
Revenues during the quarter was tad above our expectation, reported at Rs. 132,040mn (CSEC est. of Rs. 131,110mn) a sequential growth of 13.5%. Volume grew 3.2% sequentially, coupled with exchange and realization aiding 8.95% and 2% respectively, which pushed the rupee revenue run rate. However the effort mix dragged to the tune of 64bps.



Margin Expansion: Currency offsetting the Rate & Productivity slump
TCS posted an EBIT of Rs. 38,618mn a sequential growth of 22.4% and the margins expanded by 213 bps on a sequential basis to 29.24% v/s 27.11% in the previous quarter. Margin expansion was largely attributed by the currency which had a positive impact of 282 bps on margin and other factors contributing positively to the tune of 45 bps; these factors largely mitigated the negative impact caused by rate & productivity mix which had a negative impact to the tune of 94 bps and offshore shift and SG&A optimization & Provision for bad debts negatively impacting 10 bps each


Effective tax rate for the quarter stood at 22.6% verses 24.3% in the previous quarter and for
the full year it is estimated to be around 23.4%. PAT grew 18.4% sequentially to Rs. 28,866mn
with a margin of 21.9% compared to 21% in the previous quarter.




Revenue by Geographies:
Barring Middle East & UK all other geographies delivered good sequential growth. In dollar terms revenues from Continental Europe grew 6.5%, Latin America grew 5.8%, Asia Pacific and Indian operation grew 3.8% and 3.6% QoQ basis respectively.



Revenue by Vertical:
Revenue growth was broad based; all verticals grew well expect telecom and energy utilities.
Retail & distribution grew by 4.1%, manufacturing, travel & hospitality and life science & healthcare grew by 2.4% on a sequential basis.



Revenue by Services:
In dollar revenue terms, infrastructure services and global consulting services grew by 13% and
10% on a sequential basis respectively. Pressure was witnessed in business intelligence and
asset leverage solutions space which de-grew 4.1% and 2.7% respectively on a QoQ basis


To read the full report: TCS
RISH TRADER

>BASEL III: Global regulatory standard on bank capital adequacy, stress testing and market liquidity risk

Highlights of Basel III:

• Core equity tier-1 of 5.5% as against 4.5% for international banks
• Capital conservation buffer of 2.5% by way of common equity
• Leverage ratio introduced at a minimum 5% (without risk weighting) as against 3% for international banks
• Early transition by March 2017, as compared to January 2019 as per international norms
• Core equity fulcrum of CAR
• Charges to core equity tier -1 as against total CAR
• Dividend payout ratios relaxed, allowed upto 100%

For most private sector banks Basel III transition is likely to be smooth. High core-equity tier-1 capital along with room for increase in capital conservation ratios augur well for private sector banks. Select public sector banks are likely to face hiccups. Lesser room for capital conservation as PSU already operate on low dividend payout and low core equity are amongst the concerns for these PSU banks. For every 1% increase in core equity, RoEs are likely to moderate by about 200 bps on an average for the Indian banking industry.


■ Indian Private Sector banks well placed
Indian Private Sector banks are comfortably positioned to move towards Basel III guidelines. Banks would need to keep 11.5% as overall CAR with tier-1 capital at 9.5% (including capital conservation buffer of 2.5%). Core equity tier- 1 capital is the fulcrum of Basel III, and its impact extends into dividend payouts and computation of additional tier-1 capital and tier-2 capital. Leverage ratio has been introduced with core-equity as the capital base. Higher core-equity and CAR requirements are likely to moderate banks’ RoEs from current levels.


■ Select public sector banks, however, are on a sticky wicket
This list includes Bank of India, Central Bank of India, IDBI Bank, UCO Bank, United Bank of India and Vijaya Bank. Conversion of perpetual non-cumulative preference shares, however, may see UCO Bank, United Bank of India and Vijaya Bank sail through. With the Government of India holds bulk of the preference shares of these banks, such a conversion could be on the cards. Others in the list are likely to relook at their growth strategy, resort to dividend cuts or tap equity funding sources.


■ Higher core equity likely to moderate ROEs
Higher core equity are likely to curtail ROEs. Banks on average deliver about 15% ROE, and our estimates indicate that for every additional 100 bps of increase in core equity, ROEs are likely to dip ~200bps. An increase of 1% in tier-1 ratio would need an additional capital of ~Rs 470 bn (~US$10 bn) with the total RWA in the banking system at ~Rs 47 trillion. We believe private banks are well placed to strengthen their core equity through internal accruals.


To read the full report: BASEL III
RISH TRADER

>Who is an Insider? & Should one follow Insider’s foot steps? (CHOLAMANDALAM SECURITIES LIMITED)

Who is an Insider?
Insider is a person who is/was connected to the Company or has or deemed to have had access or expected to have access to unpublished price sensitive information in respect of shares of company. As per SEBI (Prohibition of Insider Trading) Regulations 1992, no insider shall either on his own behalf or on behalf of any other person deal in securities (shares) of a Company listed on any stock exchange when in possession of any unpublished price sensitive information or communicate, counsel or procure directly or indirectly any unpublished price
sensitive information to any person who while in possession of such
unpublished price sensitive information shall not deal in securities.


Should one follow Insider’s foot steps?
We hereby consolidated the Insider trades happened during the last fortnight. Insider acquiring shares in the open market should be viewed from a longer term perspective. Insider typically increases their stake for foreseeing value enhancement over an extended period, to raise their control over management or to avoid the potential take over threat. With the Insider committed to the company over the long term, in most occasions typically the time horizon does not match with that of the minority investors.


While a sale need not be always perceived as negative as at times insider pare their stake to bring in a new investor or to deploy the money in its own business. However, caution has to be exercised depending upon the utility of the proceeds and as well if the quantum of stake sale is substantial.


Insider trade in many instance doesn’t warrant into a near term price reaction. So it’s not prudent to follow the Insider’s each and every foot steps as this could happen for various reasons. However it is vital to keep a track on Insider’s activity.


Please read the Insider trades.
RISH TRADER