Merrill Lynch in their report on HPCL,

Attractive dividend yield, P/BV of 0.99; retain Buy HPCL’s FY07 EPS, at Rs46.4, is almost 4x FY06 EPS of Rs12. Quality of FY07 earnings is admittedly poor as it is entirely attributable to oil bonds. There is also uncertainty on FY08E earnings. However, recent government decisions suggest bond issue may be generous even in FY08. HPCL’s dividend yield is attractive - 6.5% for FY07 and 5.4% for FY08E. It is also cheaper than peers on PE and is trading marginally below estimated NAV. We retain our Buy rating on HPCL.

Merrill Lynch on IVRCL

Key Triggers: Growth, Margin Expansion & IVR Prime IPO IVRCL, our top pick in the mid-cap E&C space, reported solid 4QFY07 on all fronts. Sales were up Rs10bn +67%YoY; EBITDA margin expanded by 140bpsYoY & PAT of Rs732mn, +67%YoY. PAT was ahead of MLe due to better margins & non-prov of full tax (25% v/s MLe 32%) pending appeal in tribunal. Order backlog remains robust at ~3x FY07 sales. Value creation through the listing of IVR Prime, and 42% earnings CAGR in core business are potential triggers ahead. Buy, PO Rs450.

ENAM on Mahindra & Mahindra

While outlook for the subsidiaries remains buoyant, we are concerned about a likely moderation in the core business and the high capex outlined by M&M and its JVs (details on pg2). We continue to maintain our sector Neutral rating on the stock. At CMP of Rs 765, the stock trades at 10x FY08E and 9.2x FY09E core EPS of Rs 34.6 and Rs 38.5 respectively. Our target price of Rs 825 is based on 12x FY08 core EPS + value of subsidiaries at Rs 410/ share.

ENAM on Larsen and Tourbo

L&T’s management has guided for 25-30% revenues as well as order intake growth and 11% margins for the E&C business. Further, its tie up for supercritical technology in thermal power, foray into shipbuilding, defense and aerospace are likely to drive long term growth for L&T. Value unlocking of its IDPL and Infotech subsidiaries will be the icing on the cake. We maintain our earnings estimates. At CMP (Rs 1,857), the stock trades at 12.0x FY08E and 8.5x FY09E EV/EBIDTA (adj. for investments Rs 218). Maintain sector Outperformer and a target of Rs 2200

ENAM on IOC

Maintain Outperformer, retain price target IOC in our opinion is a low risk play in the OMC pack, given its diversified revenue stream. Also, given its relatively low regulatory
exposure to earnings, its valuations are likely to be at a premium to its domestic peers. We maintain our sector Outperformer rating and a target of Rs 525

ENAM on HPCL

HPCL reported profits largely on the back of oil bonds and upstream subsidiary assistance. Going ahead in FY08 profits remain leveraged to - (1) issuance of oil bonds and (2) sustained assistance from the upstream subsidiary. We still await clarity on the subsidy sharing mechanism as well as on the issuance of oil bonds. Given this weak
regulatory outlook, earnings uncertainty remains high and therefore HPCL is likely to trade at a discount to regional peers. HPCL has declared a final dividend of Rs12/share (in addition to an interim dividend of Rs 6/share) thereby offering a yield of 4.5% on the final dividend. This is likely to offer support for the stock. We maintain our
sector Underperformer rating. Target of Rs 280.

ENAM on BHEL

A healthy order backlog of Rs 550bn provides a strong near-term growth visibility. BHEL has an estimated outlay of Rs 44bn over FY08-09E taking its total capacity from 6000MW to 15000MW. Factoring in the higher than estimated order inflows in Q4FY07, we raise our FY08 earnings estimates by 10% to Rs 31.2bn and introduce a FY09 earnings estimate of Rs 36.3bn. We believe that order intake traction is likely to significantly slow down going forward due to increasing competitive intensity, technology gaps in the high rating hydro, nuclear and 765kv T&D space, and limited visibility in the fast growing super-critical technology space. Despite this, BHEL has set a target of doubling revenues in 3 years and reaching USD 10bn in revenues by FY12. This implies that BHEL may end up servicing unfavorable international contracts.
Hence, we believe that a premium in valuations is not justified given the uncertainties cited above. At CMP (Rs 2,856) the stock trades at a 13.2x FY08E EV/ EBIDTA. We maintain our sector Underperformer with a target of Rs 2500

The Indian rupee is trading just short of a nine-year peak on Friday, on sanguine cues from other high-yielding Asian currencies that rose against the dollar, and strong foreign investments in local stocks.On July 18thh 2007, it was trading just short of a 40.28, its strongest since May 1998.

“The flows are strong this morning, but the question on everyone’s mind is whether the RBI will continue to defend 40.28,” said a dealer with a private bank, referring to the Reserve Bank of India.

The central bank is widely suspected of playing an active role in the currency market recently, buying dollars through state-run banks to stem the local unit’s rise.

Robust investments by foreigners in India, and massive debt raised overseas by local companies, have bolstered the rupee, helping it gain more than 9.5 percent against the dollar this year, to be Asia’s best performing currency in 2007.

Foreign funds have bought more than $9.3 billion of equities so far in 2007, including $3.6 billion so far this month, compared with about 8 billion they bought all of last year.

In early trade, the benchmark 30-share BSE index climbed to a record — its 12th in 15 sessions.

A member of the central bank’s panel on capital account convertibility said on Thursday that the currency’s strong surge would hurt growth.

“Alarm bells are already ringing due to the sharp appreciation of the rupee and this will affect growth,” Surjit Bhalla, principal at Oxus Research and Investments said.

Domestic inflation is rising rapidly and the central bank has been tightening policy. Money growth is already slowing sharply, which typically heralds a slowdown in Indian’s business cycle. With the P/E ratio at 22 (among the highest globally), stocks offer very little valuation cushion to protect against deteriorating monetary conditions and slowing growth. More technically, the advance/decline line for the Indian stock exchange has peaked, which typically serves as a warning signal for a rollover in share prices. Banking issues appear most vulnerable as they are directly exposed to rising interest rates and the ensuing slowdown in credit demand. Bottom line: long only investors should stay clear of Indian stocks, while hedge funds should watch for shorting opportunities.

Dear Editors of HT, TOI, IndianExpress and The Hindu, I got the mail below from a friend of mine and following the unwritten code of conduct, I am forwarding it to my friends but all efforts of people who have been forwarding this mail would go waste if this mail doesn’t reach YOU……
Something to think about..!!

Shame on Indian Media??? Really what a shame…

By the time u guys read this news, the body of Major Manish Pitambare, who was shot dead at Anantnag, would have been cremated with full military honors.

On Tuesday, this news swept across all the news channels ‘Sanjay Dutt relieved by court’. ‘Sirf Munna not a bhai’ ‘13 saal ka vanvaas khatam’ ‘although found guilty for possession of armory, Sanjay can breath sigh of relief as all the TADA charges against him are withdrawn’ Then many personalities like Salman Khan said ‘He is a good person. We knew he will come out clean’. Mr Big B said “Dutt’s family and our family have relations for years he’s a good kid. He is like elder brother to Abhishek”. His sister Priya Dutt said “we can sleep well tonight. It’s a great relief”

In other news, Parliament was mad at Indian team for performing bad; Greg Chappell said something; Shah Rukh Khan replaces Amitabh in KBC and other such stuff. But most of the emphasis was given on Sanjay Dutt’s “phoenix like” comeback from the ashes of terrorist charges. Surfing through the channels, one news on BBC startled me. It read “Hijbul Mujahidin’s most wanted terrorist ‘Sohel Faisal’ killed in Anantnag, India. Indian Major leading the operation lost his life in the process. Four others are injured.

Sanjay Dutt

It was past midnight , I started visiting the stupid Indian channels, but Sanjay Dutt was still ruling. They were telling how Sanjay pleaded to the court saying ‘I’m the sole bread earner for my family’, ‘I have a daughter who is studying in US’ and so on. Then they showed how Sanjay was not wearing his lucky blue shirt while he was hearing the verdict and also how he went to every temple and prayed for the last few months. A suspect in Mumbai bomb blasts, convicted under armory act…was being transformed into a hero.

Sure Sanjay Dutt has a daughter; Sure he did not do any terrorist activity. Possessing an AK47 is considered too elementary in terrorist community and also one who possesses an AK47 has a right to possess a pistol so that again is not such a big crime; Sure Sanjay Dutt went to all the temples;
Sure he did a lot of Gandhigiri but then…….. …

Major Manish H Pitambare got the information from his sources about the terrorists’ whereabouts. Wasting no time he attacked the camp, killed Hisbul Mujahidin’s supremo and in the process lost his life to the bullets fired from an AK47. He is survived by a wife and daughter (just like Sanjay Dutt) who’s only 18 months old.

Major Manish never said ‘I have a daughter’ before he took the decision to attack the terrorists in the darkest of nights. He never thought about having a family and he being the bread earner. No news channel covered this since they were too busy hyping a former drug addict, a suspect who’s linked to bomb blasts which killed hundreds. Their aim was to show how he defied the TADA charges and they were so successful that his conviction in possession of armory had no meaning. They also concluded that his parents in heaven must be happy and proud of him.

Parents of Major Manish are still living and they have to live rest of their lives without their beloved son. His daughter won’t ever see her daddy again.

Major Manish Pitambare

So guys, please forward this message around so that the media knows which news to give importance, as it is a shame for us since this Army Major’s death news was given by a foreign TV channel!!!

If you believe in it, don’t feel shy in forwarding it and bookmarking the page.

Aurobindo Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs684

Betting big on formulation growth

Key points

Formulation business grows at 62.2% CAGR: Aurobindo Pharma (Aurobindo) has created a robust product pipeline of 1,172 formulation dossiers for various markets and expects major growth in its speciality generic formulation business. The formulation sales are expected to gallop at a CAGR of 62.2% over FY2006-09.

Robust product pipeline: During FY2007, Aurobindo filed 32 ANDAs and 41 DMFs, taking the cumulative DMF filings to 110 and ANDA filings to 82 in the US market. With the recent USFDA approval for products like Bisoprolol, Simvastatin and Zolpidem tartarate, we estimate incremental revenue of Rs100 crore from the US generic business during FY2008.

European business to expand at over 50%: Aurobindo expects to deliver over 50% growth in Europe on the back of increased product registrations and synergetic benefits flowing from the recent acquisitions of Milpharm in the UK and Pharmacin in the Netherlands. It is also contemplating a couple of mid-sized acquisitions in Europe.

Steady growth in ARV business: With most of the registrations taking place in the recent past, we expect Aurobindo to see steady growth in its ARV formulation revenues. We estimate the ARV formulation business would generate revenues worth $99 million and $128.7 million in FY2008 and FY2009 respectively.

Consolidated PAT to grow at 70% CAGR: Going forward, the increasing traction in formulation exports would help the consolidated revenue to grow at a 24.3% CAGR during FY2006-09E (Rs3,143.1 crore in FY2009E). The adjusted net profit would gallop at a CAGR of 70% during FY2006-09 (Rs348.4 crore in FY2009E), translating into earnings of Rs57.1 per share.

Buy with price target of Rs914: At the current market price of Rs684, Aurobindo is trading at 14.9x its FY2008E and 12.0x its FY2009E earnings. We initiate coverage on Aurobindo with a Buy recommendation and a one-year price target of Rs914 (an upside of 34% from the current levels). The price target discounts the FY2009E earnings by 16x.

STOCK UPDATE

Bharat Heavy Electricals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs3,125
Current market price: Rs2,724

Price target revised to Rs3,125

Result highlights

At Rs1,150 crore the Q4FY2007 net profit of Bharat Heavy Electricals Ltd (BHEL) saw a growth of 33%. The same is in line with our estimates. The turnover for the quarter grew by 25% to Rs7,576 crore driven by higher order backlog of Rs46,700 crore at the end of Q3FY2007.

The order backlog during the quarter grew by an impressive 45% to Rs55,000 crore driven by a strong 56% increase in order inflows of Rs16,300 crore on a year-on-year (y-o-y) basis.

The power division registered a 23% growth in revenues whereas the industry division recorded a growth of 30% in revenue.

The operating profit margin (OPM) for the quarter improved by 135 basis points year on year (yoy). Consequently the operating profit for the quarter grew by 33% to Rs1,587 crore.

The other income increased by 34% to Rs286 crore mainly on account of the rising yields on the huge cash reserves of the company.

On a full year basis, the turnover for FY2007 grew by 29% to Rs18,702 crore and the net profit grew by 42% to Rs2,385 crore.

Order inflows during the year grew by a whopping 88% to Rs35,633 crore. In the power segment, BHEL secured orders worth Rs27,722 crore. In the industry business BHEL secured the biggest ever order worth Rs6,008 crore during the year. The order backlog at the end of March 31, 2007 stood at Rs55,000 crore, which is around 3x its FY2007 sales.

In international business, BHEL secured export orders of Rs1,903 crore during the year in comparison with an average yearly order book of Rs1,275 crore in the last five years.

Thermax
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs585
Current market price: Rs488

Price target revised to Rs585

Result highlights

• The consolidated revenues of Thermax grew by a whopping 65% year on year (yoy) to Rs856.5 crore in Q4FY2007, sharply ahead of our expectation. The revenue of the energy segment grew by a strong 74% yoy to Rs685.5 crore and that of the environment segment grew by a robust 53.7% yoy to Rs205 crore.

• The company’s operating profit margin (OPM) declined by 70 basis points yoy to 12.4% in the quarter. The dip in the margin was due to a rise in the raw material prices and a change in the product mix. On a full year basis, the OPM stood at 12.4% as against 13.1% in Q4FY2006 and we expect the company to maintain the OPM in FY2008. The operating profit grew by 56% to Rs106 crore.

• The energy segment continued its robust performance with a revenue growth of 74% yoy. Although the profit before interest and tax (PBIT) margin for this segment declined by 240 basis points yoy in this quarter, yet we don’t see this as a cause for concern. That’s because the margin declined more because of a change in the product mix and rupee appreciation. The company has said in its conference call that it has taken adequate measures to tackle the rupee appreciation. The environment segment reported an impressive 53.7% growth in its revenue and a 230-basis-point improvement in the PBIT margin on a year-on-year (y-o-y) basis.

• The consolidated net profit grew by 66% yoy to Rs69.7 crore in Q4FY2007, in line with our expectation.

• The order backlog grew at 79% yoy to Rs3,100 crore. It is equivalent to 1.3x FY2007 consolidated revenues and order inflows during the quarter were up by 38% to Rs894 core. This imparts a very strong visibility to the revenues.

• The company has done a capital expenditure (capex) of Rs80 crore in this year and will further do a capex of around Rs150 crore in FY2008 as it is setting up a factory in Vadodara at a cost of Rs175 crore. So far it has invested Rs50 crore in this factory. The factory will start production in a phased manner. The production from the first phase of the project will commence from July this year and full production would start by March 2008.

• The company has guided for a stable to better OPM in FY2008, which, in our opinion, is indicative of the improving outlook of its business.

• In light of the continued growth traction over the last few quarters, the closure of the loss-making subsidiary ME Engineering and the revised guidance of a 40% top line growth for FY2008, we are revising our FY2008 earnings estimate upwards by 2.4%. We are also revising our one-year price target upwards to Rs585. The Rs50 per share of cash and cash equivalent on the company’s books provides a margin of safety to our price target. We maintain a Buy on the stock with a revised price target of Rs585.