Stock Views on SOBHA DEVELOPERS, HINDALCO, STATE BANK OF INDIA

RBS on STATE BANK OF INDIA

RBS maintains 'Buy' recommendation on State Bank of India, but reduces the target price from 3,703 to 3,535, largely due to the cut in FY11 earning estimates. In Q3FY11, operating growth momentum continued and asset quality concerns receded. In FY12, strong operating profit growth should start to be reflected in a higher bottomline as provision requirements decrease. SBI appears best placed in a rising interest rate environment given its favourable liability mix. About 67% of SBI's net loan growth over the past year has been funded by CASA (current and savings accounts), partly leading to about a 80-bp y-o-y improvement in net interest margins (NIMs) to 3.63%. The low-cost deposits (CASA) to total deposits ratio went up 500 bps y-o-y to about 45% as of December 2010. Going forward, RBS expects slippages to trend further downwards, translating into a lower GNPL (gross non-performing loan) ratio. Total standard restructured loans made up 4.5% of the loan book as of December 2010, marginally higher than the industry average of 3.5-4.0%.

CREDIT SUISSE on HINDALCO

Novelis' bond price is a good indicator of Novelis' performance. Post-listing in mid-December 2010, prices of new bonds have increased almost 9%. This indicates that market perception of the credit risk in Novelis is much less than what is indicated by S&P and Moody's ratings. If Novelis is upgraded to investment grade, the current covenants, which restrict cash fungibility between Hindalco and Novelis, would be suspended. Industry fundamentals for downstream aluminium players continue to do well, which is reflected in the rerating of Novelis. The industry is operating close to capacity, and the expected macro recovery in the US and Europe bodes well for demand. Credit Suisse continues to be positive on Hindalco, and the next trigger for the stock is Mahan's financial closure, which has been delayed till now, as Mahan coal block was classified under nogo area. If they incorporate Mahan and Aditya, the target price of 255 could move to 290.

BNP PARIBAS on SOBHA DEVELOPERS

BNP Paribas reiterates'Buy' rating on Sobha Developers and maintains the target price of 409 per share. Sobha reported Q3FY11 sales of 360 crore. Sales were higher than BNPP estimates by 7%. EBITDA and PAT came in at 83.7 crore and 49 crore respectively versus the expectation of 108.6 crore and 66.3 crore respectively. Margins were affected by lower realisation in land sales. The company sold approximately 0.71 million sq ft in Q3FY11 as compared to 0.74 million sq ft in Q2FY11 and 0.8 million sq ft in Q3FY10. The average selling price (ASP) increased 5% sequentially to offset higher input costs. The company reiterated its FY11 annual sales guidance of 3 million sq ft; out of which it has achieved 2.12 million sq ft in the nine months ending December '10. The guidance is largely intact as it still has 0.2 million sq ft of finished unsold inventory, 3 million sq ft of unsold inventory under construction and potential new launches of approximately 6 million sq ft to tap into in Q4FY11. BNP values Sobha's real estate business at 336 and its contractual business at 73.