>ICICI BANK (EQUITY RESEARCH)

■ We initiated coverage of ICICI Bank and set a target price of Rs 750.00 for Medium to long term.

■ The Bank has a network of 1,451 branches and about 4,721 ATMs in India and presence in 18 countries.

■ The Bank’s capital adequacy at March 31, 2009 as per Reserve Bank of India’s revised guidelines on Basel II norms was 15.5% and Tier-1 capital adequacy was 11.8%, well above RBI’s requirement of total capital adequacy of 9.0% and Tier-1 capital adequacy of 6.0%.

■ ICICI Bank intends to save up to USD 270 million in the current fiscal year by reducing sales force and other costs.

■ ICICI Bank aims to expand its fundgeneration profile and revenue streams to capitalize on the forthcoming opportunities.

■ Net Income & NII of the bank are expected to grow at a CAGR of 5% over FY08 to FY11E.

This report also includes information on:

• Company updates
• Peer Group Comparison
• Company Updates
• Company Profile
• Company Services
• SWOT Analysis
• Financials
• Charts
• Valuation
• Sector overview

To see full report: ICICI BANK

>BANKING SECTOR (GOLDMAN SACHS)

4Q08 interest coverage analysis of non-financials: early evidence of improving outlook

Early signs of outlook improving for banks' asset quality outlook
Our constructive view on banks was predicated on three key factors (i.e., improving growth outlook, rising ROE), including a benign outlook for banks’ asset quality due to resilient macro
economic prospects and the likelihood of further pick-up in economic activity. Our analysis of 1735 non-financial companies suggests that corporate sector performance has indeed seen a significant rebound in 4Q08; EBITDA margin and interest coverage ratio have recovered back to the levels prevailing in 1Q08 despite growth conditions being weaker than the corresponding period.

Further improvement to outlook likely with pick-up in economic activity.
Given our expectations of further pick-up in economic activity, we believe credit quality outlook for banks will likely improve further from here. There are some hurdles to our above view; debt/EBITDA ratio of some companies are very high which may require restructuring their financial position through capital raises or selldown of assets.

Regulatory forbearance, improving growth outlook to keep NPL/credit costs in check
Regulatory forbearance on NPL recognition and improving growth outlook for the economy are
likely to keep NPL/credit costs trends for banks under check. We do not anticipate significant
increase in credit costs from 2008 levels. We expect NPL ratio to increase modestly from 2.5%
in 2008 to 3% by 2010E.

Reiterate Conviction Buy on SBI; Buy on Axis, PNB and IOB
We believe state owned banks are key beneficiaries from an improving growth outlook for the economy; benefit of widening jaw between revenue and cost growth during 2010E and 2011E
would likely drive earnings growth stronger during this period. We expect ROE to cyclically
rise for the sector from 13% in 2009E to 17% in 2011E. We reiterate our Conviction Buy on SBI
and Buy ratings on Axis, PNB and IOB .

Key risks include rise in long bond yields as well as policy interest rates and potential set-back to our asset quality outlook.

To see full report: BANKING SECTOR

>DHAMPUR SUGAR MILLS LIMITED (FINQUEST)

Investment Summary

■ DSML is holding sugar inventory of 2.3 lakh tonnes (97.0% of sugar production in 1HFY09)
costing INR 18.9 per kg as of March 2009. We believe the company is expected to benefit
materially due to low cost inventory and recent surge in sugar prices. We expect the
company to make gross margin (sugar price - cane cost) of INR 5.5 per kg and INR 8.0 per
kg of sugar sold in FY09E and FY10E respectively. We also expect EBITDA margins for the
company to improve by 170 bps and 210 bps YoY in FY09E and FY10E respectively.

■ Our understanding of sugar situation (global and domestic scenario) concludes that average
sugar realisation for the company will increase to INR 21.6 per kg and INR 26.0 per kg in FY09E and FY10E respectively. We believe better sugar realisations together with high
inventory will provide strong traction to the topline. We expect Net sales to grow at healthy
41.0 % in FY09E and 13.7 % in FY10E.

■ We expect shortage in sugar cane production to persist through SY10 even after accounting
for 25.0 % increase in acreage, resulting in import of raw sugar to cover the shortfall. DSML has refining capacity of 1700 TPD and has contracted to import 1 lakh tonnes of raw sugar. We believe that the company will able to refine only 25000 tonnes of raw sugar in 2HFY09 and rest will be refined in FY10. As per our calculation, the company will add INR 53.8 million in FY09E and INR 217.9 million in FY10E to EBITDA through processing raw sugar.

■ DSML has increased its exportable power capacity by 33.0% YoY to 80 MW at the end of FY08. We expect gross power sales to increase by 3.2% and 4.7% to INR 535.8 million and INR 560.8 million in FY09E and FY10E respectively. The company plans to start power generation from coal in FY10 and is in negotiation with government for open power sale.

■ We believe that concerns on highly leveraged balance sheet will subside by FY10 as debt will come to a more manageable level. The company doesn't have any additional capex plan in FY10 and will generate substantial free cash flow for repayment of debt. We expect debt-equity ratio to decline from 2.0x in FY08 to 1.8x in FY09E and 1.3x in FY10E.

Valuations
At CMP, DSML is trading at 3.7x FY10E earnings and 3.4x FY10E EV/EBITDA. Historically,
sugar companies have mostly traded in one year forward EV/EBITDA band of 4.0-7.0x. Our
target EV/EBITDA multiple of 4.5x values DSML at INR 110. We rate the stock as BUY with
potential upside of 58.0%. Our reasoning for using low valuation multiple to arrive at price
target is due to our belief that sugar cycle will reverse post FY10.

To see full report: DHAMPUR SUGAR

>STERLITE INDUSTRIES (KOTAK SECURITIES)

Raise target price but downgrade on valuations.
We have rolled over our target price to FY2011E and revised our target price to Rs540 (Rs490 earlier). Also, we have downgraded our rating on the stock to REDUCE from ADD. Stronger Rupee assumptions have led us to lower our estimates for FY2010 and FY2011 to Rs33.2 and Rs41.8, respectively, from Rs41 and Rs50.5 earlier. We have raised our average copper price assumptions to US$5,000/ton from US$3,600/ton.

Downgrade to REDUCE on valuations
We have rolled over our target price to FY2011E from an average of FY2010 and FY2011 earlier. Following the rollover, we raise our target price from Rs490 to Rs540 which is 6% lower than the CMP. We therefore downgrade the stock from ADD to REDUCE.

Lower earnings by 19% for FY2010 and 17% for FY2011
We have lowered our earnings estimates lower by 19% for FY2010 and by 17% for FY2011 following changes in our Re/US$ assumptions. We have lowered our FY2010 and FY2011 Re/US$ assumptions from Rs50.75 and Rs50.5 to Rs48 and Rs47.75 for FY2010 and FY2011, respectively. Since most of Sterlite’s commodity prices are denominated in US$, earnings are highly sensitive to exchange rates.

Raise average copper price assumptions—no impact on earnings
We have raised our copper price forecast for FY2010 and FY2011 from US$3,600/ton to
US$5,000/ton. However, since the largest part of Sterlite’s copper business comprises of smelting, the impact of copper price revision is only on the topline. We maintain our aluminium price forecasts for FY2010 and FY2011 at US$1,700/ton and US$1,900/ton respectively. Also, our zinc price forecast for FY2010 and FY2011 at US$1,400/ton and US$1,500/ton, respectively, remains unchanged.

Raise power business valuations
We value Sterlite Energy’s 2,400 MW power plant currently under construction at Rs66/share (2X P/B). Sterlite Energy is implementing the project in Orissa and will supply 25% power (600 MW) to the state grid and likely earn regulated returns. Vedanta Aluminium will consume another 1,200 MW and the sale of balance 600 MW still to be tied up. We assume Sterlite Energy will be able to realize regulated returns from the power sale to Vedanta Aluminium, while the likely sale of 600 MW in the merchant market will yield attractive returns.

The project is expected to start commissioning in phases between December 2009 and September 2010. However, we note Sterlite Energy still needs to arrange the complete fuel required for the project. Sterlite Energy has been allocated a coal linkage for 600 MW by Coal India and allocation for the balance is awaited. Production from the allocated coal clock (Rampia and Dip Side of Rampia) will take another 2-3 years to commence. Sterlite Energy’s share of coal from the block is sufficient to fuel 1,000 MW of capacity.

To see full report: STERLITE INDUSTRIES