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Equity Strategy
India

Global Research

India Strategy

 2011 saw a confluence of slowing

growth and tighter monetary policy; the
Sensex lost 37% in USD terms

Indian equities in 2012: Headwinds

remain, but positives emerging

 Though headwinds remain, we are

Neutral on India in view of valuations
and potential monetary easing

2012 themes and stocks

Theme

Highlighted stocks

CMP

TP

101
200
83

130
242
97

Power Grid
Earnings resilience ITC
Idea Cellular
Structural growth

Dr Reddys
Maruti Suzuki
TCS

1606
952
1173

1950
1200
1260

Balance sheet
strength

HDFC
Hero MotoCorp
IndusInd Bank
Coal India

660
1786
243
327

808
2400
326
415

Cairn India
Valuation anomalies Hindustan Zinc
Canara Bank

329
122
384

400
150
572

Source: HSBC estimates; Prices as of 9 January 2012 and are in INR

12 January 2012
Jitendra Sriram*
India Strategist
HSBC Securities & Capital Markets (India) Private Limited
+91 22 2268 1271
jitendrasriram@hsbc.co.in
Herald van der Linde*
Strategist
The Hongkong and Shanghai Banking Corporation Limited
+852 2996 6575
heraldvanderlinde@hsbc.com.hk
Vikas Ahuja*
Associate Bangalore
View HSBC Global Research at: http://www.research.hsbc.com
*Employed by a non-US affiliate of HSBC Securities (USA) Inc,
and is not registered/qualified pursuant to FINRA regulations
Issuer of report: HSBC Securities and Capital Markets (India)
Private Limited

Disclaimer & Disclosures

This report must be read with the
disclosures and the analyst certifications
in the Disclosure appendix, and with the
Disclaimer, which forms part of it

 Our key themes for 2012: Domestic

consumption (autos, telcos, banks),
import substitute resources (coal, oil)
and exporters (pharma, IT)
2011: A year to forget
India ranked among the worst performing markets in 2011.
The Sensex fell 37% in USD terms on a mix of: self-inflicted
paralysis in policy making; stubbornly high inflation (which
resulted in tighter monetary policy); and buoyant oil prices,
which placed the INR and fiscal situation under pressure.

A few positives are emerging

Though pressure remains on the INR, fiscal situation and
corporate earnings, valuations have come off sharply with
the Sensex down 25% in INR terms in 2011 and EPS rolled
forward a year. Additionally, monetary tightening is at an
inflection point and the bulk of EPS downgrades seems to be
behind us. We rate India Neutral within Asia with a Sensex
target of 16,500 for 2012.

But an immediate rebound is unlikely

While the MSCI India trades at an 11.9x PE and 1.9x PB on
2012 estimates well below its long-term mean averages of
14.5x PE and 2.8x PB upside looks limited near term on
the potential downside to earnings and valuations relative to
the rest of Asia.

Four key themes for 2012

Amid an uncertain global environment and slowing domestic
demand, we believe investors should position themselves
defensively based on the following four themes: 1) earnings
resilience (Power Grid, ITC, Idea); 2) structural growth (Dr
Reddys, Maruti, TCS); 3) balance sheet strength (HDFC,
Hero MotoCorp, IndusInd Bank, Coal India); and 4)
valuation anomalies (Cairn, Hindustan Zinc, Canara Bank).

abc

Equity Strategy
India
12 January 2012

Investment summary
2011 was a poor year for Indian equities with the Sensex down

37% in USD terms; inflation, oil prices and policy paralysis were
the culprits
We see a few positives on the horizon: Monetary tightening

drawing to a close and valuation excesses coming off

Key 2012 themes: domestic consumption (autos, telcos, banks),

import substitute resources (coal, oil) and forex plays (pharma, IT)

The year just gone

India underperformed in 2011
Last year saw Indian equities continually slide, with
the Sensex finishing among the worst performing
Asian markets in USD terms (down 37%).
1: India among the worst performing markets in CY11

20%
0%
-20%
-40%
-60%
-80%

Persistently high inflation (see figure 2),

which has prompted the central bank (Reserve
Bank of India, RBI) to effect a cumulative
interest rate hike of 375bp over the past 21
months (see figure 3)

Ireland

Indonesia

NewZeland

USA

Malaysia

World

Turkey

Austria

India

Egypt

Greece

Buoyant oil prices leading to a widening trade

Source: DataStream, HSBC

Looking at the reasons behind this dismal

performance, a few factors stand out:
Self inflicted wounds, with policy making at a
standstill and well-publicized corruption cases.
Overseas problems (i.e. the European sovereign
debt crisis and slower US growth) taking the

focus away from domestic issues (i.e. the

burgeoning power distribution losses, slow pace
of order awards across the infrastructure
spectrum and slippages in the fiscal deficit)

deficit (see figure 4). In effect, crude in INR

terms is at a three-year high.
Though some of these factors (including
potentially populist policy making in the face of
state elections, buoyant oil prices and INR
weakness) will continue to be headwinds near
term, valuations have come off after the
underperformance of 2011.

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Equity Strategy
India
12 January 2012

The year ahead

2. Inflation remains elevated

15

This report focuses on where we think investors

should position their portfolios in 2012. A look at
the common themes across various sectors allows
us to identify four drivers that should help
generate alpha. These four themes namely 1)
earnings resilience, 2) structural growth and
franchise value, 3) balance sheet strength and 4)

10
5
0
-5
06

07
08
WPI (% yoy)

09

10
11
WPI Core (% yoy)

Source: CEIC, HSBC

valuation anomalies are in line with our regional

and global equity strategies for 2012 (see Riding
out the storm: Asia equities in 2012, published
5 December 2011)

3: Repo rate

Earnings resilience. We identify companies

that offer the lowest risk, in terms of potential
cuts to EPS. Our picks on this theme are
Power Grid, ITC and Idea Cellular.

9.0%
8.0%
7.0%
6.0%
5.0%

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

4.0%

Source: CEIC, HSBC

4. High crude prices put pressure on trade balance

Trade Bal INR bn (rhs)

Source: DataStream, CEIC, HSBC

Sep-11

May-11

Jan-11

Sep-10

May-10

Jan-10

Sep-09

May-09

0
-200
-400
-600
-800
-1,000
-1,200
Jan-09

6000
5000
4000
3000
2000
1000
0

INR/Barrel (lhs)

Structural growth. An uncertain external

environment, a slowing domestic economy
and upcoming state elections in 1H12 suggest
structural growth plays should outperform
cyclical growth plays. Our picks here are Dr
Reddys (an Asia Super Ten portfolio stock),
Maruti Suzuki and Tata Consultancy.
Balance sheet strength. Leverage was a dirty
word in 2011. As the RBI hiked rates to tame
inflation, stocks with high leverage (net debt
to equity of more than 50%) showed a
massive divergence in performance to less
leveraged firms (see figure 14). As banks deleverage (on higher capital requirements) and
funding markets remain tight, this is likely to
continue. Our picks here are HDFC, Hero
MotoCorp, IndusInd Bank, and Coal India.
Valuation support. Stocks with pricing
anomalies and free cash yields make the cut
here. Our picks are two resource plays, Cairn
India and Hindustan Zinc, and public sector
bank Canara.

abc

Equity Strategy
India
12 January 2012

India rated Neutral relative to region

In our view, the themes of earnings stability in a

volatile external environment, regulatory or market
share led structural shifts, balance sheet strength and
valuation cushion to ride out external stresses will
provide defensive quality to investors portfolios in
an uncertain macro environment.

We are Neutral on India relative to the region, given

the near-term headwinds (see table 1). The stocks we
highlight for 2012 as based on the four themes are
summarized below (see table 2 and Appendix 1 for
valuations and risks on specific companies).

Table 1. Asia market recommendations

Market

HSBC
recommendation

Previously

China
Korea
Taiwan
Hong Kong
India
Singapore
Malaysia
Indonesia
Thailand
Philippines

Over
Under
Over
Neutral
Neutral
Over
Neutral
Neutral
Under
Under

Neutral
Under
Over
Over
Neutral
Over
Neutral
Neutral
Under
Neutral

Rel 3M
Performance

End-2012e
target

Current index

Potential u p/downside
from current level

8.6%
3.8%
-7.3%
4.4%
-19.5%
-5.5%
0.4%
6.1%
7.0%
4.1%

64
1,700
7,700
21,500
16,500
3,000
1,550
4,100
1,000
4,400

54
1,864
7,131
18,813
15,857
2,713
1,514
3,906
1,037
4,519

19.2%
-8.8%
8.0%
14.3%
4.1%
10.6%
2.3%
5.0%
-3.5%
-2.6%

Source: HSBC

Table 2. Highlighted stocks in India

RIC

BBG

Company

Rating

PGRD.BO
ITC.BO
IDEA.NS
REDY.BO
MRTI.BO
TCS.BO
HDFC.NS
HROM.BO
INBK.BO
COAL.BO
CAIL.BO
HZNC.BO
CNBK.BO

PWGR IN
ITC IN
IDEA IN
DRRD IN
MSIL IN
TCS IN
HDFC IN
HMCL IN
IIB IN
COAL IN
CAIR IN
HZ IN
CBK IN

Power Grid
ITC
Idea
Dr Reddys
Maruti
TCS
HDFC
Hero MotoCorp
IndusInd Bank
Coal India
Cairn
Hindustan Zinc
Canara Bank

OW
OW
N
OW
OW
OW
OW
OW
OW
OW
OW
OW
OW

Current
price (INR)

Target
price (INR)

101
200
83
1606
952
1173
660
1786
243
327
329
122
384

130
242
97
1950
1200
1260
808
2400
326
415
400
150
572

Potential HSBC analyst

return
30%
21%
17%
21%
26%
7%
22%
34%
34%
27%
21%
23%
49%

Arun Kumar Singh*

Amit Sachdeva*
Rajiv Sharma*
Girish Bakhru*
Yogesh Aggarwal*
Yogesh Aggarwal*
Sachin Sheth*
Yogesh Aggarwal*
Tejas Mehta*
Arun Kumar Singh*
Kumar Manish*
Jigar Mistry*
Tejas Mehta*

Contact
+9122 22681778
+9122 2268 1240
+91 22 22681239
+91 22 22681638
+9122 2268 1246
+9122 2268 1246
+91 22 2268 1224
+9122 2268 1246
+9122 22681243
+9122 22681778
+91 22 22681238
+91 22 22681079
+9122 22681243

Source: HSBC; Prices as of 09 January 2012

Under our research model, for stocks with (without) a volatility indicator, the Neutral band is 10 (5)ppts above and below the hurdle rate for Indian stocks of 11%. Our target prices imply a potential return that is above//within the Neutral
band; therefore, we are reiterating our Overweight/Neutral ratings. Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated.
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations

abc

Equity Strategy
India
12 January 2012

Environment: Slowing
down
Slower post-stimulus growth momentum, political indecision and

waning earnings momentum cloud outlook for 2012

In our view, the impact of these factors will intensify in the early

part of 2012 before subsiding

8%

0.17

0.22

underachievment

0.35

Slippages on
s ubsidy bill les s

9%

4.60

Slippage in capital
receipts

10%

7.00
6.00
5.00
4.00
3.00
2.00
1.00
-

Slippage in

5. GDP growth (q-o-q %)

6. Estimated fiscal slippage

revenue receipts

A look at Indias quarterly GDP shows that the

multiple stimulus packages announced by the
government between December 2008 and March
2009, in combination with the farm loan waiver
package, payouts following the 6th Pay
Commission and coordinated monetary easing by
the RBI to counteract the effects of the global
macro slowdown, have begun to wear off.

The subsequent fiscal slippage (see figure 6)

leaves the government with limited firepower to
battle the next wave of macro pressures.

Budget ed Fiscal
Deficit FY12

Stimulus wearing off

Source: HSBC estimates

7%

Mar-11

Mar-10

Mar-09

Governance in state of paralysis

Mar-08

5%
Mar-07

Politics remain murky

Mar-06

6%

Source: CEIC, HSBC

With the economy experiencing a shorter-thannormal cycle (barely 25 months from the lows of
March 2009), policy makers have not had
sufficient time to raise taxes to normative levels.

Parliament has been virtually paralysed since the

winter session of 2010 (see figure 7). This has
meant limited progress in enacting reformist
policies like the Direct Tax Code and the Goods
and Services Tax Act.

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Equity Strategy
India
12 January 2012

7. Productive hours as a percentage of total scheduled hours

Lok Sabha

Winter'11

Monsoon'11

Budget'11

Winter'10

Monsoon'10

Budget'10

Winter'09

Budget'09

120%
100%
80%
60%
40%
20%
0%

Rajy a Sabha

Source: PRS, HSBC

Government occupied by fire-fighting

In the past year, the government has been busy
dousing one fire after another, from the widely
reported mismanagement of the Commonwealth
Games to the 2G spectrum allocation corruption
scandal and, of late, the disarray surrounding the
Lokpal Bill anti-corruption bill.
Although one could argue that some of these
issues have been stirred up by the opposition, the
about-face in foreign direct investment policy for
Indias retail and insurance sectors and the
uncertain passage of the Lokpal Bill through
parliament suggest a lack of coordination between
the government and its alliance partners.

The combination of potentially populist

policymaking in an election cycle and burgeoning
subsidies is likely to add to the fiscal deficit,
leaving limited room for direct plan expenditure.
With the fiscal situation under continued pressure,
the government will likely need to engage in an
increasing number of public-private partnerships
for infrastructure development. However the
build-own-transfer (BOT) and special-purposevehicle (SPV) structures are already weighing
down on debt equity levels of 3-4 to 1, which
leaves limited room for incremental debt. With
equity markets having corrected significantly, it is
unlikely that investors will choose to invest in
projects with long gestation periods when
secondary market valuations are incrementally
turning more favourable. This leaves private
equity to fill the funding gap on projects. In the
current uncertain macro environment, however, it
is unlikely that new pools of private capital will
emerge any faster than in the last two years.
8. Private equity investment in India (USD bn)

15

10

State election cycles ahead

Table 3. State assembly elections schedule

State
Punjab
Uttarakhand
Manipur
Uttar Pradesh
Goa
Gujarat*
Himachal Pradesh*
Source: ECI
* tentative schedule

Period
Jan-12
Jan-12
Jan-12
Feb-12
Mar-12
2H CY12
2H CY12

3Q2011

2010

2009

2008

2007

0
2006

Seven states face elections this year (see table 3),

including Uttar Pradesh, the state with the most
seats in parliament. This could take the
governments attention away from issues such as
the pricing of petroleum products. The passage of
the recent National Food Security Bill adds to
pressure on the fiscal deficit.

Source: HSBC

The farm loan waiver scheme is a case in point of

poor credit. According to an RBI report, 44% of
incremental non-performing assets (NPAs) in the
banking system in 2011 arose from the agriculture
sector. The agriculture loan book of the State
Bank of India (SBI), which accounted for nearly
19% of the Indian banking system advances, has
taken a mere 18 months for the net NPA ratio on
agricultural loans to jump to over 9% from less

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Equity Strategy
India
12 January 2012

Earnings momentum waning

than 4% (see figure 9). Figures 10-11 suggest

there is a high risk of moral hazard in the loan
waiver scheme.

Slower-than-budgeted growth in India, a weak

global economy and higher interest costs are
eroding earnings. A dichotomy is arising between
the performance of stocks with leverage and those
without leverage (see figure 14).

9. SBI net NPA to net advances

10%
8%

12. Earnings revision ratios, MSCI India

6%
4%
2%

Sep-11

Jun-11

Mar-11

Dec-10

Sep-10

Jun-10

Mar-10

0%

Source: SBI, HSBC

80
70
60
50
40
30
20
10
0
95

97

99

01

10. Agriculture NPAs to agriculture advances

03

05

07

09

11

MSCI India

Source: DataStream, IBES, HSBC

13. Consensus EPS forecasts for MSCI India

70
65

60
55

Private Banks

Public Banks

50
45

2011

CY 11
11. Composition of Incremental NPAs of domestic banks
2010-11

Non-Priority
Sectors
27%

CY 12

Jul-11

Jan-11

Jul-10

Jan-10

Source: RBI

Jul-09

40
Jan-09

2010

CY 13

Source: DataStream, IBES, HSBC

14. Share price performance of companies with net debt to

equity ratio above 50% vs. below 50%

Agriculture

100

44%

90

70

Below 50

Jan-12

Sep-11

Jul-11
Abov e 50

Nov-11

Source: RBI

May-11

60
Mar-11

Small Scale
Industries
21%

80

Jan-11

Other Priority
Sector
8%

Sensex

Source: DataStream, IBES

abc

Equity Strategy
India
12 January 2012

INR weakness and tight liquidity conditions are

likely to ensure that raw material price pressures
and/or high interest costs continue to eat into bottom
lines over 1H12 before interest costs possibly start to
wane (refer to our FX Research teams report Asian
FX Focus: Rupee: Into thin air, 24 November 2011).
15. INR at lifetime low against USD

Table 4. Major subsidies (INR bn)

INR Cr

2007-08

2008-09

2009-10

2010-11

313
325
28
43

438
766
29
65
250
273
1,820

584
613
150
67
150
390
1,954

606
550
384
102
120
384
2,145

Food
Fertilizer
Fuel (petroleum)
Other Subsidies
Debt Waiver
NREGA
Total

159
868

Source: India Budget

54
51

Softer interest rates are some way off

48

Although monetary tightening seems to have

peaked, interest rate easing may still be some way
off, in our view. India is currently witnessing
negative real interest rates and the initial fall in
inflation data may mean that real interest rates
may revert from negative to positive before we
see a meaningful impact on corporate India and
consumers (see our Economics Research teams
note India Central Bank Watch: Keeping it tight,
14 December 2011).

45
42
Jan-11

Jan-09

USD-INR
Source: DataStream, HSBC

Drivers of change
Signs of inflation abating

17. Real interest rates (%)

Rate increases taking effect

10

assuming no increase in fuel prices.

5
0
-5

Jan-11

Jan-09

Jan-07

Jan-05

-10
Jan-03

After the RBI affected a cumulative 375bp rate

increase in the recent tightening cycle, inflation
has started showing signs of slowing (see figure
16). However, risks remain on fuel prices as
under-recoveries are likely to top INR1.3trn in
2012. At the current USD:INR exchange rate the
under-recoveries could rise to INR1.7trn for 2013,

Jan-01

Jan-07

Jan-05

Jan-03

Jan-01

39

Real Interest Rate (Policy Rate minus WPI Inflation)

16. Primary article inflation cooling

Source: CEIC, HSBC

25

Downgrade cycle: 8% cut in 2012e

MSCI India EPS in last nine months

20
15
10
5
0
-5
05

06

07

08
WPI

09

10

WPI-Primary

11

A look at IBES data show that the 2012 EPS

estimate for MSCI India has been cut 8% in the
last nine months and now calls for 17% growth
this year. We believe there may be further
earnings cuts to come with the reporting of 3Q
and 4Q FY12 results because:

Source: CIEC, HSBC

The slowing GDP growth momentum may

not yet be fully factored into forecasts.

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Equity Strategy
India
12 January 2012

Interest costs as a percentage of net debt are

currently at 6%, whereas six-month AAA
corporate paper yields 10.1%. This suggests
that the effective interest cost of corporate
India will jump further.

The telecoms sector has high growth projections

for FY13. Although some of this growth is
attributed to lower 3G spectrum cost payable to
the government in FY13, risks exist on slower
growth in minutes of usage and adoption of 3G.

Corporate tax collection was up 8.3% y-o-y

from April to December 2011.

Energy is the other sector where given the lack

of fuel price increases, a weaker refining
margin outlook and the production ramp-up
problems for Reliance Industries at the KG-D6
gas fields we believe even 10% EPS growth for
FY13 could be difficult.

The slowdown in the domestic economys

growth momentum is unlikely to reverse in a
hurry.
Risks most apparent in banks, telecoms and
energy

Banking sector share prices are pricing in 21%

growth for FY13. In our view, credit costs may be
understated as is evident from other periods of
economic slowdown.

Valuations attractive vs. historical

levels
A look at the markets valuation relative to its own
history suggests that it is trading close to fair value.
This should provide some comfort to investors that
the market is not fuelled by excesses.

18. Private sector banks NPA (%)

However, global headwinds and muted capital

flows (see figures 23 and 24) continue to cloud
the near-term outlook. These headwinds could
lead the market to continue trading below the
historical mean value in the near term.

0.12
0.09
0.06
0.03
0
1997/98

2000/01

2003/04

Economic Slow dow n

2006/07

2009/10

NPA%

Source: CEIC

19. Public sector banks NPA (%)

18%
15%
12%
9%
6%
3%
0%
1997/98

India still trading at a premium, but its coming

off

2000/01

2003/04

Economic Slow dow n

Source: CEIC

As mentioned earlier, we believe the current IBES

EPS estimate for MSCI India, which calls for 17%
y-o-y growth to INR54, may see further
downward revision, given the excessive optimism
over the prospects for the telecom, banks and
energy sectors, which we regard as areas of risk.
Post the 3Q and 4QFY12 results, we see the IBES
earnings growth forecast for 2012 being
downgraded to below 10%.

2006/07

2009/10

NPA%

Relative to its own history, India looks attractive.

But relative to the region, India continues to trade
at a premium of 20-25% (see figure 21). Although
this is lower than the historical premium of 35%,
this premium has been a phenomenon seen only in
the past half decade. We forecast a year-end target
of 16,500 for the Sensex.

abc

12 M forw ard PE
-1SD

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-06

12 M forward PE
-1SD

Av erage
+1SD

Source: DataStream, HSB

Jan-05

Jan-04

Jan-03

Jan-12

Jan-02

0.8

Jan-11

6
Jan-10

1.2

10
Jan-09

1.4

14

Jan-08

18

Jan-07

1.6

Jan-06

22

Jan-05

1.8

Jan-04

26

Jan-03

21. MSCI India relative PE

Jan-02

20. MSCI India 12-month forward PE

Jan-07

Equity Strategy
India
12 January 2012

Average
+1SD

Source: DataStream, HSBC

Absence of near-term triggers may

push recovery into 2HCY12

and rising interest costs and 3) political problems

are unlikely to change near term.

Flows into Indian equities are muted

However, a degree of success in containing inflation,

along with valuation excesses draining, does give
some cause for optimism. In our view, the RBI should
tilt from an inflation focus to a growth focus after the
state elections scheduled January till March. The
government has a window to enact positive, but
unpopular, reforms thereafter for about two quarters
until the next state election cycle kicks in. We see this
window being used to raise fuel prices and trying to

Although India is by and large a domesticoriented economy (net exports represent -10.3%
of GDP), India needs external capital flows to
fund its current account deficit (-4.3% of the
GDP). 2011 was found wanting on capital flows
(see figure 24) and India did get a
disproportionate share of allocations in 2010 (see
figure 25). The current account deficit could come
under further pressure if there are withdrawals
from India post the poor performance in 2011.

pass key bills in the budget session of parliament

(which has been postponed until after state elections).

Triggers may develop after elections

The headwinds that the Indian economy faces from

1) GDP deceleration, 2) lagged EPS downgrades as
a result of slower growth, worsening asset quality

This should coincide with the RBI moving into an

easing phase, which could lead us to take a more
positive view on Indian equities.

22. MSCI India 12-month forward PB

23. MSCI India relative PB

4.5

2.0

4.0
3.5

1.7

3.0
2.5

1.4

2.0
1.5
1.0

12 M forw ard PB
-1SD
Source: DataStream, HSBC

10

Av erage
+1SD

12 M forw ard PB
-1SD
Source: DataStream, HSBC

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

1.1

Av erage
+1SD

abc

10

India

0
-10

Source: SEBI, HSBC

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

-20

CY' 2010

Vietnam

20

Philippines

30

Thailand

40
30
20
10
0
-10
-20
Indonesia

40

Taiwan

25. Funds flow

S. Korea

24. Foreign net flows into India

Japan

Equity Strategy
India
12 January 2012

CY' 2011

Source: Bloomberg, HSBC

11

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Equity Strategy
India
12 January 2012

Key themes for 2012

Environment: A slowing economy, murky politics and waning

earnings momentum form the baseline as we enter 2012

Change catalysts: Monetary tightening peaking; 8% cut in 2012e

EPS in last nine months; valuations turning attractive

Focus on defensive themes in 2012: Earnings resilience,

structural growth, balance sheet strength and valuation anomalies

Earnings resilience

Power Grid (INR101, TP INR130, covered by

This looks at the resilience of corporate earnings

to a cyclical downturn and asks where earnings
can buck the trend of earnings downgrades.

Domestic plays preferred

The headwind of slower domestic market growth
and the continuing worries around the sovereign
debt crisis in Europe make us veer towards
domestic growth stories despite the slowdown in
growth. We are still neutral on the capital
expenditure theme though we will monitor future
data points for an inflection point (see figure 26).

HSBC analyst Arun Kumar)

Power Grid is a unique play given that it is a

dedicated transmission utility, which earns
regulated returns on its transmission assets. With
asset build-up averaging 23% over the next two
years, we see earnings growth materializing as
utilisations of new assets rise.

As a key beneficiary of capex on the power

sector, we expect the company to account for
c10% of Indias total power capex of USD260bn
over the next seven years, equal to c50% of total
investment in transmission segment. The
company has a stable regulated model with strong
earnings visibility over FY12-14 and low funding
and interest rate risk. Valuation is undemanding at
a FY13 PE of 13.3x and PB of 1.8x, well below
its historical average PE of c19x and PB of 2.4x.
Growth potential is strong, with EPS forecast to
grow at a 14% CAGR over FY12-14.

-4

Consumption: Be selective

26. Gross fixed capital formation (%)

20
14

Source: CEIC, HSBC

12

Mar-11

Mar-10

Mar-09

Mar-08

Mar-07

Mar-06

In an uncertain environment, consumption

especially staples, tends to be an area of earnings
resilience. However, a few data points leave us
concerned whether the sector can remain insulated

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Equity Strategy
India
12 January 2012

from external events. Bank lending has slowed

(see figure 27) and agri-sector dole-outs are
flattening (see figure 28).
27. Credit growth - agriculture and allied activities (y-o-y %)

30
25
20
15
10
5
Sep-11

May-11

Jan-11

Sep-10

May-10

Jan-10

Source: RBI

28. NREGA disbursements to flatten out (INR Crore)

50,000
40,000

Idea Cellular (INR83, TP INR97, covered by

HSBC analyst Rajiv Sharma)

We like Idea Cellular as a pure India play and a

proxy for the domestic consumption story. We
prefer Idea to market leader Bharti, as Bharti
brings into play both the dynamics of the African
market and large USD borrowings to fund its
African acquisition.
Moreover, post the tariff hikes in June 2011 (see
figure 29), revenue per minute has stabilized,
providing support to near- to medium-term
earnings. Separately with its 900MHz spectrum in
nine markets, Idea could benefit from sector
consolidation over the next 12-18 months. The
key downside risk would be regulatory issues
pertaining to one-time payment for excess
spectrum and refarming of spectrum in the
900Mhz frequency band.
29. Tariff hike impact would ARPU and MOU from FY13

30,000

380

160

360

150

340

FY 07

FY 08

FY 09

FY 10

FY 11 FY 12E

Ex penditure under NREGA

Source: Union Budget, HSBC

ARPU-INR (lhs)

Mar-13

170

Sep-12

Mar-12

400

Sep-11

180

Mar-11

10,000

Sep-10

420

Mar-10

190

20,000

MOU-Min per month (rhs)

We prefer to play the theme through a stock

which has typically more inelastic demand, i.e.
the cigarette maker ITC.
ITC (INR200, TP INR242, covered by HSBC
analyst Amit Sachdeva)

ITC is Indias largest cigarette company. The

company has one of the most stable earnings
profiles of Indian stocks under our coverage.
Although the risk exists for steep excise hikes
given the governments fiscal deficit, ITC has
demonstrated an ability to pass these increases in
duties to consumers over the medium term.

Source: Idea, HSBC estimates

Franchise value
Franchise value looks at companies that can grow
because they benefit from structural changes in
demand, market share gains and/or have strong
pricing power.

1) Healthcare: Move to generics

Rising healthcare costs and a number of drugs
going off patent are likely to prompt a strong
move towards branded generics. We highlight Dr
Reddys as a way to play this theme off a move to
cheaper generics drugs.

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Equity Strategy
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12 January 2012

Dr Reddys (INR1606, TP INR1950, covered by

HSBC analyst Girish Bakhru; an Asia Super
Ten portfolio stock)

Dr Reddys is a leading generics major with

sizeable opportunities in the US in 2012,
including generics of blockbuster drugs like
Lipitor, Seroquel, Singulair, Actos, and Plavix. Its
long-term generics pipeline is strong with a focus
on niche injectables, new drug delivery systems
and over the counter/non prescription products.
Russia compensates for Dr Reddys slow pace of
recovery in India. Scaling biosimilars, proprietary
branded business and new chemical entities are
potential long-term drivers. A depreciating rupee
is favourable. Key risk is execution.

2) Market share gains

Maruti Suzuki (INR952, TP INR1200, covered by
HSBC analyst Yogesh Aggarwal)

Maruti should be a key beneficiary of industry

growth. Admittedly, we expect the company to
have a weak FY12, with sales falling 10% and
EBITDA margin contracting 150bp. We see
headwinds likely to persist near term, as margins
remain under pressure and the sales growth
revival is gradual.
However, we see margins bottoming and
competition peaking in FY12, with both set to
normalise in FY13-14. As a result, we expect
Marutis earnings to grow at a CAGR of 20% in
FY12-14. Aside from robust industry growth and
an improving EBITDA margin, we see the
company benefiting from stronger sales
momentum with the labour disputes behind it and
a slew of new models in the pipeline.

3) Currency and banking changing

landscapes
A confluence of two powerful forces is changing
Indias IT sector. Firstly, a persistent current
account deficit has kept pressure on the INR with
the currency slipping 16% versus USD in 2011. As
a theme we prefer the exporters and import

14

substitutes. Secondly, the biggest sector exposure

for IT Services is in banking, financial services and
insurance, which is witnessing regulatory changes
due to new legislation such as the Dodd-Frank Act
and Basel III, leading to new opportunities for the
Indian IT Services companies.
TCS (INR1173, TP INR1260, covered by HSBC
analyst Yogesh Aggarwal)

We see continued strong traction for TCS in the

market. Deal win momentum across verticals
(even including the weaker telecom market) has
been steady. The company has a better diversified
and defensive revenue mix compared with Infosys
a higher proportion of India business versus
rest-of-the-world business, lower proportion of
cyclical enterprise applications business and
strong growth in non-pure IT business (such as
the recent USD2.2bn Diligenta deal for policy
administration in the UK).
While deal and growth momentum continues, we
see a higher impact from the hedging of losses in
the next 2-4 quarters (with a total of nearly
INR6.5bn in losses to be booked by TCS in the
next few quarters in case the INR remains stable
at around INR53). Furthermore, the stock is
trading at 18x FY13e PE, which is at a c10%
premium to Infosys. TCS remains the most
defensive stock in our India IT stock universe.

Balance sheet strength

HDFC (INR660, TP INR808, covered by HSBC
analyst Sachin Sheth)

One of the strongest players in the financial

universe, HDFC has superior capitalisation levels
with a Tier-1 ratio exceeding 12%, which is a
result of high profitability and consistently
superior financials versus peers. This is reflective
not only of the strength of the Indian mortgage
sector but also of its strong conservative
management. Potential upside to the already high
Tier-1 ratio includes further capital release from
the adoption of mortgage guarantees if and when
brought into India.

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Equity Strategy
India
12 January 2012

IndusInd Bank (INR243, TP INR326, covered by

Coal India (INR327, TP INR415, covered by

HSBC analyst Tejas Mehta)

HSBC analyst Arun Kumar)

Among the smaller private banks, IndusInd stands

out as one which is comfortably capitalised with
Tier-1 exceeding 11%. A relatively new
management team has turned the bank around in
two years into a well-respected, well-run
institution with improving profitability and a solid
business model.

Coal demand is expected to double by FY17 as

coal-fired power projects come on stream with
approved linkages. Domestic coal prices, which
are still at a discount to the international prices,
have a lot of scope to go up, E-auction prices have
been strong at cINR2600 (up 45% y-o-y in the
first five months of FY12), while average fuel
supply agreements prices have increased from
INR1,400/MT to INR1,540/MT, leading to strong
EPS growth of 24% CAGR over FY11-14e.

HDFC and IndusInd also fit our theme of the

peaking out of monetary tightening. As bulk
borrowing rates peak and potentially ease in the
latter part of 2012, we expect the benefit of lower
borrowing costs to be felt first by these entities.
Hero MotoCorp (INR1786, TP INR2400, covered
by HSBC analyst Yogesh Aggarwal)

Notwithstanding the risks from the split with

Honda, we believe Hero MotoCorp (HERO) is in
a better position to face slowing market growth
and rising competition, at least for the next few
quarters. HERO has a strong rural presence (4546% of its sales were from rural India in 2Q12, up
from 38% in 1Q09), which is positive as rural
income (both agrarian and non-agrarian)
continues to grow
Additionally, even if it is not the market leader in
the scooters market, the company is likely to
benefit from strong growth in this market, aided
by the launch of Maestro. Overall, thanks to
growth in the scooters market, a strong rural
presence and lower dependence on exports, we
believe competitive risks for HERO from Honda
are equal or lower than for Bajaj.
In terms of margins, HERO saw additional sales
and marketing expenditure (relating to
rebranding) and higher royalty payments in FY12.
The company is likely to face margin tailwinds on
both these fronts in FY13. Furthermore, a forecast
dividend yield of 5% in FY12 will mitigate the
downside on the stock.

Supply is a constraint but inventory is expected to

provide support over the next 2-3 years. Concern
on wage cost and the Mines and Minerals
Development and Regulation Bill to introduction
mines taxation is negated by the new pricing
system. Valuation is reasonable.
We like Coal India as an import substitute product.
India is in coal deficit and is expected to remain so
for the foreseeable future. With Coal India selling
coal at around a 50% or higher discount to
international prices (adjusted for calorific value),
demand and price variation risks turn low.

Pricing anomalies
Cairn India: (INR329, TP400, covered by HSBC
analyst Kumar Manish)

Like Coal India, Cairn India is a play on an import

substitution product; India remains in oil deficit.
Our detailed analysis indicates substantial reserve
upside in Cairn Indias Rajasthan block, which is
currently producing 125,000 bopd (barrels of oil
per day). We believe the in-place oil volume can
more than double with a subsequent increase of
c40% in probability-weighted reserves. The
Rajasthan block constitutes c95% of our current
valuation for Cairn India. However, Cairn India
requires a series of approvals to ramp up
production. We anticipate these approvals post
final clearance from the cabinet for the Cairn-

15

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Equity Strategy
India
12 January 2012

Vedanta deal. Cabinet approval is now a formality

given that the concerned parties have already
agreed to all conditions imposed by the cabinet.
Our valuation is based on our HSBC Brent
forecast of USD91/barrel in FY13 and a
USD/INR exchange rate of INR45. Each
USD10/barrel increase in our crude oil price
assumption raises our target price by 11%, while
each INR1 appreciation in the USD raises our
target price by 2%.
Cairn Indias current share price is building
Brent of cUSD90/barrel against the existing
price of USD109/barrel. Additionally, Cairn India
is in the top 10% of Nifty companies on the basis
of FCF yield.
Hindustan Zinc: (INR122, TP INR150, covered
by HSBC analyst Jigar Mistry)

Hindustan Zinc is the worlds largest integrated

and among the lowest cost producers producer of
zinc/lead. We expect a strong 25% CAGR in EPS
over the next two years following a ramp-up in
zinc/lead capacities as well as from a higher
contribution from silver. By FY13e, we expect a
Cash and cash equivalents balance of USD5.6bn
on a market capitalization of USD11bn, which
values the resident business at an EV/E of just
3.5x (FY13e EBITDA of USD1.6bn). In addition,
the stock trades at PB of just 1.5x, which we
consider very attractive given that the asset base is
almost irreplaceable. Negative risks are lowerthan-expected zinc prices and higher-thanexpected increase in royalties.

16

Canara Bank: (INR384, TP572, covered by

HSBC analyst Tejas Mehta)

Trading at 0.7x book, close to its 2008 low of 0.5x

which itself is a nine-year low, Canara Bank
offers an opportunity to play a bounce-back, as it
is trading at a discount to other large PSU banks,
arguably on account of concerns over its larger
power sector exposure. However, not only are its
slippages set to reduce but recoveries have been
showing very favourable trends. With a potential
rate easing likely this year, and if asset quality
fears prove unfounded as power sector issues
begin to be incrementally resolved, we see an
opportunity for entry, as the stock may retrace to
its five-year average multiple of 1x book.

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Equity Strategy
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Table 5. Valuations and risks

Name

Power Grid

BBG

Current Target price Rating

price (INR)
(INR)

Valuation

Risks

Key downside risk includes longer-thanexpected delays in project

commissioning impacting earnings
Key downside risks are
slower than anticipated progress or loss
of market share in growing categories in
other FMCG
and ITCs stock prices sensitivity to
excessive taxation shocks.
Higher than estimated amount of
regulatory levies would be key downside
risk and higher than estimated traction
on 3G with low cost handsets would be
key upside risk
Key downside risks include continued
slower recovery in India, delayed
approvals and poor execution in the US
Key downside risks include increase in
competition from global OEMs;
Japanese yen appreciation could
severely impact profitability.
Key downside risk remains the
macroeconomic slowdown
Key downside risks include a sharp
increase in rates that could slow
business growth and asset quality risks
Key downside risks include HEROs
new product introduction strategy for the
next two years; appreciation of yen
could dent profitability
Key downside risks include further policy
tightening by RBI; higher than expected
loan slippages and credit costs
Key downside risk to our rating is lowerthan-expected off take because of
logistics constraints or decline in
production

PWGR IN

101

130 OW

DCF based target price of INR130 per share using COE of

12.0% and terminal growth of 3%

ITC IN

200

242 OW

We value ITC on a SOTP basis, which is based on DCF

valuation for the cigarette business; hotels, agri, other FMCG
and P&PB business are valued using a relative valuation
approach. We have used a COE of 11% in our DCF valuation
for the cigarette business

Idea Cellular

IDEA IN

83

97 N

Valued at mix of DCF and PE. DCF based value of INR90 at

12% WACC, For PE used 25x multiple to arrive at INR91. TP
includes Indus tower valuations of INR21 and negative
adjustment of INR15 for TRAI recommendations

Dr Reddys

DRRD IN

1606

1950 OW

Valued at 20x Sep-13 core EPS and NPV Para IV value of

INR20

Maruti Suzuki

MSIL IN

952

1200 OW

TCS

TCS IN

1173

1260 OW

HDFC

HDFC IN

660

808 OW

We apply a discount of c15% to our DCF-based target price of

INR1,405 to reflect near-term concerns over growth to arrive at
a target price of INR1,200, implying a multiple of 14x FY13e
EPS
Our target price of INR1,260 values the stock at 20x our FY13e
EPS, at a 10% premium to Infosys
We value the stock at 24x PE and 5x PB and arrive at our 12month target price of INR808

Hero MotoCorp

HMCL IN

1786

2400 OW

IIB IN

243

326 OW

We value the stock on a target PE multiple of 19x and book

multiple of 2.7x

Coal India

COAL IN

327

415 OW

Cairn India

CAIR IN

329

400 OW

HZ IN

122

150 OW

We value COAL on a combination of DCF and earnings

multiples. For our DCF, we use WACC of 11.3% (COE of
11.8%, cost of debt of 7.5%, and beta of 0.95) to arrive at a
value of INR431/share. We value COAL at a PE of 12.8x on 24month forward EPS and a 24-month EV/EBITDA of 7.7x. Our
target price of INR415 is based on weighted average of DCF,
PE and EV/EBITDA, to which we assign a weight of 50%, 25%
and 25%, respectively
DCF based valuation. We assume long term Brent price of
USD90/bbl and exchange rate of USDINR 45. We assume
Rajasthan crude is priced at 11% discount to Brent oil
FY13e EV/EBITDA of 4.5x for its resident zinc and lead
business & 7.0x for its silver business

CBK IN

384

572 OW

ITC

IndusInd Bank

Hindustan Zinc

Canara Bank

We value HERO at INR2,400 based on DCF, implying a multiple

of 16x on FY13e EPS. We expect HERO to clock a 14% CAGR
in earnings for FY11-13

Key downside risks include lower than

expected oil price, rupee appreciation
and delay in ramp up of production
Key downside risks include lower than
expected zinc/lead/silver prices & volumes
and higher than expected stripping costs
as mines go underground
We value Canara Bank using a weighted average combination Key downside risks include higher
of PE, PB and EPM methodologies. assigning 20%, 50%, 30% slippages and management change in
to PE, PB and EPM multiples
2HFY13

Source: HSBC estimates; Prices as of 09 January 2012

17

Equity Strategy
India
12 January 2012

Notes

18

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Equity Strategy
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12 January 2012

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Notes

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Equity Strategy
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Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Jitendra Sriram, Herald van der Linde, Arun Singh, Amit
Sachdeva, Rajiv Sharma, Girish Bakhru, Yogesh Aggarwal, Sachin Sheth, Tejas Mehta, Kumar Manish and Jigar Mistry

Important disclosures
Stock ratings and basis for financial analysis

HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;
and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative,
technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.
HSBC has assigned ratings for its long-term investment opportunities as described below.
This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when
HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at
www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this
website.
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research
report. In addition, because research reports contain more complete information concerning the analysts' views, investors
should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not
be used or relied on in isolation as investment advice.

Rating definitions for long-term investment opportunities

Stock ratings

HSBC assigns ratings to its stocks in this sector on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stocks domestic or, as appropriate,
regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock
to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the
potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months
(or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be
expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points
for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility
status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,
expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.

20

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Equity Strategy
India
12 January 2012

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12
months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,
stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past
month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

Rating distribution for long-term investment opportunities

As of 11 January 2012, the distribution of all ratings published is as follows:
Overweight (Buy)
54%
(25% of these provided with Investment Banking Services)
Neutral (Hold)

35%

(20% of these provided with Investment Banking Services)

Underweight (Sell)

11%

(13% of these provided with Investment Banking Services)

Information regarding company share price performance and history of HSBC ratings and price targets in respect of its longterm investment opportunities for the companies the subject of this report,is available from www.hsbcnet.com/research.

HSBC & Analyst disclosures

Disclosure checklist
Company

CAIRN INDIA LIMITED

CANARA BANK
COAL INDIA LIMITED
DR. REDDY'S LAB.
HDFC
HERO MOTOCORP
IDEA CELLULAR LTD
INDUSIND BANK
ITC
MARUTI SUZUKI INDIA LTD
POWER GRID CORP OF INDIA

Ticker

Recent price

Price Date

Disclosure

CAIL.BO
CNBK.BO
COAL.BO
REDY.NS
HDFC.NS
HROM.BO
IDEA.NS
INBK.BO
ITC.BO
MRTI.NS
PGRD.BO

337.80
412.60
318.05
1618.10
684.00
1775.40
82.10
260.90
205.15
986.35
102.60

10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012
10-Jan-2012

5
1, 4, 5, 6, 7, 11
9
4
2, 6, 7
2
2, 5
4, 7
6
4
9

Source: HSBC

1
2
3
4
5
6
7
8
9
10
11

HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months.
HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months.
At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
As of 31 December 2011 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
As of 30 November 2011, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of investment banking services.
As of 30 November 2011, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-investment banking-securities related services.
As of 30 November 2011, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-securities services.
A covering analyst/s has received compensation from this company in the past 12 months.
A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company

21

Equity Strategy
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12 January 2012

abc

Jitendra Sriram and his household members have a long position in the shares of Coal India Limited.
Jitendra Sriram and his household members have long positions in the shares of Power Grid Corp of India.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.
* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures
1
2
3

4
5

22

This report is dated as at 12 January 2012.

All market data included in this report are dated as at close 09 January 2012, unless otherwise indicated in the report.
HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
price sensitive information is handled in an appropriate manner.
As of 31 December 2011, HSBC beneficially owned 5% or more of a class of common equity securities of the following
company(ies) : MARUTI SUZUKI INDIA LTD
As of 31 December 2011, HSBC and/or its affiliates (including the funds, portfolios and investment clubs in securities
managed by such entities) either, directly or indirectly, own or are involved in the acquisition, sale or intermediation of,
1% or more of the total capital of the subject companies securities in the market for the following Company(ies) :
MARUTI SUZUKI INDIA LTD , DR. REDDY'S LAB. , CANARA BANK , INDUSIND BANK

Equity Strategy
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Disclaimer
* Legal entities as at 04 March 2011
Issuer of report
UAE HSBC Bank Middle East Limited, Dubai; HK The Hongkong and Shanghai Banking Corporation
HSBC Securities and Capital Markets
Limited, Hong Kong; TW HSBC Securities (Taiwan) Corporation Limited; CA HSBC Securities (Canada)
(India) Private Limited
Inc, Toronto; HSBC Bank, Paris Branch; HSBC France; DE HSBC Trinkaus & Burkhardt AG, Dsseldorf;
Registered Office
000 HSBC Bank (RR), Moscow; IN HSBC Securities and Capital Markets (India) Private Limited, Mumbai;
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Global Equity Strategy Research Team

Global

Asia

Garry Evans
Global Head of Equity Strategy
+852 2996 6916
garryevans@hsbc.com.hk

Herald van der Linde

Deputy Head of Research and Head of Equity Strategy, Asia-Pacific
+852 2996 6575
heraldvanderlinde@hsbc.com.hk

Daniel Grosvenor
+852 2996 6592

Jitendra Sriram
+91 22 2268 1271

jitendrasriram@hsbc.co.in

EU and US

Steven Sun
+852 2822 4298

stevensun@hsbc.com.hk

Peter Sullivan
Head of Equity Strategy, EU and US
+44 20 7991 6702
peter.sullivan@hsbcib.com

Roger Xie
+852 2822 4297

rogerpxie@hsbc.com.hk

Europe

Devendra Joshi
Associate, Bangalore

Robert Parkes
+44 20 7991 6716

daniel.grosvenor@hsbc.com.hk

robert.parkes@hsbcib.com

Taiwan
Jenny Lai
Head of Taiwan Research
+886 2 8725 6020
jennylai@hsbc.com.tw

CEEMEA
John Lomax
+44 20 7992 3712

john.lomax@hsbcib.com

Wietse Nijenhuis
+44 20 7992 3680

wietse.nijenhuis@hsbcib.com

South East Asia

Neel Sinha
Head of Equity Research, South East Asia
+65 6239 0658
neelsinha@hsbc.com.sg