Bharti Airtel is well positioned for strong growth over the next few years. Total minutes of usage are expected to grow at 20% annually through FY2014 as tele-density and usage per subscriber remain well below developed markets. Competition is also expected to moderate as costs for new entrants are high. Bharti trades at an attractive valuation of 12x FY2012 earnings compared to its historical average of 26x and the Sensex P/E of 14.5x, despite higher returns. The acquisition of African and Bangladesh assets is also expected to be accretive. Overall, Bharti Airtel provides exposure to the growing Indian telecom sector at a reasonable valuation.

1. Strategy
gy
April 2010
Firing up!
Research Team

2. Table of Contents
Strategy ………..………2-8
Large Caps Federal Bank ……………. 36 Heritage Foods …….…….64
Bharti Airtel ……..….……. 10 GSFC …………….……… 39 JK Tyre and Ind. ……….…67
ICICI Bank ………..………13
B k 13 IVRCL Infra ………….….. 42
Maruti Suzuki ….……....... 16 Jagran Prakashan …....… 45
Reliance Infra …..……......19 Jyoti Structures ….……….48
SBI ………………............. 22 Spice Jet ……..…….….... 51
Tech Mahindra …...………25 TAJGVK …..…….………. 54
Mid Caps Small Caps
Anant Raj Ind. ………..…..29 Fag Bearings …………… 58
Electrosteel Castings ……32 Greenply I d t i …….. 61
G l Industries

3. New growth cycle from FY2011E
Signs of economic improvement are getting stronger in India with the IIP growth having recovered from lows of
-0.2% in December 2008 to hit a high of 16.7% in January 2010. We expect the economy to further strengthen
as low interest rates help kick-start another cycle of corporate and consumer credit expansion.
Correspondingly, Earnings expectations from Corporate India for FY2011E are increasing, coming off a low
base in FY2010E. For instance, with global economies improving, we have revised upwards our Earnings
estimates for Metal stocks by 10-20%; similar upgrades have also been made for several other sectors.
Overall, we expect the Benchmark Sensex companies to register 27% CAGR in Earnings over the next two
years. W expect sectors lik C it l G d & E i
We t t like Capital Goods Engineering, I f t t
i Infrastructure, B ki and R l E t t t l d
Banking d Real Estate to lead
from the front, even as the Telecom Sector is expected to stabilise in FY2012E.
Sensex EPS Growth
(Rs)
1,500
1,312
1,250
1,065
1,000
830 805 820
723
750
527
500
250
50
-
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Source: Angel Research
2

4. Manufacturing and Capital Goods to
lead from front
Historical analysis of All-Industry Sales data indicates strong yoy growth, with an average growth rate of around
22% during FY2003-09.
The growth in Sales was achieved on the back of steady increase in capital expenditure in turn increasing the
Gross Block and Plant & Machinery (P&M). The average P&M turnover was around 2.5x during the mentioned
period with a peak rate of around 2.9x in FY2009.
To hi
T achieve th estimated S l growth of 22 24% over FY2010 12E we expect i d t t add P&M worth
the ti t d Sales th f 22-24% FY2010-12E, t industry to dd th
Rs2,64,000cr in FY2012E compared to the P&M addition of around Rs1,60,000cr in FY2009, implying a growth
of 65% over the period. This indicates the significant scope of growth for the Capital Goods Sector in India.
Capex E ti ti
C Estimation (Rs cr)
(R )
Particulars 2013E 2012E 2011E 2010E 2009 2008 2007 2006 2005 2004 2003
Gross Block 3,301,234 2,721,234 2,281,234 1,911,234 1,565,922 1,269,462 992,474 834,503 706,515 595,294 555,235
Plant and Machinery 1,980,740 1,632,740 1,368,740 1,146,740 937,265 777,194 633,965 546,789 464,244 423,509 393,196
Capital Work in Progress 580,000 440,000 370,000 345,312 235,380 148,600 95,058 71,200 74,772 63,911
Net Sales 5,715,628 4,609,377 3,717,240 3,046,918 2,720,462 2,208,030 1,713,108 1,329,333 1,103,187 898,690 807,378
Sales Growth (%) 24 24 22 12 23 29 29 20 23 11 16
Gross block turnover 1.7 1.7 1.6 1.6 1.7 1.7 1.7 1.6 1.6 1.5 1.5
P&M Turnover 2.9 2.8 2.7 2.7 2.9 2.8 2.7 2.4 2.4 2.1 2.1
Incremental Plant and Machinery 264,000 160,071
Growth 2009-12 (%) 65
Source: ACE Equity,, Angel Research
3

5. Inflation expected to decline
Visibly, the headline WPI inflation, which has WPI inflation to come down to 4-5% by March 2011
climbed to 9.9% yoy in February 2010, is the
main catalyst for the RBI’s tightening measures.
15%
Food inflation continues to be the main cause
12%
for this runaway increase in overall inflation. It 10%
remains at elevated levels of 16.3% yoy, while
9%
Non Food
Non-Food manufacturing products inflation
(having 52.2% weightage in the WPI Index) is
6%
just 4.3% in February 2010. 5%
3%
Going forward, Food inflation which was
exacerbated b the B d monsoons l
b d by h Bad last year, i
is
0%
likely to moderate. At the same time, due to the
base effect, over the next 6-9 months, overall
-3%
inflation is likely to once again come down to
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
the manageable 4 5% range
4-5% range.
Source: RBI, Angel Research
4

6. Monetary Tightening not a concern
Monetary Tightening began in Sep 2005, but Credit growth remained above 20% right up to Dec 2008
(%) (%)
9.00 60.0
8.00 50.0
7.00 40.0
6.00 30.0
5.00 20.0
4.00 10.0
3.00 -
Sep--04
Dec--05
Aug--07
Nov--08
Sep--09
Oct--06
Apr--09
Feb--05
Mar--07
Feb--10
Jul--05
May--06
Jan--08
Jun--08
Credit Growth yoy (RHS) Repo Rate (LHS) Reverse Repo Rate (LHS) CRR (LHS) Series5
Source: RBI, Angel Research
The RBI’s main objective is to control inflation expectations Nonetheless at the current juncture with growth
RBI s expectations. Nonetheless,
just picking up, stifling liquidity is not required. Hence, we expect the rate hikes to happen in small, step-by-
step increments, and it will take a dozen or more hikes spread over many quarters, before one needs to start
worrying about high interest rates affecting growth.
In fact, in the previous cycle, even with a 3-4% increase in interest rates, credit demand remained strong due
to robust economic activity and opportunity, buoyed by cheap foreign capital and strong domestic savings. The
present situation appears headed in a similar direction.
5

7. FII inflows to surge…
Even as fundamental factors continue to show significant upward momentum, the economy is also receiving FII
inflows. In fact, even during the crisis-ridden year of CY2009, the country received as much as Rs85,000cr of
FII inflows.
In the first couple of months of this calendar year, India has already received Rs15,000cr by way of FII inflow,
and considering the improving global and domestic scenario, this figure is likely to only improve going forward.
CY2010 is likely to end with at least Rs1-1.25lakh crore (US $20-25bn) of FII inflows.
FII Inflows
(Rs) Phenomenal FII inflows even
90,000 in a low global growth year
60,000
30,000
-
(30,000)
(60,000)
CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10
(YTD)
Source: Bloomberg, Angel Research
6

8. …and FDI is gaining prominence
FDI Inflows (% of World)
Country
y 1980 2000 2006 2008
World 100 100 100 100
Developed Economies 86.2 81.4 70.3 63.4
USA 31.3
31 3 22.7
22 7 16.2
16 2 18.6
18 6
UK 18.7 8.6 10.7 5.7
Developing Economies 13.8 18.6 29.7 36.6
Brazil 3.5 2.4 1.3 2.7
Russian Federation 0.0 0.2 2.0 4.1
China 1.8 8.4 9.0 11.0
India 0.1 0.3 1.4 2.4
Source: UNCTAD, Angel Research
7

9. Markets in Fair value zone, stock-picking
key to investment success
At current levels, the Sensex is trading at 13.4x FY2012E EPS v/s the 5-year average of 16.1x. While
valuations are not cheap, at the same time they are not factoring more than 8% GDP growth. With 8% growth
looking increasingly achievable, we expect the Sensex to touch 20,992 levels (an upside of 19%) by March
2011, based on T
2011 b d Target P/E of 16 FY2012E EPS
t f 16x EPS.
In the ensuing slides we have discussed 15 of our Top Picks that are expected to significantly outperform the
Sensex. We have chosen the stocks from across sectors including large, mid and small caps such as SBI, Tech
Mahindra, Electrosteel Casting, Greenply, etc.
, g, p y,
Sensex Earnings Yield
(Sensex) (%)
Sensex (LHS) Sensex Earnings Yield (%) (RHS) Avg. Bond Yields (%) (RHS)
23,000 11.0
20,500 10.0
18,000 9.0
15,500 8.0
13,000 7.0
10,500 6.0
8,000 5.0
5,500 4.0
3,000 3.0
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
Source: Angel Research
8

10. Large Caps

11. Bharti Airtel
(CMP/TP: Rs310/406)
Minute of usage to grow by 20% over FY10-14: Total MoU has been growing at robust pace marking a
CAGR of 48% in last 4 years. The total minute of usage is likely to grow at a very high rate considering the
lower tele-density of 47% as against that of 88% for US and lower MoU/subscriber (just 458 vs 772 for US)
which provides enough headroom for future growth. We believe total MoU to grow by 20% over FY10-14.
Competition Intensity to reduce: We do not expect the ongoing price war to further intensify as the cost of
operation for the new players are high and not sustainable unless they gain scale. Hence, we believe that
Bharti with high EBIDTA per minute of Rs0.16 is relatively better placed than its peers.
LBO structuring to benefit: Though the Kuwait-based Zain Telecom (African Assets) has been valued higher
than that its closest peer MTN at US $9bn we believe it would still be value accretive for Bharti owing to
peer, MTN, $9bn,
financial leverage from the Leveraged Buy-Out structuring of the deal. Moreover, Bharti has also successfully
acquired 70% stake in Warid Telecom to capitalise on the untapped opportunity in the densely populated
Bangladesh market (160mn), which has low tele-density of 32%.
Trading at attractive valuations to Peers: Bharti Airtel is currently trading at 12.0 FY12E Earnings of Rs25.8,
which is at significant discount to its historical average of 26x as well as Sensex P/E of 14.5x FY12E Earnings,
despite higher average RoCE of 20% (FY10-12E) as against average RoCE of 18% for the Sensex. Hence, we
maintain a Buy on the stock based on 14x FY12E EPS for its Core business and Rs45 per share for its 42%
stake in Indus Towers.
Valuation Snapshot
EPS( Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12
24.1 23.8 25.8 26.6 21.3 19.4 12.7 13.0 12.0 2.9 2.6 2.2 3.1 2.7 2.2
10

12. Bharti Airtel
MoU to grow by 20% over FY10-14E Leadership maintained with high customer market share
450 130 30.0%
400
25.0%
350
110
300 20.0%
250
90 15.0%
200
150 10.0%
100 70
5.0%
50
0 50 0.0%
FY'07 FY'08E FY'09E FY'10E FY'11E FY'12E FY'13E FY'14E Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
Total MOU (bn) Subscribers Market share
Source: Company, Angel Securities Source: Company, Angel Securities
Peer Group: Revenue per minute/ EBIDTA per minute Tenancy ratio going up
0.6
06 30,000
30 000 1.6
16
0.52 0.51
0.5 0.45 1.5
28,000
0.4 1.4
0.3 26,000 1.3
0.2
02 0.16
0 16 1.2
12
0.14
0.12 24,000
0.1 1.1
0 22,000 1
Bharti Rcom Idea Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
RPM EPM No of towers Tenancy ratio
Source: Company, Angel Securities Source: Company, Angel Securities
11

13. Bharti Airtel
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 36,962 39,212 42,651 46,770 SOURCES OF FUNDS
% chg 36.8 6.1 8.8 9.7 Equity Share Capital 1,898 1,898 1,898 1,898
Total Expenditure 21,794 23,195 26,000 28,484 Reserves& Surplus 28,496 36,585 44,454 52,872
EBIDTA 15,168 16,017 16,652 18,287 Shareholders Funds 30,395 38,483 46,352 54,771
(% of Net Sales) Total Loans 11,880 10,152 7,873 5,762
41.0 40.8 39.0 39.1
Deferred Tax Liability 756 756 756 756
Other Income 152 627 618 678
Other Liabilities
Oth Li biliti 34 34 34 34
Depreciation& Amortisation 4,758 5,916 6,569 7,224
Minority Interest 1,070 1,255 1,438 1,636
Interest 1,161 - - -
Total Liabilities 44,134 50,679 56,452 62,958
PBT 9,401 10,728 10,701 11,741
APPLICATION OF FUNDS
(% of Net Sales) 16 16.4 17.1 18.1 Gross Block 55,809 67,609 75,073 82,088
Share in profit of JVs (71.3) 35.0 35.0 35.0 Less: Acc. Depreciation 14,895 20,811 27,380 34,604
Exceptional & Prior Period Net Block 40,914 46,798 47,693 47,485
22 22 22 22
Expenses
Goodwill 4,036 4,036 4,036 4,036
Tax 662 1396 1,500 1,763
Investments 14 14 14 14
(% of PBT) 7.1
71 13.0
13 0 14.0
14 0 15.0
15 0
Current Assets 14,408 15,817 21,958 30,026
Less: Minority interest (MI) 175.9 185.0 182.4 197.8
Current liabilities 15,238 15,986 17,249 18,603
PAT( After Minority
8,470 9,160 9,032 9,793 Net Current Assets 14,408 15,817 21,958 30,026
Interest)
% chg 26.4 8.1 (1.4) 8.4 Total Assets 44,134 50,679 56,452 62,958
12

14. ICICI Bank
(CMP/TP: Rs948/1,155)
Well-positioned to garner strong Market share gains in CASA deposits: In our view, the Bank’s substantial branch
expansion (210 branches added during last 12 months, about 875 more in next 12-18 months ie. 2.5 times the size 8
quarters back) as well as strong Capital Adequacy at 19.4% (Tier-I at 14.2%) have positioned it to gain market share that
will contribute to substantial Core business growth as the macro environment continues to improve. In fact, the Bank has
once again started gaining market share in Savings accounts; during 9MFY2010, the Bank has improved its market
share of Savings deposits by 20bp over FY2009 levels, capturing a substantial 6% incremental market share.
Improved Deposit Mix to reflect in better NIMs: The Bank is decisively executing a credible strategy of consolidation
that will drive materially improved Balance Sheet and Earnings quality over the next two years. The distinguishing feature
of the Bank’s performance in 9MFY2010 was the improvement in CASA ratio to 40% (transformative considering that the
ratio was as low as 22% at the end of FY2007 and 29% even as recently as FY2009). In light of this change in the
Liability-mix, we expect the Bank’s NIMs to improve to a healthy 2.8-3.0% over FY11-12E (2.6% in FY2009) .
Worst of Asset Quality issues over: The Bank’s asset quality is showing signs of stabilising, with 3QFY2010 slippages
coming down to Rs750cr (against run-rate of about Rs1,000cr per quarter). In absolute terms, Gross NPAs of the Bank
declined on a sequential basis for the third consecutive quarter to Rs8,926cr. The Bank has also done lower restructuring
of loans than PSU Banks (3.0% of total loans, 10.2% of net worth). Going forward, there could be potential upsides to our
( , ) g , p p
Earnings estimates on account of the better-than-expected performance on the Asset quality front.
Valuations attractive: At the CMP, the Bank’s Core Banking business (after adjusting Rs307 per share towards the
value of the subsidiaries) is trading at 1.9x FY12E ABV of Rs377. Including subsidiaries, the stock is trading at 1.4x
FY12E ABV of Rs512. We have valued the Bank’s subsidiaries at Rs307 per share of ICICI Bank and the core Bank at
Rs848 (2.25x FY12E ABV). We maintain a Buy on the stock, with a 12-month Target Price of Rs1,155.
12 month
Valuation Snapshot
Company Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12E
ICICIBK Buy 948 1,155 21.7 1.9 2.3 15.6 21.8 1.3 15.1
13

15. ICICI Bank
Savings Deposits Market share Trend Well-positioned in terms of CAR and Branch expansion
6.0
5.0
4.0
3.0
2.0
1.0
-
Y2003
Y2004
Y2005
Y2006
Y2007
Y2008
Y2009
Y2010
FY
FY
FY
FY
FY
FY
FY
9MFY
% Savings Deposit Share
Source: Company, Angel Securities Source: Company, Angel Securities
Strong Traction expected in Profitability driven by lower Provisions SOTP Valuation Summary
40.0
40 0 1.6
16 Y/E March (Rs) Value Per Share
1.4 ICICIBK 848
30.0
ICICI Pru Life 154
1.2
20.0 ICICI Lombard General Insurance 13
1.0
10.0 0.8 ICICI Prudential AMC 15
0.6
06 ICICI Secu t es & PD
C C Securities 27
-
FY2009 FY2010E FY2011E FY2012E 0.4 ICICI Venture Funds management 14
(10.0)
0.2
ICICI UK, Canada 66
(20.0) - ICICI Home Finance 19
% Advances Growth (LHS) % Earnings growth (LHS)
% ROA (RHS) % Provisions/Assets (RHS) SOTP Value 1,155
Source: Company Angel Securities
Company, Source: Company, Angel Securities
14

16. ICICI Bank
Income Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Interest Income 9,092 8,918 10,169 12,877 Share Capital 1,463 1,463 1,463 1,463
- YoY Growth (%) 10.9 (1.9) 14.0 26.6 - Equity 1,113 1,113 1,113 1,113
Other Income 8,118 7,612 8,327 10,174 - Preference 350 350 350 350
- YoY Growth (%) (8.6) (6.2) 9.4 22.2 Reserve & Surplus 48,420 50,533 53,152 56,705
Operating Income 17,210 16,530 18,496 23,051 Deposits 218,348 212,889 263,983 327,338
- YoY Growth (%) 0.8 (3.9) 11.9 24.6 - Growth (%) (10.7) (2.5) 24.0 24.0
Operating Expenses
O ti E 7,045
7 045 5,983
5 983 7,131
7 131 9,445
9 445 Borrowings 67,324
67 324 64,557
64 557 77,678
77 678 93,473
93 473
- YoY Growth (%) (13.6) (15.1) 19.2 32.5 Tier 2 Capital 25,482 29,304 36,337 45,421
Other Liabilities & Provisions 18,265 5,176 9,835 13,825
Pre - Provision Profit 10,165 10,548 11,364 13,606
Total Liabilities 379,301 363,922 442,447 538,226
- YoY Growth (%) 13.9 3.8 7.7 19.7
Cash in Hand and with RBI 17,536 10,644 13,199 16,367
Provision and
5,048 5,229 4,698 4,482 Bal. with banks & money at
Contingencies 12,430 12,303 15,008 18,313
call
- YoY Growth (%) 30.4 3.6 (10.2) (4.6)
Investments 103,058 101,787 118,294 134,705
Profit Before Tax 5,117 5,319 6,667 9,124 Advances 218,311 212,853 263,938 329,922
- YoY Growth (%) 1.2 3.9 25.3 36.9 - Growth (%) (3.2) (2.5) 24.0 25.0
Provision for Taxation 1,359 1,337 1,686 2,332 Fixed Assets 3,802 3,164 3,743 4,431
- as a % of PBT 26.6 25.1 25.3 25.6 Other Assets 24,164 23,171 28,265 34,488
PAT 3,758 3,982 4,981 6,792 Total Assets 379,301 363,922 442,447 538,226
- YoY Growth (%) (9.6) 6.0 25.1 36.4 - Growth (%) (6.3) (4.1) 22.0 22.0
15

17. Maruti Suzuki
(CMP/TP: Rs1,396/1,861)
Per Capita near inflexion point for car demand: Car penetration in India is estimated at around 12
vehicles/1,000 people in FY2009 compared to around 21 vehicles/1,000 people in China. Moreover, India’s
PPP-based Per Capita is estimated to approach US $5,000 over the next 4-5 years, which is the inflexion point
for Car demand. Increasing penetration is estimated to drive around 14% CAGR in domestic volumes over
FY09-12E. Further,
FY09 12E Further Maruti has a sizeable competitive advantage over the new foreign entrants due to its
entrants,
widespread distribution network (service and sales outlets of around 2,767 and 681, respectively), which is not
easy to replicate.
Suzuki focusing to make Maruti a small car manufacturing hub: Suzuki Japan is making Maruti a
manufacturing hub to cater to increasing global demand for small cars due to rising fuel prices and stricter
emission standards. We estimate the company's export volume to grow at around 55% CAGR over
FY09-12E. Moreover, R&D capabilities, so far largely housed at Suzuki Japan, are progressively moving to
Maruti. The company is aiming to achieve full model change capabilities over the next couple of years, which
will enable it to launch new models and variants at a much faster pace.
Valuation: The company recorded a CAGR of 15% in volume over FY08-10E (in line with industry) and we
estimate it to continue to register double-digit growth of about 14% CAGR over FY2010-12E. We believe that
high growth potential of the Indian car market would mitigate the impact of rising competition for market leader
Maruti Suzuki. We recommend a Buy on the stock with a price target of Rs1,861, at which the stock would
trade at 17x FY2012E EPS, which is in line with our Sensex Target P/E.
Valuation Snapshot
EP (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11 FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
88.0 96.6 109.4 20.5 18.7 17.8 15.9 14.5 12.8 3.3 2.7 2.3 1.1 0.9 0.7
16

18. Maruti Suzuki
High growth potential of Indian car market would mitigate the impact of rising competition for market leader Maruti Suzuki
Particulars* PPP-based/Capita Calorie Telecom Power Car
(US $) (Kilo/Capita) (MOU / Capita) (Kwh/year) (Car/1,000 people)
India 3,100 2,047 125 618
12
USA 46,400 3,900 624 14,240
449
India - Growth Opportunity (x) 15 2 5 23 37
Source: NSSO, CIA, FCC, ERS, Human Development Report 2007-08, Crisil Research, Angel Securities; *-Estimates
Car Sales growth - Tier II and III cities/towns remain to be tapped Rising income level to support volume growth
(in %) 3QFY10 2QFY10 1QFY10 4QFY09 3QFY092QFY09 1QFY09 100%
16.8 18.8 20.4
Top 10 Cities 50 8 (10) (9) (23) (7) 7 80% High Income (annual
income>Rs2.85lakh)
Next 10 Cities 57 23 12 8 (12) 0 8 60%
62.0 Medium Income
61.8 61.6
Next 20 Cities 56 35 9 10 (11) (4) 14 (annual income
40% Rs71000 Rs2.85lakh)
Rs71000-Rs2.85lakh)
Next 60 Cities 55 29 20 23 2 12 17 Low Income (annual
20% income<Rs71000)
Other Cities (36) 55 38 34 11 22 31 21.1 19.3 18.0
0%
All India 41 22 5 4 (13) (1) 12 2005-08 2008-09 2009-10E
Source: Industry Angel Securities
Industry, Source: NCAER Angel Securities
NCAER,
17

19. Maruti Suzuki
Profit & Loss Statement Balance Sheet
Y/E March FY2009 FY2010E FY2011E FY2012E Y/E March FY2009 FY2010E FY2011E FY2012E
Net Sales 20,530 28,299 32,936 38,463
SOURCES OF FUNDS
% chg 14.7 37.8 16.4 16.8 Equity Share Capital 144.5
144 5 144.5
144 5 144.5
144 5 144.5
144 5
Total Expenditure 19,095 24,588 28,847 33,694 Reserves& Surplus 9,200 12,258 14,768 17,609
EBIDTA 1,435 3,711 4,089 4,769 Shareholders Funds 9,345 12,402 14,912 17,754
(% of Net Sales) 7.0 13.1 12.4 12.4 Total Loans 698.9 698.9 698.9 698.9
Other Income 1,016 985 1,038 1,080 Deferred Tax Liability (net) 155.1
155 1 151.3
151 3 140.9
140 9 119.8
119 8
Depreciation & Amortisation 707 854 925 1,110 Total Liabilities 10,199 13,252 15,752 18,572
Interest 51.0 50.3 52.4 50.7 APPLICATION OF FUNDS
PBT 1,693 3,792 4,150 4,689 Gross Block 8,721 10,679 12,668 14,794
(
(% of Net Sales)
) 8.2 13.4 12.6 12.2 Less: Acc Depreciation
Acc. 4,650
4 650 5,504
5 504 6,429
6 429 7,538
7 538
Extraordinary Expense/(Inc.) 146.1 - - - Net Block 4,071 5,175 6,239 7,255
Tax 457 1,247 1,359 1,526 Capital Work-in-Progress 861 1,068 1,013 740
(% of PBT) 27.0 32.9 32.8 32.6 Investments 3,173 5,301 6,301 7,429
PAT 1,236 2,544 2,791 3,163 Current Assets 5,491
5 491 6,243
6 243 7,476
7 476 9,104
9 104
% chg (30.4) 105.9 9.7 13.3 Current liabilities 3,398 4,534 5,277 5,956
Ad. PAT 1,090 2,544 2,791 3,163 Net Current Assets 2,094 1,709 2,199 3,149
% chg (36.5) 133.5 9.7 13.3 Total Assets 10,199 13,252 15,752 18,572
18

20. Reliance Infra
(CMP/TP: Rs1,008/1,253)
Transformation into Infrastructure behemoth…: R-Infra offers strong near-term growth potential with
sustained long-term cash flows with nearly Rs1.6trillion (US $35bn) in assets under development across the
Infrastructure and Power verticals and ownership/control over around 3.8bn tonne coal reserves. Visibility in
execution is likely to improve substantially with two road projects already operational and Rs14,000cr worth
roads,
roads metro rail and power projects going on stream in the next 12 months
on-stream months.
…on the back of strong Balance Sheet…: R-Infra has one of the strongest Balance Sheets in the Infra space
in India, with a huge war chest. Given its high risk appetite, the company is uniquely positioned to gain from
India’s infra growth opportunity. Its cash and cash equivalent stood at around Rs10,000cr at end FY2009.
Compared with peers, it has an under leveraged Balance Sheet, with Gross Debt-to-Equity of around 62%.
p p , g , q y
Hence, we believe that there is ample scope for R-Infra to aggressively, albeit prudently, build its infrastructure
portfolio with strong net worth along with its execution experience, which makes it a serious contender for the
proposed mega infrastructure projects, which potentially offer higher returns by restricting competition.
…coupled with strong growth opportunities: Visible traction in road project awards by the NHAI and
planned awarding pipeline (37 050k over FY10 14E) are positives f i f
l d di i li (37,050km FY10-14E) ii for infrastructure d
developers lik R li
l like Reliance
Infra. Besides this, the Mega Road Projects and Ultra Mega Transmission Projects serve as potential
opportunities in the near term. Also, the large Metro Projects in Hyderabad and Bangalore are at advanced
stages of bidding with Reliance Infra also figuring amongst the bidders.
Valuation Snapshot
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
54.1 54.4 68.3 6.5 6.2 7.2 18.6 18.5 14.8 1.2 1.2 1.1 2.5 2.4 2.0
19

21. Reliance Infra
Re-organisation to increase Value-unlocking potential
CBM (45 %)
Fuel Ou Blo
t cks (7 0%)
Mumbai Metro Line 1 (69%) Assets Coal Field (100%)
Delhi Airport Metro Express Reliance Infrastructure 45%
Reliance
Link (95%) EPC + Investments Power
(Listed Company) 51%
Mumbai Metro Line 2 (48%) Reliance
Cementation
100%
Reliance
BSES Energy Reliance Reliance Relia nce Relia nce Relia nce
Kerala Power Energy Property
Generation Energy InfraVentures
Power Transmission Trading Developers
Ltd Ltd Ltd
Ltd Ltd Ltd Ltd
(Dahanu)
100% Transmission Mumbai Energy Trading Road projects Real Estate
Projects distribution 5 projects in SEZ
Reliance (100%) Tamil Nadu
Goa & Delhi Discoms GF toll road
t ll d
Samalkot (49%)
Power Jaipur Reengus
Ltd toll road
Airport projects
Source: Company, Angel Securities
Huge infra portfolio: Metros to improve credibility
Order Book lends visibility R-Infra's Capex Concession
Project Detail Type of Project period+Const.
period+Const CoD
stake(%)
t k (%) (Rs bn)
(R b )
(Rs cr) period
Current projects
20,000
Delhi Airport Express Link Metro 95 28.9 28+2 FY11
Mumbai Metro phase I Metro 69 23.5 32.5+2.5 FY12
16,000 Namakkal - Karur (NK Toll) Road 100 3.5 18.5+1.5 Operational
5,400 9,900 Dindigul Samyanallore (DS Toll) Road 100 4.2 18.5+1.5 Operational
Trichy Karur (TK Toll) Road 100 7.5 28+2 FY12
12,000
Trichy Dindigul (TD Toll) Road 100 5.6 28+2 FY12
4,500 - Salem Ulenderpet (SU Toll) Road 100 10.8 23+2 FY12
8,000 Gurgaon - Faridabad Road 100 7.8 15+2 FY12
Total 91.8
4,000 9,000 Projects in-pipeline
7,200
Mumbai Metro Line 2 Metro 48 110 30+5 5yrs from FC
Mumbai Western Expressway Sea Link Urban Transport 51 35+5 NA
-
Jaipur-Reengus Road 100 5.9 15.5+2.5 NA
Existing Order Book Projects in Pipeline/ Pref erred Bidder Regional Airports Airport 100 1-1.5 95-year lease NA
Roads Power Transmission Metro's Total 169
Grand Total 260.7
Source: Company Angel Securities
Company, Source: C
S Company, A
Angel S
l Securities
iti
20

22. Reliance Infra
Profit & Loss Statement (Consolidated) Balance Sheet (Consolidated)
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 12,578 14,076 15,825 19,064 SOURCES OF FUNDS
% chg 50.8 11.9 12.4 20.5 Equity Share Capital 226.1
226 1 226.1
226 1 269.0
269 0 269.0
269 0
Total Expenditure 11,948 12,585 13,927 16,067
Reserves& Surplus 16,082 18,678 23,171 25,183
EBITDA 629.9 1,490.8 1,897.7 2,996.2
Shareholders Funds 16,308 18,904 23,440 25,452
(% of Net Sales) 5.0 10.6 12.0 15.7
Total Loans 10,217 13,812 16,446 16,624
Other Income 1,423.8 993.2 1,121.0 1,267.9
Depreciation & Amortisation 330.4 465.8 565.6 914.7 Deffered Tax Liability 211.3
211 3 194.0
194 0 194.0
194 0 194.0
194 0
Interest & other Charges 439.4 561.1 706.4 1,128.3 Total Liabilities 26,736 32,910 40,080 42,270
PBT 1,283.9 1,457.1 1,746.7 2,221.1 APPLICATION OF FUNDS
(% of Net Sales) 10.2 10.4 11.0 11.7 Gross Block 10,107 11,886 15,863 24,873
Extraordinary Inc
Inc. 53.6
53 6 - - - Less: Acc Depreciation
Acc. 4,638
4 638 5,104
5 104 5,669
5 669 6,584
6 584
Tax 78.3 233.1 283.7 383.9 Net Block 4,880 6,193 9,604 17,699
(% of PBT) 6.1 16.0 16.2 17.3 Capital Work-in-Progress 3,558 7,755 8,982 1,811
PAT 1,259.2 1,224.0 1,463.0 1,837.2
Investments 15,936 16,196 18,310 19,491
% chg 10.4 ( )
(2.8) 19.5 25.6
Current A
C t Assets
t 9,570
9 570 9,393
9 393 9,861
9 861 9,957
9 957
(% of Net Sales) 10.0 8.7 9.2 9.6
Current liabilities 7,208 6,627 6,677 6,688
Adj. PAT 1,205.6 1,224.0 1,463.0 1,837.2
% chg 92.7 1.5 19.5 25.6 Net Current Assets 2,362 2,767 3,184 3,269
(% of Net Sales) 9.6 8.7 9.2 9.6 Total Assets 26,736 32,910 40,080 42,270
21

23. State Bank of India
(CMP/TP: Rs2,073/2,586)
Improving Savings Market Share: During the past few years, the Bank witnessed a significant decline in CASA market
share with private sector banks pursuing aggressive branch expansion. However, the Bank’s market share of savings deposits
has expanded by a substantial 300bp to 23.5% during FY07-9MFY10 (only PSB to do so), driven by relatively faster branch
expansion (9.5% CAGR v/s 2-5% for most PSBs) leveraging its tremendous trust factor in the country.
Strongest Fee Income among PSU Banks: SBI has a relatively strong share of Fee Income flowing from commission,
g g y g g
exchange and brokerage, which is one of the highest amongst PSU banks, owing to its vast branch network and strong
corporate and government business relationships. During 9MFY10, the Bank continued its dominance with Non-Interest
Income/Assets at 1.2% (highest among PSU Banks).
Asset quality pressure – A short-term headwind: SBI has a Gross NPA ratio of 3.1% and Net NPA ratio of 1.9%, indicating
very low provision coverage ratio of 40.2%, (56% including technical write-offs) and restructured loans of Rs26,000cr,
y p g %, ( % g ) , ,
constituting 39.1% of its Net Worth. We expect pressure on Corporate and SME loans restructured to continue for another
couple of quarters. However, the Bank is expected to comfortably absorb asset quality pressures and we see this as a short-
term headwind over-discounted by the market, providing an attractive buying opportunity.
Banking and Non-Banking subsidiaries form significant portion of SOTP: Due to strong CASA and Fee Income, SBI’s
core RoEs have improved over the past few years and unlike virtually all other PSBs actual 9MFY2010 RoEs are below core
PSBs,
levels due to low asset yields, providing scope for upside as the CD ratio improves and yields normalise to sectoral averages.
Moreover, after a steep correction, SBI (excluding value of insurance and capital market subsidiaries), is trading at just 1.2x
FY2012E ABV v/s its 5-year range of 1.3-2.0x and median of 1.6x. We believe this provides sufficient margin of safety and
attractive upside, especially in light of its dominant position and reach, strong growth and superior Earnings quality. We
recommend a Buy on the stock, with a Target Price of Rs2,586.
Valuation Snapshot
Company Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12E
SBI Buy 2,073 2,586 24.8 1.2 1.6 8.6 18.0 1.1 19.2
22

24. State Bank of India
Improving Market Share – Savings Deposits Fee Income/Assets – The best amongst PSU Banks
25.0
2.5
2.1
23.0
2.0 1.7 1.7
21.0
1.5
15
1.2 1.1
19.0 1.0 1.0
1.0 0.9 0.9 0.8 0.8 0.8 0.7
17.0 0.6 0.6
0.5
15.0
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
9MFY2010
-
SBI
DBK
BOI
PNB
OBC
XSB
SIB
PBK
NBK
BOB
DBK
CBK
IOB
NBK
ICICIBK
DEN
FED
HDFC
AX
P
UN
O
CRP
IND
B
% Savings Deposit Share
Source: Company, Angel Securities Source: Company, Angel Securities
Upside in Core RoE (%, 9MFY10) SOTP Valuation Summary
30 Y/E March (Rs) Target Multiple Value Per Share
25.4
25
20.6 SBI & Associates 1.6x ABV 2,342
19.3
20 17.5
16.3 15.8
15
Life 15.0x NBP 202
10
AMC 5% AUM 14
5
Others (Cap Mkt, Cards, Factors) 28
0
BOB PNB SBI SOTP Value 2,586
Actual RoE Core RoE
Source: Company Angel Securities
Company, Source: Company Angel Securities
Company,
23

25. State Bank of India
Income Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Interest Income 20,873 24,566 29,363 36,931
Share Capital 635 635 635 635
- YoY Growth (%) 22.6 17.7 19.5 25.8
Reserve & Surplus 57,313 64,707 73,390 85,184
Other Income 12,902 13,806 15,115 18,297
Deposits 742,073 801,439 961,727 1,144,455
- YoY Growth (%) 37.3 7.0 9.5 21.1
- Growth (%) 38.1 8.0 20.0 19.0
Operating Income 33,775 38,373 44,477 55,228
Borrowings 53,714 58,011 69,613 82,839
- YoY Growth (%) 27.8 13.6 15.9 24.2
Tier 2 Capital
C p ,
30,344 37,931
, 45,517
, 54,620
,
Operating Expenses
O ti E 15,649
15 649 19,012
19 012 21,674
21 674 24,708
24 708
Other Liabilities & Provisions 80,353 79,450 99,432 119,870
- YoY Growth (%) 24.1 21.5 14.0 14.0
Total Liabilities 964,432 1,042,171 1,250,313 1,487,604
Pre - Provision Profit 18,127 19,361 22,804 30,520
31.2 6.8 17.8 33.8 Cash in Hand and with RBI 55,546 40,072 48,086 57,223
- YoY Growth (%)
Bal.with banks & money at
Provision and 48,858
48 858 52,766
52 766 63,319
63 319 75,350
75 350
3,736 4,903 5,809 7,457 call
Contingencies
Investments 275,954 275,257 330,161 385,238
- YoY Growth (%) 10.8 31.2 18.5 28.4
Advances 542,503 629,304 755,164 906,197
Profit Before Tax 14,391 14,457 16,995 23,063
- Growth (%) 30.2 16.0 20.0 20.0
- YoY Growth (%) 37.9 0.5 17.6 35.7
Provision for Taxation 5,058 4,829 5,679 7,727 Fixed Assets
Fi d A 3,838
3 838 4,021
4 021 4,680
4 680 5,402
5 402
- as a % of PBT 35.2 33.4 33.4 33.5 Other Assets 37,733 40,752 48,902 58,194
PAT 9,332 9,628 11,316 15,335 Total Assets 964,432 1,042,171 1,250,313 1,487,604
- YoY Growth (%) 38.7 3.2 17.5 35.5 - Growth (%) 33.8 8.0 20.0 19.0
24

26. Tech Mahindra
(CMP/TP: Rs907/1,168)
Sustained traction from Non-BT clients: The company’s Revenues from Non-BT clients have continued to flourish and
marked a strong CQGR of 16.1% over 1QFY06-3QFY10. The sustained volume traction from Non-BT clients (4% CQGR
over 4QFY10-4QFY12E) continues to provide Revenue growth momentum, Margin improvement, geographical
diversification, increased Off-shoring mix and reduced client concentration. Moreover, net addition of 3,897 employees in
3QFY10 (highest in the last ten quarters) taking the total headcount to 30,404, indicates a strong pipeline .
( g ) g g
Restructuring ends the uncertainty: The recent deal restructuring with BT ends the uncertainty, as the new terms
ensure compensatory volumes. We believe that the Advance Revenues will help it maintain its existing level of Operating
Margins of 24%. Also, the repayment of loans from the compensatory fee receipt (upfront payment of Rs968cr) will
reduce Interest costs and support Earnings growth.
Positive news flow from Satyam: Positive news flow from Satyam by way of client retention, new deal wins and
favorable settlement with Upaid are also providing comfort on future business prospects.
Significant discount to Peers: Currently, the consolidated EBITDA margin outlook is relatively weak due to the BT deal
as well as the uncertainty regarding Satyam. However, considering the company's pedigree of a Tier-1 IT player, margins
s ou d e e tua y e e c ose pee e e s ased o t s p e se, c ud g Satya , t e stoc s oo g att act e o
should eventually revive close to peer levels. Based on this premise, including Satyam, the stock is looking attractive on
EV/Sales basis relative to peers, trading at 1.9x FY2010E sales, a substantial discount to its peers average of 3.5x. We
have valued TechM on SOTP basis, valuing Tech Mahindra (excl. Satyam) at 13x FY2012E EPS (40% discount to our
target P/E for Infosys v/s 55% at present and 20% to the 5-year average), and value its 42.7% stake in Mahindra Satyam
at Rs287 per share based on current market cap, applying a 25% holding company discount.
Valuation Snapshot (Financials are excluding Satyam Market Cap not adjusted for Satyam)
Satyam,
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
53.2 60.7 67.8 28.5 25.1 22.1 17.0 14.9 13.4 4.3 3.3 2.6 1.9 1.7 1.4
25

27. Tech Mahindra
Robust Growth in Non-BT (qoq) Strong Employee addition
700 18% 32,000 5000
650 16% 4000
600 14% 28,000 3000
550 12%
2000
(Rs cr)
500 10%
24,000 1000
450 8%
400 6% 0
350 4% 20,000 -1000
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q409
Q1'10
Q2'10
Q3'10
300 2%
Q
Q1'09 Q
Q2'09 Q
Q3'09 Q
Q409 Q
Q1'10 Q
Q2'10 Q
Q3'10
Q
Q
Q
Q
Q
Q
Q
Q
Q
Non BT Revenue QoQ growth Employee Net addition
Source: Company, Angel Securities Source: Company, Angel Securities
Revenue contribution from BT decreasing Economical FY10E EV/Sales despite Comparative Margins
770 40% 6.5
65 7
700 35% 6
5.3
630 30%
5
560 25% 3.8
4
490 20%
2.8 3
420 15% 2.2
1.9 1.7
17 2
350 10%
5% 1
280
0% 0
Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Q3FY10
Inf osys TCS Wipro Mphasis HCL TechM # Patni
BT Revenue Non BT Revenue EV/Sales EBIDTA Margin
Source: Company, Angel Securities Source: Company, Angel Securities, # Tech M EV/Sales includes Satyam
26

28. Tech Mahindra
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 4,465 4,607 4,989 5,704 SOURCES OF FUNDS
Equity Share Capital 121.7 122.2 125.7 129.2
% chg 18.5
18 5 3.2
32 8.3
83 14.3
14 3
Preference Share Capital - - - -
Total Expenditure 3,172 3,487 3,791 4,390
Reserves& Surplus 1,833 2,479 3,344 4,320
EBIDTA 1293.0 1120.2 1198.4 1313.9 Shareholders Funds 1,954 2,601 3,470 4,449
(% of Net Sales) 29.0 24.3 24.0 23.0 Total Loans 0 1,400 800 0
Deferred T Liability
D f d Tax Li bilit (19.6)
(19 6) 0 0 0
Other Income (72) 15 10 10
Minority Interest - - - -
Depreciation& Amortisation 110 138 159 181
Total Liabilities 1,935 4,001 4,270 4,449
Interest 3 224 119 34 APPLICATION OF FUNDS
PBT 1132.5 773.7 930.0 1108.6 Gross Block 900 ,
1,100 1,275
, 1,450
,
Less: Acc. Depreciation 410.00 547.54 706.95 888.24
(% of Net Sales) 25.4 16.8 18.6 19.4
Net Block 490 553 568 562
Exceptional & Prior Period
- - - - Capital Work-in-Progress 161.7 211.7 236.7 186.7
Expenses
Tax 118 124 167 233 Investments 434.6 2946.6 2871.6 2821.6
Current Assets 1,737 2,078 2,295 2,516
(% of PBT) 10.4 16.0 18.0 21.0
PAT( After Minority Current liabilities 889 1,787 1,702 1,637
1014.5 649.9 762.6 875.8
Interest) Net Current Assets 848 290 593 879
% chg 207.5 (35.9) 17.3 14.8 Total Assets 1,935 4,001 4,270 4,449
27

29. Mid Caps

30. Anant Raj Industries
(CMP/TP: Rs134/196)
Land acquisition at discounted price: Almost all of ARIL’s land bank (872 acres) is exclusively located in
NCR (within 50km of Delhi), with around 525 acres in Delhi. This historical land bank has been acquired at an
average cost of Rs300/sq ft. This is because ARIL follows the allocation route for land acquisition rather than
auctions, which are significantly lower than prevailing market rates. The successful strategy of land acquisition
can be attributed to ARIL being a real estate contractor for the Delhi Development Authority (DDA) and a
focused NCR player, which helps it in identifying areas with high economic potential in Delhi.
Super premium Residential launches will drive near-term visibility: We expect ARIL’s two super premium
residential projects, Hauz Khas and Bhagwandas (Delhi) to drive its near-term Revenue visibility, contributing
around Rs600cr Profit over the next three years. Further, ARIL has 70% pre-lease commitments at its Manesar
IT Park (1 1mn sq ft) where 30% of lessees have already acquired fit outs and another 40% will be moving in
(1.1mn ft), fit-outs
by March FY10. It will also have five hotels operational near the Delhi airport by FY11E, with transfer of
occupancy risk to third-party in return of fixed rentals.
Trading at significant discount: ARIL is trading at 43% discount to its NAV (much higher than its peers),
which gives margin of safety, given its low-cost land bank at prime locations and well-capitalised Balance
Sheet. The discount is primarily owing to higher exposure to commercial assets (67%). However, we expect
demand to pick up in the Commercial and Retail Segments in 2HFY11E, with our channel checks indicating
that leasing enquiries have picked up following renewed interest from corporates. The stock is trading at 7.6x
FY12E EPS and 0.9x FY12E P/BV. We have arrived at a Target Price of Rs196, which is at 15% discount
to our 1-year forward NAV, and provides potential upside of 46% from current levels.
Valuation Snapshot
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
8.8 11.8 17.6 8.0 9.7 12.9 15.3 11.3 7.6 1.2 1.0 0.9 9.3 5.6 3.6
29

31. Anant Raj Industries
Valuation summary 60mn sq. ft. of Saleable area in NCR
1 Yr forward NAV (Rs per share)
Commercial 12 %
131 33 %
Hospitality 53
Residential 45
Other 17
Total 246
Add: Net Cash 22
Less: Present value of taxes (37)
55 %
NAV/share (Rs) 231
Target Price (Rs) 15% discount to NAV 196 Residential
R id ti l Commercial
C i l Hospitality
H it lit
Source: Angel Securities Source: Angel Securities
Location-wise Breakup of NAV Location-wise Breakup of Saleable Area (mn sq ft)
90
78 Other Delhi, 16.9
80
locations, 9.9
70
53
60
44 1
Rs/share
50 2
40 Faizalwas, 4.9
27 23
30
50 1
20 2 10 16
32 8 10 Nazaf garh, 4.0
27 6 8
10 20
10 4 8 10
2 4 6
0
Sonepat
Manesar
Faizalwas
Nazabgarh
Delhi
Greater Noida
Other income
Other locations
2 Retail Malls- Delhi
Greater
Nodia, 2.8
Rai, Sonepat,
3.5 Manesar, 17.5
Commercial Residential Hotels 2- Retail malls
Delhi, 0.7
Source: Angel Securities Source: Company, Angel Securities
30

32. Anant Raj Industries
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 251 338 467 785 SOURCES OF FUNDS
Equity Share Capital 59 59 63 63
% chg (58) 35 38 68
Reserves& Surplus 3,261
3 261 3,547
3 547 3,991
3 991 4,492
4 492
Total Expenditure (30) (27) (39) (60)
Shareholders Funds 3,320 3,605 4,054 4,555
EBITDA 221 310 429 725 Total Loans 210 110 110 410
(% of Net Sales) 88.0 91.9 91.7 92.3 Deffered Tax Liability 3 3 3 3
Other Income 70 54 59 44 Minority Interest 69 69 69 69
Total Liabilities 3,601 3,787 4,236 5,036
Depreciation & Amortisation (9) (17) (21) (27)
APPLICATION OF FUNDS
Interest (0) (0) (1) (3)
Gross Block 1,260 1,534 1,894 2,640
PBT 282 347 466 739 Less: Acc. Depreciation (45) (61) (82) (109)
Net Block 1,215
1 215 1,472
1 472 1,812
1 812 2,530
2 530
(% of Net Sales) 112.3 102.7 99.8 94.1
Intangibles 146 146 146 146
Min. Int./EO/Prior Period Items (1.1) (1.5) (1.0) - Capital Work-in-Progress 721 721 721 721
Investments 309 309 309 309
Tax (73) (69) (93) (185)
Current Assets 1,331 1,338 1,577 1,827
(% of PBT) 26.0 20.0 20.0 25.0 Current liabilities 126 205 334 503
Reported PAT 207 276 372 555 Net Current Assets 1,205 1,133 1,242 1,324
Mis. Exp. not written off 5 5 5 5
% chg (52.5) 33.0 34.9 49.1 Total Assets 3,601 3,787 4,236 5,036
31

33. Electrosteel Castings
(CMP/TP: Rs48/72)
Moving towards an Integrated business model: ECL is on track to have in place an integrated business
model going ahead through: a) Backward integration initiatives led by the allocation of mines, and b) Focus on
beefing up its logistic infrastructure to further reduce costs. The company has already started coal production
from its coal mines at Parbatpur, Jharkhand. This is likely to result in EBITDA Margin improving by 1,304bp to
28.0%
28 0% over FY09-12E despite the fall in DI realisations Moreover grant of iron ore mining lease with
FY09 12E, realisations. Moreover, lease,
estimated reserves of 91mn tonnes could further improve Margins, which is not factored in our estimates.
Value unlocking through listing of EIL: ECL is setting up a 2.2mn tonne steel plant through EIL, in which it
holds a 40% stake. The total project cost of Rs7,262cr has been funded through a Debt-Equity ratio of 3:1 and
the project has already achieved financial closure. Of the total equity contribution of Rs1,815cr, ECL has made
p j y q y , ,
an investment of Rs726cr. ECL plans to list EIL to raise Rs300cr, which will unlock value for ECL.
Leading DI player, to benefit from Investment in Water Infrastructure: ECL, with 65% market share, is
expected to benefit from the strong domestic demand for DI pipes, which is set to grow at 15% per annum.
Increasing demand for water and poor sanitation levels (estimated at 33%) are expected to drive investments in
water infrastructure. Also, the company’s strong relationship with the state governments will help mitigate the
risk of losing market share as competitors’ capacities come on-stream. ECL already has a presence in Europe,
the Middle-East and is currently exploring the US markets.
Valuation Snapshot
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
4.5 5.6 6.6 11.3 12.8 13.6 10.8 8.6 7.3 1.0 0.9 0.8 1.7 1.5 1.4
32

34. Electrosteel Castings
EBITDA Margins to almost double over FY09-12E Return Ratios (RoCE and RoE) on an uptrend
15
600 30
14
500 25
400 20 13
(Rs cr)
(%)
(%)
300 15 12
200 10 11
100 5 10
0 0 9
FY09 FY10E FY11E FY12E FY09 FY10E FY11E FY12E
EBITDA (LHS) EBITDA margin (RHS) RoE RoCE
Source: Company, Angel Securities Source: Company, Angel Securities
Strong operating cash flows to fund Capex Despite high Capex, Net Debt to Equity in comfortable zone
500
350 0.60
400 300
0.58
250
300
(Rs cr)
0.56
(Rs cr)
200
(x)
200 150 0.54
100
100 0.52
50
0 0 0.50
FY2009 FY2010E FY2011E FY2012E
FY09 FY10E FY11E FY12E
Operating cash f lows Capex (LHS) Net Debt/Equity (RHS)
Source: Company, Angel Securities
p y, g Source: Company, Angel Securities
p y, g
33

35. Listing of Subsidiary EIL can unlock value
Significant upside based on EV/tonne analysis Valuation of Steel business (Rs cr)
1,600
Sales Volume (mn tonne) 2.0
1,400
EBITDA/tonne (US $) 175
1,200
EBITDA 1,628
1 628
(US $/tonne)
1,000
Depreciation 360
800
600
EBIT 1,268
400
Interest 486
200
PBT 782
0 Tax @33% 258
SAIL Tata Steel* JSW Steel EIL Net Income 524
EV/tonne Target Multiple (x) 8
Market cap 4,189
Source: Angel Securities; * Standalone figures
ECL's share (40%) 1,676
Assuming a 20% discount 1,340
Steel Business (Rs) 35
SOTP Valuation (Rs)
Source: Angel Securities
FY2012E EPS 6.6
Multiple (x) 8.0
Valuation (Rs) including earnings from steel business
Value Per h
V l P share 53
Standalone business 53
Steel business at cost 19
Steel business 35
Target Price 72 Price 88
Source: Angel Securities
g Source: Angel Securities
g
34

36. Electrosteel Castings
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Total Sales 1,975 1,526 1,781 1,893 SOURCES OF FUNDS
Equity Share Capital 28.7 32.6 32.6 32.6
% chg 35.1
35 1 (22.7)
(22 7) 16.7
16 7 6.3
63
Preference Share Capital - - - -
Total Expenditure 1,684 1,137 1,334 1,385
Reserves& Surplus 1,372 1,538 1,702 1,903
EBIDTA 290.9 389.2 447.7 508.7 Shareholders Funds 1,401 1,571 1,734 1,936
(% of Net Sales) 14.9 26.8 26.2 28.0 Total Loans 1,101 1,295 1,295 1,295
Deferred T Liability
D f d Tax Li bilit 36.9
36 9 36.9
36 9 36.9
36 9 36.9
36 9
Other Income 64.0 20.0 50.0 60.0
Minority Interest 4.3 5.5 6.5 7.5
Depreciation& Amortisation 53.4 70.5 91.0 106.3
Total Liabilities 2,544 2,908 3,072 3,275
Interest 103.2 95.8 103.6 103.6 APPLICATION OF FUNDS
PBT 198.3 242.9 303.2 358.9 Gross Block 797.8 ,
1,047.8 1,297.8
, 1,497.8
,
Less: Acc. Depreciation 279.3 349.8 440.7 547.0
(% of Net Sales) 10.0 15.9 17.0 19.0
Net Block 518.5 698.0 857.1 950.8
Exceptional & Prior Period
- - - - Capital Work-in-Progress 301.7 351.7 401.7 451.7
Expenses
Tax 70.4 81.8 99.7 118.1 Investments 466.4 666.4 666.4 666.4
Current Assets 1,594 1,468 1,446 1,506
(% of PBT) 35.5 33.7 32.9 32.9
PAT( After Minority Current liabilities 337.0 276.2 298.6 300.2
135.3 168.5 211.5 248.8
Interest) Net Current Assets 1,257 1,192 1,147 1,206
% chg 17.1 24.5 25.5 17.7 Total Assets 2,544 2,908 3,072 3,275
35

37. Federal Bank
(CMP/TP: Rs258/342)
Healthy Deposit Mix: Federal Bank’s CASA deposits recorded a CAGR of 20.6% during FY05-09, leading to
a stable 25% CASA ratio. Further, a key differentiator for the Bank - low-cost NRI deposits base - constitutes
16.5% of total deposits. Thus, effectively low-cost deposits as a proportion of total deposits stand at around
41%, which is expected to underpin NIMs of around 3.1% in FY12E, even as the Bank grows its Advances
faster than industry (24% CAGR over FY09-12E) to leverage its large Net Worth
FY09 12E) Worth.
Impact of Dubai crisis within manageable limits: The stock has been an underperformer due to concerns
over impact of the Dubai crisis on the Bank’s business model, which benefits meaningfully from the
Middle-East NRI clients. However, as indicated by management, the Bank has a very low direct loan exposure
of around Rs350cr (1.3% of the loan book) to NRIs dependent on Dubai. Hence, impact of the crisis on its
asset quality is expected to be within manageable limits.
Compelling Valuations: Since April 2009 till date, the Federal Bank stock has underperformed its peers,
which posted average returns of 135%, whereas Federal Bank clocked 80% returns, implying an
underperformance of 55%. The proposed CSB acquisition, which was partly responsible for the stock's
underperformance in the last 11 months, is now unlikely to fructify, as the asking price substantially exceeds
Federal Bank's assessment of the Bank's value. At the CMP, the stock is trading at attractive valuations of
0.8x FY2012E ABV - similar to South Indian Bank, its closest peer, compared to the 5-year average premium
of 15%. While lower leverage is leading to low RoEs at present, at the core RoA level, the Bank’s Earnings
quality is one of the best amongst peers. We recommend a Buy on the stock, assigning a multiple of 1.0x
FY12E ABV to arrive at a 12-month Target Price of Rs342
12 month Rs342.
Valuation Snapshot
Company Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12E
FedBk Buy 258 342 31.6 0.8 1.0 5.5 17.0 1.3 14.4
36

38. Federal Bank
CASA Market Share Maintained % NII/Assets amongst the highest in the sector
0.7 5.0 4.5
4.5 4.1
0.6
4.0 3.5
3.5 3.3 3.3 3.2
0.5 3.0
3.0
30 2.7
27
2.5 2.4 2.4
2.5 2.3 2.2 2.2 2.2
0.4 2.1
2.0
0.3 1.5
1.0
0.2 0.5
-
SBI
DBK
SBK
BOI
OBC
PNB
SIB
XSB
PBK
NBK
0.1
BOB
CBK
DBK
IOB
NBK
CIBK
YES
DEN
FED
P
HDFC
AX
UN
CRP
O
IND
B
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
ICIC
% CASA Share
Source: Company, Angel Securities Source: Company, Angel Securities
Strong CAR and Advances Growth Stable Asset Quality, with strong Coverage Ratio
30.0
30 0 25.0
25 0 3.5
35 100.0
100 0
90.0
25.0 3.0
20.0 80.0
2.5 70.0
20.0
15.0 2.0 60.0
15.0 50.0
1.5 40.0
10.0
10.0 1.0 30.0
20.0
5.0 0.5
5.0 10.0
- -
0.0 0.0
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
% Advances Growth (LHS) %CAR (RHS) % Provision Coverage (RHS) % Gross NPA (LHS) % Net NPA (LHS)
Source: Company, Angel Securities
p y, g Source: Company, Angel Securities
37

39. Federal Bank
Income Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Interest Income 1,315 1,412 1,617 1,921 Share Capital 171 171 171 171
- YoY Growth (%) 51.5 7.3 14.6 18.7 Reserve & Surplus 4,155 4,593 5,079 5,721
Other Income 383 510 544 661
Deposits 32,198 37,672 46,336 57,457
- YoY Growth (%) (3.0) 33.2 6.6 21.6
- Growth (%) 24.3 17.0 23.0 24.0
Operating Income 1,698 1,922 2,161 2,582
Borrowings 749 876 1,065 1,305
- YoY Growth (%) 34.5 13.1 12.5 19.5
p
Tier 2 Capital 470 470 564 677
Operating Expenses 571 665 787 938
Other Liabilities & Prov. 1,057 1,614 1,957 2,278
- YoY Growth (%) 21.9 16.3 18.4 19.2
Pre - Provision Profit 1,127 1,257 1,374 1,644 Total Liabilities 38,800 45,396 55,173 67,609
- YoY Growth (%) 41.9 11.5 9.3 19.6 Cash in Hand and with RBI 2,214 2,497 2,317 2,873
Prov. and Conting. 334 426 456 429 Bal. with banks & call money 1,223 1,431 1,739 2,131
- YoY Growth (%) 13.6 27.6 7.0 (6.0) Investments 12,119 13,163 16,328 19,498
Profit Before Tax 793 831 918 1,215 Advances 22,392 27,318 33,601 41,666
- YoY Growth (%) 58.6 4.8 10.5 32.3 - Growth (%) 18.4 22.0 23.0 24.0
Provision for Taxation 293 282 312 413 Fixed Assets 281 319 376 447
- as a % of PBT 36.9 34.0 34.0 34.0 Other Assets 572 669 813 996
PAT 500 548 606 802 Total Assets 38,800 45,396 55,173 67,609
- YoY Growth (%) 36.0 9.5 10.5 32.3 - Growth (%) 19.7 17.0 21.5 22.5
38

40. Gujarat State Fertiliser Corp
(CMP/TP: Rs209/280)
Key beneficiary of new Subsidy regime: GSFC is amongst the top DAP players in the country with total
volume market share of 7%. DAP is the second highest consumed fertiliser in the country, and with the coming
up of Nutrient-based Subsidy regime wherein companies would be allowed to freely price DAP, we expect
GSFC to emerge beneficiary of the same.
JV to guarantee key raw material supply: Phosphoric acid is the key raw material required to manufacture
DAP, which is in turn manufactured from rock phosphate. Globally, few countries have rock phosphate mines.
GSFC’s has set up a joint venture (JV) in Tunisia for the manufacture of phosphoric acid. The JV would
guarantee uninterrupted supply of the acid.
Assets below Replacement cost: GSFC’s DAP manufacturing assets are available at attractive valuation of
Rs16,077/tonne against the current replacement cost of Rs20,000/ton. Hence, we expect GSFC to continue to
post good Profitability going forward. This further provides deep value in the stock.
Improving Profitability, good Dividend yield and cheap Valuations: GSFC’s FY10 performance is likely to
be muted due to the correction in commodity prices and high base effect of FY09 We expect RoCE and RoE
FY09.
to improve from 12.9% and 13.1% in FY2010E to 16.3% and 15.3% in FY2012E. If we were to assume the
company shares Profits in line with most other PSUs, the dividend yield works out to 7% on FY12E DPS. At
current valuation of 0.6x FY12E Book Value, the stock is trading at cheap valuations. Hence, we recommend a
Buy on the stock, with a Target Price of Rs280 (incl dividend), providing an upside of 34%.
Valuation Snapshot
EPS (Rs) RoE(%) P/E(x) P/BV(x) EV/Sales(x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
33.6 39.4 48.4 13.1 13.8 15.3 6.2 5.3 4.3 0.8 0.7 0.6 0.3 0.3 0.2
39

41. Gujarat State Fertiliser Corp
Improving EBITDA Margin Profits have bottomed out
18 600
500
16
400
Rs cr
(%)
14 300
200
12
100
10
0
FY2009 FY2010E FY2011E FY2012E
FY2009 FY2010E FY2011E FY2012E
Source: Company, Angel Securities Source: Company, Angel Securities
Profitability to bottom out in FY2010 Debt free by FY2012
40 0.2
02
35 0.2
0.2
30
0.1
ebt:Equity (x)
25
0.1
(%)
20
0.1
15
0.1
De
10 0.1
5 0.0
0 0.0
FY2009 FY2010E FY2011E FY2012E 0.0
RoE RoCE FY2009 FY2010E FY2011E FY2012E
Source: Company, Angel Securities
p y, g Source: Company, Angel Securities
p y, g
40

42. Gujarat State Fertiliser Corp
Profit & Loss Statement Balance Sheet
Y/E March FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 5,881 4,133 4,354 4,587 SOURCES OF FUNDS
Equity Share Capital 80 80 80 80
% chg 64.8
64 8 (29.7)
(29 7) 5.3
53 5.3
53
Preference capital - - - -
Total Expenditure 4,909 3,658 3,818 3,986
Reserves & Surplus 1,852 2,082 2,312 2,558
EBIDTA 972 475 536 601 Shareholders fund 1,931 2,162 2,392 2,638
(% of Net Sales) 16.5 11.5 12.3 13.1 Total Loans 324 389 117 23
Deferred Tax Liability 172 172 172 172
Other Income 71.3 96.5 97.0 127.5
Minority Interest - - - -
Depreciation & Amortisation 143.0 142.9 146.5 150.9
Total Liabilities 2,427 2,722 2,680 2,833
Interest 95.8 32.1 20.2 5.6 APPLICATION
PBT 804.4 396.8 465.8 571.9 Gross Block 3,215 3,280 3,378 3,479
Less: Acc.Depreciation 2,013 2,156 2,302 2,453
(% of Net Sales) 13.7 9.6 10.7 12.5
Net Block 1,202 1,124 1,076 1,026
Tax 240.6 129.1 151.7 186.1 Capital Work-in-Progress 51 51 51 51
(% of PBT) 29.9 32.5 32.6 32.5 Investments 606 606 606 606
Current A
C Assets 1,463
1 463 1,782
1 82 1,913
1 913 2,259
22 9
Exception item 65.2 0.0 0.0 0.0
Current liabilities 895 841 965 1,109
PAT 498.6 267.7 314.1 385.8
Net Current Assets 568 942 948 1,150
% chg 110.8 (46.3) 17.3 22.8 Total Assets 2,427 2,722 2,680 2,833
41

43. IVRCL Infra
(CMP/TP: Rs167/240)
Restructuring to Re-form: IVRCL in a restructuring program will transfer its BOT assets (road and water
assets) to its listed subsidiary, IVR Prime. We believe that this move will benefit both the companies, viz. 1) IVR
Prime to have consistent Revenue stream, leverage excess Net Worth for winning more BOT projects and raise
money via Equity route to fund its growth, and 2) IVRCL to focus on EPC work and experience traction in inflow
on the back of enhanced Asset portfolio of IVR Prime
Prime.
Expect huge Order inflows, strong L1 status: IVRCL has a robust Order Book of Rs17,500cr or 2.8x its
FY10E Revenues with a strong L1 status of around Rs4,500cr, the highest in the company’s history till date.
We believe that this robust Order Book provides visibility on the Top-line front for the next 24-30 months.
Further, the company has also been diversifying to reduce dependence on Andhra Pradesh.
, p y y g p
Short-term concerns provide Buying opportunity: IVRCL has around 22% of its Order Book coming from
the state of AP (facing a crisis) owing to which the stock has underperformed in the last three months.
However, we would like to take a long-term call on IVRCL, which offers an exposure to the road and irrigation
theme of India’s infra story. Thus, we recommend a Buy on the stock. Further, the excellent track record, strong
management team at the helm of affairs and compelling valuations also gives us comfort.
Valuation Snapshot
EPS (Rs) RoE (%) Adj. P/E (x)* Adj. P/BV (x)* Adj. EV/Sales (x)*
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
8.6 11.6 12.9 12.0 14.0 13.5 12.7 9.4 8.4 1.4 1.3 1.1 0.8 0.7 0.7
Note: * Adjusted for stake in subsidiaries
42

44. IVRCL Infra
Order Book spread across 21 states lends revenue visibility… …Margins to recover given lower commodity prices
3% 15% 10,000 10.0
22% 9.9
9,000 9.8
3%
8,000 9.6
4% 7,000 9.4 9.5 9.4
4% 9.3
93
6,000 9.2
26% 5,000 9.0
4% 4,000 8.8
3,000 8.6 8.6
5%
2,000 8.4
5% 1,000 8.2
9% - 8.0
AP Maharashtra Tamilnadu Karnataka MP Orissa FY08 FY09 FY10E FY11E FY12E
Gujarat UP Punjab West Bengal Other states Sales (Rs cr, LHS) EBITDA (Rs cr, LHS) EBITDA Margins (%, RHS)
Source: Company, Angel Securities Source: Company, Angel Securities
Trading at discount to historical P/E band… …in spite of significant Embedded Value
40.0
40 0 300
35.0
250
30.0
25.0 200
20.0
150
15.0
10.0 100
5.0
0.0 50
1-Jul-02
1-Jan-03
1-Jul-03
1-Jan-04
1-Jul-04
1-Jan-05
1-Jul-05
1-Jan-06
1-Jul-06
1-Jan-07
1-Jul-07
1-Jan-08
1-Jul-08
1-Jan-09
1-Jul-09
1-Jan-10
1-Apr-02
1-Oct-02
1-Apr-03
1-Oct-03
1-Apr-04
1-Oct-04
1-Apr-05
1-Oct-05
1-Apr-06
1-Oct-06
1-Apr-07
1-Oct-07
1-Apr-08
1-Oct-08
1-Apr-09
1-Oct-09
0
IVRCL Standalone IVR Prime Hindustan Dorr- SOTP Target Price
P/E 7YEAR AVG 5YEAR AVG 3YEAR AVG Construction Oliver
Source: Company, Angel Securities
p y, g Source: Company, Angel Securities
p y, g
43

45. IVRCL Infra
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 4,882 5,941 7,570 8,741 SOURCES OF FUNDS
g
% chg 33.4 21.7 27.4 15.5 Equity Share Capital 26.70 55.5 55.5 55.5
Total Expenditure 4,460 5,390 6,855 7,914 Reserves& Surplus 1,784 2,095 2,395 2,792
EBIDTA 421.5 550.8 714.6 827.0 Shareholders Funds 1,810 2,151 2,451 2,847
(% of Net Sales) 8.6 9.3 9.4 9.5 Total Loans 1,398 1,946 2,567 3,119
Deffered Tax Liability
e e ed a ab ty 11.7 10.0
00 10.0
00 7.0
0
Other Income 29.9
29 9 20.0
20 0 18.4
18 4 38.0
38 0
Total Liabilities 3,220 4,106 5,027 5,973
Depreciation& Amortisation 47.3 59.3 65.7 79.0
APPLICATION OF FUNDS
Interest 130.6 156.5 185.7 245.1
Gross Block 662.35 732.35 842.35 1,067.35
PBT 273.4 355.0 481.6 541.0
p
Less: Acc. Depreciation 141.65 200.97 266.68 345.66
(% of Net Sales) 5.6 6.0 6.4 6.2
Net Block 520.70 531.38 575.67 721.69
Extraordinary Expense/(Inc.) - - - -
Capital Work-in-Progress 19.55 143.47 132.40 144.34
Tax 47.8 117.2 158.9 183.9 Investments 388.68 388.68 388.68 388.68
(% of PBT) 17.5 33.0 33.0 34.0 Current Assets ,
3,814 4,669
, 5,736
, 7,273
,
PAT 225.6 237.9 322.7 357.0 Current liabilities 1,523 1,626 1,806 2,554
% chg 7.1 5.4 35.7 10.7 Net Current Assets 2,291 3,043 3,931 4,719
(% of Net Sales) 4.6 4.0 4.3 4.1 Total Assets 3,220 4,106 5,027 5,973
44

46. Jagran Prakashan
(CMP/TP: Rs120 /160)
Prefer Regional Print Media to English: We continue to prefer the Regional Print Media over English owing
to its lower penetration levels. According to IRS 2009, print media penetration among the rural literates is very
low at 21% v/s 42% of urban literates. Thus, there is significant scope for growth in the Circulation and
Readership of Hindi newspapers as is evident from the fact that out of the 359mn people who can read in India,
do not currently read any publication while 68% can read Hindi
publication, Hindi.
Recovery in Advertising to drive 17% CAGR in Top-line: With economic recovery is on-track and sectors
like BFSI, Real Estate and Auto are registering higher growth rates, we expect Jagran to post up-tick in its
Advertising Revenues. Moreover, we expect Jagran to announce 8-10% rate hike in the coming months, which
should help drive 17% CAGR in Revenues during FY2010-12E (aided by low base).
Higher Margins likely to sustain: Significant slide in Newsprint prices coupled with cost rationalisation
measures have helped Jagran improve is Operating Margins by almost 1,000bp to 29% (19%) in FY10.
Moreover, with the Newsprint prices expected to remain benign (modeled in 8-10% hike), Rupee to appreciate
and lower losses in new initiatives, we expect Jagran to sustain current Margin levels.
Re-iterate as Top Pick in Print Media: We maintain Jagran as our Top Pick in the Print Media space owing to
its dominant position in the Hindi Belt, increasing colour ad inventory and ability to attract high amount of local
advertising. We maintain a Buy on the stock, with a Target Price of Rs160 (Rs125) based on P/E multiple of
20x FY12E.
Valuation Snapshot
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
5.7 6.7 8.0 28.5 30.5 33.2 20.9 17.9 15.0 6.0 5.5 5.0 4.0 3.4 2.9
45

47. Jagran Prakashan
Low Penetration among Rural literates - potential for Hindi Print Strong Revenue and Earnings growth for FY2010-12E
Earnings CAGR (%)
Language Urban Rural Total 25.0 Top-line CAGR (%)
21.0
20.0
17.9
16.8
14.4 15.0
15 0 14.5
14 5
Population (Mn) 272 590 862 15.0
12.8 13.1
10.0
Literacy (%) 83% 62% 68% 5.0
-
Readership (% of Literates) 42% 21% 29% JPL HTML DB Corp DCHL
Source: IRS 2009, Angel Securities Source: Company Angel Securities
Sharp spike in Margins likely to sustain due to benign Newsprint Highest Return Ratios (RoCE %) in Print Media
40 37
35.0 45.0
35 33
41.5 43.0
29.7 30.2
30.0 29.3 41.0 30 28
39.4
25 25 26
39.0 24 25 25
25
25.0 37.0
21.9
20
35.0 17
16 15 16
32.7 14
20.0 19.0 31.6 33.0 15
31.4 12
31.0 10
15.0 29.0
5
27.0 2
10.0 25.0 -
FY2008 FY2009 FY2010E FY2011E FY2012E FY2009 FY2010E FY2011E FY2012E
OPM % (LHS) RM Costs % of Sales (RHS) JPL HTML DB Corp DCHL
Source: Company Angel Securities
p y g Source: Companies, Angel Securities
p g
46

48. Jagran Prakashan
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 823.4 928.2 1,092.3 1,267.2 SOURCES OF FUNDS
Equity Share Capital 60.2 60.2 60.2 60.2
% chg 9.8
98 12.7
12 7 17.7
17 7 16.0
16 0
Preference Share Capital - - - -
Total Expenditure 666.7 656.4 768.3 884.5
Reserves& Surplus 499.7 545.8 599.1 663.2
EBIDTA 156.7 271.8 324.1 382.6 Shareholders Funds 559.9 606.0 659.4 723.4
(% of Net Sales) 19.0 29.3 29.7 30.2 Total Loans 141.5 126.5 106.5 86.5
Deferred T Liability
D f d Tax Li bilit 52.1
52 1 52.1
52 1 52.1
52 1 52.1
52 1
Other Income 22.7 40.1 34.7 38.3
Minority Interest - - - -
Depreciation& Amortisation 38.3 49.3 54.6 59.8
Total Liabilities 753.5 784.5 817.9 862.0
Interest 5.9 6.3 5.9 5.2 APPLICATION OF FUNDS
PBT 135.2
135 2 256.2
256 2 298.3
298 3 355.9
355 9 Gross Block 479.5 580.1 642.6 704.0
Less: Acc. Depreciation 151.3 200.6 255.2 315.0
(% of Net Sales) 16.4 27.6 27.3 28.1
Net Block 328.2 379.5 387.4 388.9
Extraordinary Exp / (Inc) 0.0 0.0 0.0 0.0 Capital Work-in-Progress 70.7 87.0 96.4 105.6
Tax 43.6 83.3 96.9 115.7 Investments 156.8 156.8 156.8 156.8
Current Assets 360.1 336.1 382.2 440.5
(% of PBT) 32.2 32.5 32.5 32.5
PAT( After Minority Current liabilities 162.4 174.9 204.8 229.9
91.6 173.0 201.3 240.2
Interest) Net Current Assets 197.7 161.2 177.4 210.6
% chg -6.6 88.8 16.4 19.3 Total Assets 753.5 784.5 817.9 862.0
47

49. Jyoti Structures
(CMP/TP: Rs168/220)
Huge Opportunity for Transmission EPC Players: The government has envisaged an investment in the
Transmission sector of Rs1.4lakh crore for the 11th Plan (an increase of over two times from the investments
made in the 10th Plan) and Rs2.4lakh crore for the 12th Plan. Around 40-45% of the total Transmission capex
and 15-20% of total APDRP and RGGVY spend, works out to a potential opportunity for transmission EPC
players.
players Factoring around 80 85% achievement we estimate the total opportunity to be around
80-85% achievement,
Rs60,000-65,000cr during the 11th Plan period alone.
Healthy Order Book provides Revenue visibility: JSL has a healthy Order book of Rs4,030cr (1.9x
FY2010E Revenues), which provides good Revenue visibility and cushions it from short-term order
fluctuations. Besides,
fluctuations Besides unlike peers the large domestic presence (with exports constituting around 5% of Order
peers,
Backlog), which has price variation clause, helps to insulate Margins from input price fluctuations and volatile
currency movements.
Attractive Valuations: Currently, the stock is trading at 11.6x and 9.7x FY11E and FY12E EPS respectively,
which we believe is attractive, given that the stock has commanded an average one-year forward P/E of
one year
13-13.5x in the past five years. We believe that the stock is likely to command better valuations, underpinned
by the strong financial performance (EPS CAGR of 20.2% in FY09-12E and high average RoEs of 20-21%).
We assign a multiple of 13x (based on 5-year average) and recommend a Buy on the stock.
Valuation Snapshot
EPS (Rs) p RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
12.0 14.2 16.9 21.4 20.9 20.7 14.0 11.9 10.0 2.7 2.3 1.9 0.8 0.7 0.6
48

50. Jyoti Structures
Huge Opportunity for Transmission EPC players (Rs cr) Transmission Capex Components
300,000 Components % Spend
240,000 Transmission Lines (50%)
250,000
Design & Testing 10
200,000 Towers 30
Conductors & Insulators 30
(Rs cr)
150,000 140,000
Construction 30
100,000 Total 100
44,740 Substation (50%)
50,000
Engineering & Design 10
0 Transformers 30
10th Plan 11th Plan 12th Plan Switchgears, circuit b k
S it h i it breakers etc.
t 35
Transmission Capex Civil work 25
Total 100
Source: MoP, CEA, Angel Securities Source: Industry, Angel Securities
Order Book Coverage Healthy Return Ratios
6,000 2.5 25.7 27.9
2.2 30.0
2.1
5,000 2.0 23.6
1.8 1.9 2.0 25.0
1.8 1.8 21.1 21.4 20.9 20.7
4,000 20.0
1.5 21.2
19.7
( Rs cr)
19.6
(
18.0 19.0 19.0 19.2
3,000 % 15.0
)
1.0
2,000
2 000 10.0
10 0
0.5
1,000 5.0
0 0.0 0.0
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
RoE RoCE
Order Backlog (LHS) Revenues (LHS) Coverage Ratio (RHS)
Source: Company, Angel Securities Source: Company, Angel Securities
49

51. Jyoti Structures
Profit & Loss Statement Balance Sheet
Y/E Mar FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 1,717 2,105 2,508 2,908 SOURCES OF FUNDS
% chg 25.3 22.6 19.2 15.9 Equity Share Capital 16.3 16.4 16.4 16.4
Total Expenditure 1,521 1,873 2,235 2,596 Adj Reserves & Surplus 400.4 489.5 593.3 716.5
Shareholders Funds 416.7 505.9 609.7 732.9
EBITDA 195.9 231.5 273.4 312.6
Total Loans 303.6 363.6 393.6 393.6
% of Net Sales 11.4 11.0 10.9 10.8
Deferred Tax Liability (Net) 8.2 8.2 8.2 8.2
Others
Oth 7.3
73 10.5
10 5 12.5
12 5 14.5
14 5
Total Liabilities 728.6 877.7 1,011.5 1,134.7
Depreciation & Amortisation 8.6 14.0 16.7 17.9
APPLICATION OF FUNDS
Interest 68.3 75.1 89.0 94.5 Adj Gross Block 168.8 230.8 247.6 262.6
PBT 126.4 153.0 180.2 214.9 Less: Acc. Depreciation 52.1 66.1 82.8 100.7
% of Net Sales 7.4 7.3 7.2 7.4 Net Block 116.7 164.7 164.7 161.9
Capital Work-in-progress 4.4 2.4 0.6 0.6
Tax 46.6 54.3 64.0 76.3
Investments 23.1 23.1 23.1 23.1
Effective Tax Rate (%) 36.9 35.5 35.5 35.5
Current Assets 1,100.7 1,192.1 1,496.2 1,647.1
Reported PAT 79.7
79 7 98.7
98 7 116.3
116 3 138.6
138 6
Current Liabilities 517.4 505.7 674.3 699.0
Exceptionals 0.0 0.0 0.0 0.0 Net Current Assets 583.3 686.4 821.9 948.0
Adjusted PAT 79.7 98.7 116.3 138.6 Others 1.2 1.2 1.2 1.2
% chg 10.1 23.7 17.8 19.2 Total Assets 728.6 877.7 1,011.5 1,134.7
50

52. Spicejet
(CMP/TP: Rs58/80)
Load factors expected to remain healthy in coming quarters: Owing to the huge capacity expansion in the last few
years and plummeting demand in FY2009, Airlines suffered substantial losses in the last nine months and virtually did not
have any fleet additions. In fact, some players like Kingfisher even rationalised their fleet (down from 88 to 66). However,
with demand bouncing back significantly in the last nine months, all low-cost carriers (LCC) have been reporting strong
load factors of around 80%+. Moreover, given the high under-penetration in India, demand is expected to record 12-15%
CAGR over th next th
the t three years, th
though capacity i unlikely t get augmented. M
h it is lik l to t t d Moreover, l large orders b players lik
d by l like
Kingfisher are likely to get deferred owing to weak Balance Sheets.
Higher Load Factor to increase Profitability: Given that almost all costs are largely fixed in the Aviation Industry,
improvement in load factor is expected to drive substantial spurt in Profits, which was clearly visible for Spice Jet where it
reported excellent load factor of 80-90% over the last six months (one of the highest compared to competition) and
reported Net Profit of Rs109cr (Rs-43cr) in 3QFY10. Due to its Operating lease based, low-cost model, SpiceJet’s
EBITDAR Margins are also the highest compared to listed peers (Jet Airways-20.2%, JetLite-17.7% and SpiceJet-31%).
Increasing fleet and strengthening Balance Sheet: SpiceJet is set to take delivery of around 9 planes by FY12E (19%
CAGR) taking its total fleet to 27 planes. The increase in capacity and strong load factor provides strong Revenue
visibility for SpiceJet, while Net Profit is estimated to come in at Rs371cr in FY12E. The company’s US $80mn FCCBs
y y
are likely to get converted by December 2010; the company is also planning to raise around Rs350cr through a QIP.
Together with strong Profitability, the company’s Balance Sheet strength will also go up significantly, with an estimated
Net Worth of around Rs920cr by FY12E and zero debt. Factoring FCCB conversion and excluding cash per share, the
stock is trading at attractive FY2012E P/E of 4.8x. We value the stock at 7x FY2012E EPS and have arrived at a Target
Price of Rs80.
Valuation Snapshot
EPS( Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
5.0 7.2 9.2 - 51.0 40.4 10.8 7.7 4.8 - 4.4 2.6 0.7 0.5 0.3
51

53. Spicejet
Aviation Sector to experience highest domestic annual growth (%) Expected domestic fleet additions
12 CY2009 CY2010E CY2011E CY2012E
10
10 AIR India 0 0 0 0
8
8 Indian Airlines 80 80 81 81
6 6
6 5 5 5
4 Jet Airways 63 63 68 78
4 3
2 Jet Lite 16 16 18 20
2
Indigo 25 34 42 52
-
Kingfisher 46 46 58 73
South Africa
entral Europe
North Africa
estern Europe
China
Russia
India
U.S
Australia/New
Brazil
Spice jet 19 20 24 27
Zealand
Paramount 5 5 5 5
Go air 8 8 8 8
A
Ce
We
Total 262 272 304 344
20 years annual domestic growth f orecast Growth (%) 4 12 13
Source: Airbus, Company, Angel Securities Source: Company, Angel Securities
Domestic Airlines Load Factor set to increase Spice Jet Profits to surge with increasing load factor
90000 80% Gross Margin/ASKM(LHS) Cost/ASKM(LHS) Load Factor(RHS)
2.0 90%
80000 84%
70% 1.8 79% 79%
73%
74% 79% 80%
70000 Stagnant 60% 1.6 67% 1.7 1.7 70%
60000
Km(mn)
50% 1.4 1.5 1.5 1.5
1.4 60%
50000 1.2 1.3 1.3 1.4 1.3
40% 50%
1.1
(Rs)
40000 1.0
30% 1.0 1.0 1.0 40%
30000 0.8
20% 0.6
06 30%
20000
0.4 20%
10000 10%
0.2 10%
0 0%
- 0%
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10E
FY11E
FY12E
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Domestic ASKM mn(LHS) Domestic RPKM mn(LHS) Load Factor%(RHS) P/(L)(Rs cr) (33) (77) (133.5) (352.6) 121.7 279.2 371.4
Source: DGCA, Company, Angel Securities
, p y, g Source: Company, Angel Securities; Note: Gross Margin = Operating Revenue – ATF cost
p y g g p g
52

54. Spicejet
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Net Sales 1,689.4 2,158.2 2,886.9 3,389.0
Equity Share Capital 241.0 241.0 403.6 403.6
% chg 30.5
30 5 27.7
27 7 33.8
33 8 17.4
17 4
Preference Share Capital - - - -
Total Expenditure 2108.6 2074.2 2,586.0 3,004.7 Reserves& Surplus (670.5) (548.7) 144.0 515.0
EBIDTA (419.2) 84.0 300.9 384.3 Shareholders Funds (429.5) (307.7) 547.6 918.6
Total Loans 488.8 488.8 - -
(% of Net Sales) (24.8) 3.9 10.4 11.3
Deferred Tax Liability
y - - - -
Other Income 124.1 54.0 52.1 77.5 Minority Interest - - - -
Depreciation& Amortisation 7.3 8.0 8.4 8.9 Total Liabilities 59.4 181.1 547.6 918.6
APPLICATION OF FUNDS
Interest 16.0 8.2 4.1 -
Gross Block 95.8 100.6 105.6 110.9
PBT (318.3) 121.7 340.4 452.9
Less: A
L Acc. D
Depreciation
i ti 28.2
28 2 36.3
36 3 44.7
44 7 53.6
53 6
(% of Net Sales) (19) 5.7 11.8 13.4 Net Block 67.6 64.3 60.9 57.3
Exceptional & Prior Period Capital Work-in-Progress 185.3 164.7 82.3 6.8
30.9 - - -
Expenses Investments - - - -
Tax 3.3 - 61.3 81.5 Current Assets 497.9 733.3 1.159.9 1,653.1
(% of PBT) (0.1) - 18 18 Current liabilities 691.4 781.3 755.5 798.2
PAT( After Minority Net Current Assets (193.5) (47.9) 404.3 854.9
(352.6) 121.7 279.2 371.4
Interest) Deferred Rev. Exp - - - -
% chg 164.1 - 129.4 33.0 Total Assets 59.4 181.1 547.6 918.6
53

55. TAJGVK
(CMP/TP: Rs149 /240)
Hotel Industry witnessing signs of revival: We expect the Hotel Industry to witness an uptrend from 4QFY10E
considering the visible signs of economic revival coupled with delays on the supply side (around 26% under
supply over earlier industry estimates till CY13E). We expect business destinations like Hyderabad and Chennai
where TAJGVK has a presence, to significantly benefit as business sentiment gathers steam. Signs of improving
demand are visible with occupancy rates (OR’s) and average room rates (ARR’s) climbing up and expected to
further
f th scale up.
l
Diversification to de-risk business model: To diversify its presence and spread out geographical risks, TAJGVK
opened a property in Chennai in December 2008 thereby lowering Hyderabad’s room concentration to 59% in
FY2009 from 78% in FY2008. The company also plans to target the mid-market segment through its upcoming
property in Begumpet in Hyderabad along with exploring possibilities of a tie-up with IHCL’s ‘Ginger’. There are
plans to enter the Bangalore market too, for which land has already been acquired.
Asset-light expansion strategy to keep Balance Sheet healthy : TAJGVK is adding 189 rooms in Begumpet
adopting an Asset-light strategy to maintain its Debt-Equity ratio at comfortable levels of 0.3x in FY12E. This, we
believe, will provide adequate room for the company to plan further expansions.
Attractive Valuations: Currently, the stock is trading at attractive valuations of 16.9x and 12.5x FY11E and
FY12E EPS respectively, given that the stock has mostly traded in a P/E band of 13-24x over FY04-10E, which
covers one cycle for the Industry. Moreover, at FY12E EV/room of Rs1.2cr, TAJGVK is the cheapest in
comparison to its peers (EV/room between Rs1.5-2cr). Hence, we expect the stock to witness a re-rating on the
back of robust Earnings growth and revival signs in the industry. We recommend a Buy on the stock, with a Target
Price of Rs240.
Valuation Snapshot
EPS ( Rs) RoE (%) P/E (x) P/BV (x) EV/room (Rs cr)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
4.7 9.0 12.2 10.1 16.4 18.7 31.5 16.6 12.3 3.2 2.7 2.3 1.2 1.2 1.1
54

56. TAJGVK
Foreign Tourist Arrivals (FTA’s) Growth Trend (CY98-09) Recovering FTAs and Occupancy Trend
6,000 30 0.25 90
25
5,000 0.2 80
20 0.15 70
4,000
15
0.1 60
3,000
, 10 Tourist Arrival trend
0.05 Global slowdown & 50
5 recovering g
2,000 Terrorism Impact
0 40
0 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10
1,000
(5) -0.05 30
0 (10) -0.1 20
CY1998
CY1999
CY2000
CY2001
CY2002
CY2003
CY2004
CY2005
CY2006
CY2007
CY2008
CY2009P
-0.15 10
-0.2 0
C
Foreign Tourist Arrivals (in '000) Growth % FTA's growth trend (July 2008 - February 2010) Occupancy rates (in %)
Source: Company, Angel Securities Source: Company, Angel Securities
Room Supply estimates for CY13E (Old and Revised)
Financial Forecast
Old New % inc/dec
Business locations 400 50
Ahmedabad 350 730 108.6 45
Bangalore 6461 4554 (29.5) 350
40
Chennai 4002 3533 (11.7) 300
35
Hyderabad 5353 3027 (43.5) 250 30
Kolkata 4253 1649 (61.2) 200 25
NCR 14096 10697 (24.1) 20
North Mumbai 8709 7081 (18.7) 150
15
South Mumbai 2790 2704 (3.1)
(3 1) 100
10
Pune 2977 1180 (60.4) 50 5
Leisure locations 0 0
Agra 1971 1756 (10.9)
FY2008 FY2009 FY2010E FY2011E FY2012E
Goa 3544 3972 12.1
Jaipur 2791 1982 (29.0) Sales (Rs cr.) EBIDTA (Rs cr.) Net Prof it (Rs cr.)
Kerala 2924 2208 (24.5)
EBIDTA margin (%) Net prof it margin (%)
Total 60,221 45,073 (25.2)
Source: A
S Angel S
l Securities
iti Source: C
S Company, A
Angel S
l Securities
iti
55

57. TAJGVK
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 237.5 223.6 298.3 342.4 SOURCES OF FUNDS
% chg (7.8)
(7 8) (5.8)
(5 8) 33.4
33 4 14.8
14 8 Equity Share Capital
q y p 12.5 12.5 12.5 12.5
Adj Reserves & Surplus 258.5 281.1 330.3 395.4
Total Expenditure 136.7 146.7 177.2 195.9
Shareholders Funds 271.0 293.7 342.9 407.9
EBITDA 100.8 76.9 121.1 146.6
Total Loans 139.0 162.0 184.0 124.0
% of Net Sales 0.4 0.3 0.4 42.8
Deferred Tax Liability (Net) 12.2 12.2 12.2 12.2
Others 1.2 1.2 1.7 2.6 422.3 467.9 539.1 544.1
Total Liabilities
Depreciation & Amortisation 13.7 18.9 19.0 19.4 APPLICATION OF FUNDS
Interest 6.6 13.9 17.3 12.4 Adj Gross Block 463.1 534.8 625.9 650.9
PBT 81.7 45.3 86.5 117.3 Less: Acc. Depreciation 89.1 108.0 127.1 146.5
Net Block 374.0 426.8 498.8 504.4
% of Net Sales 34.4 20.3 29.0 34.3
Capital Work-in-progress 69.4 45.0 25.0 25.0
Tax 28.9 15.6 30.3 41.1
Investments - - - -
Effective Tax Rate (%) 35.4 34.5 35.0 35.0
Current Assets 32.7 48.4 85.5 95.6
Reported PAT 52.8
52 8 29.7
29 7 56.2
56 2 76.3
76 3
Current Liabilities 55.5 53.9 71.9 82.6
Exceptionals (0.6) 0.0 0.0 0.0
Net Current Assets (22.8) (5.5) 13.6 13.0
Adjusted PAT 53.3 29.7 56.2 76.3 Others 1.7 1.7 1.7 1.7
% chg (24.6) (44.3) 89.4 35.6 Total Assets 422.3 467.9 539.1 544.1
56

58. Small Caps

59. Fag Bearings (FAG IN)
(CMP/TP: Rs509/626)
Industry outlook encouraging: In a developing economy like India, with a greater focus on mechanisation of
the manufacturing process, the demand for bearings is expected to outperform industrial growth.
Consequently, the Industrial Segment (which accounts for almost 50% of the Indian Bearings market) offers
immense growth opportunity for the Bearings industry. Moreover, the Bearings Segment has a direct
g pp y g y g g
correlation with the Auto Sector growth, which is expected to grow at around 10% per annum over the next 2-3
years.
Strong support from parent company: FAG India is a FAG Kugelfischer George Schaefer AG Group
company. The parent manufactures bearings for automotive and industrial applications. FAG India is a
preferred supplier of bearing systems to some of the leading manufacturers of cars and trucks like Maruti
trucks, Maruti,
M&M, Tata Motors, GM, Ford and Daimler Chrysler. Notably, with global players looking at enhancing their
capacities in India, FAG can enjoy an edge over its peers to supply to these OEMs in India.
Attractive Valuations: The stock is currently trading below its average historical valuations, at 11.1x
C 0 0 a d98 C 0
CY2010E and 9.8x CY2011E Earnings. It is also attractively placed on P/BV basis and is currently trading at
a gs s a so a ac e y p aced o / bas s a d s cu e y ad g a
1.6x CY2010E and 1.4x CY2011E BV (as against its average historical valuation of 2x one-year forward Book
Value). At our Target multiple of 12x CY2011E and 2x CY2011E BV, we have arrived at a Target Price of
Rs626. Further, FAG Bearings scores well over its peers and we believe that it is a good long-term investment
pick, in view of its strong financials.
Valuation Snapshot
V l ti S h t
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales( x)
CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E
46.4 45.7 52.2 14.3 14.5 14.5 11.0 11.1 9.8 1.8 1.6 1.4 0.8 0.7 0.6
58

60. Fag Bearing
Bearing Industry Revenue Growth Trend Return Ratios
25.0 50
20.0 40
15.0
15 0 30
10.0 20
5.0 10
0.0 0
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E
CY2004 CY2005 CY2006 CY2007 CY2008 CY2009E CY2010E CY2011E
(5.0)
RoCE (%) RoIC (%)
IIP Growth (%) Bearing Industry Sales Growth (%)
Source: Bloomberg, BRBMA, Angel Securities Source: Company, Angel Securities
Relative Valuation One Year Forward EV/Sales chart
Company
C FAG SKF Timken
Ti k NRB 2,000
2.0x
1,800
CMP (Rs) 531.2 353.1 110.0 67.0 1,600
1.5x
1,400
Mcap (Rs cr) 882.6 1862.0 700.6 324.6
EV (Rs cr)
1,200
EPS (Rs) 39.4 17.9 5.1 3.6 1,000 1.0x
800
RoE(%) 16.3
16 3 14.6
14 6 10.9
10 9 10.1
10 1 600
0.5x
400
P/E(x) 13.5 19.7 21.6 18.4 200
0
P/BV(x) 2.2 2.9 2.4 1.9
Nov-02
Sep-03
Dec-04
Aug-06
Nov-07
Sep-08
Dec-09
Apr-03
Oct-05
Apr-08
Feb-04
Jul-04
May-05
Mar-06
Feb-09
Jul-09
Jan-02
Jun-02
Jan-07
Jun-07
EV/EBITDA(x) 7.4 10.3 16.2 9.0
Source: C-Line, Company, Angel Securities; Note: Valuations on TTM basis
, p y, g ; Source: C-Line, Company, Angel Securities
59

61. Fag Bearing
Profit & Loss Statement Balance Sheet
Y/E December (Rs cr) CY2008 CY2009 CY2010E CY2011E Y/E December (Rs cr) CY2008 CY2009 CY2010E CY2011E
Net Sales 762.0 818.7 919.7 1,021.5
SOURCES OF FUNDS
% chg 17.0 7.4 12.3 11.1
Equity Share Capital 16.6 16.6 16.6 16.6
Total Expenditure 599.6 694.5 784.5 868.3
Reserves& Surplus 388.4 444.2 509.5 584.5
EBIDTA 162.4 124.1 135.2 153.2 Shareholders Funds 405.0 460.8 526.1 601.1
(% of Net Sales) 21.3 15.2 14.7 15.0 Total Loans - - - -
Other Income 6.0 7.8 5.0 6.0 Deffered Tax Liability (net) 5.8
58 5.8
58 5.8
58 5.8
58
Depreciation& Amortisation 20.6 20.1 24.2 26.9 Total Liabilities 410.8 466.6 531.8 606.8
Interest 0.5 0.7 0.9 1.0 APPLICATION OF FUNDS
PBT 147.4 111.1 115.1 131.3 Gross Block 400.2 442.5 484.0 537.6
(
(% of Net Sales)
) 19.3 13.6 12.5 12.9 Less: Acc Depreciation
Acc. 251.8
251 8 271.9
271 9 296.1
296 1 323.0
323 0
Extraordinary Expense/(Inc.) (2.9) 11.5 - - Net Block 148.4 170.6 187.9 214.7
Tax 51.6 34.0 39.1 44.7 Capital Work-in-Progress 15.1 13.3 14.5 16.1
(% of PBT) 35.0 30.6 34.0 34.0 Investments 0.3 4.7 5.3 6.1
PAT 98.6
98 6 65.5
65 5 75.9
75 9 86.7
86 7 Current Assets 385.4
385 4 428.6
428 6 493.6
493 6 557.4
557 4
% chg 24.3 (33.6) 15.9 14.1 Current liabilities 138.4 150.6 169.5 187.4
Ad. PAT 95.7 77.1 75.9 86.7 Net Current Assets 247.0 278.0 324.1 370.0
% chg 20.4 (19.5) (1.4) 14.1 Total Assets 410.8 466.6 531.8 606.8
60

62. Greenply Industries
(CMP/TP: Rs198/291)
Banking on MDF and Laminates: Greenply Industries (GIL) is foraying into the lucrative, high-growth MDF
market, with the largest MDF plant in India (1,80,000 m3/yr capacity), while continuing its strong expansion in
laminates (88% capacity expansion), that is estimated to drive 25% CAGR in Sales over FY10-12E. GIL is
witnessing very strong demand for its laminate products, with both its new production lines running at full
capacity.
capacity The MDF opportunity is especially huge: MDF constitutes 20% of wood panel consumption in India India,
while plywood constitutes 80% - the reverse holds true globally. China alone consumes around 10-11mn m3/yr
of MDF v/s 0.6mn m3/yr in India. Going forward, with a strict control on issue of new plywood licenses and
5-7% CAGR in panel demand, MDF is likely to meet this demand, translating into 25-30% CAGR for MDF.
Moreover, even out of present consumption, 80% is being met through imports, which GIL can substitute given
high freight costs and 25% anti-dumping duty on imports
imports.
Strong brand, high ad-spend and massive distribution: GIL has leading plywood and laminate brands,
supported by ad-spend as high as 3.3% of sales (around 10% of laminates revenue). The company also has
the largest distribution network of over 15,000 dealers in this industry. These advantages underpin the strong
RoE profile (20% over FY10-12E) of the company's brand-driven business model.
Attractive Valuations: The stock is currently trading at 9.1x FY11E and 5.4x FY12E Earnings (as against its
historical range of 0.6-17x one-year forward Earnings) and it is also attractively priced on P/BV basis and is
currently trading at 1.4x FY11E and 1.2x FY12E (as against its historical trading range of 0.4-3.7x one-year
forward Book Value). At our current target multiple of 8x FY12E, we have arrived at a Target Price of Rs291.
Valuation Snapshot
EPS (Rs) RoE(%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
20.8 21.7 36.4 20.4 17.3 23.3 9.5 9.1 5.4 1.6 1.4 1.2 1.1 0.8 0.7
61

63. Greenply Industries
Sales Breakup- MDF and Laminates to drive growth Global MDF Production and Consumption data
1600 Producers Production Consumption
6
1400
226 China* 24,986,000 22,469,775
1200 6
108
(Rs cr)
1000 y
Germany* 4,380,000 5,040,448
6
5 668
800 542 United States of America* 3,334,680 6,087,006
267 436
3
600
1 217 Turkey* 1,952,000 1,621,000
400 182
555 498 522 548 Brazil* 1,879,000 1,763,000
200 410
284
0
World* 57,313,163 53,701,697
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
India** 200,000 618,400
Plywood Laminates MDF Others
Source: Company, Angel Securities Source: FAO.org Company, Angel Research *(2008 Data) ** (2010E)
Total Revenue highest amongst Peers (FY2009) Higher Ad-spend/Sales resulting in higher RoE’s
Rs7800cr Plywood industriy (20% organised )
Rs7800cr Plywood industriy (20% organised ) Rs3,000cr
Rs3 000cr Laminate industry (50% organised) 3.5
35 25
1% 3.0 22
20
1% 15% 17.8%
2.5
5% 35%
2.0 15
7.1%
(%)
(%)
3.6% 3.3
7% 1.5
66.8% 2.4% 10
5%
0.2%
0 2% 1.0 7
2% 5
32% 0.5 0.7
Greenply Century Ply - -
Greenply Century Ply
Sarda Ply Archidply Golden laminate Bloom Dekor
Kitply Archidply Midcap Companies Greenply Inds.
Uniply U.V Boards
W.I plywoods Rest Rest Ad Cost / Sales(LHS) RoE(RHS)
Source: Company, Angel Securities Source: Company, Angel Securities; Note: Rs 100 to 2,500cr market cap companies
p y, g ; , p p
62

64. Greenply Industries
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 724.9 824.9 1,043.9 1,291.8 SOURCES OF FUNDS
Equity Share Capital 8.5 11.0 12.1 12.1
% chg 33.8
33 8 13.8
13 8 26.6
26 6 23.7
23 7
Preference Share Capital - - - -
Total Expenditure 646 717.7 897.7 1098
Reserves& Surplus 172.4 257.7 323.1 406.5
EBIDTA 78.9 107.2 146.2 193.8 Shareholders Funds 180.9 268.7 335.1 418.6
(% of Net Sales) 10.9 13 14 15 Total Loans 258.0 457.1 430.4 413.4
Deferred T Liability
D f d Tax Li bilit 12.6
12 6 12.6
12 6 12.6
12 6 12.6
12 6
Other Income 2.2 2.3 2.4 2.5
Minority Interest - - - -
Depreciation& Amortisation 17 26.2 42.5 45.2
Total Liabilities 451.5 738.4 778.1 844.6
Interest 19.6 26.7 43 41.3 APPLICATION OF FUNDS
PBT 44.3 56.6 63.0 109.7 Gross Block 273 641.7 679.3 723.5
Less: Acc. Depreciation 73.7 100.0 142.5 187.8
(% of Net Sales) 6.1 6.9 6.0 8.5
Net Block 199.2 541.7 536.8 535.7
Exceptional & Prior Period
- - - - Capital Work-in-Progress 51.7 - - -
Expenses
Tax 7.0 10.8 10.7 21.9 Investments 2.2 2.2 2.2 2.2
Current Assets 386.4 396.4 483.0 597.4
(% of PBT) 15.9 19.0 17.0 20.0
PAT( After Minority Current liabilities 188.1 202.1 243.9 290.8
37.3 45.9 52.3 87.8
Interest) Net Current Assets 198.3 194.5 239.1 306.7
% chg (3.7) 22.9 14.1 67.8 Total Assets 451.5 738.4 778.1 844.6
63

65. Heritage Foods
(CMP/TP: Rs206/291)
Reaping the Profits from under-penetrated Milk Business: A market leader in Andhra Pradesh, with
nearly 14% market share, Heritage Foods is well placed to reap benefits of the secular growth in the
under-penetrated milk business, which is growing at a CAGR of 17.3%. On account of its large presence in the
highly unorganised industry, Heritage commands a strong brand name. Revenue from the Segment stood at
Rs465cr in FY2009, a yoy growth of 22.2%.
y yg
Diversification into value-added Milk Products: Heritage has consistently increased the proportion of Sales
from the higher-Margin value-added products like butter, cream, etc., with milk contributing nearly 80% of
Sales in FY2009. This would help further boost the Dairy Segment’s pre-tax RoCE, which stood at nearly
31.7% in FY2009.
Retail Business to break-even in FY12E: The losses from the Retail business will reduce going forward and
the company projects that the segment will break-even in FY12E. The company also plans to hive off the
business into a new company. Post that, the substantial profits from the Milk business will become clearly
visible to the investors. Hence, the stock is a potential re-rating candidate going ahead.
Outlook and Valuation: We expect the company to clock Net Profit of Rs33.6cr in FY12E from Losses of
Rs35.7cr in FY2009 owing to increase in Sales contribution from the Dairy business and improvement in
performance of the Retail business. Consequently, RoEs would improve to 25.1% in FY12E. We have valued
the company at a P/E of 10x and not assigned any value to the Retail business and have arrived at a Target
Price of Rs291.
Valuation (Rs)
EPS Snapshot RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
7.9 15.2 29.1 9.8 16.4 25.1 26.1 13.6 7.1 2.6 2.2 1.8 0.46 0.42 0.37
64

66. Heritage Foods
Sales Breakup- Dairy Business to Drive Growth Curtailing Retail Losses
1200 35 300 300
32
1000 250 250
29 260
22 237
800 200 200
219
206
600 150 150
400 835 100 100
746
665
593
200 50 50
0 0
0
FY09 FY10E FY11E FY12E
FY09 FY10E FY11E FY12E
Dairy Retail Agri Retail Sales (LHS) Retail EBIT Losses (RHS)
Source: Company Angel Securities Source: Company, Angel Securities
OPM to retrace back to Historical levels Allied products to drive Milk Business Sales
90.00
90 00 8.00
8 00 26%
80.00 7.00
24%
70.00 6.00
60.00 22%
5.00
50.00 20%
4.00
40.00
3.00 18%
30.00
20.00 2.00 16%
10.00 1.00
14%
- -
FY09 FY10E FY11E FY12E 12%
EBITDA (LHS) OPM (RHS) FY06 FY08 FY10E FY12E
Source: Company, Angel Securities Source: Company, Angel Securities
65

67. Heritage Foods
Profit & Loss Statement Balance Sheet
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 792.6 916.0 1,018.0 1,135.0 SOURCES OF FUNDS
Equity Share Capital 11.5 11.5 11.5 11.5
% chg 128.9
128 9 15.6
15 6 11.1
11 1 11.5
11 5
Preference Share Capital - - - -
Total Expenditure 790.5 875.3 960.3 1,055.3 Reserves& Surplus 72.3 81.4 95.4 122.3
EBIDTA 2.0 40.7 57.7 79.7 Shareholders Funds 83.9 93.0 107.0 133.8
(% of Net Sales) 0.3 4.4 5.7 7.0 Total Loans 172.0 182.3 186.2 180.8
Deferred Tax Liability 20.2
20 2 20.2
20 2 20.2
20 2 20.2
20 2
Other Income 6.7 8.0 6.0 5.0
Minority Interest - - - -
Depreciation& Amortisation 17.2 19.7 20.7 21.7
Total Liabilities 276.0 295.4 313.3 334.8
Interest 20.5 16.0 18.0 15.0 APPLICATION OF FUNDS
PBT (
(29.0)
) 13.0 25.0 48.0 Gross Block 264.5 290.9 320.0 352.0
Less: Acc. Depreciation 60.8 80.5 101.1 122.8
(% of Net Sales) (3.7) 1.4 2.5 4.2
Net Block 203.7 210.4 218.9 229.2
Exceptional & Prior Period
0.0 0.0 0.0 0.0 Capital Work-in-Progress 14.0 14.4 15.0 15.7
Expenses
Tax Investments 0.2 - - -
6.8 3.9 7.5 14.4
Current A
C Assets 126.3
126 3 145.9
145 9 162.2
162 2 180.8
180 8
(% of PBT) - 30.0 30.0 30.0
Current liabilities 68.1 75.4 82.7 90.9
PAT( After Minority Interest) (35.7) 9.1 17.5 33.6
Net Current Assets 58.2 70.5 79.4 89.9
% chg - - 92.3 92.0 Total Assets 276.0 295.4 313.3 334.8
66

68. JK Tyre and Industries
(CMP/TP: Rs196/267)
Favourable Product mix: Commissioning of its new T&B Radial capacity in October 2009 (up from 0.4mn to 0.8mn
tyres), expansion of PCR capacity by 10% to 5mn tyres for FY11E and planned increases in the OTR Segment for
FY10E are working in favour of the company. Given the shortage of radial tyres in the T&B Segment, the company
is in pole position to fully utilise its enhanced capacity and at higher realisations (80% of India's total truck/bus radial
tyre production). Further, the buyout of Tornel could act as an upside trigger for the stock, which has already turned
profitable i 2QFY10 aided b th restructuring exercise i l
fit bl in 2QFY10, id d by the t t i i implemented b th company.
t d by the
Margins to increase on account of high investment on Radials: Currently, manufacturing Radial tyres is far
more capital intensive than Cross-ply. Investment per TPD is 3.2x of Cross-ply at Rs6.1cr per TPD. On the other
hand, selling prices of Radial tyres are about 20% higher than Cross-ply tyres. Taking into account the difference in
capital requirements and consequent impact on Asset turnover, Interest cost and Depreciation, to generate similar
g
RoCE and RoE, Tyre companies would need to earn EBITDA Margins of around 21% compared to around 9%
being earned on Cross-ply tyres. Thus, higher capital requirements will help protect Margins from upward bound
input costs, as the business model evolves bearing in mind final RoEs rather than Margins. With the Sector set for a
structural shift and apparent pricing flexibility, it will result in an improvement in RoCE and RoE of the Tyre
manufacturers going forward.
Attractive Valuations: We estimate the company to clock EPS of Rs45.5 in FY11E and Rs53.5 in FY12E. The
stock is currently available at attractive valuations of 4.3x and 3.7x FY11E and FY12E EPS, respectively. We
recommend a Buy on the stock, with a Target Price of Rs267, at which level the stock would trade at 5x, 3.9x and
0.9x FY12E EPS, EV/EBITDA and P/BV, respectively.
Valuation Snapshot
EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
59.1 45.5 53.5 26.7 17.3 17.1 3.3 4.3 3.7 0.9 0.7 0.6 0.4 0.4 0.3
67

69. JK Tyre and Industries
Radialisation across countries Radialisation across segments
%
% %
120 105 20
100 96
100 95
100 16
80 71
65
57
60 48 95 12
40
90 8
20
20 9.1
85 4
0
Asia
America
America
Middle East
urope
India
stern
stern
World
entral
Europe
rope
outh
orth
80 0
ca/
W
Wes
Eas
No
Ce
So
Eur
Eu
Af ric
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Passenger Cars (LHS) Trucks and Buses (RHS) LCV (RHS)
Source: Industry, Crisil Research, Angel Securities Source: Industry, Crisil Research, Angel Securities
We expect P/BV to re-rate on higher forecast RoE levels Extremely attractive at 3.6x FY2012E EV/EBITDA
(x) (x) 5,100
,
1.2 1.2 4,500
1.0 1.0 3,900 7x
0.8 0.8 3,300
EV (Rs cr)
0.6 0.6 2,700
5x
0.4 0.4 2,100
0.2 0.2 3x
1,500
0.0 0.0 900
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
300
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
P/BV (LHS) 5-year Average P/BV (RHS)
Source: C-Line ,Company, Angel Securities Source: C-Line, Company, Angel Securities
68

70. JK Tyre and Industries
Profit & Loss Statement Balance Sheet
Y/E March FY2009* FY2010E FY2011E FY2012E Y/E March FY2009* FY2010E FY2011E FY2012E
Net Sales 5,553 4,741 5,447 6,049 SOURCES OF FUNDS
% chg 98.7 (14.6) 14.9 11.1 Equity Share Capital 41.1 41.1 41.1 41.1
Total Expenditure 5,388 4,136 4,850 5,374 Reserves & Surplus 650.6 870.2 1,040.3 1,240.6
EBIDTA 164.9 604.5 596.4 674.4 Shareholders Funds 691.6 911.3 1,081.3 1,281.6
(%of Net Sales) 3.0 12.8 11.0 11.2 Total Loans 1,382 1,382 1,682 1,682
Other Income 53.9 32.0 33.0 35.0 Deffered Tax Liability (net) 112.0 111.7 111.7 111.7
Depreciation& Amortisation 122.5 117.7 153.6 185.9 Total Liabilities 2,186 2,405 2,875 3,076
APPLICATION OF FUNDS
Interest 171.2 145.2 185.1 180.9
Gross Block 2,840 3,362 4,095 4,480
PBT (75.0) 373.6 290.8 342.6
Less: Acc.Depreciation 1,228 1,346 1,500 1,686
(% of Net Sales) (1.3) 7.9 5.3 5.7
Net Block 1,612
1 612 2,016
2 016 2,596
2 596 2,795
2 795
Extraordinary Expense/(Inc.) 0.2 - - -
Capital Work-in-Progress 290.5 134.5 122.9 89.6
Tax 32.9 130.8 101.8 119.9 Investments 75.9 75.9 86.3 92.3
(% of PBT) (43.9) 35.0 35.0 35.0 Current Assets 1,334 1,521 1,726 1,877
PAT (107.9) 242.9 189.0 222.7 Current liabilities ,
1,131 1,348
, 1,661
, 1,783
,
% chg (261.8) (325.1) (22.2) 17.8 Net Current Assets 202.4 173.5 65.6 93.8
Ad. PAT (104.0) 242.9 186.9 219.5 Misc Expenditure 5.2 5.2 5.2 5.2
% chg (249.5) (333.5) (23.0) 17.4 Total Assets 2,186 2,405 2,875 3,076
Note: * For 18 months
69

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person. Persons into whose possession this document may come are required to observe these restrictions.
Opinion expressed is our current opinion as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information
discussed i this material, there may b regulatory, compliance, or other reasons that prevent us f
di d in hi i l h be l li h h from d i so. P
doing Prospective i
i investors and others are cautioned
d h i d
that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may
make investment decisions that are inconsistent with the recommendations expressed herein.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true and
are for general guidance only. While every effort is made to ensure the accuracy and completeness of information contained, the company takes no guarantee
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Recipients f this
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