CESC (Favourable risk reward, ADD): IIFL

CESC (Favourable risk reward, ADD): 

Monthly cash losses in CESC’s subsidiary Spencer Retail have halved, from the average of Rs250m in FY09 to ~Rs120m in 1HFY11. Moreover, it has achieved EBITDA breakeven at store level. CESC plans to invest Rs1.5bn over the next 18-24 months in large-format stores to achieve turnaround in Spencer’s. The core power business continues to deliver value, and milestone achievement in Chandrapur and Haldia (1.2GW) projects indicates that CESC is well-placed to double its generation capacity by FY15.

UCO Bank- Future Re‐rating candidate:: Networth capital

UCO Bank has reported Q2FY2011 below market estimates. It
posted PAT of Rs 119 Cr down 42.6% YoY basis due to higher
provisioning which went up by 310% during the quarter as the
bank was struggling with higher gross NPAs. On QoQ basis PAT was
down 54.2%. However taking into consideration bank's three
pronged strategy we believe that worst is over for the bank and
we expect a better quarterly result hereafter. During the analyst
meet, Management of the bank indicated three pronged strategy
ie improvement of CASA, improvement in Quality of asset and
better HR policies targeted at cost reduction.




Key Highlights
 Higher provisioning and higher operating expenses led to the
bank’s reduction in PAT to Rs 119 Cr by 42.6% on a YoY basis &
54.2% on a Q‐o‐Q basis. Operating expenses went up by 37.4%
on YoY basis, while its Net NPA in % terms scaled higher to
1.18% as compared to 1.01% in corresponding quarter last
year. However CAR improved to 13.6% as compared to 11.8%
in Q2FY2010.
 UCO Bank is set to show better performance over the next 2
years as it improves NII and asset quality. We expect the stock
to get re‐rated significantly, as asset quality improves
gradually in FY11 & FY12. Also its capital adequacy problems
have been solved by the recent equity infusion by the Govt, to
the tune of about Rs1125cr in the last 6 months.
 The Bank's C‐I Ratio has reached an all time low of 42.8% in
Q2FY11, and we expect it to go down further in FY12. The
effective tax rates will go up to 33% by Q2FY12 as the bank
comes under full taxation; however FY11 it would be enjoying
set off against carry forward losses. On the NPA side, we
expect the asset quality to improve substantially from Q2FY11
onwards, as the bank has increased focus on recoveries and
also technical write‐offs and NPAs likely to turn good.
 UCO Bank trades at substantial discount to its peers and
deserves a better valuation in light of improving
fundamentals. The stock is currently trading at 1.6x and 1.3x
on P/BV basis of FY11 and FY12 book value respectively and
P/ABV 1.9x & 1.5x its FY2011 & FY2012 Adjusted book value.
We are extremely optimistic on the prospects of this bank
hence recommend a strong BUY with a price target of Rs 215,
implying about 55% return, in 12 months period.

Havells India (On course, BUY): IIFL

Havells India (On course, BUY): 

Electrical consumer-goods major Havells is a beneficiary of robust demand growth based on upgrading consumer preferences and increased construction activity in its key verticals—switchgears, lighting fixtures, consumer durables (fans) and cables/wires. Consolidated leverage is set to decline, with its European lighting-fixtures acquisition Sylvania looking to break even in FY12, post restructuring. The stock’s current P/E multiple of 12.0x on FY12ii is reasonably attractive, given an EPS CAGR of 17.2% over FY10-13ii, and our TP of Rs475 (ascribing zero equity value to Sylvania) indicates 19% upside. We reiterate our BUY recommendation.

IPO Details: A2Z MAINTENANCE & ENGINEERING SERVICES LTD

A2Z MAINTENANCE & ENGINEERING SERVICES LTD
Symbol - Series	A2Z EQ
Issue Period	Dec 08, 2010 to Dec 10, 2010
Post issue Modification Period	11-Dec-10
Issue Size	[.] Equity Shares Of Rs.10 Each aggregating to Rs.6,750 Million and an Offer For Sale Of 4,556,193 Equity Shares Of Rs. 10 Each at the Issue Price.**(including anchor portion of 31,37,940 equity shares.)
Issue Type	100% Book Building
Price Range	Rs 400 to Rs 410
Tick Size	Re. 1/-
Market Lot	15 Equity Shares
Minimum Order Quantity	15 Equity Shares
Maximum Subscription Amount for Retail Investor	Rs.200000
IPO Market Timings	10.00 a.m. to 5.00 p.m.
IPO Grading	IPO Grade 4
Rating Agency	CARE Limited
Book Running Lead Manager	IDFC Capital Limited,DSP Merrill Lynch Limited,Enam Securities Private Limited,ICICI Securities Limited,SBI Capital Markets Limited.
Co Book Running Lead Manager	YES Bank Limited.
Syndicate Member	Sharekhan Limited,SBICAP Securities Limited.
Categories	FI,IC,MF,FII,OTH,CO,IND, NOH and EMP.
No. of Cities with Bidding Centers	52
Name of the registrar	Link Intime India Private Limited
Address of the registrar	C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (West) Mumbai 400 078,Maharashtra, India
Contact person name number and Email id	Mr. Chetan Shinde,Tel: 91 22 2596 0320, Fax: 91 22 2596 0329 E-Mail:a2z.ipo@linkintime.co.in
Prospectus	Click Here
Trading Member List	Click Here
Application Forms	Click Here
ASBA e-form link	e-Forms
IPO Grading	Click Here
Anchor Details	Click Here

ITC Limited - No impact from plant shutdown - Reiterate BUY:: Antique

Cigarette plants shut by cigarette manufacturers due to uncertainty over
graphical warnings
According to news reports, cigarette majors like ITC and Godfrey Phillips have shut their
cigarette manufacturing units due to uncertainty over the new graphical warnings on cigarette
packs. The new graphical warnings were scheduled to be implemented on Dec 01, 2010.
However, till date no communication has been received from the Health and welfare ministry.
As per news reports, Udayan Lall, director (Tobacco
Institute of India), has said that "Companies making
cigarettes and bidis have been forced to close down
production due to the uncertainty regarding the
warning,". He further said that the companies had
written a letter to the ministry seeking clarity on the
kind of pictorial warnings to be carried on packs,
but no clarity has emerged from the government on
the same. According to Mr.Lall, tobacco companies
were under an impression that the December 2010

timeline for putting pictures of 'Mouth Cancer' on product packs would get pushed back.
ITC's cigarettes volumes during 3QFY11 to be undeterred by the shutdown
After our interaction with the ITC management, we understand that the company was
prepared for such kind of situation and therefore has an adequate inventory of cigarettes in
the market. Our industry sources have also indicated that the cigarette manufacturers have
built up high inventory levels in the market during the past two months to face the uncertainty
in the short term. Hence, we believe that ITC's cigarette sales volumes should not be impacted
due to the shutdown during 3QFY11.

New graphical warnings may have short term impact
Given a situation that the graphical health warning is issued in its planned form in the
recent future, the same is expected to have a short term negative impact on the cigarette
Source - Ministry of Health & Family Welfare
sales as the graphical warnings is a clearer depiction of the infected organ. However, as a
majority of the cigarette consumption (about 60-65%) is in loose form (not in packs), the
magnitude of impact would be low. Further, the cigarette business being of addictive nature
is expected to bounce back.
Continue to believe in the addictive strength of cigarette business -
Maintain BUY
Over the years, cigarette volumes have demonstrated strong resilience to the smoking bans
and the steep price hikes (arising from duty hikes). We, therefore, continue to believe in the
strong addictive pricing power of ITC's cigarette division, and hence, maintain our positive
stance on the company.
At the CMP of INR171, the stock is trading at a PE of 25.7x FY11e and 21.5x FY12e. At
the current levels, we reiterate our BUY recommendation on the stock with an SOTP-based
target price of INR192, providing a 12% upside.

Escorts -Margin plays hide-and-seek; new fiscal, fresh outlook:: Quant

Escorts -Margin plays hide-and-seek; new fiscal, fresh outlook
India Equity Research I Auto & Auto Ancillaries
Result Update
India Equity Research 


Escorts (ESC) reported 10% y-y growth in standalone revenue in 4Q FY10 to Rs6.7 bn, led
by 8.2% growth in tractor volume. FY10 standalone revenue grew by 26.4% to Rs27.6 bn,
primarily led by a 32% jump in tractor volume to 60,086. The construction equipment
segment (ECE) revenue grew by 30% y-y to Rs6.1 bn, leading to FY10 consolidated
revenue growth of 27% to Rs33.8 bn. On the standalone operating margin front, the
company disappointed by reporting a drop of 480bp q-q to 4.9%, led by a sharp jump in
other expenditure due to scattered accounting strategy followed by management. Other
expenditure/sales jumped to 18.1% this quarter against the first three-quarter average
of 12.5%, resulting in a full-year figure of 13.8% at par with the FY09 figure. We revise
our consolidated revenue figure for FY11E and FY12E to Rs37.8 bn and Rs44.8 bn and cut
our operating margin by 90bp and 120bp to 8.4% and 9.1%, respectively. We reiterate
our BUY rating on ESC with a revised 12-month PT of Rs267 (from Rs300) based on 6x
FY12E EV/EBITDA (at a 25% discount to a five-year average traded forward multiple).



In-line revenue; we are factoring in a 15% revenue CAGR during FY10-12E: Standalone
revenue for 4Q FY10 grew by 10% y-y to Rs6.7 bn, led by an 8.2% rise in tractor volume.
For FY10, standalone revenue was up 26.4% to Rs27.6 bn, with tractor volume growing by
32% y-y to 60,086. ECE revenue grew by 30% y-y to Rs6.1 bn, leading to consolidated
revenue growth of 27% to Rs33.8 bn. We expect consolidated revenue to grow at a CAGR
of 15% to Rs44.9 bn in FY12E, led by a 14% volume CAGR in tractors.

Margin plays spoilsport; scattered accounting treatment of other expenditure leading to
lack of relevance of first three-quarter margin: ESC reported a standalone operating
margin of 4.9% this quarter, down 480bp q-q, led by a 630-bp rise in other
expenditure/sales. As per management, scattered accounting of fixed cost elements led to
skewness in other expenditure elements getting accounted in 4Q, although on a y-y basis
other expenditure for FY10 was at par with FY09 at 13.8%. Against a first three-quarter
average other expenditure of 12.5%, the balancing act in 4Q would give us the lack of
clarity on actual operational performance based on the upcoming quarter numbers,
signifying incremental stress to be given to gross margin rather than operating margin. For
FY10, standalone operating margin contracted by 100bp to 8.4%, primarily led by higher
RM costs. At the consolidated level, margin contracted by 110bp to 7.3% in FY10. We are
modelling operating margin levels of 8.4% and 9.1% in FY11E and FY12E, respectively.

Consolidated ROCE improves to 10%; expect it to improve to 16-18% in FY12E: ESC
reported a ROCE of 10% in FY10, primarily led by improved capital intensity through higher
tractor volume. We believe, on the back of requirement of nominal capex in FY11-12E and
scope of improvement in margin, ESC can generate free cash flow to the extent of Rs6 bn
on a cumulative basis between FY11-12E along with driving the ROCE up to 16-18% levels.
Re-iterate BUY with revised 12-month PT of Rs267 (Rs300 earlier): We re-iterate our BUY
on ESC with a revised 12-month PT of Rs267 based on 6x FY12E EV/EBITDA (based on
target multiple at 25% discount to 5-year average traded forward multiple). At our target
price we expect ESC to trade at 10.6x FY12E earnings on the back of expected 42%
earnings CAGR between FY10-12E. Inability to improve tractor market share, improve
margin in core agri machinery business along with ECEL are the major risks to our
estimates and in turn our price target.

IPO Details: RAVI KUMAR DISTILLERIES LIMITED

RAVI KUMAR DISTILLERIES LIMITED
Symbol - Series	RKDL EQ
Issue Period	Dec 08, 2010 to Dec 10, 2010
Post issue Modification Period	11-Dec-10
Issue Size	Public Issue of 115,00,000 Equity Shares Of Rs. 10 Each.
Issue Type	100% Book Building
Price Range	Rs 56 to Rs 64
Tick Size	Re. 1/-
Market Lot	100 Equity Shares
Minimum Order Quantity	100 Equity Shares
Maximum Subscription Amount for Retail Investor	Rs.200000
IPO Market Timings	10.00 a.m. to 5.00 p.m.
IPO Grading	IPO Grade 2
Rating Agency	CARE Limited
Book Running Lead Manager	Comfort Securities Pvt Ltd
Syndicate Member	Comfort Securities Pvt Ltd
Categories	FI,IC,MF,FII,OTH,CO,IND, and NOH.
No. of Cities with Bidding Centers	71
Name of the registrar	Karvy Computershare Private Limited
Address of the registrar	Plot nos.17-24, Vittal Rao Nagar, Madhapur, Hyderabad ? 500 081
Contact person name number and Email id	Mr.M.Murali Krishna,Tel: +91-40-2342 0815-28, Fax: +91-40-2343 1551 E-Mail:ravikumar.ipo@karvy.com
Prospectus	Click Here
Trading Member List	Click Here
Application Forms	Click Here
ASBA e-form link	e-Forms
IPO Grading	Click Here