LARSEN & TOUBRO
RESEARCH: CITIGROUP
RATING: HOLD
CMP: 1704

Citigroup believes the E&A (electrical and automation) demerger and possible revaluation balances out the weak inflow outlook. Announcement in Q4FY11E suggests L&T may not win 74,500 crore in FY11E. Further, if the H2FY11 slowdown extends into H1FY12, L&T might not win more than 80,000 crore of orders in FY12E. Citigroup?s estimates are 7-9% below consensus in FY12E-13E, which implies there are significant downside risks. Furthermore, the estimates are not conservative given there is a possibility that the company might win less than the Rs 79,100 crore of inflows that have been assumed in the numbers. In line with Lakshya 2015, L&T proposes to transfer the electrical and automation IC (EAIC), excluding the medical equipment business, into a subsidiary and/or associate company or to any other entity as a going concern or otherwise. This restructuring of the business is required so that it is able to realise its full growth potential and participate comprehensively in the growth of the industry. L&T plans to sell its E&A business as a part of its restructuring plan at valuations of about 11,500 crore.

TATA STEEL
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: 629

HSBC reiterates ?Overweight? rating on Tata Steel. HSBC notes that the UK management is targeting GBP 55-60/t of cost savings over the next five years, with GBP 15-20/t over the next two years, GBP 20/t from the capture of gases currently flared and facilities eventually moving completely off-grid, and GBP 20/t from potentially captive coking coal. HSBC values Tata Steel on a sum-of-the-parts basis at a FY12E EV/EBITDA multiple of 6.5x for the Indian and other Asian operations and 5.5x for the European operations. A delayed expansion at Jamshedpur could cause HSBC to lower the volume estimates. Lowerthan-expected steel prices or higher-than-expected raw material prices could hurt earnings. Steel demand conditions in Europe and adverse carbon emission related policies also pose downside risks.

SINTEX
RESEARCH: CLSA
RATING: BUY
CMP: 178

CLSA initiates coverage on Sintex with a `Buy? rating and a price target of 200. Sintex?s prefabricated structures and monolithic businesses are driving strong growth, while the composites business holds the promise for the next leg of innovation-led growth and is benefitting from leveraging pre-crisis acquisitions. Improving working capital discipline should underpin positive FCF (free cash flow) performance over FY11-13. Sintex?s widening footprint and portfolio of offerings in prefab as well as the 2,600-crore order book in monolithics will support continuing growth here. The nature of its products and tight execution support superior margins in the business (about 19%). CLSA expects the stabilising business mix and improving capital discipline to drive positive free cash flow for Sintex over FY11-13. A lack of cash flow has been a key issue for Sintex over the past three years due to deteriorating working capital, which has risen from 46 days in FY07 to 152 in FY10 due to changing business mix and a lack of discipline. We expect this to stabilise at 115 days with rising management focus and capital discipline. CLSA expects Sintex to deliver a profit CAGR of 24% over FY11-13.

HDFC BANK
RESEARCH: MORGAN STANLEY
RATING: OVERWEIGHT
CMP: 2404

Morgan Stanley maintains `Overweight? rating on HDFC Bank. HDFC Bank reported profit of Rs 1,110 crore. Profits were up 2% Q-o-Q / 33% Y-o-Y while EPS grew by 31% Y-o-Y. The key trends from the results include: 1) NII grew by 2% Q-o-Q and 21% Y-o-Y. Margins were stable Qo-Q at 4.2% but were down 20 bps Y-o-Y. Loans grew by 27% Y-o-Y while deposits grew by 25% Y-o-Y. 2) Core fee income grew at 23% Yo-Y - picking up from 22% Y-o-Y in the previous quarter. 3) Asset quality trends were benign. Two-thirds of the provisions made in this quarter were floating. Reported coverage ratio was 83%. 4) Given the strong profitability, HDFC Bank has made additional contingent provisions to the tune of 50 crore for potential future issues related to its microfinance sector exposure. 5) HDFC Bank has announced a 5:1 stock split. HDFC Bank is trading at 20.3x F12E earnings and 15.4x F13E earnings and 3.7x F12E BV and 3.1x F13E BV. Morgan Stanley believes the valuation could hold in the context of the strong profitability that the bank is delivering.

GRASIM INDUSTRIES
RESEARCH: BANK OF AMERICA
RATING: SELL
CMP: 2423

Bank of America recommends ?Sell? rating on Grasim Industries. VSF (viscose staple fibre) prices in China have fallen 10-15% over the past few days. In contrast, Grasim hiked domestic VSF prices by 8/kg (+5%) at the start of April ?11. BoA?s FY12 estimates already assume lower VSF prices and remain unchanged. Their long-term stock rating stays at `Neutral? reflecting relative preference for Grasim over pure cement plays due to steep valuation discount and fewer risks to VSF outlook. Grasim reportedly hiked prices of viscose staple fibre by 8/kg (+5%) in April ?11. The gap between local and international VSF prices has therefore narrowed to about 7% versus 15-20% earlier. This creates a possibility of Grasim having to roll back some of the recent hikes. Longer-term, however, we do not see significant drop in VSF prices unless cotton prices drop sharply. Currently, VSF is priced on par with cotton compared with about 40% premium historically.