>CEMENT SECTOR: Earnings and target price upgrades

The cement sector has witnessed strong recovery in prices as rationality has prevailed. We believe

that the worst is behind us, with trough operating performance witnessed in 2HCY10. Long-term

demand drivers are intact, which would ensure return of normal growth. We are upgrading our

FY12 estimates by 2-18% to partly factor in for current prices. However, sustenance of discipline and current prices in FY12 could drive further upgrades of 9-33%. Valuations are attractive and offer a good entry point for the next upcycle. We prefer Ambuja Cements, JP Associates and Grasim among large-caps, and Birla Corp and India Cements among mid-caps

To read the full report: CEMENT SECTOR

>NTPC: fixed return on equity

NTPC is the largest power producer in India with 28.6% share in generation.

The company has a stable business model earning fixed return on equity along

with efficiency incentives based on normative parameters. We maintain our

fundamental grade of ‘5/5’, indicating that its fundamentals are ‘excellent’

relative to other listed securities in India.

To read the full report: NTPC

>STATE BANK OF INDIA

 Met SBI: asset quality comfort high; limited risks to margins

We recently met with SBI. According to SBI, asset quality should improve and will see higher recoveries going ahead. We are still estimating for ~Rs150bn of fresh slippages (gross) in FY12 vs. estimated +Rs165bn in FY11. Moreover, SBI indicated that it will likely maintain its +3.4% margins (as on 9MFY11) for FY11, although could see qoq decline by +10-12bps from +3.6% in 3QFY11. SBI also believes that upside to rate is limited to +50-75bps from hereon. Further, SBI is

guiding for +19-20% loan growth in FY12 driven by infra. SME and mortgage.

 Pension hit: ~Rs90bn, but earnings can still grow at +32%

SBI’s additional pension liability could rise to Rs90bn (vs. Rs65bn factored-in our est.), but SBI may likely amortize over 5 years. This implies an additional hit of ~Rs5bn/year. However, earnings even after factoring in the additional pension hit could still grow +32-33% earnings growth in FY12E-13E.

To read the full report: SBI

>Texmaco Rail & Engineering Limited (TREL)

 TREL now houses core engineering business of erstwhile Texmaco Limited, viz., Heavy Engineering (comprising Rolling Stock for Railways, Hydro-Mechanical Equipment, Steel Structural, Agriculture Machinery) and Steel Foundry. Company is strategically well placed to take advantage of high growth taking place in the user segments of these businesses.

 Company’s Rolling Stock division (81% of sales in 9 months FY 2011) manufactures general purpose & commodity specific special wagons catering to Indian Railways (IR) and other private players like CONCOR, NTPC, etc, and thus serves core sectors such as cement, coal, alumina, steel, oil, chemicals, fertilizers, container freight cars, etc

To read the full report: TREL