Market Outlook - July 28,2010

Market Outlook
India Research
July 28, 2010

Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The market opened flat and moved in a narrow range ahead of the RBI's credit
BSE Sensex 0.3% 57.6 18,078
policy. In early afternoon trades, the markets hailed the central bank’s decision
Nifty 0.2% 12.0 5,431
to raise short-term interest rates to rein in inflation and anchor inflationary
MID CAP 0.3% 20.1 7,382
expectations. The markets surged and hit a fresh intraday high mapping the
SMALL CAP -0.0% (3.1) 9,360
European markets and US index futures. However, markets closed the session
only a tad higher shrugging off most of its gains. The Sensex and Nifty closed BSE HC -0.3% (17.9) 5,608
0.3% and 0.2% higher, respectively. The BSE mid-cap index closed up 0.3%, BSE PSU 0.2% 21.6 9,476
while the small-cap index ended flat almost hovering in the negative. Among BANKEX 0.7% 78.7 11,478
the front-liners, M&M, Tata Motors, ACC, Hero Honda and DLF gained 2–3%, AUTO 2.4% 198.2 8,338
while L&T, HDFC, BHEL, Tata Steel and HUL lost 0–3%. Among the mid-caps, METAL 0.2% 26.5 15,491
Manappuram General Finance, Carborundum Universal, MVL, BF Utilities and OIL & GAS 0.1% 7.6 10,465
Jet Airways gained 4-6%, while Mahindra Holidays, FDC, Gee Kay Finance, BSE IT 0.7% 36.3 5,542
Mahindra Lifespace and Radico Khaitan ended 4-6% lower. Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones 0.1% 12.3 10,538
NASDAQ -0.4% (8.2) 2,288
The trend deciding level for the day is 18075/5430 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a FTSE 0.3% 14.6 5,366
further rally up to 18152–18226/5452–5473 levels. However, if NIFTY trades Nikkei -0.1% (6.8) 9,497
below 18075/5430 levels for the first half-an-hour of trade then it may correct Hang Seng 0.6% 133.5 20,973
up to 18001–17924/5408–5386 levels. Straits Times 0.4% 12.4 2,979
Shanghai Com -0.5% (13.3) 2,575
Indices S2 S1 R1 R2
SENSEX 17,924 18,001 18,152 18,226
Indian ADRs Chg (%) (Pts) (Close)
NIFTY 5,386 5,408 5,452 5,473
Infosys 0.2% 0.1 $60.8
News Analysis Wipro 0.1% 0.0 $13.4
Satyam 0.4% 0.0 $5.1
RBI hikes repo (25bp) and reverse (50bp) repo rates ICICI Bank -0.2% (0.1) $39.3
SKS Microfinance – IPO HDFC Bank 2.4% 3.7 $157.2
Result Reviews: 3iInfotech, Ashok Leyland, Asian Paints, Cadila Healthcare,
Cairn India, Ceat, Greenply, HT Media, HUL, IRB, JK Lakshmi Cement,
Advances / Declines BSE NSE
L&T, RIL, Titan Industries
Result Previews: Corp. Bank, DLF, HCL Tech, Lupin, M&M, Marico, Sun Advances 1,352 602
Pharma Declines 1,557 726
Refer detailed news analysis on the following page. Unchanged 94 50

Net Inflows (July 26, 2010)
Volumes (Rs cr)
Rs cr Purch Sales Net MTD YTD
BSE 4,086
FII 2,268 1,796 473 11,444 41,728
NSE 13,367
MFs 281 722 (441) (2,858) (11,076)

FII Derivatives (July 27, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 7,486 7,238 248 17,851
Stock Futures 7,798 7,762 37 35,108

Gainers / Losers
Gainers Losers
Price Price Chg
Company Chg (%) Company
(Rs) (Rs) (%)
GCPL 362 6.3 Tech Mahindra 710 (3.7)
Bajaj Auto 2,650 4.9 Asian Paints 2,438 (3.3)
Shriram Trans 665 3.8 Crompton Greav 275 (3.2)
United Phos 186 3.8 L&T 1,863 (2.9) 1

M&M 640 3.2 Opto Circuits 256 (2.8)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

Market Outlook | India Research

RBI hikes repo (25bp) and reverse (50bp) repo rates

With an objective to control inflationary expectations, the Reserve Bank of India (RBI) has
raised the repo and reverse repo rates by 25bp and 50bp to 4.50% and 5.75%,
respectively. The reduction in the spread between the repo and reverse repo rates to
125bp (compared to 300bp in 2QFY2009) indicates RBI’s comfort on the liquidity
situation.

In our view, the expected increase in interest rates will not affect the sector negatively, as it
will be outweighed by acceleration in core earnings growth on the back of improvement in
credit growth and fee income coupled with a sharp reduction in NPA losses. However, on a
relative basis, we continue to prefer banks with a high CASA ratio and lower-duration
investment book, given the rising interest rate scenario.

We prefer the large banks viz., HDFC Bank, ICICI Bank, Axis Bank and SBI on account of
their stronger core competitiveness and likelihood of credit and CASA market share gains
because of strong capital adequacy and robust branch expansion. Among mid-cap PSU
banks, we like Dena Bank because of its structurally strong CASA ratio relative to its peers.
We are also positive on UCO Bank, which is trading at 30% discount to its peers and
where we expect a directional improvement in core operating income to result in re-rating
of the stock.

SKS Microfinance – IPO

SKSMF offers an opportunity to invest in India’s microfinance sector, which has high yields
with a strong asset quality. Market leader SKSMF’s core strength lies in good governance,
advanced technology, wide product portfolio, diversified sources of capital and strong pan-
India distribution network. Total estimated demand for micro-credit in India stood at
Rs1,20,000-2,40,000cr in 2008 (Source: CRISIL, Intellecap). Out of this, the loans
financed by self help groups (SHG) are estimated to be Rs30,000cr and micro finance
institutions (MFIs) to be around Rs16,000cr at the end of FY2010. This translates into
penetration in the range of 19-38%, which provides significant headroom for future
growth. According to the Crisil, SKSMF is the largest MFI in India. During FY2006-10, its
branches have increased at a CAGR of 124%, with a customer base at 141.3% and loans
outstanding at 161.8%.

SKSMF lends exclusively to joint liability groups (JLGs) of women belonging to low-income
households for income generating assets, thereby capitalising on the social collateral
pioneered by Grameen Bank, Bangladesh, which has helped to keep in check the
provisioning expenses to average assets at 1.5% for FY2010. The extensive use of
technological platform has facilitated the company to restrict opex to average assets to
9.9% as of FY2010 in spite of low ticket size. This in turn has helped MFI to lend at a
cheaper rate of 22% (where the rates charged by unorganized moneylenders are much
higher) and thereby unlocking demand at the bottom of the pyramid. Further, the
company can reap the benefits of a positive ALM profile (35% of liabilities maturing >1yr,
~100% of assets maturing < 1year).

The company’s national network is especially in the rural areas with a large customer
base, which can be leveraged to negotiate favourable terms with the enterprises that want
to distribute their products such as micro-insurance through SKSMF’s network and result in
lower pricing for products distributed to its customers. This gives a competitive edge to the
company over the other regional lenders and product distributors. Globally, MFIs trade at
3.7x and 19.1x on trailing P/BV and P/E ratios, respectively. At the upper end of the price
band of Rs985, SKSMF is valued at 6.6x and 2.7x P/BV on FY2010 and FY2012E
estimates, respectively. We recommend Subscribe to the issue.

July 28, 2010 2


Result Reviews-1QFY2011

3iInfotech

3i Infotech witnessed subdued 1QFY2011 performance. Top-line grew by 1.4% qoq (6.6%
yoy) to Rs637cr backed by 10% qoq growth in IT products and solutions business and 2.1%
qoq growth in transaction services business. However, on account of higher operational
costs, EBITDA margin contracted by 26bp qoq (46bp yoy) during the quarter. Depreciation
costs went up on a sequential basis, while the tax rate increased from 5.9% in 4QFY2010
to 7.5% in 1QFY2011. Thus, the bottom-line (excluding one-time exceptional income and
expenses) declined by 25.7% qoq (up 3.9% yoy) to Rs61cr, while bottom-line (including
one-time exceptional income and expenses) stood at Rs61cr in 1QFY2011 compared to
net loss of Rs167cr in 4QFY2010 (on account of one-time kiosk-related expenses), but was
down by 29.5% yoy. Currently the stock is under review.

Ashok Leyland

For 1QFY2011, Ashok Leyland (ALL) registered a substantial 157% yoy growth in net sales
to Rs2,348cr (Rs912cr), below our expectation. Lower-than-expected growth in other
businesses (engine and spare parts) restricted higher growth. The revenue growth was
supported by the 178% yoy jump in volumes. However, net average realisations declined
partially due to the increase in excise duty and change in product mix.

On the operating front, EBITDA margins came in lower than our expectation at 10%.
Margins increased by 881bp yoy on improved operating leverage. However, on a
sequential basis, margins declined by 285bp. Staff cost and other expenditure, as a
percentage of sales, improved by 717bp and 289bp yoy, respectively. Raw material costs
however, increased by 12bp yoy and accounted for 73.8% (72.6%) of sales in 1QFY2011.
Net profit grew by a significant 1,480% yoy to Rs123cr (Rs7.8cr) on a low base, robust
volume growth and better operating performance. On the valuation front, owing to the
recent run up in the stock price, we recommend Neutral on the stock.

Asian Paints

Asian Paints posted yet another quarter of strong results beating our estimates by ~6-8%
on both the revenue and profitability fronts. Consolidated top-line grew 25% yoy to
Rs1,830.2cr led by: 1) ~16-18% volume growth, 2) ~3-5% price led growth (driven by low
base and 4.15% price hikes initiated in May, and 3) product mix gains. Earnings grew
26% yoy to Rs222.2cr largely led by higher operating leverage as gross margins (Rs347cr)
declined. We maintain an Accumulate on the stock, though the target price is under
review.

Cadila Healthcare

Cadila Healthcare (Cadila) reported 1QFY2010 results, which were much ahead of our
estimates. Net sales came in at 1,055cr (Rs880cr), up 19.9% yoy driven by the US market
(up 50.6% yoy), domestic formulations (up 17.3% yoy), Zydus Wellness (up 36% yoy) and
the API business (up 74.5% yoy). The company reported gross margins of 69.1% (67.9%)
on a favourable product mix. Cadila reported OPM of 20.7% (20.5%). Financial costs
increased 29.6% yoy to Rs31.5cr (Rs24.4cr). The company reported forex loss of Rs9.2cr
(Rs1.4cr). However, depreciation cost decreased by 21.1% qoq to Rs31.4cr. The company
reported other income of Rs81.5cr (Rs27.5cr), up 197.1% yoy on the back of milestone
payment of Rs47cr received from Abbott. Cadila reported net profit of Rs199.5cr
(Rs124.8cr), up 59.9% yoy. At current levels, the stock is trading at 21.1x FY2011E and
16.3x FY2012E earnings. We maintain an Accumulate on the stock with a Target Price of
Rs714.

July 28, 2010 3


Cairn India

Cairn India announced its results. The results were better than our expectation on the
top-line front though lower on the bottom-line front. Top-line grew 310.1% yoy to Rs841cr
(Rs205cr) as against our expectation of Rs795cr, whereas bottom-line grew by 519% yoy to
Rs281cr (Rs45cr) as against our expectation of Rs317cr. Average realisation per boe
during the quarter stood at US $67.1/bbl (US $51.2/bbl), whereas realisation from
Rajasthan’s Mangala field was higher at US $68.4/bbl. During the quarter, average crude
oil production from Mangala was 44,381bopd. However, the sales volumes were lower at
around 29,670bpd as around 1.1mnbbl of the oil produced was placed in the recently
commissioned pipeline to ensure its operations. The quarter saw commencement of
production from Train II in May 2010 and from Train III in June 2010. This has resulted in
total production from Mangala ramping up to 100,000bopd currently. EBIDTA during the
quarter registered an increase of 75.9% due to oil production at the Mangala field coupled
with higher oil prices. Other income registered a decline of 78.2% yoy as during
1QFY2010 the company registered forex gains. DD&A expenditure registered an increase
of whopping 334.9% yoy to Rs166cr (38cr) on account of commissioning of Trains at
Mangala fields and commissioning of the pipeline. Bottom-line registered an increase of
519% yoy. We maintain a Neutral on Cairn.

Ceat

Ceat registered 15.4% yoy growth in net sales to Rs778cr (Rs674cr) during 1QFY2011,
which came in below our expectation of Rs814cr. Top-line has been recovering following
the up-tick in OE volumes. However, capacity constraints restricted sequential (qoq) growth
in top-line during the quarter. EBITDA margins came in higher than our expectations at
5.3%. Margins declined by 1,013bp yoy due to the sharp increase in the rubber prices. Net
profit dipped 77% yoy and 9.5% qoq to Rs14cr. In view of the apparent structural shift that
the tyre industry is going through, the stock is available at attractive valuations. Hence, we
retain our Buy rating on the stock though the target price is under review.

Greenply Industries

Greenply Industries (GIL) reported 1QFY2010 results, which were marginally ahead of our
estimates. Net sales came in at Rs262cr (Rs178cr), up 47.7% yoy driven by capacity
expansion in the laminates segment in FY2010. The company’s OPM contracted by
174bp yoy to 11.7% (13.4%) mainly due to increase in purchase of traded goods during
the quarter, which stood at 6% of net sales v/s 2% in 1QFY2009. Depreciation cost
increased by 57.6% qoq to Rs10cr mainly due to the depreciation on the new MDF unit,
which commenced operation in FY2011. Interest cost also increased by 57.1% qoq to
Rs9cr as the company increased its debt during FY2010 to fund the MDF and laminate
expansions. GIL reported net profit of Rs10cr (Rs13cr), down 21.7% qoq mainly due to
higher depreciation and interest costs. At current levels, the stock is trading at 8.0x
FY2011E and 5.2x FY2012E earnings. We maintain a Buy on the stock, with a target price
of Rs291.

July 28, 2010 4


HT Media

HT Media posted robust set of numbers on both the revenue and profitability fronts for
1QFY2011. Top-line grew 22% yoy to Rs403cr (Rs330cr). The company’s printing business
contributed ~Rs390cr to revenues (Hindustan’s contribution was ~Rs130cr) aided by the
22% yoy growth in advertising revenues to Rs329cr (Rs269cr, Hindustan contributed to
Rs96cr) and 6% yoy growth in circulation revenues to Rs47cr (Rs44cr, Hindustan
contributed to Rs32cr). The radio and internet businesses contributed to Rs12cr and Rs2cr,
respectively. Other highlights of the result include: 1) launch of Mint in Ahmedabad,
2) increased traction of Shine.com, registering 5mn+ users.

In terms of earnings, HT Media posted 43.5% yoy growth to Rs40cr (Rs28cr) on a recurring
basis despite spike in the tax rate (up 470bp), depreciation cost (up 11.1%) and 47.4%
decline in other income, aided by significant margin expansion of 410bp, strong top-line
growth and 18.7% decrease in interest cost. Moreover, the losses in the radio business and
internet business reduced. The radio business reported a loss of Rs1.2cr (loss of Rs2.7cr),
while the internet business reported a loss Rs8.7cr (loss of Rs9.5cr).

At Rs155, HTML is trading at 17x FY2012E consolidated EPS of Rs9.1. Owing to the
significant improvement in profitability of the company’s growing businesses, incremental
revenue traction from its Hindi business (Hindustan Media Ventures) due to ramp up in UP,
and bounce back of its English print business, we maintain a Buy though the target price is
under review.

HUL

HUL posted disappointing set of numbers and below our expectations on the profitability
front. Top-line growth was marginally above estimates, posting a growth of 7.1% yoy to
Rs4,794cr (Rs4,476cr) largely driven by 11% volume growth (low base of 2% growth yoy).
However, negative value growth of ~4% (due to price cuts/promotional offers largely in
detergents category) dragged top-line growth. Overall FMCG sales grew 6.7% with 5.2%
growth in HPC and 13.4% growth in foods business. In terms of earnings, HUL posted a
decline of 2% yoy to Rs533cr (Rs543cr) on a reported basis and 4% decline to Rs515cr
(Rs537cr) on a recurring basis, despite the 106% yoy spike in other income to Rs124cr
(Rs60cr), owing to weak top-line growth and significant margin contraction by 289bp yoy,
as ad-spend surged 34% yoy (on higher competitive intensity in categories like detergents,
soaps and shampoos). Tax rates remained stable at ~23% and interest costs reduced to
almost nil. Other key highlights of the results include: 1) 2.4% yoy revenue growth in S&D
segment (EBIT margin contracted 626bp yoy), and 2) double-digit volume growth in
detergents and personal products.

We maintain a Reduce on the stock with a Target Price of Rs237 (based on 21x FY2012E
EPS) owing to weak earnings growth vis-à-vis the FMCG sector, uncertain earnings
environment and significantly higher competitive intensity.

July 28, 2010 5


IRB Infra

IRB Infrastructure (IRB) reported modest consolidated top-line growth of 23.6% to Rs512cr
for 1QFY2011, which was way below our expectations. While the road BOT segment
revenues were in line with our estimates, the construction arm did not perform as per
expectations, dragging the overall consolidated top-line performance. Margins in the
construction arm were at an all-time high (28.8%), while those from the road BOT segment
were marginally below expectations at 86.3%. Robust construction segment operating
margin performance provided a fillip to the overall consolidated margins, which came in
at 48.7% as against our expectation of 39.7%. Interest and depreciation costs were in line
with our estimates. The consolidated bottom-line grew 41.9% to Rs120.8cr as against our
expectation of Rs94cr aided by the above-expectation margin expansion. Post our
interaction with management to get insights into the construction arm top-line performance
going ahead and superior margin performance for 1QFY2011 we will release an update
on the company’s performance. However, in view of the opportunities in the road BOT
space, IRB’s vantage positioning and superior execution track record, we maintain
Accumulate on the stock, though the Target Price is under review.

JK Lakshmi Cement

JK Lakshmi’s net sales declined 7.8% yoy to Rs324cr primarily due to the fall in the cement
prices in the company’s main markets of Gujarat and North India. Net realisations fell by
8.7% yoy and stood at Rs3,169 during the quarter. Sales volume remained flat yoy at
1.02 million tons (mt). The company’s OPM fell by 1,662bp yoy to 17.4% due to the fall in
realisations as well as the steep 36% increase in power and fuel costs. Net profit declined
by a substantial 78.6% yoy to Rs16.8cr. We maintain a Buy on the stock, with a target
price of Rs98.

L&T

L&T reported a modest top-line growth of 6.4% yoy to Rs7,885cr (Rs7,408cr), below our
estimates of ~13.9% growth, mainly on account of the disappointment from the E&C
segment, which recorded a flattish topline of Rs6,644cr against our estimate of Rs7,213cr.
However, the company reported phenomenal performance (a yoy jump of 170bp) on the
EBITDA margin front mainly on account of lower subcontracting expenses. Interest cost and
depreciation were in line with expectations. We believe that at current valuations of 27.3x
on FY2012E earnings of Rs68.9/share gives limited upside from current levels and limited
upside to our SOTP target price of Rs1,853. Hence we recommend Neutral on the stock.
Further, it should be noted that our target price factors in Rs1,477/share value at 21x
FY2012E EPS (~20% earnings CAGR over FY2010-12E) for L&T parent and values its
subsidiaries at Rs406/share. Therefore, at the current juncture we believe that most of the
positives are factored in and the only upside can come from value unlocking at the
subsidiary level (read finance companies), which we are not currently factoring.

July 28, 2010 6


Reliance Industries

RIL’s 1QFY2011 numbers were lower than our expectations on the EBITDA front, though
the numbers were in line with our expectation on the bottom-line front. Top-line increased
86.7% yoy to Rs58,228cr (Rs31,187cr) primarily on the back of the 106.8% yoy growth in
refining revenues to Rs50,531cr (Rs24,434cr) and a whopping 150.3% yoy increase in oil
& gas revenues to Rs4,665cr (Rs1,864cr). Growth in the refining segment was driven by
the increase in refining throughput during the quarter coupled with the increase in crude
oil prices. Crude oil processed during the quarter was higher by 40.8% yoy to 16.9mn
tonnes (12.0mn tonnes- RIL and RPL combined) following the ramp-up of the SEZ refinery.
KG-D6 gas production scaled up in the current quarter with average production increasing
to 60mmscmd from around 19mmscmd during 1QFY2010. However, the gas production
was almost flat on the qoq basis. RIL also ramped up its oil production at the KG basin to
26,700bpd from the levels of 13,846 witnessed in 4QFY2010. During the quarter, RIL
reported GRMs of US $7.3/bbl (US $6.6/bbl- blended margins for RIL and RPL) as against
our expectation of US $8.0/bbl. However, the same was compensated by higher than
anticipated volumes throughput as we were building slight decline in the refinery
throughput (decline of 2.5% qoq on account of maintenance shutdown). Benchmark
complex Singapore Margins, during the quarter, stood at around US $3.7/bbl. Thus, RIL
managed to earn a spread of US $3.6/bbl, which was higher than the spread seen in
4QFY2010. The benchmark refining margins in RIL's target markets, viz. North America
(US Gulf Coast Margins) were lower at US $3.6/bbl. On the petrochemical side, the
production volumes during the quarter registered a decline of 7.5% on account of
maintenance shutdown by RIL, which impacted the performance on the operating level.
EBIT/tonne in the petrochemical segment was stable on a sequential basis. Oil & Gas EBIT
margins increased 180bp qoq to 41.2% (39.4%) on account of higher contribution of the
oil. Operating profit grew by 46.3% yoy to Rs9,342cr (Rs6,384cr), which was lower than
our estimate by 3.5% on account of lower-than-expected petrochemical volumes. Overall,
EBIDTA margins were flat on a qoq basis to 16% (15.9%). Other income at Rs722cr,
increased by 1.8% yoy and came in higher than our estimate of Rs500cr. PAT grew 32.3%
yoy to Rs4,851cr (Rs3,666cr), which was in line with our expectation of Rs4,872cr. On qoq
basis, net income was up 3% (Rs4,710cr in 4QFY2010).

We expect GRM’s to register an improvement going forward. This coupled with increase in
oil and gas production from the KG-basin is likely to drive earnings growth going ahead.
Also, the uncertainties and concerns associated with redeployment of cash flows are likely
to be addressed as growth and diversification plans of the company crystallize over the
next couple of quarters, which is likely to provide the required boost to the stock price. We
maintain a Buy rating on the stock, with a target price of Rs1,260.

Titan Industries

Titan reported robust 41.6% yoy growth in net sales to Rs1,253cr (Rs883cr) on the back of
good performance by all the segments. The growth in jewellery and watches segment was
driven by a good wedding season in 1QFY2011 in the domestic market. On the back of
growth in top-line along with several cost cutting initiatives undertaken earlier, the
company posted EBITDA growth of 40.2% yoy to Rs111.3cr (Rs79.4cr) with operating
margins of 8.9% (9%) during 1QFY2011. On the bottom-line front, the company posted
robust growth of 76.5% yoy to Rs81.3cr (Rs46cr). Although we remain positive on the
company’s growth prospects, we believe that at 30.7x FY2012E EPS of Rs92, it discounts
the same fairly well. Hence we maintain our Neutral rating on the stock.

July 28, 2010 7


Result Previews-1QFY2011

Corporation Bank

Corporation Bank is scheduled to announce its 1QFY2011 results today. The Bank is
expected to post a strong net interest income (NII) growth of 33% yoy to Rs622cr. However,
due to the expected dip in net interest margins (NIMs) by around 20bp and moderate
treasury gains in 1QFY2011, net profit is expected to be subdued at Rs264cr. We will be
closely watching slippages from the restructured loans of the bank, which stand at
Rs2,764cr forming 47.9% of net worth. At the CMP, the stock is trading at 6.1x FY2012E
EPS of Rs92.8 and 1.1x FY2012E adjusted book value of Rs534. We have a Neutral rating
on the stock.

DLF

DLF is scheduled to announce its results today. We expect DLF to report 23.1% yoy growth
in revenues to Rs2,030cr largely driven by the execution of its pre-sold projects. We await
details pertaining the new launches, leasing and debt reduction. We expect OPM to remain
flat at 45% as the revenue mix will be largely tilted towards the residential segment.
Consequently, net profit is estimated to grow 12.4% yoy to Rs445.2cr. At the CMP, the
stock is trading at a 7% premium to our 1-yr forward NAV of Rs298.We maintain a
Neutral on the stock.

HCL Tech-4QFY2010

We expect HCL Tech to witness 1.1% qoq growth in revenues to Rs3,109cr for 4QFY2010
(year ending June) backed by volumes, as unfavourable cross-currency movement during
1QFY2011 would restrain further growth in revenues. EBIDTA margins are expected to
contract by 20bp on higher manpower intake. However, net profit is expected increase by
1.2% qoq to Rs348cr. We maintain an Accumulate on the stock.

Lupin

Lupin is expected to announce its results today. The company is expected to record a
strong 19.6% growth in top-line for the quarter to Rs1,298cr following traction in its US
business following launch of the generic version of Lotrel in 4QFY2010, with market share
of more than 20% and strong growth in the domestic formulations business. On the
operating front, we expect OPM to expand by 100bp to 18.9%. Net profit is likely to grow
by 26.0% to Rs176cr on robust top-line growth and OPM expansion. We recommend an
Accumulate on the stock, with a target price of Rs2,099.

Mahindra and Mahindra

Mahindra and Mahindra (M&M) is slated to announce its results today. We expect the
company’s top-line to grow by 21.2% yoy to Rs5,127cr on account of 24.3% yoy growth in
volumes and increase in realisation. On the operating front, EBITDA margin is expected to
expand by 63bp yoy to 15.0%. Hence, bottom-line is expected to surge by 18.4% yoy to
Rs474.7cr. The stock is under review.

July 28, 2010 8


Marico

Marico is expected to announce its results today. For the quarter, we expect Marico to
report 7.1% yoy growth in its consolidated top-line to Rs746cr. Marico’s earnings for the
quarter are expected to grow by 29.2% yoy to Rs77.6cr driven largely by top-line growth
and margin expansion to the tune of 175bp to 15.6%. Owing to the recent run up in the
stock, we recommend a Reduce on the stock.

Sun Pharma

Sun Pharma is slated to announce its results today. We expect the company's revenues to
grow by 21.7% to Rs950cr for the quarter. Sun Pharma received seven ANDA approvals
from US FDA during the quarter, one of the highest in our pharma coverage universe. The
company's OPM is expected to expand to 34.2%. However, net profit is expected to rise by
95.9% to Rs308cr on a low base. We maintain Neutral on the stock.

July 28, 2010 9


Economic and Political News

Govt. scraps 18 special economic zones
Govt. says 'no' to ban on iron ore export
Govt. to mull ONGC, IOC stake sales in FY11: official

Corporate News

Govt. expects to garner Rs 977 cr from EIL's disinvestment
ONGC, PetroVietnam to bid for BP's stake
Telcos owe government Rs 452 cr as spectrum fee
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Events for the day
Alfa Laval Results
Bajaj Electrical Results
Chennai Petro Results
Cinemax India Results
Corporation Bank Results
D B REALTY Results
DLF Results
EID Parry Results
Essel Propack Results
GMDC Results
Gujarat State Finance Results
Havells India Results
HCL Tech Results
Jindal Steel Results
Kirloskar Oil Results
Lakshmi Mach Results
Lupin Results
Mahindra & Mahindra Results
Marico Results
Merck Results
MMTC Results
MMTC Results
Neyveli Lignite Results
Patni Computer Results
Samruddhi Cement Results
Sobha Dev Results
Sun Pharma Results
Sun TV Network Results
Tata Comm Results
Trent Results
TTK Healthcare Results
Voltas Results
WELCORP Results

July 28, 2010 10


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July 28, 2010 11

Market Outlook - July 28,2010

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