>Bank of Maharashtra (BONANZA)

Highlights

• BoM is a small PSU Bank, mainly concentrated in Western India. It has deeply penetrated underbanked areas of among the most industrialized states of the country like Maharashtra, Gujarat, Karnataka etc.

• It is an excellent take over candidate as M&A begins in PSU Banks (already started within SBI group).

• Bank has controlled its NPA very well. Its NPA levels are at 0.82%.

• At CMP Rs.22, Bank is trading at about 47% of its Book Value of Rs.41,.

• At CMP Rs.21, it offers dividend yield of 9.5%. Dividend in FY 08 was Rs 2/share. It has been paying dividend consistently.

• Government shareholding is very high at 76%, which makes further fund raising easy. Also, BoM is attractive to potential acquirer in M&A, specially banks with Govt. holding near 51%.

• PSU Banks have huge exposure to G-Sec. The prices of these Govt. securities have sharply risen in past few months and yields have fallen. With softer interest economy, Bonds yield can fall more. Thus dividend yield of the safe PSU Banks stocks are much higher than the Bond Yields (10-Year 6.05% G-Sec yield is about 7.1% presently)

• The bank enjoys high CASA of about 38%.

To see full report: BANK OF MAHARASHTRA

>Suzlon Energy – MP (INDIA INFOLINE)

· Lower earnings visibility from shrinking order book
Suzlon's order book fell by 43% since the blade cracking issue surfaced in Q4 FY08. It has been unable to bag large orders from either USA or Europe since then. As they are largest markets, non receipt of orders displays lack of customer confidence in Suzlon's products and thus raises concern over future growth. The existing order book of ~2,000 MW does not even cover Suzlon for one year. However short duration orders from India will help restrict de-growth.

· Funding REpower purchase will strain cashflow
Weak market environment will force Suzlon to 1) offload additional stake in either Hansen or Suzlon, 2) raise fresh debt or 3) contract working capital cycle. The management is already working towards contracting its working capital cycle. Any delays will result in Suzlon having to resort to bridge loans. During Q3 FY09, higher inventory and debtor days inflated its working capital cycle. We expect the company ot offload a minority stake in either Suzlon or Hansen to fund its Rs 13.5 bn REpower acquisition.

· Intergrating to overcome supply chain issues
With the commisioning of its castings and firgings unit and the acquisition of Hansen Transmission, Suzlon has become an end to end solutions provider in the wind industry. Hansen helps in filling the supply chain gap of gearboxes - which presently is a key of bottleneck. Hansen is in the process of enhancing its capacity to 14.3GW from 7.3GW FY13. It will set up capacities in China and India. Such superior level of intehgration should enable Suzlon to bid competitively and maintain margins.

To see full report: SUZLON MP

>Punjab Nastional Bank (INDIA INFOLINE)

· Significant expansion in loan book over Q4 FY08- Q3 FY09
In the past four quarters, PNB's loan loan book has grown by 40% implying a CQGR of 8.7%. In 9m FY09, bank's advances have grown by 18.5% YTD impying an annualized growth of 25% yoy. This is in startk contrast to a material slowdown in the loan growth for the system. Key drivers behind PNB's brisk loan loan growth are 1) multiple lending constraints faced by large private sector banks 2) large corporate borrowers have been shifting to the large PSBs 3) extensive branch network and rural presence.

· NIM to dip in Q4 FY09; to remain at 3.5% in FY10E and FY11E
Over Q1-Q3 FY09, PNB's NIm has improved by 60 bps to 3.9%. The margin improvement was driven by more than commensurate increase in lending rate by the bank in response to an increase in cost of funds due to tight liquidity conditions between July-October 2008. Due to extensive branch network and strong brand, PNB was amongst, PNB was amongst the least affected banks during the liquidity crunch. However, PNB's NIM is expected to decline by 20-40 bps qoq in Q4 FY09 due to significant reduction in BPLR in the past four months. In FY10E and FY11E, we expect reported NIM to hover near 3.5%.

· Fragile asset quality; but deterioration to remain under check
Traditionally, PNB has witnessed higher GNPL% than most of the other PSBs due to its more aggressive lending strategy, which focuses on earning high NIMs. Though the asset quality could rapidly deteriorate in future due to worsening macro conditions, we believe that it would remain within bank's tolerance levels. We estimate Gross NPLs to incorease 2.5x and reach 4.2% of advances while net NPLs would jump 5x and represent 2% of advances by FY11

To see full report: PUNJAB NATIONAL BANK

>Automobile Sector four wheeler (ENAM SECURITIES)

Earn to ground: Automobiles

CARS & TWO-WHEELERS: HOW SUSTAINABLE ARE CURRENT VOLUMES?
Volume for cars and 2w have shown a singnificant improvement from the troughs of Q3FY09 (cars up 45% and 2w up 37% in Feb v/s Dec'08). We analyze various factors affecting volumes, to check their sustainability.

Main reasons for for a strong rally in volumes in Q4:
· Cars: a) 6th Pay commision's 20% salary raise for 5.5 mn governemnt employees in Q3; b) Excise duty reduction of 4% in Dec'08, followed by aggressive discounts (3-5%) by all OEMs (ending March 31, 2009); c) Increased availability of finance (PSU banks) and lower lending rates (200 bps reduced); d0 Q4 seasonality: Depreciation benefits, marriage season etc; e) Pre-election season purchases.

· Two - Wheeler demand has mainly driven by high rural income on increased government spending government spending of Rs 800 bn or 3% of GDP (30% increase in MSP, NREGS, expansion, 6th pay comm and farm loan waiver etc.). While there has been a reduction in lending rates, availability of finance remains a key isssue

Structural changes in the long term, 2w better placed than cars....
· Increased participation of PSU banks will stabilize liquidity and increase geographical reach.

· Repossession norms to ease finance availability: Draft guidelines have been submitted by the MoF. These include changes in loan application procedure and a central monitoring cell for recovery agents. A decision on the same is expected on the same is expected in Q1FY10, subject to clearances from the Election Commission. 2w expected to benefit most as repossession norms ease.

· Nano Launch: expect the market size to expand as new customers come into the fold.

To see full report: AUTOMOBILE SECTOR