best performing stock advice for today - neutral rating on gail stock with a target price of rs.346

8/13/2019 Best Performing Stock Advice for Today - Neutral Rating on GAIL Stock With a Target Price of Rs.346

1/22

Company registered a turnover of Rs. 26902.25 Cr, up by 19% in H1FY14 compared to corresponding previous year period. There was fall o

10% in operating profits of the company to Rs 2971.72 Cr for H1FY14. The Other income was down 8% to Rs 279.6 Cr while Interest cost gre99% to Rs 169.36 Cr. .......................................... ( Page : 2-4)

10th Jan, 201

Edition : 181

IEA-Equity

Strategy

GAIL : "Neutral" 10th Jan 2014

7th Jan 2014

We are positive on the stock as it always beats its peers group with lower operational cost. Looking at the strategy of the company anexpansion plans for FY15 the stock may outperform among cement players with the rise in cement demand.Shree cement follows a multi bran

strategy and sells cement under the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together enjoy the largest marke

share in high value markets of Rajasthan, Delhi and Haryana. After a good monsoon and election we are expecting a good performance fro

shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/- ............................................ ( Page : 13-15)

CMC : "Reduced" 9th Jan 2014

We had initiated this stock at a CMP of Rs 1208 (5th June 2013) and now, it achieved its target of Rs1690, we advice to book profit on the stoc

because of its premium valuation at current price. However, sentiment could take a knock in the short run, since investors may prefer paying

premium for stock with better earnings visibility........................................ (Page : 5-6)

Net interest margin of the bank is likely to expand on the back of RBI’s decision to leave policy rate (repo) unchanged and softening bond yiel

to 8.75%. This would result of reducing cost of fund and fair amount of portfolio gain. Bank borrowed higher amount of repo than MSF durin

the quarter. Moreover bank is getting deposits from FCNR which would give margin of one percent plus to the bank. We value bank a

Rs.163/share which would be 0.5 times of one year forward book and 5.4 times of one year forward earning .................................. ( Page : 19

21

KPIT Tech: "On billion dollar journey" "Reduced" 8th Jan 2014

We have now neutral rating on the stock led by trading closer to our target price of Rs.221. At this price stock would trade at 0.5 times of one

year forward book and 6.5 times of earning. In the absence of comfort earning and non visibility of ROE improvement, make us compel to valu

bank in the range of 0.4-0.5 times forward book. Impairment of asset and high operating leverage would remain high according to th

management. On both front we would be getting more clarity after the quarterly result. ................... ( Page : 16-18)

UNION BANK : "BUY" 6th Jan 2014

For 3QFY14E, Indian IT players would report muted earnings growth because of seasonal weakness like furloughs and holidays impacts, alread

it is understood fact by consensus. Post result, earning guidance for FY15E and forward looking statement by most of companies would b

considered as an important fact. Considering recent demand environment scenario and healthy growth outlook of US and Europe, we ar

expecting to see positive outlook on the sector for the year 2014................................. ( Page : 9-12)

IT Industry: 3QFY14E results preview : "As usual flattish 3rd quarter" 7th Jan 2014

ORIENTAL BANK "Neutral"

We had initiated this stock at a CMP of Rs 115 (14 Jan 2013) and now, it achieved its target of Rs 177. Despite better expectation of growth an

attractive visibility of its expansion through inorganic initiative and focus into emerging verticals, we advice to book profit on the stock becausof its premium valuation. However, sentiment could take a knock in the short run, since investors may prefer paying a premium for stock wit

better earnings visibility.......................................... ( Page : 7-8)

6th Jan 2014

SHREE CEMENT: "BUY"

Narnolia Securities Ltd,

India Equity Analytics aliy Fundamental Report on Indian Equities


2/22

GAIL

1M 1yr YTD

bsolute 0.6 -5.6 -5.0

l. to Nifty 1.7 -8.7 -20.0

Current 1QFY14 4QFY13

omoters 57.3 57.3 57.3

17 16.7 16.3

I 21.6 22 22.2

hers 3.9 3.9 4

Financials

2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 13944.6 12855.6 8.5 11361.2 22.7

EBITDA 1405.5 1136.7 23.6 1380.3 1.8

PAT 915.7 606.5 51.0 985.4 -7.1

EBITDA Margin 10.1% 8.8% 120bps 12.1% (200bps)

PAT Margin 6.6% 4.7% 180bps 8.7% (210bps)

2

yr Price Movement Vs Nifty

Rs, Crore

(Source: Company/Eastwind)

Please refer to the Disclaimers at the end of this Report.

44,047

erage Daily Volume 399457

are Holding Pattern-%

→Ministry of Petroleum and Natural gas has capped subsidy burden of Gail (India) at Rs

1400 Cr for FY'14.

→Capex incurred during H1FY'13 was Rs 2525 Cr as Rs 1500 Cr on Petrochemical, Rs

400 Cr on pipeline expansion, Rs 270 Cr on E&P and Rs 360 Cr towards equity

contribution.

→The company has commissioned Kochi pipeline on 25th August 2013.

→Company has shared Rs 698.68 Cr towards LPG subsidy in the quarter ended

September 2013 compared to Rs 785.67 Cr in the corresponding previous year period.

The LPG transmission was 1,428 TMT. The Natural Gas transmission was 97.25

MMSCMD, against 107.72 MMSCMD. The Natural Gas stood at 80.33 MMSCMD in

1HFY14 as against 81.92 MMSCMD in 1HFY3.

Highlights of Conference Call:

During 1HFY14, Petrochemical Production was 231 TMT, up by 20 % YoY it was 193

TMT in 1HFY13.The Petrochemical Sales were 229 TMT, up by 37 % against 167 TMT in

the corresponding period in the previous year. The LPG and Other Liquid Hydrocarbon

production were 685 TMT, against 684 TMT in 1HFY13.

MP 348

rget Price

About The Company

ange from Previous

6168

kt Cap (Rs Crores)

ompany Update Neutral

pside

1HFY14 Production Highlights :

1HFY14 Financial Highlights :

fty

GAIL (India) Limited is a gas utility company. The Company is engaged in transport

through pipeline; manufacture of basic chemicals, fertilizer and nitrogen compounds,

plastics and synthetic rubber in primary forms; extraction of crude petroleum; extraction ofnatural gas and electric power generation, transmission and distribution. The company

operates in five segments viz Gas Transmission Business ,LPG Transmission Business,

Gas Trading Business, Petrochemical Business and LPG and Liquid Hydrocarbon

Business.

Company registered a turnover of Rs. 26902.25 Cr, up by 19% in H1FY14 compared to

corresponding previous year period. There was fall of 10% in operating profits of the

company to Rs 2971.72 Cr for H1FY14. The Other income was down 8% to Rs 279.6 Cr

while Interest cost grew 99% to Rs 169.36 Cr, The net profits for H1FY14 was Rs

1723.84 Cr down by 19 %in comparison to 2HFY13.

The company during the first half of the current financial year, earned the revenues of Rs.

23,437 Cr from Natural Gas Trading up 24% YoY as compared to corresponding periodof the last year. The revenues from Natural Gas Transmission increased by 9% YoY to

Rs. 2,066 Cr for H1FY14. The net sales from LPG and Liquid Hydrocarbons business

increased by 11% YoY to Rs. 2,043 Cr as against Rs. 1,842 Cr for the same period of

last year. The net sales from Petrochemicals business increased by 54% to Rs 2,237 Cr

for 1HFY14. The revenues from LPG transmission increased by 72% to Rs. 189 Cr in

1HFY14.

arket Data

E Code 532155

SE Symbol GAIL

wk Range H/L 395/273

evious Target Price

ock Performance

"NEUTRAL"10th Jan' 14



3/22


ear-term gas supply visibility which may lead to under-utilization of new pipelines

e stock is currently trading at Rs 346 and business outlook going forward ,management

idance does not provide us with much convincing thought .We donot see much upsides

tached with the stock in current business scenario. We therefore recommend NEUTRAL

ew on the stock.

ontinued

Projected Capex for FY'14 is Rs 5000 Cr and Rs 3500 Cr in FY'15.

GAIL has shared Rs 698.68 Cr towards LPG subsidy in the quarter ended September 2013

mpared to Rs 785.67 crore in the corresponding previous year period

ecent Events

AIL management indicated that, MoPNG has in-principle agreed to provisionally cap GAIL’s

Y14 subsidy at INR14b, implying 2HFY14 subsidy to be nil. As per our view the final decision

l be post Finance Ministry consent.

ncertainty on under recovery sharingsk & Concern


aphical Dipiction

QFY14 SEGMENTAL SALES TURNOVER

The company has borrowed Rs 585 Cr during Q2FY'14.

Total borrowings stood at Rs 10632 Cr at the end of September 2013 quarter-out of which

% loan is foreign currency loan. Almost 90% of foreign currency loan is financially or

turally hedged.

The company anticipates increase in gas availability in near future. It expects around 20-25

mscmd of gas over a period of 3-4 years including 11-12 mmscmd of gas from domestic

urces and 10-15 mmscmd from LNG.

ew and Valuation :

GAIL



4/22


ITDA & OPM%


GAIL

ALES TREND

Sales increased by 22% YoY driven by hig

revenues from the natural gas

trading and petrochemical segments

Higher Depcreciation owing to capitalizat

of assets with respect to new

pipelines and higher interest cost resulted

a NPM decline


dj PAT & NPM %




5/22

CMC

1M 1yr YTD

solute 15.0 29.2 40.0

l. to Nifty 15.4 24.6 35.8


omoters 51.12 51.12 51.12

23.32 21.84 19.87

17.83 19.05 20.46

hers 7.73 7.99 8.55

Financials


Revenue 560.75 486.61 15.2 458.64 22.3

EBITDA 88.41 77.04 14.8 76.59 15.4

PAT 67.3 53.12 26.7 49.4 36.2

EBITDA Margin 15.8% 15.8% - 16.7% (90bps)

PAT Margin 12.0% 10.9% 110bps 10.8% (120bps


Healthy Deal pipeline: The deal pipeline is in line with the last year. It indicated th

pursuing good number of deals in the Developed and as well emerging marke

Considering current sound demand environment across geographies (like US a

Europe) and verticals Company is more optimistic for clients acquisition and d

executions ahead.

are Holding Pattern-%

We believe, CMC will continue with its efforts to enhance revenue contribution of hig

margin System Integration (SI) and ITES segments. Further, its high focus on educatio

space will also add margin in near term. Considering recent healthy deman

environment across the IT space with favorable supply side scenario, we rema

confident on the stock for better earning visibility and stable margin picture.

Key things to watch: Outlook for deal pipeline, updates on SMAC(social, mobil

analytics, cloud) and guidance on forward looking statement.

E Code 517326

E Symbol CMC


year forward P/E

Rs, Cro

(Source: Company/Eastwi


Now, CMC is focusing on new emerging segments like IMS (Infrastructu

Management Services), Cloud, Big data, Mobility and Analytics. Considering

impressive client as well as market response, company is expecting to quantify inrevenue. Its new and emerging projects like Mining Management System, GPS Syste

and Port & Cargo Management System would play a major role for generati

revenue.

View and Valuation: View and Valuation: CMC expects the growth momentum

improve in the quarters ahead and the revenue growth to be higher than the NASSCO

guidance in FY14. The Company remains a strong with excellent earning visibility led

joint effort of market strategy by TCS (contributes 59% of sales) in its product a

solutions. Considering the company’s premium valuation, we advice “Book Profit”

the stock. At a CMP of Rs 1657, stock trades at 16.3x FY14E earnings. Our view cou

be change with management guidance and post earnings of coming quarter.

"On track to deliver"

MP 1657

rget Price 1690

We had initiated this stock at a CMP of Rs 1208 (5th June 2013) and now, it achieve

its target of Rs1690, we advice to book profit on the stock because of its premiu

valuation at current price. However, sentiment could take a knock in the short ru

since investors may prefer paying a premium for stock with better earnings visibility.1729

side -

For 3QFY14E, we expect to see 2-1.5% (QoQ) sales growth in USD term and 1-1.5

(QoQ) in INR term, PAT is expected to decline by 2-3% (QoQ) led by a marginal growth

the forex loss. We expect 50-100bps improvement in EBITDA margin to 15.5-16sequentially.

kt Capital (Rs Crores)

ompany update Book Profit

gh Price (08.01.2014)

arket Data

ock Performance

ange from Previous -

fty 6175

5020

"Book Profit"9th Jan, 2014



6/22

CMC



nancials;

ating and Price Target Chart Updation Detail



Date Update Detail CMP View Target P

5-Jun-13 Initiation 1208 BUY 1380

4-Jul-13 Company Update 1315 BUY 1490

18-Jul-13 Result Update 1318 BUY 1490

21-Oct-13 Result Update 1334 BUY 1490

20-Dec-13 Company Update 1510 BUY 1690

9-Jan-14 Company Update 1729 Profit Booking 1690

s, Cr FY10 FY11 FY12 FY13 FY14E FY15E

et Sales 870.73 1084.40 1469.34 1927.87 2239.31 2600.4

urchases of stock-in-trade 99.35 99.28 145.40 188.56 201.54 234.04

mployee Cost 276.16 345.13 440.22 521.65 593.42 702.11

ubcontracting and outsourcing cost 173.56 262.35 446.11 679.73 794.96 923.15

ther expenses 159.94 170.17 213.63 222.88 235.13 273.04

otal Expenses 709.01 876.93 1245.36 1612.82 1825.04 2132.34

BITDA 161.72 207.47 223.98 315.05 414.27 468.07

epreciation 9.85 10.46 21.37 23.20 41.95 60.69

ther Income 18.75 11.80 17.46 13.17 22.39 26.00

BIT 151.87 197.01 202.61 291.85 372.33 407.38

nterest Cost 3.17 0.22 0.02 0.18 0.2 0.25

BT 167.45 208.59 220.05 304.84 394.52 433.14

ax 24.23 32.42 68.59 76.76 86.79 99.62

AT 143.22 176.17 151.46 228.08 307.73 333.52

rowth-%

ales -7.4% 24.5% 35.5% 31.2% 16.2% 16.1%

BITDA 27.7% 28.3% 8.0% 40.7% 31.5% 13.0%

AT 23.3% 23.0% -14.0% 50.6% 34.9% 8.4%

Margin -%

BITDA 18.6% 19.1% 15.2% 16.3% 18.5% 18.0%

BIT 17.4% 18.2% 13.8% 15.1% 16.6% 15.7%

AT 16.4% 16.2% 10.3% 11.8% 13.7% 12.8%

xpenses on Sales-%

mployee Cost 31.7% 31.8% 30.0% 27.1% 26.5% 27.0%

ubcontracting Cost 19.9% 24.2% 30.4% 35.3% 35.5% 35.5%

ax rate 14.5% 15.5% 31.2% 25.2% 22.0% 23.0%

aluation

MP 1340.0 2079.6 994.8 1410.0 1657 1657o of Share 1.50 1.50 3.00 3.03 3.03 3.03

W 510.68 654.02 772.19 946.26 1192.11 1454.9

PS 95.48 117.45 50.49 75.27 101.56 110.07

VPS 340.45 436.01 257.40 312.30 393.44 480.17

oE-% 28.0% 26.9% 19.6% 24.1% 25.8% 22.9%

ividen Payout ratio 18.6% 19.9% 23.2% 19.4% 20.1% 21.2%

/BV 3.94 4.77 3.86 4.51 4.21 2.78

/E 14.03 17.71 19.70 18.73 16.32 15.05


7/22

KPIT Tech.

1M 1yr YTD

solute 24.7 64 57.2

l. to Nifty 25.5 61.1 54


omoters 22.87 24.25 24.3

36.42 32.79 30.8

11.12 10.93 11.8

hers 29.59 32.03 33.1

Financials


Revenue 702.76 613.21 14.6 567.02 23.9

EBITDA 108.1 96.6 11.9 94.1 14.9

PAT 66.7 60.1 11.0 48 39.0

EBITDA Margin 15.4% 15.8% (40bps) 16.6% (120bp

PAT Margin 9.5% 9.8% (30bps) 8.5% (100bp

are Holding Pattern-% Close to Revolo launch and working on cloud based IB tool: The unit has been in t

process of conducting trials in 40 vehicles. As per the management, by next year it co

be a part of revenue. It is also working on cloud based BI tools as well as Analytics to

for opportunities in warranty management.

6162

For 3QFY14E, we expect to see 4% (QoQ) sales growth in USD term and 2.7% (QoQ)INR term, PAT is expected to grow by 3-4% (QoQ) led by a marginal growth in the fore

We expect 50-100bps improvement in EBITDA margin to 16-16.5%, sequentially.

Key things to watch: Outlook of deal pipeline, Updates on SAP and Revolo, a

acquisition plan.

ock Performance


fty

532400

E Symbol

arket Data

KPIT

3445kt Capital (Rs Crores)

"On billion dollar journey"

MP 180

rget Price 177

ompany update Book Profit We had initiated this stock at a CMP of Rs 115 (14 Jan 2013) and now, it achieved

target of Rs 177. Despite better expectation of growth and attractive visibility of

expansion through inorganic initiative and focus into emerging verticals, we advice

book profit on the stock because of its premium valuation. However, sentiment cou

take a knock in the short run, since investors may prefer paying a premium for sto

with better earnings visibility.

evious Target Price -

side

ange from Previous -

The company expects better earnings, confident of generating a positive cash flow f

FY14E, after considering the balance payments for existing M&A deals.

KPIT ‘s Management is confident to report USD Revenue for FY14 to be in the range

USD 465 Mn to USD 475 Mn, and INR PAT for FY14 to be in the range of INR 2,309 Mn

INR 2,388 Mn. They expect better H2FY14E than H1FY14E. KPIT expects to close som

more deals in next quarter, which will again drive growth and expects the compan

growth to be stronger in the 2H FY14E.

-

ice Performance

Rs, Cro



Robust pipeline of large deals: During the quarter, company closed 2 larges deals

excess of USD 10 mn 1 in Europe and 1 in the US and have created a robust pipeline larger deals. We expect this large set of deals would reveal stronger 2HFY

performance with judicious mix of volume and value growth.

We expect KPIT to grow its revenues at a CAGR of 24% over FY12-14E.Considering t

company’s premium valuation, we advice “Book Profit” on the stock. At a CMP of

180, stock trades at 13.8x FY14E earnings. Our view could be change wmanagement guidance and post earnings of coming quarter.

View and Valuation: Despite all previous ups and down in IT sector, global dema

environment is on the way of recovery and growth. Impressive organic growth desp

inorganic thrust (acquired 10 companies in the last 10 yrs), Potential option value fro

success of its hybrid engine venture Revolo (on trial) . KPIT has targeted to reach US

1billion in revenues by 2017.

wk Range H/L 186/92

E Code

"Book Profit"7th Jan' 14



8/22


nancials


ating and Price Target Chart Updation Detail

KPIT Tech


Date Update Detail CMP View Target Pr

14-Jan-13 Initiation 115 BUY 145

29-Jan-13 Result Update 116 BUY 145

3-May-13 Result Update 106 BUY 1455-Jul-13 Company Update 120 BUY 145

25-Jul-13 Result Update 132 BUY 145

13-Sep-13 Company Update 147 BUY 162

24-Oct-13 Result Update 144 BUY 162

22-Nov-13 Company Update 146 BUY 177

8-Jan-14 Company Update 180 Profit Booking 177

s, Cr FY10 FY11 FY12 FY13 FY14E FY15E

et Sales-USD 153.76 224.07 306.71 410.46 465.00 558.00

et Sales 731.64 987.05 1500.00 2238.63 2790.00 3320.1

mployee Cost 265.92 529.95 771.78 1140.79 1422.90 1726.4

ther expenses 304.70 308.82 511.97 762.32 906.75 1095.6otal Expenses 570.62 838.77 1283.75 1903.11 2329.65 2822.0

BITDA 161.02 148.28 216.25 335.52 460.35 498.02

epreciation 30.80 41.12 44.49 47.16 62.58 88.34

ther Income 1.20 6.74 13.82 11.74 13.95 16.60

xtra Ordinery Items -26.45 0.00 10.05 -1.30 -45.17 16.60

BIT 130.22 107.16 171.76 288.36 397.77 409.68

nterest Cost 2.74 3.78 7.32 13.99 21.37 18.61

BT 102.23 110.12 188.31 284.81 345.17 424.28

ax 16.91 15.49 43.67 76.55 93.20 116.68

AT 85.32 94.63 144.64 208.26 251.98 307.60

AT (excluding EO Items) 111.77 94.63 134.59 209.56 297.15 291.00

rowth-%

ales -7.8% 34.9% 52.0% 49.2% 24.6% 19.0%BITDA -12.2% -7.9% 45.8% 55.2% 37.2% 8.2%

AT 129.4% 10.9% 52.8% 44.0% 21.0% 22.1%

Margin -%

BITDA 22.0% 15.0% 14.4% 15.0% 16.5% 15.0%

BIT 17.8% 10.9% 11.5% 12.9% 14.3% 12.3%

AT 11.7% 9.6% 9.6% 9.3% 9.0% 9.3%

xpenses on Sales-%

mployee Cost 36.3% 53.7% 51.5% 51.0% 51.0% 52.0%

ubcontracting Cost 20.8% 14.5% 17.2% 0.0% 0.0% 0.0%

ax rate 16.5% 14.1% 23.2% 26.9% 27.0% 27.5%

aluation

MP 115.00 168.05 122.90 99 180 180

o of Share 7.90 8.70 17.80 19.28 19.28 19.28

W 387.11 603.19 712.55 1036.23 1272.42 1557.4

PS 10.80 10.88 8.13 10.80 13.07 15.95

VPS 49.00 69.33 40.03 53.75 66.00 80.78

oE-% 22.0% 15.7% 20.3% 20.1% 19.8% 19.8%

ividen Payout ratio 6.4% 6.8% 4.9% 7.9% 6.3% 7.3%

/BV 2.35 2.42 3.07 1.84 2.73 2.23

/E 10.65 15.45 15.12 9.17 13.77 11.28


9/22

IT Industry: 3QFY14E results preview

Key facts of 3QFY14E earnings:

Seasonal Impacts on (QoQ) earnings, while better on YoY:

Stable Margin and flat currency movement:

New discretionary spending:

Management commentary and forward looking statement:

↑6.9%

"As usual flattish 3rd quarter"


(Source: Eastwind)

Because of better economic scenario, demand environment expansion has taken plac

Now, domestic IT players have been able to retain its market share in US and successfu

improved its market share in Euro region, at a same point pricing pressure has turned o

During the quarter, most of multimillion-dollar projects have been bagged from Eu

region. During the current fiscal, out of 27 large projects 11 orders deputed from Eu

(including UK) region and only 3 from US.

Post revealing 3QFY14E earnings, street will closely watch on the response of its clien

budgeting cycle to assess the strength of the demand environment and its sustainabili

Most of companies will comment on earning guidance, margin outlook and order pipeli

for FY15E. Taking recent attractive supply side scenario, we would like to see hiri

guidance and commentary on maintaining utilization rate and attrition rate.

NX IT v/s USD/INR

(Source: Eastwind)


For 3QFY14E, Indian IT players would report muted earnings growth because of seaso

weakness like furloughs and holidays impacts, already it is understood fact

consensus. However, this quarter would report better earning and margin growth th

same quarters of last year. Because of stable currency movement, margin could be seflattish or marginally inched up.

ice performance of our coverage:

dex Performance:

Movement of INR-USD and Other Currencies v/s USD

(Source: Eastwind)

Post result, earning guidance for FY15E and forward looking statement by most

companies would be considered as an important fact. Considering recent dema

environment scenario and healthy growth outlook of US and Europe, we are expecti

to see positive outlook on the sector for the year 2014.

For 3QFY14E, we expect to see lower rate of earning growth impacted by furloughs a

holidays, already YoY growth would be a favorable. The December quarter h

traditionally been a soft quarter for the IT sector. On USD term, revenue of top-4

players could be reported at a range of 2-3.3% sequentially. We expect Tier-1 IT to rep

constant-currency revenue growth of 1.4-3% (QoQ).

During the quarter, margin for IT Industry will largely be flattish or see marginal decline

sequential basis. Across the tier-1 IT players, Infosys could improve its margin because

cost rationalization and slow pace of currency benefit TCS will maintain its previo

quarters margin picture. While, margin of HCLTech and Mindtree could see some d

because of wage hike during the quarter.


1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QF

Average 44.65 45.73 50.84 50.29 54.09 55.19 54.14 54.17 55.93 62.08 61.

Closing 44.59 48.86 53.08 51.4 56.8 52.85 54.97 54.28 59.54 62.59 61.

Average 1.41 1.4 1.35 1.31 1.28 1.25 1.3 1.32 1.31 1.33 1.3

Closing 1.45 1.36 1.3 1.33 1.26 1.29 132 1.28 1.3 1.35 1.3

Average 1.62 1.61 1.57 1.57 1.57 1.58 1.61 1.55 1.54 1.55 1.6

Closing 1.61 1.57 1.55 160 1.56 1.62 1.62 1.52 1.51 1.6 1.6

Average 1.06 1.05 1.01 1.05 1.01 1.04 1.03 1.04 0.99 0.92 0.9

Closing 1.07 0.99 1.02 1.03 1.02 1.04 1.03 1.04 0.91 0.93 0.8

INR/USD

EUR - USD

GBP-USD

AUD-USD

↑59.5%

↑6.9%

↑13%

↑59.5%


10/22


Results preview

Forex loss as a hedging will reduce the net income growth.

We expect revenue growth of 2.2% in USD term for3rd qtr FY14E, sequentially.



We expect company is likely to report 3.5% (QoQ) revenue growth in USD term. On

constant currency basis, the growth will be 3% QoQ.

Margins are likely to decline marginally because of Flattish currency movement

ey things to watch - Comments onlume, demand environment, deal

osures from US, pricing, and

scretionary spends.

Margin is expected to remain stable and benefits from cost optimisation initiatives a

offset by the negative impact of the rupee appreciation by 1.2% during the quarter.

We expect Infosys to increase their FY2014 guidance to ‘at least 12%’ from 9-10% earliThe company needs a quarterly run rate of average 2% for the next two quarters

achieve 12% for FY14E.

reet would like to see some up

adation in given revenue guidance

om 9-10% to 12% for FY14E.

The company had guided a strong 3QFY14 USD revenue growth guidance of 1.8-3.6% Q

for IT services .We expect IT services revenue growth to be closer to the higher end of t

range and to be 3% QoQ in USD terms.

The large deals won in the previous quarter are ramping up as expected and compa

could reveal its orders pipeline.

Key things to watch – 4th quarter

evenue guidance, margin commentary,

visibility of growth/hiring in software

services.


TCS

Rs, Cr 3QFY13 2QFY14 3QFY14E (QoQ)-% (YoY)-%

Sales 16069.93 20977.24 21606.56 3.0% 34.5%

EBITDA 4660.49 6632.95 6300.3 -5.0% 35.2%

PAT 3549.6 4633.33 5096.66 10.0% 43.6%

EBITDA Margin 29.0% 31.6% 31.0% (60bps) 200bp

PAT Margin 22.1% 22.1% 23.6% 150bps 150bp

WIPRO


Sales 9587.5 10990.7 11342.40 3.2% 18.3%

EBITDA 2050.2 2503.8 2552.04 1.9% 24.5%

PAT 1598.1 1932 1984.16 2.7% 24.2%

EBITDA Margin 21.4% 22.8% 22.5% (30bps) 10bps

PAT Margin 16.7% 17.6% 17.5% (10bps) 80bps

INFYRs, Cr 3QFY13 2QFY14 3QFY14E (QoQ)-% (YoY)-%

Sales 10424 12965 13069.1 0.8% 25.4%

EBIT 2677 3346.9 3424.1 2.3% 27.9%

PAT 2369 2407 2695.8 12.0% 13.8%

EBITDA Margin 25.7% 25.8% 26.2% 40bps 50bps

PAT Margin 22.7% 18.6% 20.6% 200bps (190bp


11/22




Expect revenue growth of 3% in $-term QoQ and margins to be down by 50-100bps wh

is largely attributable to the wage hikes effective from October 1, 2013 for som

employees..

ey things to watch - outlook for

icing/volumes and deal ramp up and

eal re bid, margin commentary,

sibility of growth/hiring in software

rvices.

We expect revenue growth guidance of 2.5% in USD term and and full integration

Complex IT.

Expect margins to be don by 50-100bps (QoQ) - wage hikes deferred to 4QFY14

ey things to watch – Outlook for deal

peline, outlook on BT/AT&T (theggest clients), updates on SMAC(social,

obility, analytics, cloud) and

mments on synergies

We expect revenue growth guidance of 1.5% in USD term and expect margin ramp up

40bps.

ey things to watch – Outlook for deal peline, updates on SMAC(social,

obility, analytics, cloud) and guidance

forward looking statement.

Expect 3% US$ revenue growth. Hexaware discontinued quarterly guidance since t

previous quarter.

Expect 30-50bps decline in margin.

ey things to watch: Key stance onvidend policy, deal wins and revenue

owth momentum and outlook for

der win.


HCLTECH


Sales 6273.8 7961 8160.03 2.5% 30.1%

EBITDA 1416.6 2093 2080.81 -0.6% 46.9%

PAT 974.3 1416 1472.64 4.0% 51.1%


PAT Margin 15.5% 17.8% 18.0% 20bps 250bps

TECHM


Sales 3523.7 4771.5 4819.22 1.0% 36.8%

EBITDA 756.9 1110.85 1084.32 -2.4% 43.3%

PAT 455.9 718.2 754.11 5.0% 65.4%



CMC


Sales 492.97 560.75 566.36 1.0% 14.9%

EBITDA 83.2 88.41 87.79 -0.7% 5.5%PAT 61.07 67.3 65.62 -2.5% 7.4%

EBITDA Margin 16.9% 15.8% 15.5% (30bps) (140bps

PAT Margin 12.4% 12.0% 11.6% (40bps) (80bps)

HEXAWARE

Rs, Cr 4QCY12 3QCY13 4QCY13E (QoQ)-% (YoY)-%

Sales 507.52 621.1 629.17 1.3% 24.0%

EBITDA 109.02 147.74 147.86 0.1% 35.6%PAT 66.20 98.7 103.64 5.0% 56.5%




12/22


We expect to see revenue growth by 4% (QoQ) in USD term.

ew and valuation:


ey things to watch: Outlook of deal

peline, Updates on SAP and Revolo,

d acquisition plan.

We expect overall revenue growth at 3% in USD term due to healthy growth in IP l

business and $1mn HP deal.PAT is expected to grow by 10% (QoQ) despite a marginal growth in margin due to t

forex gain of Rs 5-6 cr v/s 9 cr of same previous quarter.

ey things to watch: Commentary on

al pipeline and contribution from IP-

d revenue

We expect the company to report 1% QoQ growth in USD terms. Due to the

lower other income, we expect the net income to decline by 5%.

ey things to watch: Updates on new

eal win, revenue traction from all

ographies & inorganic initiatives.

y macro indicators in US economy and recent interaction by Industry experts bring some optimistic view in the IT sector. T

eaning full recovery has been seen in US labor market. At the same time, business investment and consumer confidence appear

coming back. We believe, uptick in discretionary spend could be sustain over the next 12-18ms.

ommentary on demand outlook, deal pipeline and discretionary spending will be key topic to discuss post results. At a sam

anagement commentary would also be monitor able.

ence, with strong medium term earnings visibility, better demand environment and optimistic management comments, we a

ositive on (In order of preference) TCS, INFY, and HCL tech from large cap coverage and TECHM, eClerx and NIITTech from Mid c

ace.


KPIT


Sales 563.3 702.8 721.97 2.7% 28.2%

EBITDA 87.9 108.1 115.52 6.9% 31.4%

PAT 59.9 66.7 69.40 4.0% 15.9%

EBITDA Margin 15.6% 15.4% 16.1% 70bps 50bps

PAT Margin 10.6% 9.5% 9.7% (90bps) 120bp

PERSISTENT


Sales 333 432.4 436.06 1% 30.9%

EBITDA 82.4 100.8 104.65 4% 27.0%

PAT 49.5 60.8 66.88 10% 35.1%

EBITDA Margin 24.7% 23.3% 24.0% 70bps (70bps


NIITTECH


Sales 514.4 587.3 593.50 1.1% 15.4%

EBITDA 81.3 88.6 86.06 -2.9% 5.9%

PAT 56.6 60.4 57.38 -5.0% 1.4%

EBITDA Margin 15.8% 15.1% 14.5% (60bps) (130bps

PAT Margin 11.0% 10.3% 9.7% (60bps) (130bps

CMP Upside

(06.01.14) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15

S 2239.6 BUY 2360 5.4% 71.82 90.74 102.37 31.19 24.68 21.88 36.42% 36.22% 32.95

FOSYS 3514.2 BUY 3622 3.1% 164.2 181.1 208.2 21.40 19.40 16.88 24.8% 23.0% 22.2%

CLTECH 1251.3 BUY 1415 13.1% 58.10 71.87 83.49 21.54 17.41 14.99 30.72% 29.10% 26.39

PRO 558.05 NEUTRAL 450 25.0 25.15 27.4 22.28 22.19 20.37 21.7% 18.9% 17.8%

CHM 1817.65 BUY 2330 28.2% 85.48 144.15 161.64 21.26 12.61 11.25 35.91% 38.31% 30.38

MC 1734.45 REDUCE 1693 75.27 101.56 110.07 23.04 17.08 15.76 24.10% 25.81% 22.92

TTECH 379.85 BUY 408 7.5% 36.28 44.03 53.38 10.47 8.63 7.12 20.0% 19.6% 19.3%

IT 181.55 REDUCE 177 10.80 13.07 15.95 16.81 13.89 11.38 20.10% 19.80% 1 9.75

XAWARE 138.65 BUY 141 1.4% 11.1 13.1 14.3 12.49 10.61 9.69 27.2% 27.0% 26%

RSISTENT 990.05 REDUCE 960 46.12 63.40 76.92 21.47 15.62 12.87 18.1% 20.5% 20.4%

LERX 1064.6 BUY 1360 27.7% 64.25 71.61 83.65 16.57 14.87 12.73 43.8% 37.9% 34.4%

TAELXSI 413.65 REDUCE 210 10.63 17.53 19.76 38.91 23.60 20.93 16.94% 23.55% 2 2.37

NSARTECH 397.95 BUY 400 0.5% 40.03 57.16 74.62 9.94 6.96 5.33 23.22% 26.07% 26.34

RoE-%mpany View Target

EPS-Rs P/E-x


13/22

SHREE CEMENT.

4460

4791

NA7%

NA

500387

15502

3875

6191

1M 1yr YTD

solute 0.1 -4.8 -5.1

l. to Nifty 0.0 -8.0 -9.2

2QFY14 1QFY14 4QFY13

omoters 64.8 64.8 64.8

8.2 8.1 7.8

5.7 5.9 5.6

hers 21.3 21.2 21.8

Financials : Q1FY14 Y-o-Y % Q-o-Q % Q1FY13 Q4FY1

Net Revenue 1248 -5.7 -13.9 1324 144EBITDA 249 -36.8 -35.7 394 38

Depriciation 114 21.3 -14.3 94 13

Tax 5 -88.9 -68.8 45 1

PAT 172 -24.6 -39.4 228 28(In Cr

1

Cement : Theme Report

Industry’s profitability deteriorated to multi‐year low during 2QFY14 as all companies reporte

sharp decline in their operating profits. Weak demand on account of a strong & timely monsoo

led to muted volume growth and weak cement prices. Regional & smaller players hit the hardes

.The industry’s profitability suffered on weak demand & rising costs; Fuel costs have large

remained stable.Capex slowdown continues to impact demand off‐take. Sand mining bans als

hurting construction activities & cement demand.Infrastructure execution remains uncertain; rur

pick up on good monsoon can lead to demand growth. The storm seems over but headwin

Source - Comapany/EastWind Research


EBIDTA for the cement segment declined 39% at Rs.249 Cr (-37% YOY) on account of weak price

coupled with higher operational costs. Lower effective tax rate (2.8% vs 16.5%) stemmed th

decline in net profits to INR1.7bn, a degrowth of 24.5%.

On the expansion front :

are Holding Pattern-%The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of simila

capacity along with 25MW of WHRS (at the same location) is expected by Jun’14.Two grindin

units of 2m tons each, at Ras and in Bihar,are being constructed and expected by Jun’14.For th

greenfield clinker-cumgrinding unit (Chhattisgarh) and 2m ton grinding unit (Ras), equipmen

order have been placed; commissioning is for Mar‐Jun’15.We expect Shree to be a 21.5m-tp

company by Jun’15.It plans to foray into high demanding eastern. It has set its eye on 'Missio

2015', i.e. achieving a production capacity of 25mmt by 2015.Total capex for these expansion

Rs.3,000 crore which is spread over next 2 years.yr Forward P/B

Volume Growth with degrowth in EBIDTA :

kt Capital (Rs Crores)With Q1FY14 performance Net sales declined 5.8% to Rs.1248 Cr as weak cement pricing in its ke

northern market offset the benefits from higher cement and power volumes. While cement an

clinker dispatches rose 7.2% YoY to 3.26mmt, realizations weakened 12.7% YoY and 7.2% QoQ a

INR3,334/ mt.On the volumes front, while the 7.2% increase in cement dispatches positivesurprised, a 36% growth in power sales lagged our estimate of a 128% growth.

erage Daily Volume (Nos.)

fty

ock Performance-%


ompany Update Buy As on Mid June, the company's gross debt stood at Rs.12.9bn, including Rs.3.1bn of long-ter

debt maturing within a year and cash and cash equivalents of Rs. 25.7bn. We believe net cas

balance of INR12.8bn coupled with future cash flows should result in smooth execution of it

expansion plan. A very good strategy for capacity expansion has ensured that leverage remainunder control like in the past.We are positive on the stock as it always beats its peers group wit

lower operational cost. Looking at the strategy of the company and expansion plans for FY1

the stock may outperform among cement players with the rise in cement demand.Shree cemen

follows a multi brand strategy and sells cement under the highly recognized brands of Shree Ultra

Bangur and Rockstrong which together enjoy the largest market share in high value markets o

Rajasthan, Delhi and Haryana. After a good monsoon and election we are expecting a goo

performance from shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a targ

MP

rget Price

evious Target Priceside

ange from Previous

arket Data

E Code

E Symbol SHREECEM

"BUY"7th Jan' 14


M a r - 0 2

S e p - 0 2

M a r - 0 3

S e p - 0 3

M a r - 0 4

S e p - 0 4

M a r - 0 5

S e p - 0 5

M a r - 0 6

S e p - 0 6

M a r - 0 7

S e p - 0 7

M a r - 0 8

S e p - 0 8

M a r - 0 9

S e p - 0 9

M a r - 1 0

S e p - 1 0

M a r - 1 1

S e p - 1 1

M a r - 1 2

S e p - 1 2

M a r - 1 3

S e p - 1 3

PRICE 1.5x 2x 2.5x

3x 3.5x 4x 4.5x


14/22

UT LOOK :

FY11 FY12 FY13 FY14E

3454 5898 5590

203 163 188

3656 6061 5779

2569 4252 4029

885 1646 1561

676 873 436

98 235 193

365 619 1004

20.8 23.1 26.1OE%

penditure

ITDA

epriciation

terest Cost

AT

ree Cement (SCL) is a cement producer operating in the two segments cement and power. AsJune 30, 2012, the company had a cement capacity of 13.5 million tonnes per annum (MTPA)

d power capacity of 560 MW. This includes 300 MW (150 MW x2) thermal power plant

mmissioned at Beawar. The company's waste heat recovery power plants have a total capacity

46 MW. The company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It

s manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units at

ushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in Uttarakhand.

om the view company Operations in the high utilisation North and Central markets, capacity

pansions underway, low gearing and strong RoE are fundamental positives. We believe

hough, near term challenges in terms of a slowdown in demand for cement would remain,

ong balance sheet and better efficiency in terms of cost remains a key positive for this

mpany to overcome challenges.Company Management is bull for the rest two quarters of

2014 as according to them demand has already buttom out.We are positive on the stock as it

ways beats its peers group with lower operational cost. Looking at the strategy of the

mpany and expansion plans for FY15 the stock may outperform among cement players with

e rise in cement demand.Shree cement follows a multi brand strategy and sells cement

der the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together

joy the largest market share in high value markets of Rajasthan, Delhi and Haryana. After a

od monsoon and election we are expecting a good performance from shree cement for the

FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/-



et tax expense / (benefit)

SHREE CEMENT.

L PERFORMANCE

et Revenue from Operation

her Income

tal Income

ompany Description :


0

5

10

15

20

25

30

35

40

Q 1 F Y 1 2

Q 2 F Y 1 2

Q 3 F Y 1 2

Q 4 F Y 1 2

Q 5 F Y 1 2

Q 1 F Y 1 3

Q 2 F Y 1 3

Q 3 F Y 1 3

Q 4 F Y 1 3

Q 1 F Y 1 4

EBIDTA Margin

(10.0

-

10.00

20.00

30.00

40.00

50.00

60.00

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1,550REVENUE

GROWTH


15/22

FY10 FY11 FY12 FY13

35 35 35 35

1798 1951 2699 3809

1833 1986 2734 3844

1789 1472 818 443318 217 143 534

28 16 17 18

171 185 584 81

472 267 178 87

4906 4940 5973 6160

0 0 0 0

752 1167 1521 1782

967 729 97 133

299 308 205 378

358 404 503 530

82 108 181 315

416 499 459 369

415 429 363 326

4906 4940 5973 6160

FY10 FY11 FY12 FY13

4.4 3.6 3.8 4.2

212.3 118.6 177.5 288.2

2.3 3.1 3.1 5.6

4.7 5.3 9.9 1.4

1.0 1.2 0.9 0.9

FY10 FY11 FY12 FY13

0 0 0 15660 0 0 -64

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

sh from Operationanges In Working Capital

et Cash From Operation

sh From Investment

sh from Finance

et Cash Flow during year

rading At :


ASH FLOWS

ATIOS

B

S

ebtor to Turnover%

editors to Turnover%

ventories to Turnover%

tal Assets

tal liabilities

tangibles

ngible assets

pital work-in-progress

ng-term loans and advances

ventories

ade receivables

sh and bank balances

ort-term loans and advances

ort-term provisions

SHREE CEMENT.

S PERFORMANCE

are capital

serve & Surplus

tal equity

ng-term borrowingsort-term borrowings

ng-term provisions

ade payables


0

1000

2000

3000

4000

5000

6000

0

000

000000

000

000

000

000

NIFTY SHREECEM


16/22

216.5

221-

2

-

1M 1yr YTD

bsolute 15.2 -36.8 -53.8

el.to Nifty 14.9 -42.2 -59.2


omoters 58.0 58.0 58.0

I 10.0 10.1 9.6

I 24.0 24.6 25.2hers 8.1 7.3 7.2

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 4178 4216 4701 5719 6710

Total Income 5138 5456 6356 7419 8410

PPP 3245 3141 3691 2968 3364

Net Profit 1503 1142 1328 1032 1165

EPS 51.5 39.1 45.5 35.4 39.9


We hav e now neutral rating on Orient Ban k largely due to tradi ng clo ser to o

target pric e Rs.221. At this p ric e sto ck wo uld trad e at 0.5 tim es of one ye

forward book and 6.5 t imes of forward earning. We haven’t revised thmu lt iple on acc oun t of non vis ibi l i ty of ROE imp rovem ent in near to mediu

term . As set qualit y and op erating lever age is lik ely to remain at elevated lev

in FY14. Pro vis ion co verag e ratio at the end of 2Q was 30% im ply ing ver y litt

cu sh ion to its futu re earnin gs . Balan ce sheet size is likely to grow at belo w

indu stry average. Despite of com fortable Tier-1, capital infu sion o f Rs.150

wo uld be book valu e dilut iv e. Inabil i ty to increase CASA and expected high

operat ing leverage in 2HFY14 restr ict valuat ion mult iple to mo ve in the rang

of 0.4 to 0.5 t imes of one y ear forward book in our view.

Asset quality pressure likely to persist but guided better recovery in

agriculture portfolio

Bank management is caution about impairment of asset and taken tig

measurement in lending norm especially in large corporate. Recently large ticket s

fresh slippage emerges from large corporate. Bank management has taken cauti

outlook towards the corporate loan and tighten sanction and disbursement nor

As the result corporate loan grew by 7% YoY in 2QFY14. We observe that corpora

loan constituted about 70% of total credit and rest came from retail loan. With low

growth in corporate segment, overall credit growth is likely to be muted in full ye

and would be below of industry average.

During the last quarter Orient Bank reported flesh slippage at 3.2% (annualize

basis) and asset impairment of 11.1% which would be likely to be flat in full ye

according to management. However management expects better recovery

agriculture portfolio in 2HFY14 led by better harvest. At the end of September ba

has total restructure portfolio of Rs.9421 cr in which most came from infrastructu

segment (about 49%). Power sector contributed 18% of total infrastructure standa

restructure. But as per management most of power sector exposures are fro

government sector where chances of fresh slippage are very low. In line w

management guidance we model 3.3% of GNPA for FY14 and 3.4% in FY1

keeping view of better recovery and controlled fresh slippage.

Balance sheet size likely to grow below of Industry average

arket Data

pside

NEUTRAL

MP

arget Priceevious Target Price

ORIENTAL BANK

ORIENTBANK

verage Daily Volume

6329

ompany Update

365/121

kt Capital (Rs Cr)

hange from Previous

RIENT BANK Vs Nifty

hare Holding Pattern-%

1.98 lac

fty 6211


ock Performance

2wk Range H/L

SE Code 500315

SE Symbol

"NEUTRAL"6th Jan 2014



17/22

ORIENTAL BANK

Source:Eastwind/Company

e note that bank’s CASA ratio stick to 24.5% from FY10 to 2QFY14 which undoubtedly

scalate cost of deposits from 5.8% in FY10 to present of 7.8%. We donot expect

terest rate would be come down in surging inflation imperil. Inability to increase CASA

nd rising interest rate would keep NIM under pressure. However management guided

M at 2.85 -2.87% in FY14. Lower visibility of comfort earnings and book value dilution

n account of capital infusion, we expect ROE would be 7-10% in near term which will

tract valuation multiple of 0.4 to 0.5 times book.


apital infusion of Rs.150 cr despite of 8.9% of Tier-1 capital

perating leverage would be remain at high led higher retirement expenses

perating expenses to total asset of the bank is much higher than its peers group largely

ue to higher expenses towards retirement. Cost-Income (CI) ratio of the bank remained

gh at 60% as against industry average of 45%. Bank is likely to provide higher

mployee provision in 2HFY14 as indicated by management. We factor CI ratio of 60%

full year but we understand that ratio may go higher than anticipated. We will get more

arity after the third quarter result and post conference call.

ccording to basel-111 norm, Tier-1 capital was 8.9% which was comfortable for required

usiness growth in our view but recent capital infusion of Rs.150 diluted our estimated

OE by 10 bps. Bank may use the additional fund in credit growth without adequate

pport of deposits.

ow cost deposits stick to 24.5% from last few quarters; exert pressure inxpanding NIM and ROE

aluation Band



18/22

ORIENTAL BANK

Source: Company/Eastwind


nancials & Assuption


/L 2011 2012 2013 2014E 2015E

erest/discount on advances / bills 8954 12075 13758 16609 19101

come on investments 2774 3671 3854 4865 5457

erest on balances with Reserve Bank of India 335 34 31 78 78hers 25 35 61 14 14

tal Interest Income 12088 15815 17705 21568 24651

hers Income 960 1240 1655 1700 1700

tal Income 13048 17055 19359 23267 26351

erest on deposits 7474 11213 12553 15254 17251

erest on RBI/Inter bank borrowings 23 38 111 149 172

hers 413 348 340 446 517

erest Expended 7910 11599 13004 15849 17941

4178 4216 4701 5719 6710

Growth(%) 43.7 0.9 11.5 21.7 17.3

her Income 960 1240 1655 1700 1700

tal Income 5138 5456 6356 7419 8410

mployee 1048 1357 1576 2626 2977

her Expenses 844 959 1089 1825 2069perating Expenses 1892 2315 2665 4451 5046

P( Rs Cr) 3245 3141 3691 2968 3364

ovisions 1742 1999 2363 1678 1907

t Profit 1503 1142 1328 1032 1165

t Profit Growth(%) 32.4 -24.0 16.3 -22.3 12.9

ey Balance sheet data

posits 139024 155965 175898 196963 220598

posits Growth(%) 15.6 12.2 12.8 12.0 12.0

rrowings 5639 5259 7679 8498 9854

rrowings Growth(%) 15.4 -6.7 46.0 10.7 16.0

an 95908 111978 128955 148298 170543

an Growth(%) 14.9 16.8 15.2 15.0 15.0

vestments 42075 52101 58555 65747 73745

vestments Growth(%) 17.6 23.8 12.4 12.3 12.2

stwind Calculation

eld on Advances 9.3 10.8 10.7 11.2 11.2

eld on Investments 6.6 7.0 6.6 7.4 7.4

eld on Funds 7.8 9.2 9.0 10.1 10.1

st of deposits 5.4 7.2 7.1 7.7 7.8

st of Borrowings 7.7 7.3 5.9 5.9 7.0

st of fund 5.5 7.2 7.1 7.7 7.8

aluation

ok Value 380 409 403 435 464

BV 1.0 0.6 0.6 0.4 0.4

E 7.5 6.4 5.5 5.1 4.5


19/22

128.9

16326.5

-

-

1M 1yr YTD

bsolute 6.3 -53.8 -53.8

el.to Nifty 6.0 -59.2 -59.2


omoters 57.9 57.9 57.9

I 10.2 11.7 10.6

I 17.8 17.7 18.0

hers 14.2 12.8 13.5

Financials Rs, Cr

2011 2012 2013 2014E 2015ENII 6216 6793 7543 7654 8602

Total Income 8255 9241 10095 10389 11337

PPP 4305 5254 5583 5298 5782

Net Profit 2082 1787 2158 1851 1967

EPS 39.7 29.9 36.2 31.0 33.0


ock Performance

2wk Range H/L

Margin declined by 10 bps to 2.54% largely due to increase of cost of fund. Yield o

advance was stable at 10.6% QoQ despite to tight liquidity environment where

cost of fund increased by 10 bps QoQ. With the recent RBI decision not to hike re

rate along with higher FCNR deposits, bank’s margin would be expanded in 2HFY1

Union bank has borrowed fewer amounts for repo than MSF and during quarter bo

yield settle at 8.75% which would result on fair amount of portfolio gain and redu

the cost of fund.


hange from Previous

NION Bank Vs Nifty

hare Holding Pattern-%

6.87LAC

fty 6211

kt Capital (Rs Cr)

UNION BANK

ompany Update BUY

MP

arget Price

Unio n Bank is tradi ng at 0.4 tim es of one year for ward bo ok and 4.2 tim es

one year forw ard earning whic h we believe attract ive for entry. We are look inmargin expansion on the back of RBI’s decis ion not hik ing the pol icy ra

(repo rate) and bon d yield settle at 8.75% wh ich was muc h lower as comp a

to Apri l-June quarter. Bank bo rrow ed more mo ney on the repo and less o

MSF and bon d yield soft ened to 8.75% wh ich wo uld resu lt on fair amo un t

portfo l io gain. Moreover bank has taken more mon ey throug h FCNR (Foreig

curren cy Non-Resident) wh ich is less costl ier than depos its and would help

reduce the cost of fund and hence margin accret ive. We value bank

Rs.163/share wh ich wo uld be 0.5 tim es of on e year forw ard boo k and 5 tim e

of one y ear forward earning.

Stable asset quality on sequentially but restructure pipeline still high At the end of 2QFY14, bank has impairment assets (GNPA+ restructure) at 8.7%

total advance which is lower as compare to its peers. Fresh addition to restructu

loans were at 2.8% of loans at Rs.1534 cr higher from 2.2% of loans at Rs.1068 cr

1QFY14. Management guided another Rs.3000 cr of loans are in pipeline led mos

from SEB. Fresh slippage reported by bank was stable at 3.1% as against 3% in fi

quarter. Out of total fresh slippage, 50% came from 4 corporate accounts (Powe

manufacture, Iron & Steel and services). Bank made lower provisions as compare

growth in GNPA as the result provision coverage ratio declined by 320 bps to 42.1

from 45.3% on sequential basis.

Margin declined by 10 bps in 2QFY14 but expect to expand in 2HFY14

verage Daily Volume

3231

evious Target Price

arket Data

pside

281.6/97.1

SE Code 532477

SE Symbol UNIONBANK

"BUY"6th Jan, 2014



20/22

Source:Eastwind/Company

UNION BANK


omfortable earnings and ROE improvement would be possible

able yield on loan sequentially indicated that bank is able to deliver comfort earning on

e back of shifting low yield mix loans to borrowing other market instrument. Although

ank has stable CASA ratio but would be getting benefit from FCNR deposits and

nchanged repo rate along with MSF. So cost of fund would be lesser as compare toevious quarter in our view. This would help bank to expand margin and ROE

provement. Balance sheet is expected to grow at 16-17% in FY14 as per management.

ew & Valuation

nion Bank is trading at 0.4 times of one year forward book and 4.2 times of one year

rward earning which we believe attractive entry point. We are looking at margin

xpansion on the back of RBI’s decision not hiking the policy rate (repo rate) and bond

eld settle at 8.75% which was much lower as compare to April-June quarter. Bank

orrowed more money on the repo and less on MSF and bond yield softened on 8.75%

hich would result on fair amount of portfolio gain. Moreover bank has taken more

oney through FCNR (Foreign currency Non-Resident) which is less costlier than

eposits and would help to reduce the cost of fund and hence margin accretive. Welue bank at Rs.163/share which would be 0.5 times of one year forward book and 5

mes of one year forward earning.

aluation Band



21/22

UNION BANK

Source: Company/Eastwind



L 2011 2012 2013 2014E 2015Eerest/discount on advances / bills 12031 16027 19140 21539 24769

ome on investments 4003 4570 5671 6797 7884

erest on balances with Reserve Bank of India 161 331 199 205 205

hers 258 101 115 177 177

tal Interest Income 16453 21028 25125 28717 33035

hers Income 2039 2448 2552 2735 2735

tal Income 18491 23477 27677 31452 35770

erest on deposits 9538 13406 16551 19872 23052

erest on RBI/Inter bank borrowings 113 141 274 1191 1381

hers 585 689 756 0 0

erest Expended 10236 14235 17582 21063 24433

6216 6793 7543 7654 8602

Growth(%) 48.3 9.3 11.0 1.5 12.4

her Income 2039 2448 2552 2735 2735

tal Income 8255 9241 10095 10389 11337

ployee 2600 2479 2755 3105 3389

her Expenses 1350 1508 1757 1985 2166

erating Expenses 3950 3988 4512 5090 5555P( Rs Cr) 4305 5254 5583 5298 5782

ovisions 2223 3467 3425 3447 3815

t Profit 2082 1787 2158 1851 1967

0.3 -14.2 20.7 -14.2 6.2

y Balance sheet dataposits 202461 222869 263762 305963 354918

posits Growth(%) 19.1 10.1 18.3 16.0 16.0

rrowings 13316 17909 23797 27694 32124

rrowings Growth(%) 44.5 34.5 32.9 16.4 16.0

an 150986 177882 208102 239318 275215

an Growth(%) 26.5 17.8 17.0 15.0 15.0

vestments 58399 62364 80830 97094 112629

vestments Growth(%) 7.3 6.8 29.6 20.1 16.0

stwind Calculation

ld on Advances 8.0 9.0 9.2 9.0 9.0

ld on Investments 6.9 7.3 7.0 7.0 7.0

ld on Funds 7.2 8.3 8.3 8.5 8.5

st of deposits 4.7 6.0 6.3 6.5 6.5

st of Borrowings 5.2 4.6 4.3 4.3 4.3

st of fund 4.7 5.9 6.1 6.3 6.3

luationok Value 243 245 290 313 337

BV 1.4 1.0 0.7 0.4 0.4E 8.7 7.8 5.8 4.2 3.9


22/22

Narnolia Securities Ltd

402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph

033-32011233 Toll Free no : 1-800-345-4000

email: [email protected],website : www.narnolia.com

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available information, findings of our research wing “East wind” & information that we

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best performing stock advice for today - neutral rating on gail stock with a target price of rs.346

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