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Castrol, India Cement, BOI – Investment Update by ABN Amro

January 24, 2007

ABN Amro’s investment views on the following stocks after quarterly results.

India Cements: IC
IC’s results were exactly in line with our expectations. The macro environment for the cement business in India (and South India) remains positive on volumes and pricing, and the real threat (if any) to pricing seems clearly from 2HFY09. IC is contemplating a greenfield capacity in North India to address growth beyond FY09. It remains the cheapest stock on all key parameters in the top-five cement companies. We continue to like the stock and re-iterate Buy. Sales growth of 36% driven by 28% realisation growth and 7% volume growth.

Bank of India: BOI
Net profit increased 78% yoy, led by a 47.6% increase in pre-provision operating income. However, there has been a slippage in three large accounts, leading to an increase in provisioning; hence, the improvement in asset quality is not significant compared to the recent past. Tax rate was lower at 21.5% in 3QFY07, vs 26.4% a year ago. Maintain Buy rating. BOI trades at 9.5x FY08F earnings and 1.5x FY08F adjusted book, after writing off 100% pre-tax net NPAs. Our estimates include equity dilution of 100m shares in FY08.

Castrol India:
Castrol has maintained its bottom line despite large spikes in base oil prices. This proves the strength of brand and raises earning growth potential as base oil prices weaken and volumes grow. Reommended to Buy and with a target price of Rs300.

Castrol’s 2007 EPS is expected to grow 40% to Rs16.20, giving a return on equity of 46%. Earnings are likely to grow 64% over 2007-09 on the back of lower base oil prices and volume growth. We believe a potential share price trigger is a decline in LOBS prices, which we expect to come through by 2Q07. Meanwhile, the 2007F dividend yield of 4.7% should provide downside support.

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