By Angel Broking

The markets opened the first session of the F&O expiry week on a negative note, taking cues from weak Asian Indices. However, after a lackluster opening, recovery in Asian markets helped local indices to move higher in the mid-session. Volatility was high as the markets gave up all gains in the final session and closed below the previous session’s close. The Sensex and the Nifty closed with a loss of 0.4% and 0.5%, respectively. The BSE Mid-Cap and Small-Cap indices fell by 1.8% and 1.3%, respectively. Among the front liners, Tata Motors, Tata Steel, ITC, HDFC and NTPC gained between 1.2-1.9%, while DLF, JP Associates, Hindalco, Reliance Communications, Reliance Infra and SBI lost between 2.1-5.4%. In the Midcap segment, Kansai Nerolac, Balrampur Chini, Jagran Prakashan, REI Agro and HT Media gained between 3.5-8.1%, while Gammon Infra, Punj Lloyd, Aban Offshore and Karnataka Bank lost between 9.3-79.8%.

Markets Today
The trend deciding level for the day is 4989 / 16795. NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 5016 /16884. However, if NIFTY trades below 4989 / 16795 for the first half-an-hour of trade then it may correct up to 4944 – 4916 /16651- 16562.

2QFY2010 Monetary Policy Preview

In our opinion, the RBI is likely to maintain status quo in respect of policy rates in the upcoming policy, reiterating that its priority remains growth rather than inflation at this juncture. An important thing to watch out for will be RBI’s take on the potential acceleration of forex inflows going forward, and the resultant problems of high liquidity, appreciating rupee as well as rising asset prices and demand-side pressures that the country may have to face all over again. Such inflows may necessitate CRR hikes in subsequent policies. However, the important thing to note in this regard is that, over the next 4-6 quarters at least, such hikes will likely only be aimed at sterilizing the excess forex-driven liquidity in the system rather than stifling growth by choking off M3. Overall, for the upcoming policy, we expect the RBI to maintain an accommodative stance, as the key priority for the economy remains keeping interest rates low until a broad-based revival in domestic demand is firmly rooted.

2QFY2010 Result Reviews

Tata Motors
Tata Motors reported Net Sales of Rs7,978.8cr (Rs7,078.9cr,) on a standalone basis, for 2QFY2010, a growth of 12.7% yoy, owing to a 12.3% yoy growth in volume. However, the company’s continued focus on cost efficiencies, coupled with a reduction of raw material prices, inventory reduction and an improvement in sales realisation, yielded considerable benefits, resulting in the operating margin rising to 13.2% (from 7.4% in the previous year), with operating profits at Rs1,050.3cr. The Profit before Tax grew by 153.3% yoy to Rs906.9cr (Rs358.0cr), and the Profit after Tax was Rs729.1cr (Rs347cr), an increase of 110.1%. The interest cost (net), at Rs285.64cr, for the quarter, increased by 92.6% due to the increased debt taken by the company during the previous year to support its product programmes, investments and working capital requirements. The depreciation, at Rs263.4cr, was higher by 29.8%, reflecting the increased investments in new products and supporting capabilities. For 2QFY2010, there was an exceptional notional foreign exchange valuation loss of Rs15.3cr (Rs245.2 cr).

At Rs539, the stock is trading at around 19x its consolidated FY2011E earnings. Considering the recent decline and better-than-expected operating performance in 2QFY2010 (on a standalone basis), we recommend an Accumulate on the stock, with a target price of Rs572.

Idea
Idea witnessed a 29.1% yoy growth in revenues to Rs2,974cr during the quarter. However, sequentially, the revenues de-grew by 0.1%. The EBIDTA margin expanded by 89bp yoy, but were down by 167bp qoq at 27.2%. The company had other income of Rs32cr in 2QFY2010, which was nil in 2QFY2009. The interest cost was down by 29% yoy. However, despite of yoy increases in depreciation costs and in the tax rate (from 6.4% to 14% in 2QFY2010) the company reported a 52.8% yoy growth in net profit to Rs220cr, on account of strong operational efficiency. Yet, the net profit was down by 26% qoq due to revenue de-growth and impact on the EBIDTA margin. We recommend a Neutral on the stock.

Ranbaxy
Ranbaxy announced its 3QCY2009 result, which was ahead of our estimates, primarily on the Operating profit front. The company reported Net Sales of Rs Rs1,716.3cr (1,882.0cr), which were down by 8.8% on a yoy basis. Sales from Developed market de-grew by 30% yoy, on the back of a loss in sales in the US region, while the revenue from Emerging markets was flat on a yoy basis. The company reported an OPM of 3.1%, which was much ahead of our expectation, driven by cost containment initiatives and a change in the product mix. For the quarter, Ranbaxy reported a Net profit of Rs 116.6cr, primarily driven by other Operating Income. For 9MCY2009, the company reported Net sales of Rs5,063.0cr (Rs 5,316.9cr), which were down 4.8% mainly on account of a fall in sales in Developed markets. On the Bottom-line front, the company reported a Net profit of Rs48.7cr. Ranbaxy expects the US FDA re-inspection of its Dewas facilities to be concluded by 4QCY2009. The company is also confident that it will protect its near-term exclusivities of Valtrex (Rs12 NPV per share). Further, Ranbaxy is likely to announce its long-term synergy plans with Daiichi Sankyo by the end of January 2010.

While the 3QCY2009 numbers were ahead of our estimates, primarily on the back of lower-than-expected de-growth on the Emerging market and positive surprises on the OPM front. We have revised our sales estimates upward for CY2009E and CY2010E by 5-7%. As a result, we have increased our Target Price to Rs319 (Rs251), which values the base business of the company at Rs 244 (1.8x (1.5x) CY2010E EV/Sales) and one-time exclusivities at an NPV of Rs75 per share (excluding Valtrex). However, we continue to recommend Sell on the stock, as it is currently trading at a rich valuation of 2.9x CY20009E and 2.7x CY2010E EV/Sales, and we expect any further re-rating from hereon to be driven by positive news flow on the US FDA front.

Dabur
For 2QFY2010, Dabur India posted a robust Top-line growth of 22.7% yoy to Rs848cr (Rs691.2cr) on a consolidated basis marginally ahead of our expectations of a 21.3% yoy growth to Rs838cr. Top-line growth was led by robust volume driven growth (14.2% yoy) across its key categories and strong growth in its International Business Division (grew 27.5% yoy led by strong performances in GCC, Egypt, Levant and South Asian markets). Amongst its categories, Shampoos, Hair Oils, Toothpastes, Health Supplements & Foods witnessed acceleration in growth. Fem registered robust growth of 24.2% for 2QFY2010, first full quarter under Dabur management contributing 4% to the 2Q Top-line growth. Dabur’s reported Earnings for the quarter on a consolidated  basis registered a strong growth of 29.1% yoy to Rs139.2cr (Rs107.8cr) in-line with our expectation of a 26.2% yoy growth to Rs136.1cr. The Earnings growth, despite 26%drop in Other income and 425bp rise in Tax rate, was aided by robust Top-line growth and Margin Expansion. On the Operating front, Dabur India delivered a positive surprise registering strong Margin expansion of 263bp to 20.7% (18.1%) driving a robust growth of 40.6% in EBITDA to Rs175.4cr (Rs124.8cr). Operating Margins expanded, largely driven by a 374bp fall in input costs and 158bp reduction in other expenses. However, the company re-invested some Margin gains into higher ad spends (up289bp yoy) to support new launches during the quarter.

We have marginally tweaked our Top-line estimates to factor in higher volume growth across categories, new product launches and positive traction from consolidation of Fem Care numbers which have been fully consolidated in the current quarter for first time. Moreover, we have revised our Earnings in the range of 2-4% for FY2010E and FY2011E to factor in higher Gross Margins (post re-investment in higher ad-spends to support new product launches). However, owing to the recent run-up in stock price, Dabur is trading at 22.7x FY2011E revised EPS of Rs6.8, capping potential upside from the stock. Hence, we maintain Neutral view on the stock.

Union Bank of India
Union Bank of India announced its 2QFY2010 results yesterday, reporting a Net Profit growth of 40% yoy to Rs505cr (Rs361cr), far ahead of our expectation, although the Net Interest Income fell short of our estimate (NII declined by 11% yoy). The high growth in the Net Profit is mainly on account of a strong growth in non-interest income of 96% yoy and lower provisions during 2QFY2010. The asset quality remained stable, with a Gross NPA and Net NPA ratio of 1.9% and 0.2%, respectively. The CAR was reported at a healthy 13.8%

At the CMP, the stock is trading at 5.9x its FY2011E EPS of Rs42.7 and 1.2x its FY2011E Adjusted Book Value of Rs203.1. The rating on the stock is under review, as we await more details and clarity on the results from the Management.

Lupin
Lupin announced its 2QFY2010 results, which were ahead of our estimates. Net Sales for the quarter came in at Rs1,114.7cr (Rs 908.4cr) up 22.7% yoy and higher than our estimate of Rs939.9cr. The Advanced market sales grew by 27.4% to Rs481.5cr (377.9cr), driven by strong growth across US, Europe and Japan. The US branded generic business grew by a whopping 83% yoy, while the Indian Formulation market grew by 18.5% to Rs346.7cr (Rs 292.6cr). However, the company disappointed on the OPM front of 14.7% (16.8%), on account of a higher Raw-Material cost. The Net profit of the company for the quarter grew by 38.6% to Rs160.3cr (Rs115.6cr), on the back of growth on the top-line front and other Operating Income. Lupin received Rs25cr outlicensing income from Salix Pharma during the quarter. For 1HFY2010, the company reported Net Sales of Rs2,200.3cr (Rs1,770.7cr), up 24.3%, and a bottom-line of Rs 300.4cr (Rs227.7cr) up 32.0%.

We are raising our Target Multiple on Lupin to 18x (15x), as we expect the recent acquisition of Allernaze, Antara and out licensing deal with Salix Pharma to compensate for any Revenue shortfall in case of adverse action by US FDA on Mandideep. Further, Lupin is among the few players globally that is aggressively targeting the low-competitive Oral Contraceptive market, which will bear fruits for the company over the next 2-3years. As a result, we raise our Target Price to Rs1,548 (Rs1,290). The stock is currently trading at 16.2x FY2010E and 14.4x FY2011E earnings. We recommend a Buy on the stock.

Areva T&D (3QCY2009)
Areva T&D India came out with its results for 3QCY2009. The company posted a healthy top-line growth of 26.1% yoy to Rs7,40cr (Rs586cr) for 3QCY2009. On the Operating front, however, a steep rise in raw material costs caused a sharp dent in the EBITDA Margin, which fell by 850bp to 8.6% (17.1%), which was well below our expectations. Consequently, the net profit de-grew 55.6% to Rs22cr (Rs50cr). The stock is currently under review.

Oriental Bank of Commerce
Oriental Bank of Commerce announced its 2QFY2010 results yesterday, delivering a 14% yoy growth in Net Profits to Rs271cr (Rs237cr), higher than expectations, on account of strong other income growth. However, Balance Sheet details are not yet available. Net Interest Income was up 8% yoy and 16% sequentially. Other income was up 46% yoy, probably on account of large treasury gains. Asset quality remained stable sequentially, with the Gross NPA ratio at 1.54% (1.61%) and Net NPAs at 0.66% (0.71%). The cost-to-income ratio improved to 41.7% in 2QFY2010, from 44.3% in 2QFY2009.

At the CMP, the stock is trading at valuations of 6.7x its FY2011E EPS of Rs39.9 and 0.8x its FY2011E Adjusted Book Value of Rs319.2. A detailed analysis and revised ratings will be available after we attend the conference call with the Management.

Blue Star
Blue Star Ltd declared its results for 2QFY2010 on Monday. The Top-line for the quarter fell by 12.8% yoy to Rs563cr, on account of lower demand from segments like IT, ITeS, office and retail. The Operating Margin improved from 10.8% to 11.5% in the same period. This was on account of lower input and operating costs. As a result, the Net Profit for the quarter increased by about 10% to Rs49.4cr. The company has an analyst conference call on Nov 3rd. We will review our numbers after the management’s conference call. We maintain our Target Price of Rs 383 in the interim.

HT Media
HT Media declared its 2QFY2010 results. HT Media posted yet another quarter of a muted Top-line growth of 4.9% yoy to Rs347.1cr (Rs330.7cr), on a standalone basis, largely aided by a 28% jump in circulation revenues (added by cover prices hikes) to Rs47.9cr (Rs37.3cr) and inclusion of Radio Business (merged in 4QFY2009) which contributed Rs9.8cr to Top-line. However, a marginal fall in advertising revenues to Rs282.1cr (Rs283.1cr) dragged Top-line growth. According to the management, Hindustan registered a growth of 23% yoy to Rs102.6cr and Mint revenues also grew at a strong pace.

In terms of Earnings, the company posted a whopping growth of 117.5% yoy to Rs35.4cr (Rs16.3cr) on a recurring basis, despite a 64.8% yoy fall in Other Income to Rs3.9cr (Rs8.6cr) and higher depreciation charges (up 36.4% yoy), owing to significant Margin expansion, flattish interest costs and 1,391bp fall in tax rate. However, on a reported basis, the company posted a growth of 92.9% yoy to Rs31.4cr impacted by exceptional item of provision for diminution in value of long term investments. At the operating front, the company posted significant Margin expansion of 761bp yoy to 18.6% (11%) driving a robust 77.5% yoy growth in EBITDA to Rs64.6cr (Rs36.4cr) largely aided by Gross Margin expansion to the tune of 881bp as benefits of low-priced newsprint inventory kicked in. We will be re-visiting our numbers post concall with the Management today. Currently, the stock is under review.

NIIT Ltd.
NIIT witnessed 16.3% yoy growth in revenues to Rs359.8cr during the quarter. The EBIDTA margin expanded by 70bp yoy and stood at 13.8%. However, on account of a 35.6% yoy increase in depreciation costs and a loss on other income of Rs7.8cr (vis-àvis other income of Rs2.1cr in 1QFY2010), the company reported a 11.8% yoy decline in net profit to Rs26.2cr. We recommend a Neutral view on the stock.

TajGVK
TajGVK came out with its 2QFY2010 results. Net Sales declined by 14% to Rs53.5cr due to a 12% fall in occupancy rates and a 25% decline in room rentals. On a yoy basis, the EBITDA margin declined to 35%, mainly due to a high fixed cost, whereas PAT registered a fall of 57% to Rs7cr. We expected the 1HFY2010 performance to remain subdued; however, a significant recovery is expected in the coming quarters on the back of the economic revival. We already have a Neutral rating on the stock. However, the stock is currently under review and we may re-consider our rating post discussion with the company’s management.

TV Today
TV Today declared its 2QFY2010 results. For the quarter, the company posted degrowth of 3.5% yoy in its Top-line to Rs64.5cr (Rs66.9cr). The economic slowdown is reflected in the slowdown in the ad-inventory utilisation, which has gone down significantly for all media companies. In terms of viewership, however, ‘Aaj Tak’ continues to maintain its leadership position. The company posted a robust bottom-line growth of 39.6%, in line with our expectations, to Rs10.6cr (Rs7.6cr), aided largely by a sharp fall of 740bp in other expenses to Rs8.8cr (Rs14.1cr) and a 270bp fall in advertising and distribution costs (decline in carriage fees) to Rs15.2cr (Rs17.6cr). The employee cost, however, increased 26% to Rs21.4cr (Rs16.9cr), which arrested the margin expansion. After the 2QFY2010 result, we have tweaked our FY2010E Earnings estimates to account for – 1) lower advertising expenses (reduction in carriage fees) and 2) higher Other Income. We estimate TVTN to post a CAGR of 13.8% in its Topline over FY2009-11E. We maintain a Buy in the stock, with a Target price of Rs111.

2QFY2010 Result Previews

Tata Steel
Tata Steel is expected to announce its 2QFY2010 results today. The company is expected to register a 9.3% yoy de-growth in its Top-line to Rs6,214cr. On the operating front, we expect margins to compress by 1,168 bps to 34.8%. Consequently, the Bottom-line is expected to de grow by 36.5% yoy to Rs1,136cr during the quarter. We have a Neutral recommendation on the stock.

Crompton Greaves
Crompton Greaves is expected to announce its 2QFY2010 results today. The company is expected to register a 7.3% yoy jump in its Top-line to Rs2,245cr. On the operating front, we expect Crompton to witness a 42bp margin expansion to 11.5%. Consequently, the Bottom-line is expected to increase by 20.6% yoy to Rs145cr during the quarter. We have an Accumulate recommendation on the stock.

Cadila Healthcare
Cadila Healthcare is likely to announce its 2QFY2010 result today. The company is expected to post a strong 24.7% growth in its Top-line to Rs920.1cr, on the back of strong Exports. Exports are expected to surge by 43.1% to Rs441.2cr, driven by its US market and Contract Manufacturing Segment. We expect the company's OPM to remain flat yoy. The Net Profit is expected to increase by a healthy 37.5% to Rs130.5cr, driven by Top-line growth. On the valuation front, the stock is trading at 17.1x FY2010E and 15.4x FY2011E earnings. The stock is under review.

Madras Cements
Madras Cements is set to announce its 2QFY2010 results. We expect the company to post a substantial 38.7% growth in its Top-line, on the back of a 27.8% growth in volumes, driven by capacity expansion. The company’s OPM for the quarter is expected to expand by 154bp to 35.9%. We also expect a 42.9% growth in Net Profit to Rs162.3cr. We maintain our Neutral view on the stock.

IGL
IGL is expected to declare its 2QFY2010 results today. We expect IGL to report net sales of Rs264cr during the quarter, registering a growth of 22.8% yoy. We expect the company to continue to post a strong Volume growth, driven by higher conversion of CNG vehicles during the trailing one year. CNG Volumes during the quarter are estimated to have registered an increase of 7.6% yoy. The impact of the price hike made in the latter part of the previous quarter will be visible in 2QFY2010, with OPMs expected to increase on a qoq basis to 41.5% (36.9%). Operating profits during the quarter are likely to witness an increase of 27.3% to Rs110cr (Rs87cr). However, on account of increase in the depreciation during the quarter, the bottom-line is likely to grow at a slower pace of 16.7% to Rs59cr (Rs50cr). Currently, we have a Neutral rating on the stock.

Ipca Labs
Ipca Labs is likely to announce its 2QFY2010 result today. We estimate the company to grow its Top-line by 14.4% to Rs397.8cr. Exports are expected to increase by 13.0%, on the back of higher penetration in the US and Semi-Regulated markets. We expect the company's Domestic Formulation business to grow at a notch higher than the overall Industry growth. However, OPMs are expected to decline on account of lower Gross Margins. Moreover, Net Profit is expected to increase by 40.0% to Rs51.1cr, albeit on a low base. On the Valuation front, the stock is trading at 12.3x FY2010E and 9.8x FY2011E earnings. The stock is under review.

JK Lakshmi Cement
JK Lakshmi Cement is set to announce its results today. For 2QFY2010, we expect the company to post an 11.3% yoy growth in its net sales to Rs326cr, on the back of good dispatch numbers. The company’s OPMs are also expected to increase by 1,047bp to 29.8%, on account of the increased captive power consumption. We expect the company to clock a net profit of Rs59.9cr in the quarter – an increase of 122.7%. We remain Neutral on the stock.

Economic and Political News
- Govt. to reiterate ban on FDI in multi-brand retail
- EGoM likely to let other sectors access KG gas
- Food Industry set to touch US $181bn by 2015 – FICCI study

Corporate News
- Satyam-Tech Mahindra merger likely after June 2010
- Govt. orders probe into Sesa Goa accounts
- Motherson Sumi bags Rs1,402cr worth of orders
- Bombay HC asks Kingfisher to deposit Rs3.6cr against dues