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Telecom, BHEL (result 4QFY08), Cement, Steel, Inside India - Ports, Result Calendar

Telecom (On spectrum, start-ups and active sharing – the government is indeed busy): We review the prospects for new licencees including international companies looking to enter the telecom sector and developments on active infrastructure sharing regulations and 3G. Our key conclusions are that while the grant of numerous new licences can give the illusion of a significant increase in competitive intensity, the business case for entrants does not look promising. We retain our BUY recommendations on Bharti, RCOM and Idea. We are sceptical of the ability of new competitors to seriously threaten the incumbents, though international companies may enter the fray through greenfield efforts and acquisitions.

BHEL (Disappointing 4QFY08, BUY): The key disappointment in BHEL's 4QFY08 results is the tepid 4.7% YoY growth in revenues. We await management's clarification on this, but it looks like the shortfall may have been due to delays in stabilisation of the expanded production capacity or supply-chain bottlenecks. Net margins have declined 190bps YoY and EBITDA margins have potentially declined by 250bps YoY. One positive aspect of the results is that order inflows, at Rs502.7bn for FY08, were above our estimates of Rs484.5bn, providing strong visibility for our revenue and earnings estimates for FY09-10ii. The key issue remains execution, as this quarter's results highlight.

Cement Sector (Inflation pressures): We see turbulent times ahead for the cement sector over the next 6-12 months, with the increase in utilisation rates of new capacities restricting pricing power, and rising costs dragging down profitability. Nevertheless, we remain positive on cement companies with large capacity expansion plans and cost reduction initiatives, which we believe would allow these companies to tide over these issues and register positive growth. We recommend BUY on Grasim, Madras Cements, Shree Cements, UltraTech Cement and India Cements. Inside, we also present a snapshot of our March 2008 result expectations.

Steel Sector: Stand-off with government over: Indian steelmakers have decided to cut prices, in keeping with the government's wishes. They have agreed to cut prices of long (negative for SAIL and Tata Steel) and galvanised products while leaving those of flat products untouched. The price cuts announced are unlikely to have a significant impact on steel companies' earnings. However, if inflation remains high, further government intervention cannot be ruled out. This would keep steelmakers' earnings multiples under pressure until inflation subsides. We prefer Tata Steel over JSW Steel, given the former's higher international exposure and attractive valuation. We maintain Sell on SAIL.

Inside India – Ports (Vast, under-utilised coastline): We recently published our new research product, Inside India, which comprises a series of maps exploring a variety of the country's aspects. Today, we showcase a map depicting India's ports. India has a long but highly under-utilised coastline. This should change in the years ahead, as the government has chalked out an aggressive programme that will double the country's port capacity over the next five years.

Corporate Front Page
BSNLqqqqqqqqqSteel producers, including Tata Steel and Rashtriya Ispat Nigam Limited agree to cut prices by Rs2,000/MT on long products. (BS)
- Reliance Industries submits Rs300bn proposal to government for setting up two semiconductor units. (FE)
- Cummins India to invest Rs2bn in current fiscal to expand capacities for producing automotive and industrial engines. (BS)
- Reliance Industries on the look out to buy global oil terminals. (DNA)
- Jet Airways to sell 5-10% stake through a private placement. (FE)
- Videocon's telecom arm is in talks with Deutsche Telekom, Orascom and AT&T to form a Joint Venture. (ET)
- Cairn India may foray into city gas distribution in collaboration with GAIL. (BL)
- Apollo Hospitals plans to increase capacity to 10,000 beds in the next two years; to invest Rs3.8bn. (BS)
- Aditya Birla group cement sales increase 2.8% in March to 3m tons. (BL)
- GSPC may raise US$1.5bn via IPO to fund its KG gas basin plan. (ET)
- Tata Motors gets Thailand government approval to manufacture 'eco cars' at an investment of Rs10bn. (Mint)
- BHEL plans to supply 1,000 railway locomotives for Dedicated Freight Corridor project in partnership with global firms. (Mint)
- Dr Reddy's buys Italian generics firm Jet Generici. (BL)
- Ranbaxy Laboratories announces launch of BONISTA– Teriparadite an injection for treatment of osteoporosis. (FE)
- Adani Power plans to expand capacity by 10,000MW. (DNA)
- M&M decides to set up its own plant in Chennai. (BS)
- Shyam Telelink-Sistema JV get start up spectrum in seven states to rollout CDMA services. (DNA)
- Garware Offshore plans to buy five new vessels over the next one year. (BL)
- NHPC plans an IPO in the second quarter of current fiscal; plans to add 4,000MW capacity by 2012. (BS)
- AV Birla is planning to foray into financial services through a separate holding company. (ET)
- Kingfisher-Deccan has been asked by aviation ministry to prune its international flight list. (TOI)

Economy Front Page
- Index of six core infrastructure industries grew by 8.7% in February against 7.6% a year ago. (BS)
- Insurance regulator IRDA allows insurance companies to lend shares to foreign and domestic institutions. (Mint)
- Steel companies are likely to cut prices to spare curbs on current export commitment of the company. (FE)
- Government may ban futures trading on food items like edible oil and potato to lower inflation. (FE)
- Reserve Bank of India hikes cap on overseas investments by mutual fund to US$7bn.(FE)
- Direct tax collection crosses Rs3trn for 2007-08. (FE)
- SEBI allows direct market access to institutional investors. (FE)
- Petroleum minister seeks zero custom duty on crude oil. (FE)
- Government weighs price cap on key items to curb inflation. (ET)
- MRTPC has ordered an inquiry to probe into any cartelization by GSM players to distort competition.(ET)
- Government surplus with RBI rises to Rs820bn. (ET)

RegardsAniruddha Dange, CFAD: +91 22 6620 6640M: +91 99675-75000

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