Market Strategy

November 4, 2010

IT is riding on the wave of global recovery

In this month’s strategy, we are focusing on the IT sector, which has so far been one of
the underdogs of this rally due to global headwinds on the one hand and strong
domestic tailwinds favoring domestic consumption and investment-driven sectors on
the other. The market, taking cues from the ‘weak outlook’ for developed economies,
was factoring in low revenue growth for the sector. But the sector has belied these
growth expectations and the top IT companies have also started upping their guidance
for the coming quarters. Valuations, while not cheap, are not unduly expensive either,
especially in some of the second rung companies. Hence, we remain overweight on
the IT sector (12% weightage in our model portfolio) and recommend investors to
increase exposure to the sector.

Robust volume-led growth to persist: The Indian IT sector witnessed strong volume
growth of 6.6–11.2% qoq in 2QFY2011 for Tier-I IT companies on the back of pent-
up discretionary spend. Growth was broad-based, with troubled verticals like
manufacturing and telecom returning to their growth trajectories, with strong spending
on services like package implementation and engineering. This has led to return of
large, multi-year transformational deals, with total contract value (TCV) of US
$100mn-800mn strengthening the deal pipeline for IT companies. On the back of
upbeat outlook, companies like Infosys and TCS have raised their hiring guidance for
FY2011 from 30,000 to 40,000 and 36,000 to 50,000, respectively. This envisages
the strong deal pipeline foreseen by companies. Going forward, we expect volume
growth momentum to sustain at a 5–6% CQGR for Tier-I companies.

Adequate levers to counter margin headwinds: On account of the sudden surge in

demand, Tier-I IT companies undertook strong lateral hiring, leading to high utilisation
level. Going ahead as well, we expect utilisation to remain tightly held and continue to
Diwali Picks
be a strong margin lever, offsetting the negative impact of rupee appreciation and
Company CMP (`) TP (`)
wage inflation. We expect EBITDA for Infosys and TCS to witness a 17–22% CAGR
RIL 1,093 1,260 over FY2010–12.

ICICI Bank 1,231 1,335 Valuation gaps still attractive: We have a positive outlook on Infosys, as the company
continues to trade at a premium of 32% over the BSE Sensex vis-à-vis its historical
Mphasis 609 872
premium of 46%, despite returning to the high-growth phase similar to the
United Phosphorous 204 228 pre-slowdown period (April 2005-December 2007), even on a much larger scale and
with better profitability .
GE Shipping 327 396
Also, TCS continues to remain our top pick, as the company continues to outperform
Blue Star 453 596
on the volume front and has significantly bridged the wide gap between its
Anant Raj 134 178 operational margins vis-à-vis Infosys’ margins, attaining the historic high of 30%
EBITDA margin. Hence, we value TCS and Infosys at a 35% premium to our target P/E
LMW 2,704 2,977
of 17x for Sensex, i.e. at 23x FY2012E EPS. We recommend Accumulate on Infosys
FAG Bearing 902 1,035 and TCS with Target Prices of `3,260 and `1,120, respectively. In mid caps, we prefer
Mphasis and Tech Mahindra due to the steep discounts at which they are currently
Electrosteel Casting 41 72
trading vis-à-vis Tier-I IT companies, despite having growth comparable to them.
Finolex Cables 59 82 Hence, we recommend Buy on Mphasis and Tech Mahindra with Target Prices of `872
Surya Roshni 115 143 and `941, respectively.

Denso India 95 136

Note: Investment period – 12 Months
BSE Sensex (20,356) and Price as on Nov. 1, 2010

Please refer to important disclosures at the end of this report.

 Market Strategy

Volume-led robust revenue growth continues

The Indian IT sector is riding on the wave of global recovery. Most of the tier-I IT
companies are outperforming revenue growth expectations by a fair margin, led by
strong volume growth. Volume growth has reached levels of 6.6–11.2% qoq, which
were last seen during the pre-slowdown phase.

Exhibit 1: Trend in volume growth (qoq) Exhibit 2: Trend in revenue growth (qoq)
12 14 Infosys TCS HCL Tech Wipro
10
10
8
6
6
2

(% qoq)
4
(% qoq)

2 (2)
0
(6)
(2)
1QFY07

3QFY07

1QFY08

3QFY08

1QFY09

3QFY09

1QFY10

3QFY10

1QFY11

(4) (10)

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11
(6)
(8)
Infosys TCS HCL Tech Wipro

Source: Company, Angel Research Source: Company, Angel Research

The sudden surge in volumes in 1HFY2011 can be attributed to return of spending

on discretionary IT services by clients to a) drive operational efficiencies by way of
automation and b) prepare for future growth. Thus, the combination of strong
volume growth and favourable cross-currency movement helped the dollar
revenue growth to outperform the street’s expectation, with 5.8–11.7% qoq growth
in 2QFY2011.

Revenue growth is becoming broad-based

Demand drivers for this kind of robust growth span across various dimensions industry
wise, service wise as well as geography wise.

Industry wise: As per NASSCOM’s strategic review in February 2008, the Indian IT
industry has verticals like banking, financial services and insurance (BFSI) (40% to
revenue), telecom (19% to revenue), manufacturing (15% to revenue) and retail (8% to
revenue) as its main demand drivers.

The nature of IT spend has changed from 2HFY2010 to 1HFY2011, with respect to
industries as well as services that are now driving volume growth. In 2HFY2010,
volume growth for IT companies was led by its anchor sector BFS. This is because post
the implementation of various government bailout programs as well as consolidation of
banks, which took place by the way of merger and acquisition, presented the IT space
with a huge opportunity for rationalisation of systems and system integration, among
others. BFS continues its strong growth momentum, as banks are now looking at
customising their operations to adhere the various risk-compliant frameworks. This
vertical registered strong CQGR of 5–10% over 4QFY2010–2QFY2011. The nature of
services as well as industries driving growth was skewed primarily to BFS only, but in
1HFY2011 it has become broad-based with other anchor industries like retail and CPG
as well as manufacturing beginning to spend on IT.

Retail and CPG have begun to spend on multi–channel integration to encash on the
digital consumer behaviour. This vertical has been growing at a scorching pace with

November 4, 2010 2
 Market Strategy

double-digit revenue growth of 10–20% qoq across all the four tier-I companies in
2QFY2011.

The manufacturing vertical is also back with higher spend on IT, especially in industries
like hi-tech and semiconductor that are looking at immediate go-to-the-market
strategies and, thus, are spending on product engineering. Further, the manufacturing
vertical is spending on IT for supply chain management and consulting to drive cost
efficiencies and for achieving a global presence.

The telecom vertical is now returning to stability, growing 4.0–12.5% qoq for all the
companies in 2QFY2011. This vertical was heavily impacted for Infosys and TCS due to
one of their top clients, British Telecom, cutting back heavily on capex and downsizing
operations. Managements of both the companies maintain that the client-specific issue
is behind, and they foresee a slow recovery in the sector. We believe the telecom
service providers (TSPs) of matured markets will start spending to migrate to next-
generation networks like 4G to support the heavy voice and burgeoning data traffic.

Exhibit 3: Trend in revenue growth for BFSI vertical Exhibit 4: Trend in revenue growth for telecom
Infosys TCS Wipro HCL Tech
15 Infosys TCS Wipro HCL Tech 15
10
10
5
5
(% qoq)
(% qoq)

0 (5)
(10)
(5)
(15)
(10) (20)
3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11
Source: Company, Angel Research Source: Company, Angel Research

Service wise: The changed business needs of various industries have led to a surge in
demand for discretionary services like enterprise application services (EAS) and
engineering and R&D services (ERD). Investments in EAS mostly focus on simplifying
internal processes and harmonising business processes across the enterprise to make
organisations smarter and leaner–primarily focusing on increasing efficiencies and
reducing throughput. In 2QFY2011, the EAS segment reported double-digit qoq growth
of 14–16% for Infosys and TCS. In addition, demand for ERD services is surging as
product companies want to reduce their go-to-market time to gain market share from
the rise in consumer spending.

Geography wise: US has been going very strong as far as clients’ spending on IT is
concerned, though the macro data points at mixed outlook. The US has been the
frontrunner in awarding transformational deals. For US, growth is very much broad-
based, driven across industries and services. Europe is back with heavy spending,
growing by double-digit rate of 10–18% qoq for all the four IT companies (Infosys,
TCS, Wipro and HCL Tech) in 2QFY2011. In Europe, manufacturing and energy and
utilities are returning to normalcy, with clients spending on higher value-added services
such as EAS and ERD. The European clients are primarily spending on IT to drive cost
efficiencies by outsourcing run-the-business (RTB) type of work and through
rationalisation of existing multiple applications and systems. Asia, on the other hand, is
witnessing more of greenfield projects, relating to clients looking out for global
expansion.

November 4, 2010 3
 Market Strategy

Hiring continues to be upbeat, with major upward revision in

target for FY2011

The hiring spree continues in the IT sector, with net addition numbers in 1HFY2011
comparable to entire FY2010. In fact, Infosys and TCS have also increased their hiring
targets from 30,000 to 40,000 and 36,000 to 50,000, respectively, from the beginning
of FY2011 to the end of 1HFY2011 for FY2011. This envisages on the strong deal
pipeline foreseen by these companies.

Exhibit 5: Trend in hiring (net additions)

Net additions FY08 FY09 FY10 1QFY11 2QFY11
Infosys 18,946 13,663 8,946 1,026 7,646
TCS 21,988 32,354 16,668 3,271 10,717
Wipro 18,529 2,243 10,261 4,854 2,975
HCL Tech 9,653 4,224 4,103 6,428 5,661
Source: Company, Angel Research

Utilisation: Continues to be a strong margin lever

The pent-up demand witnessed in 1HY2011 has led to utilisations for Infosys and TCS
reach all-time highs. Tier-I companies managed to address this sudden surge in
demand by hiring more of just-in-time laterals, taking their utilisation to a new level.
Going forward, we expect utilisation to remain tightly held despite robust hiring and to
continue as a strong margin lever countering the negative impact of rupee appreciation
and wage inflation. Hence, though Infosys and TCS are expected to witness a 20–22%
revenue CAGR over FY2010–12E, EBITDA is expected to surge at a 17.5–21.5% CAGR
over the same period.

Exhibit 6: Trend in utilisation Exhibit 7: Trend in EBIT margins

80 35

75 30
(%)
(%)

70 25

65 20
2QFY08

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11
1QFY08

2QFY08

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

Infosys TCS Infosys TCS

Source: Company, Angel Research Source: Company, Angel Research

Rupee to remain narrow ranged

In 3QCY2010 till date, the rupee has appreciated by 3.6% against the USD over
2QCY2010, on the back of FII inflows witnessed over the past
one-and-a-half month. We believe this is a temporary phase as India’s fundamentals
like high current account deficit, which is expected to touch 3-3.5% of GDP, in
3QCY2010, from US $13.7bn in 2QCY2010, would not support strong rupee in the
medium term and the RBI’s intervention is likely. Thus, we have taken USD/INR
assumption of 45.5 and 44.5 for FY2011 and FY2012, respectively.

November 4, 2010 4
 Market Strategy

Outlook and valuation

In FY2009–10, when the macro environment was at its trough, IT spend was more on
run-the-business type services and change-the-business spend had completely dried
up. In 1HFY2011, clients returned to spending on initiatives to drive efficiencies as well
as invest for future, which involved spending on transformational engagements, client-
facing applications, ERD services for earliest go-to-market options and to collaborate
platforms. This has led to return of large, multi-year deals, with TCVs of US $100mn–
800mn strengthening the pipeline for IT companies. Thus, the nature of spend, which
has seen a tectonic shift in 1HFY2011 compared to 2HFY2010, is driving double-digit
broad-based growth. Also, early indications of client budgets for CY2011 point towards
the likelihood of an increase in spending with mere possibility of an uptick in pricing.
Thus, the outlook remains upbeat for tier-I companies and we expect dollar revenue to
witness a 20–25% CAGR over FY2010–12.

We like Infosys, as the company continues to trade at a premium of 32% over the BSE
Sensex vis-à-vis its historical premium of 46%, despite returning to high-growth phase
similar to the pre-slowdown period (April 2005–December 2007), even on a much
larger scale and with better profitability. Also, TCS continues to remain our top pick, as
the company continues to outperform on the volume front and has demonstrated
exceptional operational exuberance, taking its EBIT margin to an all-time high of 28%,
shunning the headwinds of a steep rupee appreciation as well as wage inflation. Thus,
TCS has bucked the industry’s margin trend by enhancing its operational efficiency on
account of a cut back in G&A expenses and increased offshore effort, thus extensively
bridging the margin gap with Infosys (Exhibit 11). Hence, we value both Infosys and
TCS at a 35% premium to our target P/E of 17x for Sensex, i.e. at 23x FY2012E EPS,
and recommend Accumulate on Infosys and TCS with Target Prices of `3,260 and
`1,120, respectively.

Exhibit 8: Infosys v/s Sensex, P/E premium/(discount) Exhibit 9: TCS v/s Infosys, P/E premium/(discount)
100 30

80 20

60 10

40 0
20 (10)
0 (20)
(20) (30)
(40) (40)
(60) (50)
Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-05 Dec-05 Aug-06 Apr-07 Dec-07 Aug-08 Apr-09 Dec-09 Aug-10

Infosys premium/(discount) to SENSEX Average TCS premium /(discount) to Infosys Average

Source: Company, Angel Research Source: Company, Angel Research

Amongst mid-tier IT companies, we prefer Mphasis because of its revenue growth and
profitability comparable to tier-I companies and unwarranted steep discount of 53% to
tier-I companies (Infosys) at current levels (v/s pre-slowdown historical discount of
30%). Hence, valuing the company at 14.3x FY2012E EPS, we maintain a Buy rating
with a Target Price of `872.

November 4, 2010 5
 Market Strategy

Exhibit 10: Mphasis v/s Infosys, P/E premium/(discount) Exhibit 11: TechM v/s Infosys, P/E premium/(discount)

Apr-05 Dec-05 Aug-06 Apr-07 Dec-07 Aug-08 Apr-09 Dec-09 Aug-10 150
0
100
(10)
(20) 50
(30)
0
(40)
(50) (50)
(60)
(70) (100)

(80) Apr-07 Dec-07 Aug-08 Apr-09 Dec-09 Aug-10

Mphasis premium /(discount) to Infosys Average TechM premium/(discount) to Infosys Average

Source: Company, Angel Research Source: Company, Angel Research; Note: On the basis of reported EPS

Tech Mahindra is another mid-cap IT company that is currently trading at a P/E of 7.5x
FY2012E EPS (excluding the value of its stake in Mahindra Satyam), i.e. at a steep
discount of 65% to Infosys vis-à-vis its historical five-year premium of 11%. Hence, we
also like Tech Mahindra amongst mid-tier IT companies and recommend Buy with an
SOTP Target Price of `941.

Exhibit 12: SOTP valuation for Tech Mahindra

(` cr) FY12E
Fully diluted EPS for Tech Mahindra 55.1
Target P/E(x) for Tech Mahindra 12
Target Mcap for Tech Mahindra (ex. Mahindra Satyam) 8148
Market value of stake in Mahindra Satyam 4056
Holding discount to Mahindra Satyam's stake 15%
Target Mcap of stake in Mahindra Satyam 3448
Target Mcap for Tech Mahindra (inc. Mahindra Satyam) 11,596
Target price (incl value of stake in Mahindra Satyam)(`) 941
Source: Company, Angel Research

Exhibit 13: Recommendation Summary

Company Reco CMP Tgt Price Upside FY2012E P/BV FY2012E P/E FY2010-12E FY2012E RoCE FY2012E RoE
(`) (`) % (x) (x) EPS CAGR % % %
3iInfotech BUY 68 100 47.5 0.8 4.2 204.0 15.7 19.5
Educomp BUY 548 734 33.9 2.5 11.9 26.9 21.0 22.9
HCL Tech Acc. 407 462 13.6 3.2 12.8 34.4 17.3 26.6
Infosys Acc. 2,995 3,260 8.9 5.2 21.1 13.7 28.3 27.0
Infotech Enterprises Acc. 161 184 14.0 1.5 9.6 (26.1) 17.3 16.4
Mphasis BUY 609 872 43.1 2.2 10.0 8.4 43.6 24.1
NIIT BUY 66 83 26.4 1.7 11.4 16.6 12.1 15.8
TCS Acc. 1,054 1,120 6.3 7.3 22.1 16.7 45.4 36.6
Tech Mahindra BUY 737 941 27.6 2.3 13.4 1.4 19.0 19.0
Wipro Acc. 423 465 9.8 3.5 17.0 14.7 17.8 22.6
Source: Company, Angel Research

November 4, 2010 6
 Market Strategy

Diwali Picks
Reliance Industries (CMP: `1,093/ TP: `1,260/ Upside: 15%)

„ RIL’s stock price has borne the brunt of negative news flows on account of slower
ramp-up of KG Basin gas, subdued refining and petrochemical margins and
concerns over the redeployment of the cash flows. However, we believe that the
current price has discounted the worst case scenario and there is potential upside
for the stock from the current levels.
„ We expect RIL’s profitability to register 34% CAGR over FY2010-12E driven by
improvement in refining margins coupled with ramp up of oil and gas production
at the KG Basin. Moreover, increase in the share of E&P in the profit matrix will in
turn reduce exposure to cyclical segments.
„ We expect the company's foray in the newer ventures (such as shale gas,
Broadband and power) along with discovery and monetisation of its upstream
portfolio to keep it on high-growth orbit going ahead. Moreover, the same is also
likely to resolve the concerns over the redeployment of the cash flows. On the
valuation front, the stock is relatively under-valued trading at 1.9x FY2012E P/BV.
„ Moreover, RIL is trading at ~30% discount to Sensex in terms of FY2012E P/BV,
even though estimated RoIC for FY2012E continues to be as high as 18.0%.
Hence, we maintain a Buy on RIL, with a Target Price of Rs1,260, translating into
an upside of 15% from current levels.

One-year forward Premium/Discount to Sensex P/BV

60

40

20

0
(%)

(20)

(40)

(60)
Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10
Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Prem/Disc to Sensex - P/BV Avg Prem/Disc to Sensex - P/BV (since FY2005)

Source: Company, Angel Research

Comparison with Sensex

Earnings growth (FY2010-12E CAGR %) FY2012E P/BV (x)
RIL 34.0 1.9
Sensex 19.7 2.7
Source: Company, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 234,754 17.4 22,718 69.5 15.0 15.7 2.2 9.5 1.7
FY2012E 243,596 20.0 28,530 87.2 16.4 12.5 1.9 7.5 1.5
Source: Company, Angel Research

November 4, 2010 7
 Market Strategy

ICICI Bank (CMP: `1,231/ TP: `1,335/ Upside: 8%)

„ The Bank is well-positioned to gain CASA market share on the back of substantial
branch expansion from 955 in 3QFY2008 to 2,500+ in 2QFY2011 as well as
credit market share on the back of strong Capital Adequacy at 20.2% (Tier-I at
13.8%).

„ Net Interest Margins of the Bank are expected to improve on the back of increase
in CASA ratio to 44.0% in 2QFY2011 from 29% in FY2009.

„ On the back of an improving economic environment, NPA losses are expected to

start declining. The Bank has also done lower restructuring of loans than PSU
Banks (4.8% of Net Worth v/s 40%+ for most PSU Banks). As a result, we expect
NPA provisions /Assets to decline sharply to 0.5% by FY2012E (from 1.2% in
FY2010)

„ We expect the bank to deliver strong earnings CAGR of 29.7% over FY2010-12E
and a ROE of 15.6% by FY2012E vs. 9.7% in FY2010. The stock is trading at
valuations of 2.4x FY2012E P/ABV (including subsidiaries). Hence, we recommend
an Accumulate on the stock with a Target Price of `1,335 valuing the core bank at
2.9x FY2012E P/ABV and assigning a value of `254 for its subsidiaries.

Depressed risk-adjusted NIMs to improve going forward

Particulars FY06 FY07 FY08 FY09 FY10 FY11E FY12E
Net Op Inc (` cr) 9,224 13,599 17,081 16,875 15,591 16,196 20,639
PAT (` cr) 2,540 3,110 4,158 3,423 4,024 5,133 6,984
Risk-adj NIMs* (%) 1.2 1.1 1.2 1.1 1.0 1.6 1.9
ROA (%) 1.1 0.9 0.8 0.9 1.0 1.2 1.4
ROE (%) 14.8 13.4 10.3 9.2 9.7 11.9 15.6
*Risk-adjusted NIMs=(NIMs - provisioning expenses) as % of assets

Key Financials
Y/E Op Inc. NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2011E 16,196 2.5 5,133 44.6 474 1.2 11.9 27.6 2.6
FY2012E 20,639 2.6 6,984 60.7 508 1.4 15.6 20.3 2.4
Source: Company, Angel Research

Mphasis (CMP: `609/ TP: `872/ Upside: 43%)

„ The company steered the pricing headwind from HP’s renegotiation exercise very
prudently by making up the cuts in application services with higher price points in
Infrastructure services. The major pricing review overhang is done and, going
forward, management expects a stable pricing arrangement with HP given that the
50% of rate card pricing will remain fixed and 50% will be market driven
„ Management is focused on enhancing the company’s growth trajectory in the
Non-HP business going forward. This initiative coupled with the effective rate card
implementation, which has witnessed cost optimisation, would see improved
operational performance for Mphasis going ahead.
„ Mphasis has strong cash position of `1,487cr as on July 2010, which would help it
to go for acquisitions of strategic fit in the size of US$50mn–$100mn annual
revenue run rate.
„ Considering the company’s parentage of one of the largest IT companies globally
(HP-EDS), driving rapid growth and bringing it closer to Top Tier status, we expect

November 4, 2010 8
 Market Strategy

Mphasis to be rerated from the FY2012E P/E of 10.0x that it is currently trading at.
We value the stock at 14.3x FY2012E EPS of `60.9 (at 35% discount to Infosys’
target PE of 22x and in line with target multiple for HCL Tech) and maintain our
Buy rating on the stock with a Target Price of `872.

Relative valuations
Avg FY2012E P/E
FY2012E P/E 5-year average P/E
for Tier 1 cos.
Mphasis 10.0 11.8 18.3
Source: Company, Angel Research

Peer valuations
FY2012E FY2012E FY2012E FY2010-FY12E FY2012E FY2012E
P/BV(x) P/E(x) EV/EBITDA EPS CAGR(%) ROCE(%) ROE(%)
Infosys 5.2 21.1 13.7 13.7 28.3 27.0
TCS 7.2 22.1 14.8 16.6 45.4 36.6
Wipro 3.5 17.0 11.1 14.7 17.8 22.6
HCL Tech 3.2 12.8 7.2 34.4 17.3 26.6
Mphasis 2.2 10.0 5.3 8.4 43.6 24.1
Source: Company, Angel Research

Key Financial
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 6,083 25.4 1,237 58.9 30.5 10.3 2.8 6.5 1.6
FY2012E 7,101 24.2 1,279 60.9 24.1 10.0 2.2 5.3 1.3
Source: Company, Angel Research

United Phosphorous (CMP: `204/ TP: `228/ Upside: 12%)

„ United Phosphorus (UPL) figures among the Top-5 generic Agrichemical players in
the world, with a presence across major markets like the US, EU, Latina America
and India.
„ Total off-patent market is worth US $29bn, of which a mere US $16bn is currently
being catered by the generic players. Furthermore, 61% of the same is controlled
by the five largest generic players including UPL. Further, given the high entry
barriers by way of high investments, entry of new players is also restricted. Thus,
amidst this scenario and on account of having a low cost base, we believe that UPL
enjoys an edge over competition and is placed in sweet spot to leverage the
upcoming opportunities in the global Generic space
„ Over FY2010-12E, we expect UPL to post 9% and 19% CAGR in Sales and EPS,
respectively. We expect RoCE and RoE to improve from 14% and 19% in FY2010
to 20% each in FY2012E.
„ At current valuations of 11.6x FY2012E EPS, the stock is attractively valued. Over
FY2005-08, UPL traded in-line with Sensex P/E, however post global meltdown
and deterioration in core business, stock has been trading at discount. With
improvement in earning and RoEs, current P/E discount of 27% against Sensex is
unwarranted, hence we maintain our Buy recommendation on the stock with
Target Price of `228.

November 4, 2010 9
 Market Strategy

Comparison with Sensex

Earnings growth (FY2010-12E CAGR) FY2012E PE
United Phosphorous 18.5 11.6
Sensex 19.7 17.2
Source: Angel Research

One year forward Premium/Disc to Sensex P/E

40
30
20
10
0
(%)

(10)
(20)
(30)
(40)
(50)
Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10
Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10
Prem / Disc to Sensex P/E Avg Prem / Disc to Sensex P/E (Since 2005)
Source: C-Line, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 5,830 20.3 652 14.1 19.3 14.5 2.5 8.5 1.7
FY2012E 6,406 21.3 814 17.6 19.9 11.6 2.1 7.1 1.5
Source: Company, Angel Research

Great Eastern Shipping (CMP: `. 327/ TP: `396/ Upside:21%)

„ Tanker freight rates bottoming out: The International Energy Agency (IEA) estimates
global oil demand to register 1.5% CAGR over CY2009-11E increasing by 2.6mbd
to 87.5mbd as against the decline of 1.5% in CY2009. As per Clarksons, 13% and
14% of the existing capacity (fleet) of crude and product tankers will be added in
CY2010. However, accelerated phase out of single hull tankers, which account for
12% of the world's existing tanker fleet, will relieve supply-side pressures and keep
the freight rates at current sustainable levels over the near to medium term. GE
Shipping (Gesco) will be a key beneficiary of higher tanker freight rates as it
derives around 46% of its Consolidated Revenues from the Tanker Segment.
„ GIL IPO to unlock value: The company intends to list its 97.62% subsidiary,
Greatship Ltd (GIL) by 2HFY2011E through fresh equity issuance. We believe this
will unlock potential value of the Offshore business, which globally trades at higher
multiples than the Shipping business due to better stability and high visibility in
Earnings. We have valued Gesco's Offshore business at 5.0x FY2012E EV/EBIDTA
which is at a discount to Great Offshore (FY2012E EV/EBITDA of 5.6x) thereby
fetching `107/share or `1,678cr
„ Relatively younger fleet:  The average age of Gesco’s fleet (34 vessels) is around
10.6 years, which is relatively young given that most vessels have a life of 25
years. The company has applied depreciation on an accelerated basis for the
vessels that will need to be phased out by FY2010 as per the MARPOL regulations.

November 4, 2010 10
 Market Strategy

Offshore assets such as platform supply vessels and anchor handling tugs are
relatively young and hence, the company could earn better rates on such assets. 
„ Compellingly attractive valuations: We expect Gesco to register 41.6% CAGR in
Net Profit over CY2010-12E with the bottoming out of the freight rates and asset
prices. We value Gesco on SOTP basis, with its Shipping business contributing
`289/share (15% discount to NAV), while its Offshore business contributing
`107/share business (5.0x FY2012E EV/EBIDTA). Based on our Target Price of
`396 the implied EV/ EBITDA, P/BV, P/E multiple works out to 6.2x, 0.9x, and 5.9x
respectively, on FY2012E basis. Thus, on account of trading at a significant
discount to its global peers, we recommend a Buy on stock. 

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)

FY2011E 2,985 37.7 681 44.7 11.4 7.3 0.8 7.4 2.8
FY2012E 3,833 40.2 1,028 67.5 15.5 4.8 0.7 5.5 2.2

Blue Star (CMP: `453/ TP: `596/ Upside: 32%)

„ Blue Star operates in a high value add space, as indicated by its high RoE profile
of over 40%. The company is poised for strong growth in the years to come, based
on positive business outlook across all its segments and a healthy order book of
`1,998cr, which is 1.1x FY2010 sales of the Electro Mechanical Projects and
Packaged Air Conditioning Systems (EMPPACS) segment. The acquisition of DS
Gupta Construction will complement the company’s service bouquet, which would
now have a strong presence in the plumbing and fire fighting space.

„ Going ahead, we expect the demand from the traditional IT and office segments to
improve, driving the growth of the company. We expect the sales to grow at a
CAGR of 24.4% over FY2010-12E.

„ At the CMP, the stock is trading at reasonable valuations of 14.5x FY2012E EPS,
compared to a P/E of 17.3x for Voltas, even though Voltas has a high exposure to
the relatively weaker Middle East markets, while Blue Star is a domestic-focused
player. We believe that this is a good entry point into the stock, keeping in view its
strong growth prospects. We have valued the stock at P/E of 18.8x FY2012E EPS
and arrived at a target price of `596.

Blue Star trading at a Discount to Peers

FY2012E PE FY2012E RoE (%) FY2010-2012E PAT Growth
Blue Star 14.5 41.2 15.5
Voltas 17.3 29.5 23.7
Source: Company, Angel Research; * Note: Blue Star's peers include only Voltas

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 3,163 10.1 215 23.9 39.9 19.0 6.7 12.8 1.3
FY2012E 3,989 10.6 282 31.4 41.2 14.5 5.3 9.7 1.0
Source: Company, Angel Research

November 4, 2010 11
 Market Strategy

Anant Raj Industries (CMP: `134/ TP: `178/ Upside: 33%)

„ Almost all of ARIL's land bank (1,000 acres) is exclusively located in the NCR within
50km of Delhi, with approximately 525 acres in Delhi. This land bank has been
acquired at an historical average cost of `300/sq ft.
„ We expect ARIL's residential projects to drive its near-term operational visibility and
help register `600cr Profit over the next three years. ARIL recently launched two
residential projects in NCR; Kapashera (0.28mn sq. ft.) and Manesar (1mn sq. ft.)
for `5,000/sq. ft. and `2,500/sq. ft., respectively. The management has also
indicated that the Huaz Khas project is back on track and is expected to be
launched soon after Diwali. Further,  we expect ARIL’s Manesar and Kirti Nagar
properties to reach their peak occupancy levels in 6–9 months as leasing activity
improves coupled with five hotels getting operational by FY2011E. Consequently,
we expect ARIL to report rental income of `201cr in FY2012E as compared to
`49cr reported in FY2010.  
„ ARIL is trading at a 36% discount to its NAV. The stock is trading at 9.7x FY2012E
EPS and 1.0x FY2012E P/BV and hence we maintain a Buy on stock with a Target
Price of `178 (15% discount to our one-year forward NAV).

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)

FY2011E 491 52.7 209 6.6 5.6 20.1 1.1 14.6 7.7
FY2012E 995 58.2 434 13.8 10.6 9.7 1.0 7.4 4.3

Lakshmi Machine Works (CMP: `2,703/ TP: `2,977/ Upside: 10%)

„ Lakshmi Machine Works (LMW) is the market leader in textile machinery space in
India, the world’s second largest market, giving it strong competitive advantages.
The company has a strong service network, with service centres in each textile hub
of the country, again a strong advantage over its European peers. LMW also has
the advantage of having a huge client base of about 1300 out of the total universe
of 1600 players. LMW has proved its technological prowess by developing its
products using in-house research and development for the past 15 years.
„ LMW has a strong order book of `3,600cr, with the current quoted delivery time of
8-10 months. The company has seen strong order inflows in 2QFY2011 of about
`800cr, which is more than the total order inflow in the entire FY2010. Going
ahead, we believe that the deferment of orders would reduce, as yarn demand
outlook is strong and spinning players are operating at high utilization levels of
around 95%.
„ Moreover, the promoters have announced a buyback of shares at a maximum
price of `2,045/share, giving a limited downside to the stock price.
„ We believe reasonable valuations of 14.5x FY2012E EPS provides a good entry
point for investors. We have valued the stock at 16x FY2012E EPS which result into
target price of `2,977.

Share buy-back details

Price for buyback Date of announcement Buyback amount (` cr) Market Cap (` cr)
` 2,045 /share 28-Jul-10 230 (Max.) 3,445
Source: Company, Angel Research

November 4, 2010 12
 Market Strategy

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 1,883 14.3 158 127.9 16.2 21.1 3.2 9.4 1.3
FY2012E 2,487 14.8 230 186.1 20.5 14.5 2.8 6.2 0.9
Source: Company, Angel Research

FAG Bearing (CMP: `902/ TP: `1,035/ Upside: 15%)

„ FAG Bearing (FAG) is India’s second largest player in the Indian bearing industry
with a total market share of ~15%, and a market leader in the spherical roller
bearing segment with a market share of ~55%. FAG is a member of the Schaeffler
Group, Germany, a global leader in rolling element bearing segment and one of
the most prominent player in the industry. We believe that the robust demand in
the auto and industrial segments will aid FAG in registering a CAGR of ~17% in
net sales and ~30% in net profit over CY2009-12E.
„ We believe that there is likely to be a substantial uptick in the industrial segment in
the next three-four quarters driven by increase in demand from capital good
companies. Also auto segment is likely to grow driven by 12.3% CAGR in auto
sector volumes. The company has a strong customer base (Maruti, M&M, Tata
Motors, GM, Ford, Daimler Chrysler, etc.) in this segment.
„ The company’s net asset turnover remains high (over ~6x in CY2010E) due to
largely depreciated assets. Its strong business model enables it to record robust
and consistent RoCE in the range of 30-33%. Cash flow generation is also
expected to remain healthy. On the valuation front, the stock is attractively priced
at 10.4x CY2012E EPS vs. the peer average of 12x CY2012E EPS. We rollover to
CY2012E and recommend a Buy on the stock, with a Target Price of `1,035,
valuing the stock at 12x CY2012E earnings.

Relative valuations
CY2012E P/E 5-year average P/E CY2012E P/E Peer average
FAG Bearings 10.4 9.7 12.0
Source: Bloomberg, Company, Angel Research

Peer valuations
Company CMP (`) Mcap (` cr) EPS (`) RoE (%) P/E (x) P/BV (x) EV/EBITDA (x)
FAG 902 1,499 62.7 22.6 14.4 3.2 8.5
SKF 576 3,035 31.1 23.0 18.5 4.2 11.2
Timken 192 1,225 7.7 14.9 25.0 3.7 18.2
NRB 57 554 4.3 22.4 13.2 3.0 7.7
Source: Company, Angel Research; Note: Valuation on TTM basis

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
CY2010E 1,049 18.3 118 70.9 22.9 12.7 2.7 6.6 1.2
CY2011E 1,185 18.0 128 76.7 20.4 11.8 2.2 5.7 1.0
CY2012E 1,326 17.4 143 86.3 19.2 10.4 1.9 5.0 0.8
Source: Company, Angel Research

November 4, 2010 13
 Market Strategy

Electrosteel Castings (CMP: `41/ TP: `72/ Upside: 76%)

„ Electrosteel’s (ECL) backward integration initiatives through coking coal mine at

Parbatpur (Jharkhand), which is already operational, is expected to result in
expansion of EBITDA margin by 329bp over FY2010-12E.
„ The company is also awaiting final environmental clearance for its iron ore mine at
Kodolibad (Jharkhand), which will further lower costs, but has not been factored in
our estimates.
„ ECL is venturing into steel-making through its associate Electrosteel Steels, which is
setting up a 2.2mn tonne steel plant. The plant is expected to be fully
commissioned by June 2011E.
„ Currently, the stock trades at 0.7x FY2011E and FY2012E P/BV. On a P/E basis,
the stock trades at 6.3x FY2011E and 6.1x FY2012E earnings. We maintain a Buy
on the stock, valuing the Core business at 8x FY2012E FDEPS and its investments
in the Steel business at 1x Book Value.

SOTP Valuation
(`)
FY2012E EPS 6.7
Multiple (x) 8
Value Per share 53
Steel business 19
Target Price 72
Source: Company, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 1,706 26.2 246 6.5 14.2 6.3 0.7 4.3 1.1
FY2012E 1,818 28.0 254 6.7 13.1 6.1 0.7 3.6 1.0
Source: Company, Angel Research

Finolex Cables (CMP: `59/ TP: `82/ Upside: 39%)

„ Finolex Cables is poised for strong growth over the next few years, owing to entry
in the verticals of High Tension (HT) and Extra High Voltage (EHV) Cables and
market share expansion in the existing Low Tension (LT) Cables segment.

„ The rapid ramp up of production at the Roorkee plant has already started
delivering results. The company has further increased the capacity at this plant by
50%. The proximity to the growing North Indian markets and tax benefits from this
plant are expected to boost the turnaround of the company.
„ Company’s derivatives losses are expected to decline going ahead. By FY2012E,
these losses are estimated to decline to ` 24cr from `76cr in FY2010.
„ We believe attractive valuations of 6.8x FY2012E EPS and 1.2x FY2012E BV
provides a good entry point for investors. We have valued the stock at 9x FY2012E
EPS which result into target price of `82. Moreover, the company has a holding in
Finolex Industries, which has a book value of `152cr but a market value of `472cr.
This is not captured in our target price, providing further upside potential.

November 4, 2010 14
 Market Strategy

Market Value of investment in Finolex Industries

FY12 Net Worth Market Cap Book Value of Market Value of
P/BV
(` cr) (` cr) Investment (` cr) Investment (` cr)
812 896 1.2 152 472
Source: Company, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 2,050 9.3 80 5.3 12.0 11.7 1.3 5.1 0.5
FY2012E 2,458 9.9 139 9.1 18.3 6.8 1.2 4.1 0.4
Source: Company, Angel Research

Surya Roshni (CMP: `.115/ TP: `.143/ Upside: 24%)

„ Surya Roshni has completed a large capacity expansion program across all
products in the lighting and steel division. The new capacities are expected to
contribute to strong top-line growth of 23.8% CAGR over FY2010-12E.

„ The contribution of the high-margin lighting division to sales is expected to

increase from 29.5% to 33.6% over FY2010-12E. This asset-light nature of the
expanded capacity would improve the RoCE of the company from 12.2% to 15.0%
over FY2010-12E.

„ The promoters have subscribed to three rounds of warrants, two of which have
already been partially converted. We expect the outstanding warrants also to be
converted into equity, thereby increasing the promoters’ stake to 60.0% by
FY2012E from 29.1% at the end of FY2010. The promoters would infuse `193cr
into the company through these warrant conversions.
„ We believe attractive valuations of 5.8x FY2012E EPS provides a good entry point
for investors. We have valued the stock at 6.6x FY2012E EPS which result into
target price of `143.

Preferential allotment plan

Date of Warrant Warrant Conversion Price Expected Year of Amount invested
allocation (`/share) conversion (` cr)
14-Dec-09 59 FY2011 37.8
12-Jul-10 83 FY2011 94.9
22-Oct-10 111 FY2012 60.8
Source: Company, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 2,293 7.2 63 12.7 18.0 9.2 1.3 6.6 0.5
FY2012E 2,751 7.5 97 19.7 19.2 5.8 1.0 5.4 0.4
Source: Company, Angel Research

November 4, 2010 15
 Market Strategy

Denso India (CMP: `95/ TP: `136/ Upside: 43%)

„ Denso is a subsidiary of Denso Corp., a US $30bn enterprise, which has strong

relations with global auto majors, viz. Suzuki, Honda and Toyota. Besides strong
relations with global majors, Denso Corp. provides strong financial backing and
technological knowledge to Denso, which will help the company to expand
capacity as well as add new products to its portfolio in the future to cater to the
growing domestic demand.  
„ With the huge spurt in demand for automobiles, OEMs have witnessed a
supply-side constraint from auto ancillary companies. This has resulted in a
considerable increase in the bargaining power of these companies. Denso on the
back of its strong balance sheet is likely to be a preferred supplier going forward.

„ On the back of strong growth witnessed by the OEMs, we expect Denso to witness
a 17% CAGR in sales over FY2010-12E. Given the company’s MNC profile and
strong product range, current margins are too low and are expected to show
material improvement. We have factored in 7.3% EBITDA margins in FY2012E vs.
4.8% in FY2010, the drivers being localization, increased bargaining power and
measures by Bank of Japan to curb further Yen appreciation. Consequently, the
company’s net profit is expected to increase at a 49% CAGR over FY2010–12E.
Denso has traded at a five-year average of 9x one-year forward earnings.
Currently, the stock is trading at 6.2x FY2012E EPS and we value the company at
9x FY2012E EPS. We recommend a Buy rating on Denso with a Target Price of
Rs136, implying an upside of 43%.

Improving EBITDA margins to result in higher RoEs

Particulars FY06 FY07 FY08 FY09 FY10 FY11E FY12E
Sales (` cr) 361 421 466 531 736 884 1016
PAT (` cr) 21.0 27.7 27.8 18.1 18.9 21.2 42.1
Operating Margin (%) 11.8 11.6 9.8 6.1 4.8 4.8 7.3
ROE (%) 16.9 18.4 16.2 9.6 9.4 9.9 17.5
Source: Company, Angel Research

Key Financials
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2011E 884 4.8 21.2 7.6 9.9 12.3 1.2 6.4 0.3
FY2012E 1,016 7.3 42.1 15.1 17.5 6.2 1.0 3.3 0.2
Source: Company, Angel Research

November 4, 2010 16
 Market Strategy

Angel Model Portfolio

BSE 100 Angel
Sector Company CMP (`) Target Price (`) Weightage (%) Weightage (%) Stance

Auto & Ancillaries 6.3 8.0 Overweight

Maruti Suzuki 1,509 1,670 0.9 3.0 Overweight
FAG Bearings 902 1,035 0.0 3.0 Overweight
Denso India 95 136 0.0 2.0 Overweight
BFSI 26.4 27.0 Overweight
SBI 3,196 3,556 4.0 5.0 Overweight
Axis Bank 1,511 1,705 1.8 7.0 Overweight
ICICI Bank 1,231 1,335 6.2 11.0 Overweight
HDFC Bank 2,347 2,510 3.8 4.0 Equalweight
Cement 2.4 0.0 Underweight
FMCG 7.4 3.0 Underweight
ITC 172 177 4.1 3.0 Underweight
Hotels 0.2 3.0 Overweight
Taj GVK 149 228 0.0 3.0 Overweight
Infrastructure & Cap
12.0 15.0 Overweight
Goods
Bluestar 453 596 0.0 4.0 Overweight
L&T 2,081 2,024 5.1 5.0 Equalweight
LMW 2,704 2,977 0.0 3.0 Overweight
Nagarjuna
152 201 0.0 3.0 Overweight
Construction
Media 0.0 3.0 Overweight
Jagran Prakashan 129 154 0.0 3.0 Overweight
Metals 8.1 3.0 Underweight
Electrosteel Castings 41 72 0.0 3.0 Overweight
Oil & Gas 14.3 11.0 Underweight
Reliance Industries 1,093 1,260 8.4 11.0 Overweight
Pharma 3.9 6.0 Overweight
Cipla 357 360 0.0 3.0 Overweight
Aurobindo Pharma 1,246 1,330 0.0 3.0 Overweight
Power 3.6 0.0 Underweight
Real Estate 1.4 3.0 Overweight
Anant Raj Industries 134 178 0.0 3.0 Overweight
Software 10.6 12.0 Overweight
TCS 1,054 1,120 2.7 4.0 Overweight
Tech Mahindra 737 941 0.0 3.0 Overweight
Mphasis 609 872 0.0 5.0 Overweight
Telecom 2.8 0.0 Underweight
Others 0.7 6.0 Overweight
United Phosporus 204 228 0.0 3.0 Overweight
Finolex Cables 59 82 0.0 3.0 Overweight

November 4, 2010 17
 Stock Watch | November 4, 2010

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(`) Price (`) (` cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Agri / Agri Chemical
Bayer Cropscien Neutral 1,037 - 4,095 1,995 2,294 12.6 12.8 43.2 51.7 24.0 20.1 5.8 4.6 26.9 25.7 2.0 1.7
Jain Irrigation Neutral 236 - 8,975 4,205 5,324 18.0 18.6 8.3 11.8 28.5 19.9 1.2 1.0 23.4 27.0 2.4 1.9
Rallis India Neutral 1,462 - 2,852 1,103 1,324 19.1 18.4 73.5 94.4 19.9 15.5 5.5 4.5 30.4 32.1 2.4 2.0
United Phosphorous Buy 204 228 8,949 5,830 6,406 20.3 21.3 14.1 17.6 14.5 11.6 2.5 2.1 19.3 19.9 1.7 1.5
Auto & Auto Ancillary
Amara Raja Batteries Buy 198 251 1,687 1,772 2,087 14.3 14.8 16.7 22.2 11.8 8.9 2.5 2.0 23.4 25.0 1.0 0.8
Apollo Tyres Buy 72 86 3,632 9,310 10,518 10.4 11.2 7.9 10.8 9.1 6.7 1.5 1.2 24.1 17.7 0.6 0.5
Ashok Leyland Neutral 76 - 10,130 10,051 11,895 10.4 10.5 4.3 5.4 17.7 14.0 3.9 3.4 15.0 17.5 1.2 1.0
Automotive Axle^ Accumulate 515 578 778 709 819 13.5 13.5 33.2 38.5 15.5 13.4 3.8 3.2 26.2 25.8 1.0 0.9
Bajaj Auto Accumulate 1,529 1,603 44,252 16,833 19,460 20.9 20.0 89.4 100.2 17.1 15.3 12.4 9.4 79.8 70.2 2.3 2.0
Bharat Forge Accumulate 379 404 8,818 4,373 5,287 15.1 16.3 12.3 20.2 30.9 18.8 4.5 3.7 16.6 21.7 2.2 1.8
Bosch# Neutral 6,504 - 20,421 6,655 7,771 18.4 18.1 273.3 314.8 23.8 20.7 5.6 4.7 23.7 22.7 2.7 2.2
CEAT Buy 157 200 536 3,297 3,754 5.3 7.1 21.7 39.9 7.2 3.9 0.8 0.7 17.9 14.2 0.4 0.3
Denso Buy 95 136 262 884 1016 4.8 7.3 7.6 15.1 12.3 6.2 1.2 1.0 9.9 17.5 0.3 0.2
Exide Industries Accumulate 157 174 13,354 4,768 5,697 21.9 21.6 8.0 9.1 19.7 17.4 4.9 4.0 25.4 25.0 2.5 2.0
FAG Bearings* Buy 902 1,035 1,499 1,049 1,185 18.3 18.0 70.9 76.7 12.7 11.8 2.7 2.2 22.9 20.4 1.2 1.0
Hero Honda Neutral 1,840 - 36,749 18,096 20,003 13.6 13.8 107.1 119.9 17.2 15.4 8.7 7.4 55.8 52.3 1.7 1.5
JK Tyre & Ind Buy 161 202 663 5,588 6,362 7.9 8.5 31.1 40.4 5.2 4.0 0.7 0.6 14.1 16.1 0.4 0.3
Mah and Mah Accumulate 766 827 44,575 22,196 25,858 14.2 14.0 41.5 47.2 18.5 16.2 4.7 3.9 25.7 24.7 1.7 1.4
Maruti Suzuki Accumulate 1,509 1,670 43,601 35,081 41,308 10.0 10.6 82.9 103.4 18.2 14.6 2.9 2.5 18.0 16.6 1.0 0.8
Motherson Sumi Accumulate 186 195 7,189 7,820 9,152 10.8 11.0 8.7 11.6 21.2 16.0 5.5 4.9 27.3 32.2 0.9 0.8
Subros Buy 48 57 288 1,086 1,244 8.9 9.6 4.2 5.7 11.6 8.5 1.2 1.1 11.3 13.9 0.4 0.4
Tata Motors Neutral 1,170 - 66,780 110,181 124,634 13.3 13.0 123.9 135.3 9.4 8.7 5.0 3.4 64.9 46.1 0.8 0.6
TVS Motor Neutral 78 - 3,688 6,197 7,011 6.5 7.4 4.5 5.9 17.4 13.2 4.1 3.7 23.9 29.4 0.6 0.6
Banking
Axis Bank Accumulate 1,511 1,705 61,229 10,732 13,585 3.3 3.3 77.9 104.2 19.4 14.5 3.3 2.8 18.3 21.1 - -
Bank of India Neutral 501 - 26,340 9,627 10,802 2.5 2.4 49.8 60.5 10.1 8.3 1.8 1.6 18.9 19.8 - -
Corporation Bank Neutral 749 - 10,749 3,952 4,407 2.4 2.3 94.8 103.3 7.9 7.3 1.6 1.4 21.6 20.1 - -
Dena Bank Accumulate 141 150 4,046 2,187 2,321 2.8 2.5 20.8 21.3 6.8 6.6 1.4 1.2 22.8 19.8 - -
Federal Bank Neutral 491 - 8,398 2,273 2,567 3.8 3.6 33.8 45.3 14.5 10.8 1.6 1.5 11.8 14.2 - -
HDFC Bank Accumulate 2,347 2,510 107,450 14,606 18,640 4.4 4.4 86.5 118.6 27.1 19.8 4.4 3.7 17.2 20.4 - -
ICICI Bank Accumulate 1,231 1,335 137,243 16,196 20,639 2.5 2.6 44.6 60.7 27.6 20.3 2.6 2.4 11.9 15.6 - -
Indian Bank Accumulate 292 324 12,566 5,218 5,849 3.6 3.4 37.6 41.3 7.8 7.1 1.6 1.4 22.7 21.1 - -
IOB Accumulate 163 186 8,864 4,771 5,340 2.8 2.7 14.2 19.3 11.4 8.4 1.3 1.1 11.6 14.3 - -
Oriental Bank Neutral 507 - 12,706 5,185 5,353 2.9 2.5 63.8 66.9 7.9 7.6 1.5 1.3 20.1 18.1 - -
PNB Neutral 1,310 - 41,317 14,751 16,673 3.7 3.5 132.8 154.2 9.9 8.5 2.1 1.8 23.4 22.7 - -
SBI Accumulate 3,196 3,544 202,895 46,540 55,963 2.8 2.9 177.6 224.3 18.0 14.2 2.8 2.4 17.1 19.0 - -
South Ind Bk Neutral 28 - 3,209 949 1,078 2.8 2.6 2.5 2.9 11.2 9.9 1.9 1.7 18.1 17.8 - -

18
 Stock Watch | November 4, 2010

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(`) Price (`) (` cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
UCO Bank Neutral 135 - 7,081 4,909 5,423 2.8 2.6 17.3 22.2 7.8 6.1 1.6 1.3 23.7 25.4 - -
Union Bank Accumulate 381 403 12,953 7,554 8,352 2.8 2.7 40.9 47.2 9.3 8.1 1.9 1.6 21.5 21.0 - -
Yes Bank Accumulate 369 415 12,525 1,867 2,238 2.8 2.4 20.0 21.8 18.5 16.9 3.4 2.8 19.9 18.2 - -
Capital Goods
ABB Neutral 842 - 17,835 7,543 9,027 9.6 10.7 23.1 30.6 36.5 27.5 6.3 5.2 18.6 20.8 2.3 1.8
Areva T&D Sell 295 218 7,063 3,887 4,650 8.9 10.5 5.6 9.9 52.3 29.9 7.3 6.1 14.7 22.2 1.9 1.6
BGR Energy Neutral 763 - 5,495 4,444 5,746 11.0 10.9 38.7 48.1 19.7 15.9 6.1 4.7 34.7 33.6 1.3 1.0
BHEL Neutral 2,466 - 120,728 40,095 47,111 18.1 18.1 109.5 130.0 22.5 19.0 6.1 4.9 30.0 28.6 2.7 2.2
Crompton Greaves Buy 326 375 20,884 10,184 11,406 13.5 14.0 14.0 16.2 23.3 20.2 6.5 5.1 31.4 28.4 2.0 1.8
Elecon Engg Co Neutral 93 - 868 1,303 1,624 14.9 13.9 8.9 9.7 10.5 9.6 2.2 1.8 23.0 20.8 1.0 0.8
Graphite India Buy 95 117 1,853 1,608 1,909 24.4 24.2 12.3 14.0 7.7 6.8 1.2 1.1 16.9 16.6 1.3 1.0
Jyoti Structures Buy 135 215 1,110 2,447 2,851 11.0 11.0 13.5 16.5 10.0 8.2 1.9 1.5 20.2 20.6 0.6 0.5
KEC Int Buy 493 648 2,536 4,563 5,223 10.0 10.0 41.9 49.8 11.8 9.9 2.9 2.3 27.6 26.2 0.7 0.6
Lakshmi Machine Works Accumulate 2,704 2,977 3,344 1,883 2,487 14.3 14.8 127.9 186.1 21.1 14.5 3.2 2.8 16.2 20.5 1.3 0.9
McNally Bharat Engg Buy 257 406 800 2,501 3,332 8.5 8.6 19.9 26.8 12.9 9.6 2.4 2.0 21.7 22.5 0.4 0.4
Thermax Neutral 880 - 10,486 4,539 5,720 11.5 11.5 29.7 37.4 29.7 23.5 7.9 6.3 29.3 29.5 2.1 1.6
TIL Buy 708 823 710 1,394 1,816 9.3 9.5 65.4 91.4 10.8 7.7 2.1 1.7 21.5 24.4 0.5 0.4
Cement
ACC* Neutral 1,014 - 19,064 7,577 8,268 26.3 21.2 60.4 51.0 16.8 19.9 2.8 2.5 17.7 13.4 2.3 2.0
Ambuja Cements* Neutral 143 - 21,743 7,335 8,171 27.2 22.7 8.0 6.5 17.7 21.8 3.0 2.8 18.0 13.3 2.7 2.4
Grasim Neutral 2,318 - 21,251 19,749 21,847 23.0 24.8 203.3 235.8 11.4 9.8 1.4 1.3 13.5 13.8 1.4 1.2
India Cements Buy 113 139 3,469 3,680 4,167 12.4 15.0 2.8 4.2 40.0 26.7 1.0 1.0 2.1 3.0 1.3 1.3
JK LakshmiCement Buy 61 92 751 1,461 1,617 20.3 22.2 9.1 11.7 6.8 5.2 0.6 0.6 10.0 11.3 0.8 0.7
Kesoram Industries Buy 305 437 1,395 5,237 6,226 12.6 13.5 47.9 66.4 6.4 4.6 0.8 0.7 13.4 16.3 0.9 0.7
Madras Cements Buy 118 141 2,810 2,769 3,060 21.0 21.7 7.6 8.5 15.6 13.9 1.7 1.5 11.1 11.4 1.7 1.5
UltraTechCement Neutral 1,101 - 30,172 11,499 14,329 19.0 19.3 33.4 45.5 33.0 24.2 2.5 2.1 11.1 9.5 3.0 2.5
Construction
Consolidated Co Neutral 78 - 1,448 2,397 2,891 8.8 9.5 5.0 6.7 15.7 11.7 2.1 1.8 17.1 18.4 0.7 0.6
Hind Constr Neutral 62 - 3,731 4,146 4,900 12.7 12.9 1.6 1.8 38.9 33.6 2.4 2.3 6.2 7.0 1.3 1.1
IRB Infra Neutral 259 - 8,608 2,675 3,672 42.2 40.5 13.0 15.7 19.9 16.5 3.6 3.1 19.5 20.0 4.1 3.6
ITNL Accumulate 319 358 6,196 3,480 6,071 26.7 19.8 21.8 25.9 14.6 12.3 3.0 2.5 22.5 22.1 0.7 0.4
IVRCL Infras Buy 153 216 4,143 6,493 8,071 9.3 9.4 8.8 10.9 17.5 14.0 2.0 1.8 12.1 13.4 0.9 0.8
Madhucon Project Buy 143 173 1,057 1,763 2,197 9.7 9.8 7.3 9.2 19.4 15.5 1.7 1.5 9.5 11.0 0.7 0.6
Nagarjuna Const Buy 152 201 3,900 5,738 6,587 9.8 9.9 8.6 9.8 17.6 15.5 1.6 1.5 9.6 10.0 0.8 0.7
Patel Eng Buy 370 565 2,583 3,693 4,297 16.1 15.8 30.8 32.7 12.0 11.3 1.7 1.5 14.8 13.8 1.0 0.9
Punj Lloyd Buy 123 153 4,061 9,118 12,371 9.1 9.3 5.1 10.9 24.2 11.2 1.3 1.2 5.5 11.0 0.7 0.6
Sadbhav Eng Accumulate 1,449 1,623 1,811 1,621 1,986 11.5 11.2 77.4 89.8 18.7 16.1 3.8 3.1 22.2 21.0 1.3 1.0
Simplex Infra Buy 480 575 2,375 5,460 6,543 9.8 9.5 33.0 40.9 14.6 11.7 2.1 1.8 15.6 16.6 0.7 0.6
Larsen&Toubro Neutral 2,081 - 122,270 44,047 55,519 11.1 11.2 54.7 70.1 38.0 29.7 5.8 5.0 16.7 18.2 2.6 2.0

19
 Stock Watch | November 4, 2010

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(`) Price (`) (` cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
FMCG
Asian Paints Accumulate 2,695 2,952 25,849 7,733 9,235 18.1 18.1 92.8 113.5 29.0 23.7 11.6 8.9 39.8 37.5 3.3 2.7
Colgate Reduce 881 820 11,986 2,251 2,576 22.6 23.1 32.8 37.3 26.9 23.6 27.4 21.6 116.7 102.2 5.1 4.4
Dabur India Accumulate 99 106 17,308 4,089 4,794 18.4 18.7 3.4 4.1 29.1 24.5 13.7 10.7 54.0 49.1 4.2 3.5
GlaxoSmith Con* Neutral 2,193 - 9,223 2,256 2,642 16.2 16.8 67.4 81.5 32.5 26.9 8.5 7.1 28.6 28.9 3.8 3.2
Godrej Consumer Neutral 424 - 13,730 3,557 4,275 18.4 19.1 14.7 18.1 28.8 23.4 7.6 6.3 37.4 29.4 4.2 3.5
HUL Reduce 295 276 64,274 19,296 21,610 13.5 13.8 10.6 12.0 27.2 24.6 20.3 17.2 72.9 70.1 3.1 2.8
ITC Neutral 172 - 131,232 21,040 24,079 35.0 35.1 6.4 7.4 26.9 23.4 7.9 6.7 31.8 31.1 6.0 5.1
Marico Neutral 137 - 8,429 3,133 3,598 13.5 13.8 4.9 5.7 28.1 24.3 9.4 7.1 38.5 33.4 2.7 2.4
Nestle* Neutral 3,536 - 34,097 6,175 7,267 19.6 20.1 84.4 103.5 41.9 34.2 41.0 32.8 115.1 106.6 5.5 4.7
Hotel
Hotel Leela Neutral 52 - 2,026 632 874 40.3 41.6 2.0 2.7 26.3 19.3 2.5 2.2 9.8 12.2 6.8 4.9
Taj GVK Hotels Buy 149 228 937 277 333 39.1 41.8 7.6 11.4 19.6 13.1 2.8 2.4 15.3 19.6 3.9 3.1
IT
3i Infotech Buy 68 100 1,357 2,756 3,200 18.6 18.2 14.0 16.1 4.8 4.2 0.9 0.8 22.3 19.5 1.1 0.8
Educomp Sol Buy 548 734 5,207 1,553 2,165 48.2 43.4 35.9 45.9 15.3 11.9 3.1 2.5 22.3 22.9 3.5 2.6
Everonn Edu Reduce 677 602 1,023 393 496 34.0 32.5 25.9 30.5 26.1 22.2 4.2 3.6 17.7 17.5 2.4 1.8
HCL Tech Accumulate 407 462 28,053 15,907 19,464 17.6 18.2 23.5 31.9 17.3 12.8 3.7 3.2 22.1 26.6 1.7 1.3
Infosys Accumulate 2,995 3,260 171,294 27,690 33,728 32.4 32.0 118.9 141.7 25.2 21.1 6.4 5.2 26.7 27.0 5.5 4.4
Infotech Enter Accumulate 161 184 1,791 1,191 1,478 16.4 17.3 13.6 16.8 11.8 9.6 1.7 1.5 15.5 16.4 1.1 0.8
Mphasis Buy 609 872 12,770 6,083 7,101 25.4 24.2 58.9 60.9 10.3 10.0 2.8 2.2 30.5 24.1 1.6 1.3
NIIT Buy 66 83 1,084 1,318 1,459 13.7 14.1 5.0 5.8 13.1 11.4 1.9 1.7 15.1 15.8 0.9 0.8
TCS Accumulate 1,054 1,120 206,268 36,412 43,531 29.6 29.4 42.1 47.8 25.0 22.1 9.0 7.3 39.9 36.6 5.3 4.4
Tech Mahindra Buy 737 941 9,231 5,154 5,484 19.4 20.1 47.8 55.1 15.4 13.4 2.8 2.3 20.8 19.0 1.4 1.2
Wipro Accumulate 423 465 105,207 31,084 36,348 22.1 22.1 22.0 24.8 19.3 17.0 4.3 3.5 24.4 22.6 3.0 2.5
Logistics and Shipping
Allcargo Global* Buy 150 195 1,964 2,468 2,876 11.0 12.0 11.5 15.0 13.1 10.0 1.6 1.4 14.8 16.0 0.8 0.7
Container Corp Reduce 1,318 1,194 17,130 4,067 4,607 26.9 25.6 66.0 72.3 20.0 18.2 3.5 3.1 18.7 17.9 3.6 3.2
Gateway Distri Accumulate 112 123 1,210 617 766 24.9 26.8 7.4 9.5 15.2 11.9 2.0 1.8 11.6 13.8 3.7 3.1
ABG Shipyard Neutral 474 - 2,411 1,988 2,482 22.0 22.0 25.8 38.7 18.3 12.2 2.6 2.2 14.9 19.4 1.1 0.9
GE Shipping Buy 327 396 4,976 2,985 3,833 37.7 40.2 44.7 67.5 7.3 4.8 0.8 0.7 11.4 15.5 2.8 2.2
Media
Deccan Chronicle Buy 138 193 3,351 993 1,116 47.8 47.1 11.5 13.1 11.9 10.5 2.4 2.1 20.9 21.1 2.8 2.4
HT Media Buy 165 186 3,867 1,763 2,012 19.9 19.7 8.1 9.3 20.3 17.7 3.4 2.8 18.0 17.4 2.3 1.9
Jagran Prakashan Buy 129 154 3,891 1,101 1,251 30.2 30.3 6.6 7.7 19.5 16.8 5.9 5.4 31.3 33.5 3.6 3.2
PVR Buy 169 231 458 551 700 20.1 21.2 9.5 15.4 17.8 11.0 1.4 1.2 8.0 11.8 0.9 0.7
SUN TV Network Neutral 500 - 19,710 1,984 2,231 77.2 78.1 18.5 21.8 27.1 22.9 8.3 6.6 33.5 31.9 9.8 8.7

20
 Stock Watch | November 4, 2010

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(`) Price (`) (` cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Metal
Electrosteel Castings Buy 41 72 1,350 1,706 1,818 26.2 28.0 6.5 6.7 6.3 6.1 0.7 0.7 14.2 13.1 1.1 1.0
Godawari Power Buy 203 302 547 1,039 1,265 20.5 22.8 35.7 59.5 5.7 3.4 0.9 0.7 18.2 24.8 0.8 0.5
Hindalco Neutral 213 - 40,818 63,659 67,521 13.0 13.8 18.9 20.3 11.3 10.5 1.6 1.4 15.1 14.2 0.8 0.9
Hindustan Zinc Accumulate 1,263 1,342 53,359 8,996 11,073 53.6 55.1 97.2 123.6 13.0 10.2 2.4 2.0 20.5 21.4 4.2 3.0
JSW Steel Neutral 1,342 - 25,110 22,349 29,363 21.9 23.3 55.6 97.2 24.1 13.8 1.8 1.6 10.4 12.5 1.2 1.1
NALCO Sell 406 316 26,159 5,655 6,376 28.4 31.3 15.8 18.7 25.7 21.7 2.4 2.2 9.7 10.7 3.9 3.6
NMDC Reduce 277 244 109,763 10,979 14,232 81.8 80.5 16.8 21.3 16.5 13.0 5.6 4.2 39.3 37.1 8.4 6.1
SAIL Neutral 193 - 79,799 46,594 52,932 19.7 22.5 14.5 17.1 13.3 11.3 2.1 1.8 16.8 17.3 1.2 1.2
Sesa Goa Neutral 328 - 27,261 8,648 9,233 53.4 51.7 46.1 40.9 7.1 8.0 2.2 1.8 38.4 24.3 1.8 1.5
Sterlite Ind Accumulate 171 196 57,389 27,064 34,036 25.7 30.1 13.4 19.1 12.8 9.0 1.3 1.2 10.9 13.9 1.6 1.1
Tata Steel Buy 593 702 52,550 115,961 121,410 13.8 14.3 73.1 80.7 8.1 7.3 1.6 1.3 21.2 19.7 0.8 0.7
Bhushan Steel Sell 502 396 10,650 6,290 7,131 37.5 41.1 45.6 59.3 11.0 8.5 2.5 2.0 26.0 26.1 2.3 1.8
Sarda Energy Accumulate 263 290 894 791 888 28.1 29.4 35.2 43.9 7.5 6.0 1.3 1.1 19.4 20.2 1.4 1.1
Prakash Ind. Buy 146 232 1,817 2,068 2,601 21.8 24.9 22.2 33.1 6.6 4.4 1.0 0.8 19.7 23.2 0.9 0.8
Monnet Ispat Accumulate 607 687 3,173 1,743 2,304 29.8 32.1 44.9 64.8 13.5 9.4 1.8 1.5 14.8 17.6 2.3 2.5
Oil & Gas
Cairn India Neutral 323 - 61,348 7,863 14,761 81.2 83.9 23.2 46.1 14.0 7.0 1.6 1.6 12.4 23.0 7.3 3.8
GAIL Accumulate 492 534 62,365 31,104 34,760 19.1 20.2 29.5 33.3 16.7 14.8 3.2 2.8 20.5 20.0 2.0 1.6
GSPL Accumulate 115 128 6,448 1,051 1,345 93.4 93.3 7.2 9.4 15.8 12.2 3.4 2.8 23.7 25.5 6.9 5.3
Gujarat Gas Under Review 385 - 4,933 1,736 2,046 22.3 22.4 18.3 21.8 21.1 17.7 5.4 4.5 28.0 27.8 2.5 2.0
IndraprasthaGas Accumulate 325 345 4,553 1,625 2,001 29.8 31.1 18.1 22.1 18.0 14.7 4.6 3.8 27.9 28.3 2.7 2.2
ONGC Accumulate 1,318 1,391 281,916 117,551 124,021 44.9 46.1 114.4 123.1 11.5 10.7 2.4 2.1 22.6 21.1 2.1 1.9
Petronet LNG Neutral 119 - 8,895 12,220 18,040 8.8 6.9 6.8 8.5 17.3 14.0 3.4 2.9 21.3 22.5 0.7 0.5
Reliance Buy 1,093 1,260 357,704 234,754 243,596 17.4 20.0 69.5 87.2 15.7 12.5 2.2 1.9 15.0 16.4 1.7 1.5
Shiv Vani Oil Buy 424 539 1,966 1,562 1,676 43.7 44.5 47.4 53.9 8.9 7.9 1.4 1.2 19.4 18.4 2.3 2.0
Pharmaceuticals
Alembic Neutral 73 - 973 1,266 1,393 12.4 12.0 5.6 6.4 13.0 11.5 2.3 2.0 18.9 18.5 1.1 0.9
Aurobindo Pharma Accumulate 1,246 1,330 6,940 3,796 4,506 18.6 20.4 82.4 109.2 15.1 11.4 3.1 2.5 22.7 24.1 2.2 1.9
Aventis Pharma Neutral 1,840 - 4,237 1,070 1,206 15.2 17.3 72.0 87.4 25.6 21.1 4.1 3.6 16.8 18.2 3.4 2.9
Cadila Health Neutral 707 - 14,453 4,308 5,100 20.1 21.0 30.6 39.6 23.1 17.8 7.1 5.5 34.8 34.7 3.5 2.9
Cipla Neutral 357 - 28,672 5,902 6,797 20.2 21.5 13.8 17.1 25.9 20.8 4.2 3.7 17.5 18.9 4.7 4.1
Dishman Pharma Under Review 182 - 1,472 1,099 1,335 24.1 25.5 17.4 21.4 10.5 8.5 1.5 1.3 15.8 16.8 1.9 1.6
Dr Reddys Labs Neutral 1,678 - 28,335 8,416 9,797 18.9 19.4 59.0 78.0 28.4 21.5 5.8 4.6 25.0 25.5 3.4 2.8
GlaxoSmithKline Under Review 2,200 - 18,631 2,145 2,422 35.0 35.3 65.4 73.9 33.6 29.8 9.2 8.1 29.0 28.9 7.7 6.8
Indoco Remedies Accumulate 504 541 620 473 590 15.4 17.1 41.9 54.1 12.0 9.3 1.8 1.6 15.8 18.2 1.4 1.1
Ipca Labs Neutral 323 - 4,048 1,850 2,175 20.9 21.0 18.7 23.1 17.3 14.0 3.9 3.2 24.5 25.1 2.4 2.0
Lupin Neutral 445 - 19,827 5,645 6,579 18.9 19.5 18.6 23.3 23.9 19.1 6.1 4.9 28.5 28.5 3.6 3.1
Orchid Chemical Neutral 302 - 2,127 1,302 1,654 18.0 18.9 12.7 16.6 23.7 18.2 2.2 2.5 9.3 12.7 1.7 1.5
Piramal Health Neutral 479 - 10,004 4,190 4,863 20.4 20.8 27.2 33.8 17.6 14.2 5.2 4.2 32.5 32.7 2.6 2.2

21
 Stock Watch | November 4, 2010

Company Name Reco CMP Target Mkt Cap Sales (` cr) OPM (%) EPS (`) PER (x) P/BV (x) RoE (%) EV/Sales (x)
(`) Price (`) (` cr) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Ranbaxy Labs Neutral 602 - 25,307 8,162 9,913 16.0 19.0 38.3 28.8 15.7 20.9 4.6 3.9 31.3 20.2 3.2 2.6
Sun Pharma Neutral 2,189 - 45,344 5,595 7,336 32.1 32.8 78.7 105.9 27.8 20.7 4.8 4.1 18.7 21.4 7.5 5.7
Power
CESC Buy 375 474 4,725 4,308 4,749 22.8 23.1 40.6 46.1 9.2 8.1 1.1 1.0 12.4 12.5 1.6 1.3
Guj Ind Power Buy 114 135 1,717 1,265 1,648 25.4 24.5 9.9 11.6 11.5 9.8 1.3 1.2 11.5 12.4 2.5 2.1
NTPC Buy 193 230 159,271 52,584 59,927 29.3 29.4 10.2 11.4 18.8 16.9 2.3 2.1 12.6 13.0 3.6 3.4
PTC India Neutral 135 - 3,957 10,364 13,671 1.3 1.3 4.9 6.6 27.4 20.5 1.8 1.7 6.8 8.6 0.3 0.2
Real Estate
Anant Raj Inds Buy 134 178 4,208 491 995 52.7 58.2 6.6 13.8 20.1 9.7 1.1 1.0 5.6 10.6 7.7 4.3
DLF Neutral 361 - 61,267 9,327 13,563 46.1 49.0 11.6 21.0 31.2 17.2 1.9 1.7 6.2 10.5 7.3 4.9
HDIL Buy 254 302 11,199 1,858 3,159 54.9 53.4 18.9 30.1 13.5 8.5 1.1 1.0 10.1 13.0 7.4 4.2
Retail
Pantaloon Neutral 469.0 - 10,182 10,704.3 13,136.9 10.1 10.1 15.1 19.8 31.1 23.7 3.0 2.7 10.2 12.0 1.2 1.0
Shoppers Stop Neutral 701.8 - 20,356 1,819.0 2,209.6 8.1 8.3 17.3 20.5 40.5 34.3 7.7 5.4 20.9 19.4 1.5 1.2
Titan Industries Neutral 3,795 - 16,852 5,902 7,378 9.5 9.0 83.4 100.7 45.5 37.7 16.9 12.8 42.8 38.7 2.9 2.3
Telecom
Bharti Airtel Accumulate 334 360 126,686 61,256 72,354 36.1 36.6 20.3 24.6 16.5 13.6 2.6 2.2 16.7 17.6 3.0 2.4
Idea Cellular Reduce 69 59 22,607 15,280 17,171 24.6 25.1 2.2 1.7 30.7 40.5 1.8 1.7 6.0 4.3 2.2 1.8
Reliance Comm Sell 184 140 37,875 22,412 24,592 31.5 30.0 5.7 9.2 32.3 19.9 0.9 0.8 4.7 4.9 2.3 1.9
Others
Bajaj Hindusthan^ Neutral 126 - 2,233 3,626 6,106 15.3 10.6 - 5.4 - 23.6 1.2 1.2 - 5.1 1.5 0.7
Bajaj Electric Neutral 263 - 2,585 2,686 3,241 10.2 10.6 16.2 20.7 16.3 12.7 4.2 3.3 29.2 29.6 1.0 0.8
Balrampur Chini Mills^ Neutral 86 - 2,212 2,195 3,146 15.2 17.7 4.5 11.4 19.3 7.6 1.8 1.6 9.8 22.5 1.4 1.0
Blue Star Buy 453 596 4,078 3,163 3,989 10.1 10.6 23.9 31.4 19.0 14.5 6.7 5.3 39.1 41.2 1.3 1.0
Essel Propack Buy 55 75 863 1,485 1,682 19.5 20.3 4.6 8.9 12.1 6.2 1.0 0.9 9.0 15.8 0.9 0.7
Finolex Cables Buy 59 82 896 2,050 2,458 9.3 9.9 5.3 9.1 11.7 6.8 1.3 1.2 12.0 18.3 0.5 0.4
Greenply Inds Buy 194 291 429 1,088 1,279 14.0 15.0 23.5 36.4 8.3 5.3 1.4 1.1 18.4 22.8 - -
Page Industries Accumulate 1,282 1,392 1,430 456 608 18.5 18.5 44.0 58.0 29.1 22.1 12.6 10.4 46.2 51.6 3.1 2.3
Phillips Carbon Black Buy 197 263 653 1,233 1,644 15.7 15.3 40.5 39.7 5.0 4.1 1.2 0.9 30.4 25.7 0.6 0.5
Polyplex Neutral 919 - 1,470 1,692 1,822 20.0 19.0 95.7 100.0 9.6 9.2 1.7 1.5 19.4 17.2 1.2 1.0
Sintex Industries Accumulate 212 229 5,736 4,099 5,053 16.9 17.9 14.9 19.1 14.3 11.1 2.8 2.2 19.0 20.3 1.8 1.4
SpiceJet Neutral 83 - 3,369 2,718 3,287 7.0 8.5 5.1 7.2 16.4 11.5 5.5 3.4 - 50.0 0.3 0.3
Surya Roshni Buy 115 143 320 2,293 2,751 7.2 7.5 12.7 19.7 9.2 5.8 1.3 1.0 18.0 19.2 0.5 0.4
Note: For some stocks we have kept a BUY rating inspite of lower than benchmarked returns, as we believe these stocks have potential to get re-rated and hence would provide good upsides from a long term perspective. Source: Company, Angel Research, * estimates for CY10E and CY11E;
^ estimates for SY10E and SY11E; Price as on November 1, 2010

22
 Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com
Website: www.angeltrade.com

Disclaimer
This document is solely for the personal information of the recipient, and must not be singularly
used as the basis of any investment decision. Nothing in this document should be construed as
investment or financial advice. Each recipient of this document should make such investigations as
they deem necessary to arrive at an independent evaluation of an investment in the securities of
the companies referred to in this document (including the merits and risks involved), and should
consult their own advisors to determine the merits and risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses
may, from time to time, make investment decisions that are inconsistent with or contradictory to
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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%)

November 4, 2010
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Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angelbroking.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angelbroking.com
Vaishali Jajoo Automobile vaishali.jajoo@angelbroking.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angelbroking.com
Anand Shah FMCG, Media anand.shah@angelbroking.com
Deepak Pareek Oil & Gas deepak.pareek@angelbroking.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angelbroking.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angelbroking.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angelbroking.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angelbroking.com
Paresh Jain Metals & Mining pareshn.jain@angelbroking.com
John Perinchery Capital Goods john.perinchery@angelbroking.com
Srishti Anand IT, Telecom srishti.anand@angelbroking.com
Jai Sharda Mid-cap jai.sharda@angelbroking.com
Sharan Lillaney Mid-cap sharanb.lillaney@angelbroking.com
Naitik Mody Mid-cap naitiky.mody@angelbroking.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angelbroking.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angelbroking.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angelbroking.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angelbroking.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angelbroking.com
Yaresh Kothari Research Associate (Automobile) yareshb.kothari@angelbroking.com
Shrinivas Bhutda Research Associate (Banking) shrinivas.bhutda@angelbroking.com
Sreekanth P.V.S Research Associate (FMCG, Media) sreekanth.s@angelbroking.com
Hemang Thaker Research Associate (Capital Goods) hemang.thaker@angelbroking.com
Nitin Arora Research Associate (Infra, Real Estate) nitin.arora@angelbroking.com

Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angelbroking.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angelbroking.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angelbroking.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angelbroking.com

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Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angelbroking.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angelbroking.com
Nitesh Jalan Sr. Manager niteshk.jalan@angelbroking.com
Pranav Modi Sr. Manager pranavs.modi@angelbroking.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angelbroking.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angelbroking.com
Jay Harsora Sr. Dealer jayr.harsora@angelbroking.com
Meenakshi Chavan Dealer meenakshis.chavan@angelbroking.com
Gaurang Tisani Dealer gaurangp.tisani@angelbroking.com

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Bharathi Shetty Research Editor bharathi.shetty@angelbroking.com
Simran Kaur Research Editor simran.kaur@angelbroking.com
Bharat Patil Production bharat.patil@angelbroking.com
Dilip Patel Production dilipm.patel@angelbroking.com

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November 4, 2010