Weekly Review---April 6, 2010

Markets continue to consolidate
The Indian stock markets continued to consolidate their gains during the current week of trade as well, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by a mere 0.3% and 0.2%, respectively. The BSE Mid- and Small-cap indices, however, out-performed their large cap counterparts, with both the indices gaining 3.3% and 1.5%, respectively. Notably, volatility was high, with the key benchmark indices even hitting their highest level in more than two years during the week. On the sectoral front, most of the indices mirrored the mixed trend, with the BSE Realty index gaining the maximum of 3.3%, followed by the BSE Metal index; however, the BSE IT index ended in the negative territory, losing 2.9%.
BSE Realty Index - Bottom Fishing
The BSE Realty Index was the highest gainer for the week, up by 3.3%, and outperforming the benchmark Sensex, which was almost flat with minor gains of 0.3%. The top gainers in the real estate space were DLF (+5.8%), Unitech (+5.2%), Omaxe (+4.2%), Peninsula Land (+3.9%) and Sobha Developers (+3.3%), while the top losers were Akruti City (-2.2%) and Ansal Props (-1.4%). The strong performance by the sector is attributed to value buying by investors after a prolonged relative underperformance vis-à-vis the Sensex. Moreover, we expect to witness a strong sales momentum in 4QFY2010 for DLF and Unitech.
BGR Energy (BGR) - Initiating Coverage
BGR has taken several 'bigger' leaps over the years, from being a mere manufacturer of a few BoP (Balance of Plant) components to executing Turnkey BoP projects, and now gradually executing full-fledged EPC contracts. The company has a healthy order book of Rs11,609cr (4.2x FY2010E sales), providing good revenue visibility. At the current price of Rs505, the stock is quoting at 14.9x and at 11.0x its FY2011E and FY2012E EPS, respectively, which we believe is attractive. We Initiate Coverage with a Buy recommendation and a Target Price of Rs641.
Piramal Life Sciences - Visit Note
Piramal Life Sciences is the de-merged R&D outfit of Piramal Healthcare. The company embarked on the basic R&D activity in 1998 consequent to the acquisition of Hoechst India’s R&D Center. With manpower of around 350 scientists, the company has developed good depth and breadth of pipeline. However, on the valuation front, at current levels, the company is trading at 3.5x its Expenses (FY2009), which is at a significant discount to its peer, SPARC, which trades at 46x its Expenses (FY2009). The stock is Not Rated.