>CIPLA (IDFC SSKI)

Cipla’s partnership-based, geographically diversified model, with particular focus on RoW markets, and its formidable R&D capabilities have proved to be a robust and sustainable growth engine. Momentum will be further boosted by Cipla’s muchawaited entry into the EU inhaler market as also likely launch of niche partnership products in USA. Aggressive capex rollout indicates management’s comfort on future growth outlook. Coupled with significant EBITDA margin expansion of 260bp to ~26%, we expect 29% EPS CAGR for Cipla over FY09-11 (albeit on a low base) with upside possibilities. An expected decline in capex FY12 onwards would see asset turnover ratios plateau and lead to improving return ratios. Maintain estimates and upgrade the stock to Outperformer with a price target of Rs368 per share.

A winning business model: Recent alliances between Dr Reddy’s-GSK, Aurobindo- Pfizer, etc endorse Cipla’s strategy focused on R&D and manufacturing as also sales and marketing tie-ups with global companies. Cipla is among the most geographically diversified global generics companies with significant presence in multiple RoW markets including Africa, Middle East, Latin America and Australia. With future global pharma market growth likely to largely accrue from RoW markets, Cipla has created an enviable business model to participate in this opportunity.

Inhalers and US launches to drive upsides: With its diversified model yielding steady revenue growth (10-15%), the much-delayed entry into EU inhalers market as well as niche product launches in US will generate upsides. Cipla’s inhaler plans for EU (a US$3bn+ market with limited competition) are fructifying with launch of Salbutomol in UK in Q3FY10 and likely approval for its first combination inhaler in H2FY11. Cipla has partnerships for 118 drugs in the US with only 23 commercialized ANDAs so far, indicating significant potential for ramp-up in the market.

Good gets better

Better days ahead; Outperformer: The recent upswing in EBITDA margins (26% in H1FY10) appears sustainable on the back of an improving product mix and tighter cost control. Cipla’s aggressive capex intensity (Rs30bn spend over FY06-10) will likely ease by FY11, leading to improved return ratios and higher asset turnover. The management’s intent to enhance investor interaction through quarterly investor calls provides comfort and will aid re-rating. Any adverse FDA action or unfavorable court decision on contingent liabilities related to overcharging stay potential risks for the stock. Upgrade to Outperformer.

To read the full report: CIPLA

>INDIA BULL REALESTATE(HSBC)

Upgrade to OW(V): Valuation now attractive

�� Channel checks suggest IBREL is benefitting from
improving luxury residential demand in Mumbai

�� Stock has substantially underperformed the broad market
and sector and now offers a better risk reward trade-off

�� Upgrade to OW(V) from UW(V) with TP of INR252 (INR235
before). Slower-than-expected execution is a key risk

Improving demand in Mumbai’s luxury residential market is positive for IBREL. We
have seen a steady pickup in demand for luxury residential in the Mumbai market over the past
5-6 months. We believe this segment will benefit from an economic recovery, which is now
steadily becoming evident as well. Our channel checks suggest that IBREL has received a
good response to its luxury residential product in South Mumbai, which we believe is
sustainable. Improved business environment increases our visibility on volumes and execution.
Offset impact of weak office space demand. IBREL’s strategy of increasing the residential
component in its IPIT assets is positive as it offsets current weak demand for its commercial
product (c1m sq ft of near-term delivery). The residential projects should allow IBREL to
capitalise on a higher Floor Space Index (FSI) of 4.0x (against 2.66x earlier). We expect
accelerated cash flows from these residential projects to allow Indiabulls Properties Investment
Trust (IPIT) to tap re-investment opportunities.
Upgrade to OW(V) on improved visibility and attractive valuation. IBREL stock has
underperformed the Sensex by 38% y-t-d and 29% over the past three months. It has also
underperformed the sector by 19% y-t-d and 7% over the past three months. Accordingly, we
upgrade our contrarian UW(V) call to OW(V). We believe the current share price factors in
most of the negatives and provides opportunity to gain exposure to a good mix of Grade A
office space and luxury housing projects in South Mumbai, along with other mid-income
projects across Tier II cities.
Revise TP to INR252. We value IBREL’s real estate business at INR174 (10% discount to
its DCF-based NAV). Further, we value the power business at INR78 (market price less
20% holding company discount) versus INR64 before (1.5x PB before its listing). Our
revised TP also factors in a cut in earnings (9% in FY10 and 3% in FY11), mainly owing to
lower interest income on cash balances. Key share price catalysts: Announcements on
improved business volumes and new project additions by deploying cINR90/share of net
cash (real estate: September 2009e). Key risk: Slower-than-expected execution.

Read full report :-India bull realestate

>Indian companies exposure in Dubai(CLSA)

India’s links to Dubai, and the UAE
􀂉 11% of Gulf capital flows between 2002-06 headed to Asia
􀂉 Indian are ~40% of UAE’s population; forming ~10-12% of India’s
inward remittances. 31% of the 5.3m Indians in the Gulf are in UAE.
􀂉 UAE forms ~8% of India’s non-oil exports and 3.0-3.5% of India’s nonoil
imports.
􀂉 DP World operates five container terminals in India, accounting for
40% of India’s container traffic.
􀂉 Real Estate: Emaar-MGF and DLF-Limitless are the key alliances for
investments into India. Sobha Developers had plans to build two residential
towers and two hotels in the UAE.
􀂉 Construction: L&T has two joint ventures in the UAE, others with business
interests include Gammon India.
􀂉 Banking: Bank of Baroda has 10 branches in the Gulf (largest), but mostly
small banking exposure, mainly for remittances. Bank lending to UAE funded
projects in India unknown.
􀂉 IT Services: No material exposure. A few deals for Wipro and one for
Infosys.

To read full report :- Indian companies exposure

>Asian banks exposure to Dubai/Middle east (CITI)

 Limited exposure for Asian banks – We’ve been gathering feedback from banks
across the region yesterday regarding their exposures to Dubai/Middle East in light
of the debt issues in Dubai. Initial feedback by bank is included in this note. It
appears that most Asian banks have little lending exposure, if any, to Dubai.
Standard Chartered and HSBC would have higher exposure given their operations
in the Middle East. Otherwise, Taiwan financials show up as having some
exposure. We also include a download of syndicated loan exposures specifically to
Dubai World and Nakheel – HSBC and some of the Japanese banks appear more
frequently on the list.

 Stan and HSBC – From annual reports, Stan’s corporate loan exposure to the
Middle East was US$14bn at 1H09, equal to 7.6% of group loans and 60% of
equity. HSBC’s loan exposure to UAE was US$15.9bn at 1H09, equal to 1.7% of
group loans and 13% of equity.


 Taiwan financials – So far, First, Mega, Sinopac, Chinatrust, Shin Kong, Cathay,
and Taishin have revealed exposures to Dubai/UAE. Exposures among Taiwanese
financials are not entirely surprising as companies have been forced to tap
overseas markets for yield, given the pressures from low interest rates, excess
liquidity, and a tough competitive environment. Thus far, amounts are not that
worrying and represent an earnings hit as opposed to a capital hit. However, the
earnings hit may be more significant for some, especially as their earnings buffer
is not as wide in the first place.

To read full report :- Asian banks