Market Outlook 11th August 2011

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Market OutlookIndia Research August 11, 2011

Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

Dealer’s Diary

The Federal Reserve's decision on Tuesday, August 9, 2011, to keep US interestrates ultra-low for two more years raised expectations of increased fund inflows

into high-yielding emerging markets such as India. Those expectations triggereda rebound in battered Indian shares. The barometer index BSE Sensex regainedthe psychological 17,000 mark. The rebound was quite broad-based asindicated by the strong market breadth. Eleven out of 13 sectoral indices on BSEwere in green. Auto stocks gained on optimism of the recent fall in globalcommodity prices boosting profitability. The Sensex and Nifty closed with gainsof 1.6% and 1.7%, respectively. The mid-cap and small-cap indices also closedwith gains of 2.3% and 2.5%, respectively. Among the front runners, TataMotors, Maruti Suzuki, Hindalco Industries, M&M and DLF gained 4-6%, whileONGC, ITC, HUL, Sun Pharma and Tata Power lost 1-2%. Among mid caps,Page Industries, Monsanto India, RCF, TTK Prestige and India Securities gained11-20%, while KGN Industries, Polaris Software, GE Shipping, MindTree andBajaj Electrical lost 3-5%.

Markets Today

The trend deciding level for the day is 17,136/5,161 levels. If NIFTY tradesabove this level during the first half-an-hour of trade then we may witness afurther rally up to 17,250–17,370/5,198–5,235 levels. However, if NIFTYtrades below 17,136/5,161 levels for the first half-an-hour of trade then it may correct up to 17,016–16,902/5,124–5,086 levels.

Indices S2 S1 R1 R2

SENSEX 16,902 17,016 17,250 17,370

NIFTY 5,086 5,124 5,198 5,235

News Analysis

1QFY2012 Reviews – Bharat Forge, Page Industries, LMW 1QFY2012 Previews – Tata Motors, Apollo Tyres

Refer detailed news analysis on the following page

Net Inflows (August 9, 2011)

` cr Purch Sales Net MTD YTD

FII 2,415 4,376 (1,961) (5,553) 3,180

MFs 927 602 325 591 4,368

FII Derivatives (August 10, 2011)

` cr Purch Sales NetOpen

Interest

Index Futures 4,838 3,309 1,529 14,452

Stock Futures 1,930 1,714 216 30,045

Gainers / Losers

Gainers Losers

Company Price (`) chg (%) Company Price (`) chg (%)

Chambal Fert 103 10.4 Great Eastern Sh 237 (4.2)

Jai Corp 83 10.0 Indian Oil Corp 326 (3.5)

Shriram Trans 650 8.7 Torrent Power 218 (2.4)

Jubilant Food 825 8.0 ONGC 280 (2.2)

United Spirits 970 7.9 Financial Tech 767 (2.0)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex 1.6% 272.6 17,131

Nifty 1.7% 88.2 5,161

MID CAP 2.3% 148.2 6,554

SMALL CAP 2.5% 184.5 7,669

BSE HC 1.1% 63.7 6,086

BSE PSU 1.0% 76.6 8,124

BANKEX 2.4% 278.6 11,954

AUTO 4.2% 346.1 8,63

METAL 1.5% 177.2 12,438

OIL & GAS -0.2% (15.7) 8,471

BSE IT 2.4% 121.6 5,163

Global Indices Chg (%) (Pts) (Close)

Dow Jones -4.6% (519.8) 10,720

NASDAQ -4.1% (101.5) 2,381

FTSE -3.1% (157.8) 5,007

Nikkei 1.1% 94.3 9,039

Hang Seng 2.3% 453.0 19,784

Straits Times -2.2% (62.9) 2,821

Shanghai Com 0.9% 23.1 2,549

Indian ADRs Chg (%) (Pts) (Close)

Infosys -5.0% (2.8) $52.5

Wipro -4.7% (0.5) $10.

ICICI Bank -4.5% (2.0) $41.1

HDFC Bank -4.8% (1.6) $31.9

Advances / Declines BSE NSE

Advances 2,205

Declines 696 239

Unchanged 84 24

Volumes (` cr)

BSE 2,828

NSE 12,081



August 11, 2011 2

Market Outlook | India Research

1QFY2012 Result Reviews

Bharat Forge

Bharat Forge (BFL) reported an in-line 36.1% yoy (4.4% qoq) jump in standalone revenueto ` 858cr, driven by a 17.4% yoy (2.2% qoq) jump in domestic revenue and 67.1% yoy (6.4% qoq) jump in exports revenue. While volume in tonnage terms increased by 24.2%yoy (3.3% qoq) to 52,959MT on strong export demand, average net realisation grew by 9.7% yoy (flat qoq) in 1QFY2012. Strong growth in the CV segment and non-autosegment in the Europe and US benefitted the company’s exports performance. On theoperating front, margins remained flat on a yoy and qoq basis at 24.3%. Net profit grewby strong 63.9% yoy (down 3% qoq) to ` 97cr, led by strong operating performance andimproved operating leverage. Higher other income at ` 15cr (up 45% yoy) also aided bettergrowth in net profit to a certain extent.

On a consolidated basis, BFL reported better-than-expected 37% yoy (1.5% qoq) growth inits top line to ` 1,568cr. EBITDA margin came in marginally lower than our estimate at

15.8%, down 23bp yoy (47bp qoq). However PBT grew by 60% yoy (2.3% qoq) to ` 153cr.

At ` 285, BFL is trading at 15x and 12x FY2012E and FY2013E earnings, respectively.The stock rating is currently under review, as we wait for more clarity from themanagement on profitability at the consolidated levels.

Page Industries

Page Industries reported strong top-line growth of 47.6%% yoy to ` 176cr ( ` 120cr) in1QFY2012. Operating profit increased by 99.6% yoy to ` 44cr ( ` 22cr) on the back of strongrevenue growth and OPM expansion. OPM increased by 622bp to 24.8% (18.6%), mainly because of lower-than-expected raw-material cost and other expenditure, which declined to

49.4% and 10.3% of sales in 1QFY2012 vs. 50.5% and 13.5% in 1QFY2011. Despite strongexpansion in OPM, PAT margin increased by 425bp yoy to 15.7% (11.4%) largely due to higherinterest cost and tax provision during the quarter. PAT came in at ` 28cr ( ` 14cr), up 102.1%yoy. We continue to recommend Neutral on the stock. We may revise our estimates postmanagement interaction.

LMW

Lakshmi Machine Works (LMW) reported strong top-line growth of 50.3% yoy to ` 502cr( ` 334cr) in 1QFY2012. Operating profit increased by 27.1% yoy to ` 71cr ( ` 56cr) on the backof strong revenue growth. OPM fell by 227bp to 13.9% (16.1%), mainly because of

higher-than-expected other expenditure, which increased to 17.3% of sales vs. 15.8% in1QFY2011. Despite OPM contraction, PAT margin only declined by 66bp yoy to 8.0% (8.7%),largely due to higher other income and lower tax rate. PAT came in at ` 41cr ( ` 30cr), up 36.7%yoy. We continue to recommend Buy on the stock. We will be coming out with a detailed reportpost management interaction.

1QFY2012 Result Previews

Tata Motors

Tata Motors will be announcing its 1QFY2012 results. On a consolidated basis, we expect

the company’s top line to grow by strong 23% yoy to ` 33,166cr, led by 6% and 9% yoy growth in domestic and JLR volumes, respectively. On the operating front, EBITDA marginis expected to contract by 175bp yoy to 12.5% due to input cost pressures. As a result,the bottom line is expected to increase by 11.9% yoy to ` 2,226cr. The stock rating isunder review.



August 11, 2011 3


Apollo Tyres

Apollo Tyres is slated to announce its 1QFY2012 results. On a consolidated basis,we expect the company to report a strong 33% yoy increase in revenue to ` 2,426cr.EBITDA margin is expected to post a 90bp yoy decline to 10% on account of higher natural

rubber prices. However, net profit is expected to jump by 22% yoy to ` 91cr.The stock rating is under review.

Economic and Political News

Car sales skid 16% in July, see sharpest fall in 31 months

Government may mull IOC divestment if oil continues to decline

Dip in GSM additions for six months in a row

RBI may soon let banks assess credit risk internally

Corporate News

Satyam’s minority shareholders oppose merger with Tech Mahindra

Piramal Healthcare to buy 5.5% in Vodafone Essar for US$640mn

Leela Group to sell Kovalam Hotel for ` 500cr

Tatas get approval to hive off VSNL’s surplus land

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Events for the day

Abbott India Results

Amtek Auto Results

Anant Raj Inds Results

Apollo Tyres Results

Castrol India Results Moser Baer Results Parsvnath Dev Results Reliance Infra Results Reliance Power Results

S Kumar Nation Results

Shree Renuka Sugar Results

Tata Motors Results



August 11, 2011 4


Research Team Tel: 022-3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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Market Outlook 11th August 2011

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