Buy Apollo Tyres Ltd. - One year Return - 25%
Recommendation: BUY
CMP: Rs:64
Target Price: Rs:80

· EBIDTA/Profits above expectation due to sharp increase in inventory (7.2% of consolidated sales). Expect margins to decline QoQ despite price hikes

· VBBV reports strong results with margins of 16.5%. Expansion of capacity in FY12 due to strong demand in Europe. Higher rubber prices to affect margins from 3QFY11

· Lower FY11E conso EPS by 15.6% to Rs 7.2 due to lockout at Perambara plant. Assumed that plant will resume operation in 3QFY11. Marginally upgrade FY12 EPS by 2.5% to Rs 9.8

· Maintain BUY but lower target price to Rs 80 (down 9.1%), valuing at FY12E PER of 8.1 and EV/EBIDTA of 5.0. Lower target multiple as contribution from subsidiary to increase.

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Buy Essel Propack - One Year Return - 40%
Recommendation: BUY
CMP: Rs:48
Target Price: Rs:70

Essel Propack (EPL) reported satisfactory performance on like-to-like basis – revenue growth of 15.0% yoy to Rs3.3 bn and adjusted net profit of Rs104.0 mn

Blended volume growth of 12-13%, driven by 13% growth in laminated tubes, 30% in plastic tubes and 15% in packaging.

EBIT loss reduction in Europe (from Rs103.1 mn to Rs39.8 mn), but Americas continue to report muted performance.

Maintain positive bias with ‘BUY’ rating and price target of Rs70/Share

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Buy Orient Paper & Industries - One Year Return - 15%
Recommendation: BUY
CMP: Rs:54
Target Price: Rs:63

· Net profit at Rs0.34bn (+ 2.1% yoy) below estimates, on account of higher than estimated losses in paper division

· Revenues at Rs4.42bn grew by an impressive 27.6% yoy driven by 32% growth in cement segment (Rs2.84bn) and 32.3% in electricals segment (Rs1.35bn)

· Paper division reported a loss of Rs233mn (our est Rs111 mn) due to unprecedented shortage of water which led to shutdown at Amlai paper plant for the entire quarter

· Downgrading earnings by 14.3% for FY11 (EPS of Rs:8) and introducing FY12 estimates with a EPS of Rs10.3. Maintain BUY with price target of Rs:63

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Buy Genus Power - One Year Return - 30%
Recommendation: Buy
Price Target: Rs:300
CMP: Rs:229

Top line up 33.8%: Genus Power Infrastructures Ltd (GPIL)?s Q1FY2011 earnings topped our projections both on revenue and profitability fronts. The net revenue for the quarter was up 33.8% year on year (yoy) to Rs159.8 crore, much above our estimate of Rs145.8 crore. The
company?s meter?s business continued to post robust growth with revenue for the quarter at Rs72 crore. The projects business recorded revenue of Rs64 crore.

OPM robust at 16.9%: The operating profit margin (OPM) was stable?at 16.9% in the quarter as compared to 17.1% in the year ago quarter, as the rise in other expenses was offset by containment in raw material cost. The other expenses increased 59.4% yoy in the quarter mainly on account of increased provision of Rs5-6 crore (with respect to state electricity boards [SEBs] for any eventuality of liquidated damages).

PAT up 55.6%: The interest cost came down marginally, to Rs9.6 crore in the quarter. Robust margins led the profit after tax (PAT) up 55.6% yoy to Rs12.95 crore, as against our expectation of a 22.1% y-o-y growth.

Order book at Rs788 crore: The order book at the end of Q1FY2011 stands at Rs788 crore as against Rs820 crore at the end of Q4FY2010. The company got orders worth Rs129 crore during the quarter. The orders for meters division formed 34% of the current order book and
those for projects division formed 65%. The company has already participated in tenders worth Rs1,530 crore.

Outlook and valuation: GPIL, one of the mid-cap companies under our coverage, is the market leader in meters space. Given its strong order pipeline, huge opportunity in chosen niche and proven execution capabilities, we believe that the company can sustain about 20-25% growth in revenue over the next few years, over which period its OPM is also likely to remain stable. At the current market price, the stock trades at 4.6x FY2012E earnings per share (EPS) while it
discounts its historical (FY2010) book value by 1.2x. In our view, the stock does not adequately capture the potential compounded annual growth rate (CAGR) of 24.3% in profit over FY2010-12E. We remain positive and maintain our Buy recommendation on the stock with price
target of Rs300 (6xFY2012E EPS) on the stock.

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Buy 3i Infotech - One Year Return - 60%
Recommendation: Buy
Price target: Rs:100
Current market price: Rs:63

3i Infotech's Q1FY2011 net income of Rs61.9 crore was below our expectation of Rs75.4 crore. The main reason for the deviation of the net income from our estimate was higher interest expenses (Rs37.5 crore) coupled with increased depreciation cost (Rs25.6 crore). We were expecting a lower interest cost of Rs25.6 crore and lower depreciation charge of Rs21.1 crore.
For Q1FY2011, the consolidated revenues grew by 1.4% quarter on quarter (qoq) and by 6.6% yoy to Rs637 crore. The sequential revenue growth was muted during the quarter on account of decline in the volume of the transaction services business sequentially; revenues for the same were down by -1.2% qoq to Rs242.1 crore. The information technology (IT) solutions business (IT services and products) clocked revenues of Rs394.9 crore, up by 3% qoq.

The operating profit margin (OPM) declined marginally by 20 basis points qoq to 19.5%, on account of the wage hikes effected during the quarter (about 10% blended). Nevertheless, better cost control on account of the IT solutions and services business? integration restricted the margin decline. For FY2011 the management has indicated the margins shall be maintained at the current level.

Starting from Q1FY2011, 3i Infotech has changed its reporting structure in segment reporting from three segments earlier (software products, IT services, transaction services) to two segments, namely IT solutions and transaction services. The IT solutions business? revenues grew by 3% qoq and by 8.3% yoy to Rs394.9 crore, thereby accounting for 62% of the total revenues. The transaction services business? revenues declined by 1.2% qoq but increased by 3.8% yoy to Rs242.1 crore, thereby accounting for 38% of the total revenues.

3i Infotech's performance for the quarter gone by was below our expectations on both the top line and the bottom line front. Nevertheless, its margin performance was quite better than our
expectations. Going forward, the management has hinted at an improving demand environment with healthy traction seen in the emerging geographies, like the UK, the Middle-East and the Asian markets. However, the US market is yet to pick up as per expectations.Nevertheless, the management is confident of achieving its FY2011 revenue guidance of 11-14% growth. We remain positive on the stock with a long-term perspective; however, in the medium term, stability in the quarterly financial performance will be a key trigger for the re-rating of the stock.

We maintain our Buy recommendation and price target of Rs100 on the stock. At the current market price of Rs63, the stock is trading at attractive valuations of 5.5x FY2011 earnings estimate and 5x FY2012 earnings estimate

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Buy Bank of Baroda - One Year Return - 25%
Recommendation: Buy
Price target: Rs:935
CMP: Rs:753

For Q1FY2011 Bank of Baroda (BoB) reported a bottom line of Rs859.16 crore vs our estimate of Rs794 crore. The bottom line grew by 25.4% year on year (yoy) supported by a strong growth in the net interest income (NII). The asset quality deteriorated on a sequential basis due to slippages from the small and medium enterprise (SME) and agri portfolios.

The NII for the quarter was up a robust 54.2% yoy to Rs1,858 crore, driven by a strong 30.7% year-on-year (y-o-y) growth in the advances.Meanwhile, the reported net interest margin (NIM) deteriorated by seven basis points sequentially led by a contraction in the yields.The non-interest income came down by 12.2% yoy to Rs617.2 crore due to a y-o-y decline in the banks treasury income.

The operating expenses were up by 5.5% yoy led by a 22.1% y-o-y increase in the other operating expenses. Meanwhile, the staff expenses contracted by 2.9% yoy. The cost-to-income ratio improved by 878 basis points yoy to 38.3% during the same period.

The business growth remained very strong with deposits and advances growing by 28.2% and 30.7% yoy respectively. The advances growth was led by the SME and retail segments. The current account and savings account (CASA) ratio of the bank stood at a healthy 38.1%, which was largely in line with that of the year-ago quarter.

The provisions for the quarter stood at Rs251.3 crore vs a write-back of Rs39 crore in the year-ago quarter. The asset quality of the bank deteriorated in the quarter on absolute
basis as the gross non-performing asset (GNPA) increased by 10.7% quarter on quarter (qoq) to Rs2,657.4 crore. However, the GNPA on a relative basis (%GNPA) remained largely stable at 1.41%. The deterioration in the asset quality was largely due to slippages from the bank?s SME and agri portfolios. The provisioning coverage as at the end of Q1FY2011 stood at 73%.The total restructured assets stand at Rs5,283.4 crore (about 2.8% of the advances) of which Rs476 crore (about 9% of the total restructured assets) have slipped into non-performing assets (NPA) so far.

The bank, as on June 30, 2010, remains adequately capitalised with its capital adequacy ratio (CAR) at 13.25% (as per Basel II norms) and tier-I CAR at 8.16%. The bank raised tier-II capital of Rs1,000 crore during the quarter.

Bank of Baroda has reported a sturdy performance for the quarter on the back of a strong business growth and a largely stable NIM. We continue to maintain our optimistic view for the bank on the back of its conservative approach, steady margins, and healthy loan book growth. We are tweaking our estimates to factor in the banks Q1FY2011 performance. At the current market price of Rs753, the stock trades at 6.6x its FY2012E earnings per share (EPS), 4x FY2012E pre-provisioning profit (PPP) and 1.5x its FY2012E adjusted book value (ABV). We
maintain our Buy recommendation on the stock with a revised price target of Rs935.

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Buy IPCA Laboratories - One Year return 25%
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs:350
Current market price: Rs:280

Base profit misses expectations: For Q1FY2011 Ipca Laboratories (Ipca) reported an adjusted net profit of Rs41.8 crore. The Q1FY2010 net profit declined by 4.2% year on year (yoy) and was below our expectation of Rs48.6 crore largely due to higher employee and marketing expenses during the quarter. The total income of the company grew by 16.4% to Rs418 crore, which was in line with our estimate of Rs417.4 crore, essentially due to a 20% year-on-year (y-o-y) growth in the formulation exports. The operating profit margin (OPM) contracted by 300 basis points to 17%, which was lower than its normal margin of 19-20%. The margin was subdued on account of aggressive hiring of field force (up 130 basis points) and higher marketing expenses (up 140 basis points).

But sales growth remains in line: The 16.1% y-o-y growth in the domestic formulation business and the sharp pick-up in the export of the formulations (up 29% yoy; branded--up 15%, generic--up 34%) elevated the sales to Rs418 crore. However ,the lower anti-malarial sales (down 20.5%; owing to delayed monsoon) remained a drag on the overall performance. The rupee?s appreciation against the major other currencies also hampered the revenue growth by 7%. The sales in the Commonwealth of Independent States (CIS; up 18% yoy) and the UK (up
33%) normalised during the quarter. The business of active pharmaceutical ingredients (APIs) remained subdued with only a 5% growth yoy due to a decline in the anti-malarial API and a loss in revenue from its product, Metopolol API, due to the closure of the plant of one of its clients.
Guided for 18.5-19% top line growth: The growth in the domestic market and the increasing contribution of tender from artemether + lumefantrine give the management confidence to achieve an overall growth of 18.5-19% (tweaked from the 18-20% growth guidance givenearlier) and to improve the earnings before interest, tax, depreciation and amortisation (EBITDA) margin from hereon. Ipca plans to incur Rs150 crore of capital expenditure (capex) in FY2011; of this Rs90 crore will be utilised towards the Sikkim facility.

Tweak estimates, maintain Buy: The Q1FY2011 results are below our estimates owing to the aggressive hiring and promotional activities undertaken by the management for its domestic business. We treat this quarter as an aberration and believe the growth will normalise in the
subsequent quarters. We also remain confident of a strong recovery in the anti-malarial sales (we expect only partial recovery in API sales). Thus, we tweak our estimates to factor in the partial loss from the anti-malarial API sales. Our revised earnings per share (EPS) estimates stand at Rs18.1 for FY2011 (vs Rs19.6) and at Rs22.6 for FY2012 (vs Rs23.5). At the current market price of Rs264, Ipca is attractively valued at 13.5x FY2011E earnings and 11.2x FY2012E earnings.

With a healthy balance sheet and improving return ratios, the stock is expected to get re-rated closer to its peers. Based on the strong earnings visibility from the export segment and the scale-up in the domestic business, we maintain our Buy recommendation on the stock with a price target of Rs350

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Buy Provogue India Ltd - One Year Return - 50%
Recommendation: Buy
Price target: Rs:90
Current market price: Rs:58


For Q1FY2011 Provogue India Ltd (PIL) has reported a strong sales growth of 41.1% on a year-on-year (y-o-y) basis to Rs103 crore (which is higher than our estimate of Rs90 crore). The growth was led by the revival in the domestic demand and the strong performance of the
export business. The same-store sales growth for the quarter was 8% while exports contributed 53% to the revenue as against the normal contribution of 33-34%.

Despite contraction in the gross margin due to the high contribution from the export segment, a strong operational improvement during the quarter aided PIL?s operating profit to grow at 40% on a y-o-y basis.The operating profit margin (OPM) stood flat on a y-o-y basis at 14.6%
(14.7% in Q1FY2010).

A lower other income restricted the earnings before interest, tax,depreciation and amortisation (EBITDA) growth to 15.8% on a y-o-y basis to Rs18.6 crore. In line with the same, the profit after tax (PAT) grew by 15.9% on a y-o-y basis to Rs7.8 crore (against our estimate of Rs7.2 crore). PIL is poised to report a healthy earnings compounded annual growth rate (CAGR) of 22.8% over FY2010-12 in its core business of fashion brand retailing. The growth will be achieved on the back of strong store expansion, buoyant demand and enhanced product range. We like the stock and consider it a good bet to play the Indian retail and retail infrastructure play. Hence, we maintain our Buy rating on the stock.

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