TUBE INVESTMENT OF INDIA
RESEARCH: NOMURA
RATING: BUY
CMP: 148

Nomura continues to maintain `Buy? rating on Tube Investment of India due to the strong competitive position of its businesses, good return ratios, high quality of management and attractive valuations. While the growth may slow down in FY12E as compared to that in FY11, it is still likely to be upwards of 15% as per current indicators and estimates. The company has been able to pass on the increase in raw material prices and is likely to maintain margins at least in the next one-two quarters. Oneyear forward P/E multiple of 13.5x on a standalone one-year forward EPS of 11.08 gives a value of 150/share. The one-year forward P/E multiple of 13.5x for the standalone business is justified as it is a highquality and high ROCE business where the company has dominant market share. Nomura has not assigned any value to the general insurance business, in which the company holds a 74% stake and held a market share of 2.3% in FY10.

ESSAR OIL
RESEARCH: CREDIT SUISSE
RATING: OUTPERFORM
CMP: : 135

Credit Suisse upgrades Essar Oil?s rating to `Outperform? with a target price of 155. Essar Oil reported Q4FY11 EPS of 2.35, up 18% Q-o-Q and 57% Y-o-Y. ESOIL has booked sales tax deferral benefits of $2.86/bbl in Q4, supported by high product prices. Adjusting for this, Q411 GRM (gross refining margin) stands at $5.3/bbl, up $0.5/bbl Q-o-Q. The refinery upgrade project has been delayed due to fabrication issues at some units. These have reportedly been fixed, and ESOIL now believes it will be able to complete the upgrade by Q3/Q4 FY11. Trail production and sales have commenced at the Raniganj CBM block. Commercial production is expected to commence as some pending approvals are obtained. FY12/13E EPS increases by 8%/6% to 6.9/22.3 respectively. Completion of the upgrade should materially increase ESOIL?s EPS/cash flow.

BHARTI AIRTEL
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: : 372

HSBC upgrades Bharti Airtel to `Overweight? and raises target price to 425 as Bharti benefits most from weakening of competition. The stock underperformed after the launch of GSM services by Tata Teleservices and the entry of a range of new greenfield operators that led to irrational price competition. However, in the last six-nine months, the stock has bounced back as new GSM operators have become defensive in terms of pricing and rollout of services. In fact, Bharti won back about 100 bp of its revenue market share in the June quarter, a clear indication of its dominance in the Indian wireless space. Bharti is well positioned in the Indian market with the largest block of 900 MHz spectrum and 3G spectrum in 13 circles that cover 68% of India?s population; the largest amongst all operators. HSBC believes FY12E will be a year of consolidation for both voice and data. With 3G launch to gain traction in the next 9-12 months and focus on voice improvements to be more visible in FY13E, investors should now be looking at FY13E.

PETRONET LNG
RESEARCH: DEUTSCHE BANK
RATING: BUY
CMP: : 133

Deutsche Bank is reiterating the `Buy? rating on Petronet LNG, with a price target of 150. PLNG?s greenfield 5 mmtpa LNG terminal at Kochi and its capacity expansion at Dahej are on track for completion within the next 30 months. This should increase its capacity from 10 mmtpa currently to 15 mmtpa in FY13 and 18 mmtpa by FY14. PLNG is evaluating further capacity expansion. Deutsche Bank estimates PLNG?s EBITDA to rise at a CAGR of 28% over FY10-14, driving its RoE from 19% in FY10 to 28% in FY14. GAIL?s evacuation pipeline connecting the Kochi terminal is expected to be commissioned in time for the start-up of Phase I of the terminal. The contract for a new jetty at Dahej has also been awarded and is expected to be completed by June 2013. PLNG is evaluating setting up a greenfield LNG terminal on the east coast of India as well as further expanding its existing Dahej terminal.

SUN PHARMA
RESEARCH: CITIGROUP
RATING: HOLD
CMP:: 440

Citigroup maintains the `Hold? rating on Sun Pharma. Sun and MRK has formed a JV to tap the emerging markets with new combination drugs and formulations of incrementally innovative, branded generics. This is separate from Sun?s current branded generics biz in these markets and upside appears a few years out. While Citigroup does not see any material impact on valuations in the near term, this is positive for the margin as it adds a revenue stream over the long term. The JV seeks to leverage MRK?s front end in emerging markets, its strong regulatory expertise and clinical excellence as an innovator while Sun will bring in manufacturing and product development capabilities. However, in the absence of additional information, Citigroup is unable to quantify the incremental revenues and profitability for Sun. The target price Rs 480 is based on a sum-of-the-parts approach, valuing the base business using a P/E and ascribing an option value for its patent challenge pipeline. However, Sun deserves a premium, given its consistent track record, high profitability and return rations, as well as the potential upside from the deployment of idle cash in the business.