Tracking the global trends, Indian indices had weak session for the second day. Indices traded on a weak note since the start of the trade. Profit booking was seen across the board except selective stocks in Software, Pharma and Airlines where there was some buying interest. IT major Infosys firmed up further as every one awaits the giants results which is due tomorrow. The key economic data of February 2007 industrial production output rises to 11.1% VS 8.8%, which shows no signs of slowdown in the economy. Asian markets ended in mixed where as European markets currently trading in red.
Sensex closed down 69 points at 13113.81. Weighing on the Sensex were losses in ONGC (852.5,-3 percent), TISCO (495.95,-3 percent), Ranbaxy (335.15,-3 percent), HDFC (1536.95,-3 percent) and Maruti (759.8,-3 percent). Losses are restricted by gains in Bajaj Auto (2349.3501,+3 percent), Infosys (2043.65,+3 percent), Grasim (2258.6499,+2 percent), NTPC (159.9,+1 percent) and Satyam (446.1,+1 percent).
Infosys numbers are due tomorrow and a lot is being made of it. Guidance expected is about 22- 28% for bottomline growth next year. Valuations at 24 X FY 08 certainly not enthusing in the current environment. So better to be careful here. There are short positions and that may limit the downsides.
Jet Airways India Ltd and Sahara Airlines have settled their dispute with regard to the Share Purchase Agreement of January 18, 2006. Jet is set to acquire Sahara Airlines for a lump sum price of Rs 1450 cr. Rs 500 cr has already been paid. Rs 400 cr is payable immediately no later than April 20, 2007. The balance Rs 550 cr is payable in four interest free annual equal instalments commencing on or before March 30, 2008. Jet closed up by 2.83% and its peer Deccan Aviation ended up 10%.
Telecom stocks closed in red on profit taking . Sustaining its aggressive growth in subscriber additions, the GSM-based cellular industry has added over 61 lakh subscribers in March with Bharti Airtel capturing 30.59% of the market share. With this, the all-India GSM subscriber base has touched 12.14 crore at the end of March 2007 compared to 11.53 crore as on end of February 2007, reflecting a growth rate of five per cent. In March, the cellular subscriber base of Bharti touched 3.71 crore with additions of over 17 lakh users, followed by BSNL at 2.74 crore with a market share of 22.59 per cent and additions of over 19.84 lakh subscribers. Hutch-Essar has 2.64 crore subscribers, taking its market share to 21.78% and Idea with a market share of 11.54% has 1.4 crore subscribers in March. Bharti Airtel closed marginally down and its peer R Com, MTNL and VSNL ended in red. Idea closed positive.
Educomp Solutions closed at the upper limit. The company has acquired a Web based trailing company and also bagged some orders in Haryana. We have been bullish on this one and our stand has been vindicated. Do read our research note here. We had a research note on Esab as well. This one looks interesting. Do read the note. Its for our subscribers.. may be here is a hidden gem as well.
Technically Speaking: It was a weak session for the whole day before closing. Sensex touched intraday high of 13194 and low of 12904. Sensex has closed above its resistance at 13170. On the higher side it is looking to hit near 13400 whereas on the lower side major support likes at 12900. Resistance lies at 13289, 13386. Support lies at 13000, 12808. Market turnover stood at Rs 3075 cr. Overall breadth was in favor of Advancers where the Advancers stood at 1916, Decliners stood at 632.
Thursday, April 12, 2007
Global Economics - April 07
The global economy continues to be faring well in the face of a downshift in the US. Has the long-awaited decoupling — with the rest of the world untethering itself from the US — finally occurred?
It is premature to conclude that the world has faced a legitimate decoupling test. America’s deceleration has been concentrated in one of the least globalized pieces of
the US economy – homebuilding activity. It takes internal spillovers to drive external cross-border linkages.
America’s downshift will have global implications only if there are spillovers between housing and consumption demand.
Recent IMF research confirms the growing dependence of the rest of the world on the US, warning of a still synchronous global downturn if the US slowdown broadens and deepens. Canada, Mexico, China, and the rest of Asia ex Japan would be especially hard hit.
Market implications. I continue to believe that the American consumer will falter – taking the lead engine of the global growth train off the tracks, with the rest of the world quick to follow. That would be a major shock to financial markets, which are still discounting relatively sanguine prospects for global growth in 2007-08.
Risks. If the US labor market continues to display extraordinary staying power as it did in March, I would be the first to concede that the overly-indebted, saving-short
American consumer will squeak by – and so, too, will the rest of a still-coupled world.
It is premature to conclude that the world has faced a legitimate decoupling test. America’s deceleration has been concentrated in one of the least globalized pieces of
the US economy – homebuilding activity. It takes internal spillovers to drive external cross-border linkages.
America’s downshift will have global implications only if there are spillovers between housing and consumption demand.
Recent IMF research confirms the growing dependence of the rest of the world on the US, warning of a still synchronous global downturn if the US slowdown broadens and deepens. Canada, Mexico, China, and the rest of Asia ex Japan would be especially hard hit.
Market implications. I continue to believe that the American consumer will falter – taking the lead engine of the global growth train off the tracks, with the rest of the world quick to follow. That would be a major shock to financial markets, which are still discounting relatively sanguine prospects for global growth in 2007-08.
Risks. If the US labor market continues to display extraordinary staying power as it did in March, I would be the first to concede that the overly-indebted, saving-short
American consumer will squeak by – and so, too, will the rest of a still-coupled world.
US Economics April 07
The Employment Conundrum
What's New: The mix of growth and inflation has again turned less favorable. And the dichotomy between weak output and firm labor markets raises critical questions about the outlook: Will job and income gains sustain consumer outlays? Has potential output growth declined? If so, will it prolong the whiff of stagflation? And will slowing growth and rising unit costs squeeze profit margins?
Conclusions: Consumer retrenchment is unlikely
although the housing recession is far from over; strong global growth likely will sustain both output and employment. Amid uncertainty about productivity’s trend, we still think inflation has peaked, but inflation risks are rising again. Margin compression implies that profit growth likely will stall in 2007.
Market Implications: This mix likely will reinforce the Fed’s conviction that they must wait patiently for inflation to decline. Rising uncertainty about the outlook and reduced forward-looking guidance from the Fed imply that term and other risk premiums will rise
further, the yield curve will steepen irregularly, and TIPs may outperform.
Risks: The risks for investors are rising with
crosscurrents swirling around the outlook for growth, inflation, profits, and monetary policy. That markets have defied these uncertainties lately does not give us
comfort because we see neither a rapid improvement in growth, a quick decline in inflation, nor relief from the Fed.
What's New: The mix of growth and inflation has again turned less favorable. And the dichotomy between weak output and firm labor markets raises critical questions about the outlook: Will job and income gains sustain consumer outlays? Has potential output growth declined? If so, will it prolong the whiff of stagflation? And will slowing growth and rising unit costs squeeze profit margins?
Conclusions: Consumer retrenchment is unlikely
although the housing recession is far from over; strong global growth likely will sustain both output and employment. Amid uncertainty about productivity’s trend, we still think inflation has peaked, but inflation risks are rising again. Margin compression implies that profit growth likely will stall in 2007.
Market Implications: This mix likely will reinforce the Fed’s conviction that they must wait patiently for inflation to decline. Rising uncertainty about the outlook and reduced forward-looking guidance from the Fed imply that term and other risk premiums will rise
further, the yield curve will steepen irregularly, and TIPs may outperform.
Risks: The risks for investors are rising with
crosscurrents swirling around the outlook for growth, inflation, profits, and monetary policy. That markets have defied these uncertainties lately does not give us
comfort because we see neither a rapid improvement in growth, a quick decline in inflation, nor relief from the Fed.
Daily Call - April 12th, 07
The markets are likely to plunge in early morning trade in line with the international sentiment. The Dow lost 89 points, breaking it’s eight session continuous rise with Nikkei following its footsteps. The Sensex has now made a lower top of 13294 as compared to 13386 seen on 23rd March. So the 13,386- 12316 range, that was defined earlier remains intact . For the Nifty 3902 and 3554 still remain the defined boundaries. The derivatives data suggests that punters had gone short in the Nifty Wednesday as the discount between cash and Nifty futures widened to 31 points from 21 on Tuesday. Shorts were built in the IT and Banking arena, while metals went long yesterday. The metals today face their litmus test. The cash stocks too, which were beginning to do well are likely to see extensive profit taking because retail participation had only increased yesterday. I think the markets are likely to lie low today ahead of the Infosys numbers and guidance, that will come on Friday the 13th.
Morning Notes - April 12th, 07
Gujarat Ambuja Cements Ltd’s March shipments fell 4.5% to 1.48 million tonnes from 1.55 million tonnes a year earlier. Production fell to 1.43 million tonnes from 1.53 million tonnes a
year earlier. –ET
Elecon Engineering Company has been awarded a contract worth Rs 229.09 crore for supply and installation of coal handling plant package for National Capital Termal Power Project from
state-run NTPC. –ET
Domestic car sales in the financial year ended Mar’07 rose 22% from the year before to 1,076,408 from 882,208 in 05/06-ET
iGate Global Solutions posted over four fold jump in net profit at Rs 21.42 cr for the qtr ended March 31, as compared to Rs 5.25 cr for the same quarter last year. Total income of the company increased 29.91% to Rs 196.05 cr for the 4th qtr ended March 31, from Rs 150.91 crore a year ago. –ET
Mastek reported a 132% increase in consolidated net profit at Rs 40.23 cr for the 3rd qtr ended March 31, 2007 compared with Rs 17.31 cr in Q3FY06. –BS
Larsen & Toubro plans to set up a major state-of-the-art ship building yard at a cost of Rs 1,500 crore. The new greenfield ship building yard would come up on a 1,000-acre area and have capability to make all types of ships, including high tech designs like CNG, LNG carriers and containers upto 3 lakh dead weight tonnes. –BS
The final hearing by the arbitration panel on the Jet-Air Sahara merger has been postponed till 12 April 07. –BS
Around 14 funds and institutions, including eight from overseas, have shown interest in buying a strategic stake in India’s oldest term lending institution, IFCI Ltd, with a few even ready to pick up 51 per cent equity. –BL
Tanla Solutions Ltd‘s U.K.-based subsidiary, Tanla Mobile, has expanded its operations into Ireland. –BL
Punjab National Bank has increased the Benchmark Prime Lending Rate by 75 basis points to 13 per cent. –ET
Deccan Chronicle Holdings Ltd would raise its advertisement tariff by 30% from May 2007. –BL
year earlier. –ET
Elecon Engineering Company has been awarded a contract worth Rs 229.09 crore for supply and installation of coal handling plant package for National Capital Termal Power Project from
state-run NTPC. –ET
Domestic car sales in the financial year ended Mar’07 rose 22% from the year before to 1,076,408 from 882,208 in 05/06-ET
iGate Global Solutions posted over four fold jump in net profit at Rs 21.42 cr for the qtr ended March 31, as compared to Rs 5.25 cr for the same quarter last year. Total income of the company increased 29.91% to Rs 196.05 cr for the 4th qtr ended March 31, from Rs 150.91 crore a year ago. –ET
Mastek reported a 132% increase in consolidated net profit at Rs 40.23 cr for the 3rd qtr ended March 31, 2007 compared with Rs 17.31 cr in Q3FY06. –BS
Larsen & Toubro plans to set up a major state-of-the-art ship building yard at a cost of Rs 1,500 crore. The new greenfield ship building yard would come up on a 1,000-acre area and have capability to make all types of ships, including high tech designs like CNG, LNG carriers and containers upto 3 lakh dead weight tonnes. –BS
The final hearing by the arbitration panel on the Jet-Air Sahara merger has been postponed till 12 April 07. –BS
Around 14 funds and institutions, including eight from overseas, have shown interest in buying a strategic stake in India’s oldest term lending institution, IFCI Ltd, with a few even ready to pick up 51 per cent equity. –BL
Tanla Solutions Ltd‘s U.K.-based subsidiary, Tanla Mobile, has expanded its operations into Ireland. –BL
Punjab National Bank has increased the Benchmark Prime Lending Rate by 75 basis points to 13 per cent. –ET
Deccan Chronicle Holdings Ltd would raise its advertisement tariff by 30% from May 2007. –BL
Premarket April 12th,07
After consecutive two flat closes it seems market is waiting for a trigger to move either side of the zone. Most of the participants remained on the sidelines ahead of corporate result, beginning with Infosys announcing its forth quarter results tomorrow. For the last one month market is moving in tune with international markets and local indices may witness caution following the weak global indices. However, for the last few sessions FII have turned buyers of equities in the domestic market may help the sentiment turn positive. Among the domestic indices, the Nifty could test 3825 and below this level may slip to 3800, while on the upside it could edge higher to 3900. The Sensex has a likely support at 13050 and may face resistance at 13250.
US indices ended weak on Wednesday as minutes from last month's Federal Reserve meeting hinted at the need for more rate hikes. While the Dow Jones dropped by 89 points to close at 12485, the Nasdaq ended 18 points lower at 2459.
All the Indian ADRs ended in the red on US bourses. Wipro and Satyam Computers fell sharply and tumbled over 2% each, while Tata Motors, Infosys, HDFC Bank, Patni Computers and Rediff closed with the marginal losses.
The Nymex light crude oil for May delivery rose 12 cents to close at $62.01. In the commodity space, the Comex gold for June series rose by 20 cents to settle at $681.70 a troy ounce.
US indices ended weak on Wednesday as minutes from last month's Federal Reserve meeting hinted at the need for more rate hikes. While the Dow Jones dropped by 89 points to close at 12485, the Nasdaq ended 18 points lower at 2459.
All the Indian ADRs ended in the red on US bourses. Wipro and Satyam Computers fell sharply and tumbled over 2% each, while Tata Motors, Infosys, HDFC Bank, Patni Computers and Rediff closed with the marginal losses.
The Nymex light crude oil for May delivery rose 12 cents to close at $62.01. In the commodity space, the Comex gold for June series rose by 20 cents to settle at $681.70 a troy ounce.
Wednesday, April 11, 2007
Q4FY07 Preview - Macquarie
Is earnings growth slowing?
Event
> Our earnings growth forecasts for the 56 companies in our universe suggest a slowdown in aggregate growth to 12% YoY in 4Q FY3/07 from the 83% achieved in 3Q FY3/07. Sequentially, we expect earnings to drop 6% QoQ. This poses the question of whether earnings growth is poised to slow down.
Impact
> Only a partial earnings slowdown. One-offs in two of the largest sectors, oil & gas, and banks, are likely to skew growth. The oil & gas sector typically witnesses violent unpredictable swings in subsidy allocations, especially in the 4Q of every financial year. Stripping out oil & gas, estimated PAT growth improves to 35% YoY and 2% QoQ. Similarly, the banks will make ~Rs 9bn of one-off general provisioning. Stripping this out, the banks’ PAT growth increases to 37% YoY and 7 % QoQ. Excluding both oil & gas profits and banks’ one-offs, PAT growth rises to a significant 41% YoY and 7% QoQ.
> EBITDA margin expansion, but PAT pressure. We expect strong top-line aggregate growth of 24% YoY and even stronger EBITDA growth of 29% suggesting margin expansion of 100bp. Nevertheless, aggregate PAT margins will be squeezed by 140bp, a trend generally evident in most sectors and primarily attributable to higher interest costs.
> Telecom, pharma and property likely to show high growth, albeit off a lower base. Robust subscriber growth of 70-100% should cushion telecom average revenue per user (ARPU) declines, while pharma growth should be driven by US generic launches by Dr Reddy’s. Similarly, property sector growth should come from better volumes and margins off a low base.
> Cement and IT sectors driven by volume growth, with PAT growth of 73% and 46%, respectively. Volume growth in cement should be 8-10% and for IT, 35-40%. A small loss expected for Arvind Mills should force a 50% fall in textile aggregate PAT growth. Ex-Arvind, textile growth should be 26% YoY.
Outlook
> Cautious on cyclicals given risk of hard landing. The latest CRR hike was a serious surprise to the market, raising the probability of a hard landing. We think the market will be cautious on cyclicals (where the cycle relates to the Indian economy) and rate sensitives for a little while.
> Focus on low-interest-rate-sensitive stocks. We are positive on companies whose earnings are relatively protected from rising interest rates or where topline growth is somewhat hedged against a hard landing. This is reflected in our top 5 stock picks - Bharti Airtel (BHARTI IN, Rs753, Outperform, TP: Rs1,025), TCS (TCS IN, Rs1,203, Outperform, TP: Rs1,672), Reliance Industries (RIL IN, Rs1,362, Outperform, TP: Rs1,590), Tata Steel (TATA IN, Rs467, Outperform, Target: Rs556) and Dr Reddy’s (DRRD IN, Rs738, Outperform, TP: Rs837.5).
Our top five stock picks
Bharti Airtel (BHARTI IN, Rs753, Outperform, TP: Rs1,025) – 36.1% upside
> Bharti delivers one of the lowest tariffs per minute in the world, but still generates attractive operating margins (41.5% in FY08E) and returns (ROE 40.9% in FY08E).
> Bharti’s low-cost position, driven by its scale, innovation and efficiency, should insulate it from competitive threats.
> Further EBITDA margin expansion in the next three years and better asset leverage will result in higher return ratios (ROE).
> Among Asia’s cheapest wireless stocks on valuation multiples adjusted for growth. On EV/EBITDA by EBITDA CAGR, it is at 0.43x, while on PEG, it trades at 0.67x.
> More sharing of passive infrastructure should increase margins.
TCS (TCS IN, Rs1,203, Outperform, TP: Rs1,672) – 39.0% upside
> Huge volume growth due to small base effect (combined market share of Indian IT <3%> Presence of margin expansion levers, like 0-3 years employee mix - ie, the percentage of employees with 0–3 years of experience - (TCS at 52% as against Infosys at 59%) and offshore mix (TCS at 46% as against Infosys at 51%), would lower the per capita employee cost. These should more than offset the effect of margin erosion arising from wage inflation. TCS also enjoys the industry’s lowest attrition rates.
>Lastly, focus on software products business (driving non-linear growth and therefore operational gearing), adoption of global delivery model (delivery centres spanning from China to Chennai and Chile providing near-shoring capabilities) and complementary inorganic growth (eight relatively small gap-filling acquisitions in the past three years) would squarely position TCS to translate the growth into shareholder value.
Reliance Industries (RIL IN, Rs1,362, Outperform, TP: Rs1,590) – 16.7% upside
> RIL recently embarked on a staggering capex plan of US$19bn over the next five years to fuel aggressive growth.
> Earnings poised to triple as expansion plans in refining, petchem, oil & gas and organised retail contribute over the next five years.
> Financing growth not a concern as free cashflow should be sufficient to fund capex.
> ROE is expected to rise consistently due to contribution from high-margin businesses such as oil & gas.
> Fall in gearing would enhance flexibility to raise debt for funding stepped-up capex.
Tata Steel (TATA IN, Rs467, Outperform, Target: Rs556) – 19.1% upside
> India's largest private sector steel manufacturer, and with the acquisition of Corus is now the fifth largest steel producer globally.
> Six-fold expansion planned over the next 10 years, to drive the synergy benefits with Corus.
> Highest operating leverage to steel prices and the best steel play to ride the upcycle in the sector,in our view.
> Highest EBITDA margins in steel globally, along with a rich resource base and investment book,not being factored into valuations.
Dr Reddy’s Labs (DRRD IN, Rs738, Outperform, TP: Rs837.5) – 13.5% upside
> Launch of generic Ondansetron towards the end of December 2006 is expected to drive quarterly earnings for 4Q FY07 and 1Q FY08.
> Overall structural improvement in business and earnings mix, robust outlook for all base businesses including Betapharm (excluding the impact of 180 days marketing exclusivities and authorised generic launches).
> Strong growth outlook for FY09.
Event
> Our earnings growth forecasts for the 56 companies in our universe suggest a slowdown in aggregate growth to 12% YoY in 4Q FY3/07 from the 83% achieved in 3Q FY3/07. Sequentially, we expect earnings to drop 6% QoQ. This poses the question of whether earnings growth is poised to slow down.
Impact
> Only a partial earnings slowdown. One-offs in two of the largest sectors, oil & gas, and banks, are likely to skew growth. The oil & gas sector typically witnesses violent unpredictable swings in subsidy allocations, especially in the 4Q of every financial year. Stripping out oil & gas, estimated PAT growth improves to 35% YoY and 2% QoQ. Similarly, the banks will make ~Rs 9bn of one-off general provisioning. Stripping this out, the banks’ PAT growth increases to 37% YoY and 7 % QoQ. Excluding both oil & gas profits and banks’ one-offs, PAT growth rises to a significant 41% YoY and 7% QoQ.
> EBITDA margin expansion, but PAT pressure. We expect strong top-line aggregate growth of 24% YoY and even stronger EBITDA growth of 29% suggesting margin expansion of 100bp. Nevertheless, aggregate PAT margins will be squeezed by 140bp, a trend generally evident in most sectors and primarily attributable to higher interest costs.
> Telecom, pharma and property likely to show high growth, albeit off a lower base. Robust subscriber growth of 70-100% should cushion telecom average revenue per user (ARPU) declines, while pharma growth should be driven by US generic launches by Dr Reddy’s. Similarly, property sector growth should come from better volumes and margins off a low base.
> Cement and IT sectors driven by volume growth, with PAT growth of 73% and 46%, respectively. Volume growth in cement should be 8-10% and for IT, 35-40%. A small loss expected for Arvind Mills should force a 50% fall in textile aggregate PAT growth. Ex-Arvind, textile growth should be 26% YoY.
Outlook
> Cautious on cyclicals given risk of hard landing. The latest CRR hike was a serious surprise to the market, raising the probability of a hard landing. We think the market will be cautious on cyclicals (where the cycle relates to the Indian economy) and rate sensitives for a little while.
> Focus on low-interest-rate-sensitive stocks. We are positive on companies whose earnings are relatively protected from rising interest rates or where topline growth is somewhat hedged against a hard landing. This is reflected in our top 5 stock picks - Bharti Airtel (BHARTI IN, Rs753, Outperform, TP: Rs1,025), TCS (TCS IN, Rs1,203, Outperform, TP: Rs1,672), Reliance Industries (RIL IN, Rs1,362, Outperform, TP: Rs1,590), Tata Steel (TATA IN, Rs467, Outperform, Target: Rs556) and Dr Reddy’s (DRRD IN, Rs738, Outperform, TP: Rs837.5).
Our top five stock picks
Bharti Airtel (BHARTI IN, Rs753, Outperform, TP: Rs1,025) – 36.1% upside
> Bharti delivers one of the lowest tariffs per minute in the world, but still generates attractive operating margins (41.5% in FY08E) and returns (ROE 40.9% in FY08E).
> Bharti’s low-cost position, driven by its scale, innovation and efficiency, should insulate it from competitive threats.
> Further EBITDA margin expansion in the next three years and better asset leverage will result in higher return ratios (ROE).
> Among Asia’s cheapest wireless stocks on valuation multiples adjusted for growth. On EV/EBITDA by EBITDA CAGR, it is at 0.43x, while on PEG, it trades at 0.67x.
> More sharing of passive infrastructure should increase margins.
TCS (TCS IN, Rs1,203, Outperform, TP: Rs1,672) – 39.0% upside
> Huge volume growth due to small base effect (combined market share of Indian IT <3%> Presence of margin expansion levers, like 0-3 years employee mix - ie, the percentage of employees with 0–3 years of experience - (TCS at 52% as against Infosys at 59%) and offshore mix (TCS at 46% as against Infosys at 51%), would lower the per capita employee cost. These should more than offset the effect of margin erosion arising from wage inflation. TCS also enjoys the industry’s lowest attrition rates.
>Lastly, focus on software products business (driving non-linear growth and therefore operational gearing), adoption of global delivery model (delivery centres spanning from China to Chennai and Chile providing near-shoring capabilities) and complementary inorganic growth (eight relatively small gap-filling acquisitions in the past three years) would squarely position TCS to translate the growth into shareholder value.
Reliance Industries (RIL IN, Rs1,362, Outperform, TP: Rs1,590) – 16.7% upside
> RIL recently embarked on a staggering capex plan of US$19bn over the next five years to fuel aggressive growth.
> Earnings poised to triple as expansion plans in refining, petchem, oil & gas and organised retail contribute over the next five years.
> Financing growth not a concern as free cashflow should be sufficient to fund capex.
> ROE is expected to rise consistently due to contribution from high-margin businesses such as oil & gas.
> Fall in gearing would enhance flexibility to raise debt for funding stepped-up capex.
Tata Steel (TATA IN, Rs467, Outperform, Target: Rs556) – 19.1% upside
> India's largest private sector steel manufacturer, and with the acquisition of Corus is now the fifth largest steel producer globally.
> Six-fold expansion planned over the next 10 years, to drive the synergy benefits with Corus.
> Highest operating leverage to steel prices and the best steel play to ride the upcycle in the sector,in our view.
> Highest EBITDA margins in steel globally, along with a rich resource base and investment book,not being factored into valuations.
Dr Reddy’s Labs (DRRD IN, Rs738, Outperform, TP: Rs837.5) – 13.5% upside
> Launch of generic Ondansetron towards the end of December 2006 is expected to drive quarterly earnings for 4Q FY07 and 1Q FY08.
> Overall structural improvement in business and earnings mix, robust outlook for all base businesses including Betapharm (excluding the impact of 180 days marketing exclusivities and authorised generic launches).
> Strong growth outlook for FY09.
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