ESCORTS
RESEARCH: STANDARD CHARTERED
RATING: OUTPERFORM
CMP: 137

Standard Chartered initiates coverage on Escorts with `OutperformÂ? rating and a price target of 181, valued at 8x one-year forward earnings and at a 33% discount to M&MÂ?s core business. They expect volume momentum and improving realisations in tractors to result in a 25% standalone earnings CAGR over FY10-12E. After disappointing over the past two quarters, EscortsÂ? core business is back on track, driven by: 1) volume momentum in tractors, 2) bounce back in margins post-two price hikes in the recent quarter, and 3) the auto component segment ceasing to be a drag on earnings. The robust outlook for the construction equipment sector coupled with a much improved product mix is likely to revive ECELÂ?s earnings over FY10-12E. StanChart values Escorts as a pure tractor play with the nearest comparable proxy being M&M. Given M&MÂ?s leadership, earnings profile and scale, StanChart values Escorts at a 33% discount to M&MÂ?s core business multiple (12x) at 8x, which is also its historic average forward multiple.

ULTRATECH CEMENT
RESEARCH: BNP PARIBAS
RATING: REDUCE
CMP: 1087

BNP Paribas reiterates `ReduceÂ? rating on Ultratech Cement. Ultratech reported flattish volume growth y-o-y given higher exposure to weak south and north regions. On a like-for-like basis it reported sales and EBIT increases of 6.7% y-o-y and 5.5% y-o-y respectively. Ultratech reported consolidated net profit of 690 crore, 47% higher than the estimate, aided by tax provision reversal of 115 crore in Q411 and higher-than estimated other income. Driven by price cooperation among cement vendors, ASPs increased 7% q-o-q leading to a standalone EBITDA/t of 962.5. While UTCEM benefited from higher ASPs, the full impact of domestic coal price hikes has not been seen yet. Ultratech saw a secular increase in RM costs and other expenses which, however, were offset by the ASP increase. Ultratech trades at EV/t of $131.0/t. BNP reiterates the negative view on the Indian cement sector due to muted demand growth, 20-25% oversupply, and rising commodity costs for FY12.

JET AIRWAYS
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: 478

HSBC estimates the potential impact of a 15% disruption in services of Air India on Jet Airways. If the traffic lost by the state carrier as a result of the strike spills over to the private carriers in the proportion of their market share, HSBC estimates that all else being equal, each week of strike would add roughly 0.7% to the current FY12E profit forecast for Jet AirwaysÂ? by pushing up load factors by 1.5 ppts. The impact, however, could differ depending upon the profile of the affected routes, JetÂ?s current load factors on those routes and some incremental costs from higher load factors. HSBC continues to value Jet using relative valuation metrics. In using relative valuation, HSBC values Jet at the FY11E multiples of Cathay Pacific and Air China. HSBC uses four approaches: EV/EBITDAR, price to book, PE, and rating to economic profit and places the fair value of Jet at the midpoint of the range derived using these metrics and its own average price to book of 3x over 2005-07.

EXIDE INDUSTRIES
RESEARCH: UBS INVESTMENT
RATING: BUY
CMP: 153

Exide IndustriesÂ? reported Q4FY11 PAT of 160 crore, sharply higher than UBSÂ? and consensus estimates, led by higher than expected EBITDA margins. Q4 EBITDA margins came in at 19.1%, up by 380 bps sequentially. The company had disappointed the Street in Q3 when margins collapsed to 15.3% because of capacity constraints. UBSÂ? forecasts for FY12 are premised on EBITDA margins of 18.9%. Recovery in Q4 was sharper and sooner than expected. UBS reiterates the view that Exide remains well-placed to benefit from growth in the auto aftermarket and power back-up segments, given its strong brands and distribution. The stock valuations are attractive at 14.4x FY12E P/E with strong earnings growth of 21% CAGR over FY11-13E, high core ROEs of 53% and a strong net cash balance sheet. UBS derives the price target of 162 on 16x FY12E P/E for the companyÂ?s core storage battery business, to which UBS adds value for its stakes in subsidiaries and the insurance business.

RELIANCE INDUSTRIES
RESEARCH: GOLDMAN SACHS
RATING: NEUTRAL
CMP: 982

Goldman Sachs removes RIL from the Asia Pacific Conviction list and downgrades it to `NeutralÂ? from `BuyÂ? as they are concerned about the lack of clarity in its sustainable growth drivers, implying limited scope for medium-term earnings surprise following Q4 results. Since adding to the `BuyÂ? list on October 8, 2010, RIL has declined 3.7% versus the BSE30 Sensex declining 3.3%. Goldman SachsÂ? positive stance on RIL was primarily based on strong earnings momentum from the cyclical businesses - refining and petrochemicals, potentially leading to consensus earnings upgrades. RILÂ?s refining margin either implies lower correlation to Asian distillate cracks than the estimated, or lower gains from the light-heavy oil price differential than the historical trend. RIL also indicated that it would be challenging to profitably deploy cash of around $9.5 billion. Goldman Sachs lowers FY12E/13E EPS by 11%/15% due to lower gas production and to reflect BPÂ?s 30% stake in 23 E&P blocks.