>PRINT SECTOR: Top-2 dailies register decline in readership

Pecking order remains largely unchanged

■ Lokmat makes a comeback as it climbs up to rank 7th from rank 8th (Lokmat had slipped to rank 8th from rank 6th in IRS 2Q 2011 survey) with an AIR (Average Issue Readership) of 7.6mn. Saving this reshuffling, the pecking order remained unchanged. The top-2 dailies, Dainik Jagran and Daink Bhaskar registered AIR decline on ror (readership over readership) basis of ~0-2%, while, Hindustan registered marginal increase of 0.1% ror in its AIR


■ Jagran Prakashan (flagship daily Dainik Jagran (DJ), other dailies Mid Day and Inquilab) maintained its leadership with AIR of 16.4mn, while, DB Corp ( flagship daily Dainik Bhaskar) registered an AIR of 14.6mn. DB Corp’s strategy of increasing urban readers has paid rich dividends, with consolidated DB Corp (dailies Dainik Bhaskar (DB), Divya Bhaskar, DB Star and Business Bhaskar) increasing its urban readership by 0.7% ror to 12.8mn, however, rural readership of Dainik Bhaskar registered decline of 5% ror to ~5mn. Hindustan maintained its 3rd rank albeit on a flattish growth rate with AIR of ~12mn


■ We have highlighted the urban readership numbers for the companies under our coverage (refer Exhibit 4 and Exhibit 5), as we believe dominant presence in urban areas is a good indicator for the companies to garner higher advertisement revenue


■ We maintain our Neutral recommendation for Jagran Prakashan (CMP Rs103, fair price of Rs104/share) and HT Media (CMP Rs141, fair price of Rs143/share). We are Reduce on DB Corp (CMP Rs209) with Target Price of Rs174/share as we believe, that the market is not factoring : 1)slower GDP growth rate of India resulting in lower advertisement revenue recognition (as DB Corp is primarily an urban play) and 2) numerous new launches (launched Divya Marathi), which will be a drag on the company’s balance sheet.


To read full report: PRINT SECTOR
RISH TRADER

>CIPLA: A potential opportunity in Dymista which is a combination of azelastine and fluticasone; has been a development partner for Sweden-based speciality pharma company Meda AB

Sweden-based speciality pharma company Meda AB (MEDA) has indicated that its NDA for a combination inhaler branded Dymista (azelastine and fluticasone) for allergic rhinitis could be approved in H2CY12. Cipla is the development/manufacturing partner of Meda for this product. The global market size for azelastine is ~US$250mn market while that for fluticasone is ~US$350mn. We expect Cipla to benefit significantly when this product is launched in the US and EU markets in CY12. We have currently not built this prospect into our estimates and expect upgrades if and when this product is approved. Maintain BUY with target price of Rs393/share.


■ Dymista, the opportunity: Dymista is a combination of azelastine and fluticasone and is administered through an inhaler device. Having filed an NDA in the US in Jun’11 and a pre-registration in EU in Oct’11, Meda is preparing for a launch of the product in H2CY12. Individually, fluticasone (a steroid) and azelastine (antihistamine) have global sales of ~US$250mn and ~US350mn respectively and we believe that a combination has potential to offer better treatment. In one single product, patients will receive the benefit of a steroid (to treat the inflammation) and an antihistamine (for rapid effect and relief of nasal congestion).


■ Cipla as a partner: Cipla has been a development partner for Meda and will also be the manufacturer for the product – both the formulation as well as the inhaler device. In CY09, it expanded its partnership to include other major markets like Australia, Brazil, Europe, Japan and South Korea over and above the US and EU. We believe Cipla will gain from the combination product as its sales pick up.


■ Timelines: Meda has filed an NDA (for seasonal allergic rhinitis) in the US in Jun’11 and has indicated that its PDUFA (Prescription Drug User Fee Act) date for Dymista will be early May’12 indicating an imminent launch thereafter. In the EU Meda has filed a pre-registration in Oct’2011 and an NDA would be filed soon.


■ Recent underperformance provides an opportunity: Since the announcement of Q3FY12 results, the Cipla stock has corrected ~10%. Our estimates have not changed post the Q3FY12 results and we continue to believe that Cipla’s export potential remains under-appreciated. At current price, Cipla trades at 17.8x FY13E EPS – ~10% discount to peer average. We find value in the stock and thus recommend BUY with target price of Rs393/share.


To read full report: CIPLA
RISH TRADER

>TORRENT PHARMACEUTICALS LIMITED: Supplier of Citalopram and second largest supplier of Zolpidem for the US market; Maintained its dominant position in domestic Cardiovascular (CVS) and Central Nervous System (CNS) segment with new product launches

■ Established in 1994, Torrent Pharmaceuticals Ltd is a flagship company of Torrent group. While its 36 brands lead in their respective molecule segments, six brands of the company appear in India’s top 300 pharma brands.


■ Torrent has successfully maintained its dominant position in domestic Cardiovascular (CVS) and Central Nervous System (CNS) segment with new product launches. In line with industry trend, Torrent has maintained its tilt towards chronic profile over acute.


■ By entering into regulated as well as emerging markets, Torrent has successfully increased its footprint in International markets, which contribute ~51% to the total revenue of the company in FY11. With 27 successful drug launches, Brazil contributes majorly (32%) to company’s international division. Torrent has been the largest faster exports to drive growth for Torrent supplier of Citalopram and second largest supplier of Zolpidem for the US market.


■ In 9MFY12, Torrent recorded sluggish performance mainly in the acute therapy segment, due to increasing competitive pressure. To get back the company on growth path, management has taken corrective action in terms of addition and improvement in efficiency of field force.

■ Apart from regular 25-30 drug launches in domestic market every year, the company is planning to enter into new therapy segments like oncology and infertility to widen its offerings. Similarly in its existing international market, new launches in Brazil and U.S are expected to propel growth.


■ Therefore, we initiate coverage on Torrent Pharmaceuticals Ltd. with a BUY rating and a target price of `660 per share.


T read full report: TORRENT PHARMA
RISH TRADER

>OIL & MONEY: Quantitative Easing(QE). Emerging Markets(EM) and Monetary Policy

■ Higher oil prices reflect both supply concerns and rising global demand
■ QE is adding to oil price increases as well by ‘turbo-charging’ EM growth
■ Higher oil prices will imply more monetary easing from the west but EM will respond by quantitative tightening


Oil prices are edging up again. Why are prices rising?
Western policymakers have been accused of stoking oil and wider commodity price rises through quantitative easing. We believe that oil price increases are still a function primarily of higher emerging market demand and supply side concerns especially related to Iran. Our analysis shows only limited impact of direct speculative activity on oil prices, but QE is playing a role in pushing oil prices higher as well by turbocharging
EM world growth.


What will be the impact of further oil price rises? The historical link between a slump in developed economy growth and lower oil prices globally has been broken, since emerging markets now account for nearly half of oil consumption. Higher global oil prices lead to a drop in nonenergy consumer spending in developed economies. In many emerging economies, the biggest threats are inflationary.


What should the policy response to higher oil prices be?
Developed world monetary easing has been ineffective to the extent that it has stoked oil price increases, resulting in an unfavourable growth-inflation trade-off. But we expect monetary easing including QE to remain the main response to oil price increases. The costs to slow growth are much higher than the risk of runaway inflation in an environment of high unemployment and low wage increases.


For a number of emerging markets, inflation will ultimately be the main concern, which will favour monetary tightening albeit unconventional tightening. The first line of defence is likely to be fiscal policy, in particular price controls and subsidies, with monetary policy aimed at preventing second round effects on inflation. In terms of fiscal health, it would seem that Asia is better placed than other regions to deal with an oil price shock.


Oil’s worth


Globally, the US and other economies seem to be showing signs of stabilisation, raising hopes that this year will be the start of a real period of recovery for the western world. But we’ve been here before, at the start of 2011 when the growth outlook seemed similarly rosy. That optimism faded quickly as the world economy was buffeted by the impact of the tsunami and earthquake in Japan but more importantly by the surge in oil prices that followed the loss of oil supply from Libya.


Undoubtedly, stable or falling oil prices in 2012 would be a boon, with inflation set to ease as the energy component falls out of the equation. This in turn, would allow authorities more room to focus on growth.


To read full report: OIL & MONEY