>Mundra Port & SEZ Ltd. (UBS)

■ Factoring increased capacity, longer concession, and stronger cargo growth: We upgrade our rating on MSEZ from Sell to Neutral, factoring: 1) increased capacity of 50mt for the coal jetty (30mt earlier); 2) concession period upto FY51 (FY31 earlier); and 3) stronger volume growth (20% over FY09-12 versus 9% earlier led by higher-than-expected growth and improved outlook). We believe that a pick-up in cargo volumes and long-term growth potential is likely to keep valuations buoyant.

■ We estimate capacity expansion equivalent to 50% of existing facilities
MSEZ has significant growth potential given: 1) large physical capacity (waterfront is 4x of current utilization); 2) healthy internal accruals (Rs40bn over the next five years); 3) low gearing (average net-debt-to-equity ratio of 0.6x over FY09-12); 4) robust demand outlook (also aided by delays in capacity expansion plans at other ports); 5) management keenness to expand facilities; and 6) strong execution capabilities.

Strong growth commands premium

■ Pick-up in private sector capex to drive demand for SEZ land
Alstom-Bharat Forge JV is setting up its facility in MSEZ—120 acres was leased in Q2FY10. In Q1FY10, MSEZ had lease income of Rs50m (~60% of value taken upfront). Though the high rates were due to land usage for hotels/buildings, it provides comfort about potential land valuations in the SEZ. The SEZ leasing activity seen over the last two quarters will further gather steam in CY10 led by private sector capex pickup and aided by the advantage of the port infrastructure.

■ Valuation: sum-of-the-parts-based price target of Rs640 (earlier Rs390)
Our price target, implying FY11 P/BV of 6.3x comprises of: 1) Port – Rs531; 2) SEZ – Rs72; and 3) investments – Rs27 (Dahej, Adani Logistics and Inland Container). We revise our FY10/11 EPS estimates from Rs12.65/16.85 to Rs16.18/19.55.

To read the full report: MUNDRA PORT AND SEZ

>FEDERAL BANK (LKP SHARES)

• Low cost deposits and CASA: Federal Bank Ltd. (FBL) always had advantage of garnering NRI deposits and remittances, which constitute to a healthy low cost deposit base of the bank. Together with CASA of ~ 25%, low cost deposits constitute ~ 40% of total deposits of the bank. Low cost deposits base has anchored its NIMs to a significant extent, helping Federal Bank report one of the highest NIMs in the industry @ ~4% for FY09.

• Credit Offtake: FBL witnessed a very healthy loan growth in H1FY10E @ 21% and management is confident of maintaining a robust 25-30% loan growth for the year 2010E, which is more than the average industry standards. Slower credit off take in past quarters as well as infusion of capital has led to contracted growth of the balance sheet and has impacted return ratios. However, credit offtake in the corporate segment as well as retail segments, especially home loans shall remain the focus areas for growth.

• Asset Quality: FBL has reported high slippages in H1FY10E, at Rs.4.5bn out of restructured assets. However, FBL's provision coverage ratio, which has historically been in the range of 80-85% is the highest in the industry. Conservative provisioning of FBL is likely to continue going forward, with FBL maintaining ~ 83% as provision coverage, which gives further cushion on the asset quality and profitability. We believe that the incremental slippages should peak out this year, with FBL likely to see Gross NPAs at ~3% in FY11E.

• Pending acquisition of CSB: The acquisition of Catholic Syrian Bank (CSB), if it happens, will be a complementary fit to FBL's regional leadership strategy. CSB has s strong branch network of 363 branches and 140 ATMs as at March'09. This merger would provide FBL the market leadership in South India, thus raising the entry barriers for other banks in Kerala. Further, FBL would be able to productively utilize its excess capitalization for acquisition of CSB.

To see full report: FEDERAL BANK

>Dish TV (Macquarie Research)

 We transfer coverage of this stock to Nitin Mohta from Shubham Majumder.
We upgrade Dish TV to Outperform from Neutral and raise our target price to
Rs45 from Rs11.6.
Impact
 Expect DTH industry to add 10m subscribers in each of the next three
years. Based on our interaction with the managements of various DTH
operators, we remain confident of our industrywide subscriber addition
forecasts. We expect Dish to remain the market leader for the next five years,
despite an assumed decline in net adds market share from 25.6% in FY3/09
to 22% in FY3/10E and thereafter. (Please see Figure 6.)
 EBITDA expected to treble in FY3/12 from FY3/10E level. Dish has
delivered positive EBITDA for three consecutive quarters, clearly surprising us
and the Street positively. We now forecast EBITDA margins to double to
20.1% in FY3/11 from 9.3% in FY3/10E. Despite assuming no major uptick in
margins in FY3/12 (20.5%), we forecast EBITDA to increase by over 3x to
Rs3.7bn from Rs1bn in FY3/10E.
 Positive investment view based on strong improvement in operating
cashflows, led by strong growth in subscriber base and tight cost
control. We expect Dish TV to add 4.4m subscribers over the next two years,
implying a CAGR of 27.4% in the subscriber base for FY3/10–12. Dish TV
management has done a commendable job in capping the content cost as a
percentage of subscription revenues by entering into fixed-price contracts; we
view this as the key reason for the sharp rise in EBITDA.
 Funding overhang removed. Sixty-four percent of the money raised in a
rights issue has been infused into the company, and we do not view funding
as a bottleneck to growth.

To read full report Dish TV (Macquarie Research)

>Bajaj Auto(India info line)

Robust Motor cycle sales in domestic market drive 2-W sales.

Three wheeler volumes witness decent growth.

Rising raw material cost to pressurize margins.

Raise estimates and upgrades to Buy.

To read full report Bajaj Auto(India info line)