india equity today tips - buy stocks of coal india ltd with target price of rs.334

Private Bank Result Preview 3QFY14 : 13th Jan 2014

Broadly banking indices outperform Nifty by 6% in third quarter and most of banking stocks are trading at attractive valuation. Despite of, we

have caution view on account of slowdown in economy, high interest rate and inflationary pressure. High inflation would be risk for the

economy going forward. Any rise in inflation would result of rise in interest rate by RBI in its third quarter monetary policy review on 28th

Jan.2014 which would be negative for banking industry. Most of banking stocks are expected to report moderate revenue and profit growth

owing to multiple headwinds. In private sector banking universe we like HDFC Bank, ICICI bank and DCB.............................................. ( Page :

22-24)

Infosys : "On the way of excitement" "BUY" 13th Jan 2014

Infosys largely reported inline set of sales numbers and beats the street on margin front, In USD term, Sales grew by 1.65%(QoQ) and 0.5%(QoQ)

in INR term, led by 0.7% (QoQ) volume growth and 0.7%(QoQ) pricing growth. At a CMP of Rs 3549, it trades at 16.3x FY15E At a CMP of Rs

3549, it trades at 16.3x FY15E earnings. We retain our “BUY” view on the stock with a target price of target price of Rs 3910 (revised from 3620).

....................................... ( Page : 12 -15)

DB Corp :"On strong footing"

INDUSIND BANK "Neutral" 13th Jan 2014

Despite of reported higher than expected profit we have neutral view on the stock owing to shifting of loan mix from consumer finance to

corporate loan which will lead to margin compression and deterioration in asset quality as per our view. Corporate loans generally are big ticket

size in nature and with slowing of economy there are higher chances of these loan slip into NPA than other loan. Moreover retail loans are high

yield in nature than corporate loan. At current price, we have neutral view on the stock due to trading almost near to our valuation multiple and

anticipating margin compression and higher slippage. ........................ ( Page : 16-21)

Zensar Tech :"Better growth trajectory" "BUY" 14th Jan 2014

The deal booking and pipeline is good and expects to perform well going forward. It expects double digit growth in the Enterprise Services

business for the FY15E on the back of healthy pipeline. Also, it anticipates good growth from the IMS for the FY'15E. Considering healthy order

pipeline and its earning visibility in near future, we maintain “BUY” view on the stock and we revise our target price from Rs 400 to Rs 440. At a

CMP of Rs 412, stock trades at 7.2x FY14E EPS .............................................. ( Page : 10-11)

15th Jan, 2014

Edition : 184

IEA-Equity

Strategy

Coal India LTD : "BUY" 15th Jan 2014

A Rs 1800-crore fine could possibly mean less profits for the company and less dividend income for its owners. But as the main owner, the

government, will pocket this amount in the form of a fine, it will not be poorer in any way.Recently Coalindia after a long discussion with govt

declared Rs29/share intrim dividend .which recovers our ROE estimate for FY14 to 40% from 33%.which is up 4% YOY.we revised our EPS

estimate for FY14 to 28.4 which is 3.4% YOY (including 2100 CR realization Gain).Hence we Upgrade coal india to a target price of RS.334/-

(previously 310)................................................ ( Page : 2-4)

"BUY" 14th Jan 2014

In view of upcoming general election, we expect government ad spending to go up substantially. Being one of the biggest player, company will

benefit from this. Considering its long-term growth story with favorable earning scenario and leadership position in key market, we are positive

on the stock. We initiate “BUY” view on the stock with the target price of Rs 340. At a CMP of Rs 305, stock trades at 4.3x of FY15E P/BV

............................................... ( Page : 8-9)

UltraTech Cement Ltd : "BUY" 14th Jan 2014

We are expecting 8%-15% Sales growth with ~19% ROE in FY15E.We expect cement demand to pick up from 2HFY14 onwards driven by

governments pre-election spending as well as on account of rural demand pick post the good monsoon witnessed this year. UTCL is a largest

cement player in India and we expect it to maintain or increase the same through timely commissioning of capacities, which are expect to come

on stream by FY15E.We value the stock and arrive at the target price of Rs 1846. As from the current level the upside is very limited (10%), so we

recommend investors to "Buy" the stock at lower level dips to get a decent returns over a time horizon of 12-18 months

................................................. ( Page :5-7)

Narnolia Securities Ltd,

India Equity AnalyticsDaliy Fundamental Report on Indian Equities

Coal India LTD.

Cash Deployment : Dividend at Rs 29/- per share289

334

310

16%

NA

533278

176226 Coal India to get Rs 2,119 cr extra on coal price revision :17622

6308

1M 1yr YTD

Absolute -1.3 -21.2 -21.4

Rel. to Nifty 2.8 8.8 8.6

2QFY14 1QFY14 4QFY13

Promoters 90.0 90.0 90.0

FII 5.5 5.4 5.4

DII 5.3 2.3 2.0

Others 2.2 2.4 2.6

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14

Net Revenue 15411 5.8 -6.4 14573 16472

EBITDA 2794 -2.4 -29.4 2862 3958

Depriciation 495 27.8 4.1 387 476

Interest Cost 8 -22.2 7.0 10 7

Tax 1412 -4.2 -27.9 1475 1958

PAT 3052 -0.8 -18.2 3078 3731(In Crs)

2

Mkt Capital (Rs Crores)

372/238

Q2FY14 :

Management Corner : Management is confident about their coal production target and

coal off take target for FY2014E, which is 482 mmt and 492 mmt respectively. Till now in

the H1FY14 the company cpmpleted 400 mmt production and 424 mmt offtake. The

company is not sure about the production target but very sure abot the offtake .

Source - Comapany/EastWind Research

The company’s net sales grew 5.8% yoy to 15,411cr (above our estimate of 15,083cr).

Sales volumes stood at 109mn ton in 2QFY2014 compared to 102mn ton in 2QFY2013.

The blended realizations declined by 1.4% yoy to 1,414/ton (despite price hike) due to

lower realization on FSA coal.Despite 5.8% yoy growth in top-line, EBITDA decreased by

8.2% yoy to 3,176cr due to higher raw material costs (18.1% yoy to 2,251cr) and

contractual expenses (27.6% yoy to 1,394cr). The depreciation expenses increased by

27.8% yoy to 495cr; hence, adjusted net profit was flat yoy at 3,043cr .

Coal India Ltd is likely to get additional revenue of Rs 2,119 cr in this fiscal on account of

revision in dry fuel prices.CIL (Coal India Ltd) has revised and rationalized the basic

notified prices of all the grades of non-coking coal except GI, G2 and G5.The estimated

additional revenue due to revision of basic notified price for the current financial year is

Rs 2,119 cr.CIL had revised the prices of all grades of coal, barring three, for all its eight

producing subsidiaries with effect from May 28 this year. Mahanadi Coalfields which is

expected to contribute Rs 686 crore, followed by Rs 664 crore from Northern Coalfields

and Rs 495 crore from South Eastern Coalfields.

Nifty

Average Daily Volume (Nos.)

Market DataBSE Code

COALINDIANSE Symbol

52wk Range H/L

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

Stock Performance-%

Share Holding Pattern-%

1 yr Forward P/B

Upside

Change from Previous

Company UpdateCMP

Target Price

Competition Appellate Tribunal stays Rs 1,773 crore fine on CIL , and will decide on the

matter on next hearing feb 11 2014. We believe , A Rs 1800-crore fine could possibly

mean less profits for the company and less dividend income for its owners. But as the

main owner, the government, will pocket this amount in the form of a fine, it will not be

poorer in any way.Recently Coalindia after a long discussion with govt declared

Rs29/share intrim dividend .which recovers our ROE estimate for FY14 to 40% from

33%.which is up 4% YOY.we revised our EPS estimate for FY14 to 28.4 which is 3.4%

YOY (including 2100 CR realization Gain).Hence we Upgrade coal india to a target price

of RS.334/- (previously 310).

Previous Target Price

"Buy"15th Jan' 14


OUTLOOK:

FY10 FY11 FY12 FY13

431 431 436 452

416 425 433 465

1073 1183 1441 1468

404744 390243 377447 364736

1066 1105 1155 1240

FY11 FY12 FY13 FY14E

50234 62415 68303 69960

7573 5123 6556 8372

1755 2013 2333 2591

4580 4901 5802 6049

20481 26705 27943 28943

40390 40857 50219 53705

9843 21558 18084 16255

1673 1969 1813 1860

79 54 45 34

5595 6484 7623 7310

10868 20588 17356 17921

33 51 36 40

3

Tax

PAT

Net Revenue from Operation

Cost Of Projects & Contractual

Power and fuel

E-auction prices remain under pressure: E-auction prices for Nov’13 were at Rs 2,117/t

(-15% YoY/-8% MoM). YTD, weighted average e-auction prices were at Rs 2,238/t, lower

16% YoY. Weakness in sponge iron and cement industry, the two key end-users of e-

auction coal, has impacted E-auction realisations.

Depriciation

Interest Cost

ROE %

Revenue Generation From unit Ton

Avg Man Power (in numbers)

Productivity Per Man

contractual expenses

Employee benefit Expence

Expenditure

EBITDA

Coal India LTD.

OPERATING MATRIX

Coal Production in MT

CIL’s e-auction realizations have declined over the past one year on account of decline

in international coal price coupled with weak domestic demand. Going forward, we

expect CIL’s profitability to be affected due to lower e-auction realizations, sticky staff

costs and other expenses. Moreover, given the price hike taken during 4QFY2013, we

do not expect CIL to undertake any further price hikes in the near-term.

P/L PERFORMANCE

Coal Offtake in MT

We expect modest increase in sales volumes growth during FY2013-15 on account of

poor offtake capabilities of CIL. Also, we expect CIL’s margins to decline during FY2014

due to lower e-auction realizations and higher staff costs/other expenses.Recently

Coalindia after a long discussion with govt declared Rs29/share intrim dividend .which

recovers our ROE estimate for FY14 to 40% from 33%.which is up 4% YOY.we revised

our EPS estimate for FY14 to 28.4 which is 3.4% YOY (including 2100 CR realization

Gain).Hence we Upgrade coal india to a target price of RS.334/- (previously 310).From

the CMP the target price is up by ~15% .




FY10 FY11 FY12 FY13

6316 6316 6316 6316

20956 26998 34137 42156

27273 33314 40453 48472

343 1334 1305 1078

1620 33 0 0

2545 22461 28271 31144

772 645 829 837

1404 12387 15595 20447

5443 8490 9785 12385

0 779 759 712

12035 12065 12681 12754

2211 2057 1848 3496

610 845 1017 1181

4402 5586 6071 5618

2169 3419 5663 10480

39078 45806 58203 62236

8066 11180 13478 16189

17921 21646 24688 25479

FY10 FY11 FY12 FY13

0.0 5.7 5.5 4.0

0.0 17.3 32.6 27.5

4.9 22.8 29.2 52.7

1.7 4.3 4.3 4.2

1.0 3.7 3.1 2.8

FY10 FY11 FY12 FY13

10727 12819 16323 15948

-131 -3822 3565 -6839

10596 8997 19888 9109

950 697 -10410 -1833

2163 2911 -7382 -7852

13708 12606 2095 -575

Down 21% from its 52week High

Up 14% from its 52 week Low

4

CASH FLOWS

Trading At :

Changes In Working Capital

Net Cash From Operation

Cash From Investment

Cash from Finance

Net Cash Flow during year

Cash from Operation

Short-term loans and advances

Total Assets

RATIOS

P/B

EPS

Debtor to Turnover%

Creditors to Turnover%

Inventories to Turnover%

Long-term provisions

Tangible assets

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables

Intangibles

Cash and bank balances

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Coal India LTD.


Trade payables

Short-term provisions

Total liabilities


UltraTech Cement Ltd.

1675

1846

1875

10%

-2%

532538

45942

18377

6272

1M 1yr YTD

Absolute -7.3 -14.8 -10.2

Rel. to Nifty -9.0 -19.9 -14.3

2QFY14 1QFY14 4QFY13

Promoters 62.0 62.0 62.0

FII 20.7 20.7 20.6

DII 4.8 4.6 4.6

Others 12.6 12.7 12.7

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14

Net Revenue 4522 -4.3 -9.2 4727 4980

EBITDA 679 -34.4 -36.7 1035 1072

Depriciation 257 10.8 2.0 232 252

Interest Cost 89 48.3 34.8 60 66

Tax 107 -54.1 -56.7 233 247

PAT 264 -52.0 -60.8 550 673(In Crs)

5

Market Data

The outlook continues to remain challenging. Demand growth in FY14 is likely to be around 5 %,

though in the long term growth is likely to be over 8 % - 15% . Government initiatives to

expedite large infrastructure projects have yielded little so far and this is putting pressure on

cement makers, especially those with debt that has become expensive to service due to high

interest rates.We believe that UltraTech will maintain its healthy debt protection metrics ,

supported by its earnings and cash flows.At present Ultratech is running at 79% of its capacity

utilization.The utilization levels will decline due to stabilization of supply from new capacities,

owing to insufficient demand in the domestic market. UltraTech plans to strengthen its logistics

infrastructure and increase its captive power plant capacity, which will help to reduce its

operational cost.We value the stock at the target price of Rs 1846. From the current level the

upside is very limited (10%), so we recommend investors to "Buy" the stock at dips to get a

decent returns.

Average Daily Volume (Nos.)

BSE Code

ULTRACEMCONSE Symbol

52wk Range H/L


2066/1404 Q2FY14 Update : Ultratech Cement reported a 52 per cent dip in net profit for the July-September

quarter at Rs 264. Net sales were down 4 per cent at Rs 4,502 crore .Cement and clinker sales

remained unchanged compared with last year at 9.1 million tonnes while white cement and wall-

care putty sales were up 15 per cent at 2.75 lakh tonnes (2.39 lakh tonnes). Despite flat cement

sales, overall cost increased 4 per cent to Rs 4,100 crore (Rs 3,927 crore) on the back of high

logistics cost.Overal realisation during the quarter was down 5 per cent at Rs 239 per 50 kg bag

compared with Rs 252 in last year.The company’s long-term borrowings stood lower at Rs 3,841

crore (Rs 3,893 crore), while deferred tax liabilities increased 9 per cent to Rs 2,073 crore (Rs

1,906 crore). EBITDA slipped 34.3 percent on yearly basis to Rs 660 crore and operating profit

margin declined 670 basis points Y-o-Y to 14.7 percent in the quarter.

Nifty

Struggle for beter Manufacturing : Financial performance impacted by lower selling price and

subdued demand. The demand remained sluggish due to prolonged monsoon across the country,

resulted in reduced offtake by infrastructure and real estate companies. During the quarter

,benefit of lower imported coal prices was get cancelled due to sharp depreciation of the rupee

against the dollar. Logistics and raw material costs continued to rise given the high diesel prices.

However, optimisation of fuel mix i.e use of pet coke helped to lower power and fuel costs to an

extent.


Stock Performance-%


1 yr Forward P/B


Capacity Addition : Meanwhile, UltraTech Cement agreed to purchase debt-laden Jaiprakash

Associates' Gujarat cement unit having a capacity of 4.8 million tonnes for Rs 3,800 crore. Gujarat

cement unit comprises of an integrated cement unit at Sewagram and grinding unit at Wankbori.

With this acquisition of 4.8 million tonnes per annum, the company's current capacity increases to

59 million tonnes per annum. The transaction implies a valuation of $124 per tonne of cement,

which is lower than the existing benchmark of around $140 per tonne, and is a positive for

UltraTech.Currently, UltraTech’s debt is around Rs.4,500 crore. After the transaction is completed,

the company’s net debt-to-equity ratio will increase to around 0.45 from 0.27. Debt will increase

to 2 times EBIDTA. With projects underway it will stand raised to 70 million tonnes by 2015.

Target Price


Company Update Buy

Upside


CMP

"BUY"14th Jan' 14


Au

g-0

4

Mar

-05

Oct

-05

May

-06

De

c-0

6

Jul-

07

Feb

-08

Sep

-08

Ap

r-0

9

No

v-0

9

Jun

-10

Jan

-11

Au

g-1

1

Mar

-12

Oct

-12

May

-13

Price 1x2x 3x4x 5x6x 7x

OUT LOOK :

FY11 FY12 FY13 FY14E

13798 19232 21319 21267

154 371 304 363

13952 19603 21623 21630

3280 4639 4646 4607

2881 3741 4243 4586

2696 4194 4839 3791

813 963 1023 1110

292 256 252 325

384 948 1179 775

1367 2403 2678 1934

13 19 18 11

2.9 3.2 3.4 2.9

6

PAT

ROE%

P/B

Power and fuel

Freight and forwarding

EBITDA

Depriciation

Interest Cost

Tax

Total Income

Company Description :UltraTech had an estimated market share of around 18 per cent, with presence across regions -

north being the largest, contributing 33 per cent to its sales, followed by west (31 per cent),

south (20 per cent), and east (16 per cent) - thereby insulating it from downtrends in any single

region. The company has a strong focus on improving operating efficiencies; it has 529

megawatts (MW) of captive power generation capacity, which meets 80 per cent of its power

requirement and also maintains power consumption norms in line with the other players in the

industry.

On The Expansion Front : Setting up a cement plant with 5.5 MMTPA cement and a 75 mega

watt (MW) captive power plant, with an investment of Rs 2,500 crore. The company has

received approval from Expert Appraisal Committee (EAC), under the Ministry of Environment,

for the proposed facility. The cement plant will be based on the dry process technology for

cement manufacturing with pre-heater and pre-calciner technology and the coal requirement for

the project will be met by importing it from Indonesia and South Africa, as an interim basis.

Petcoke will be procured from Reliance Industries Limited, Jamnagar.

Source - Comapany/EastWind ResearchOther Income

Ultratech's EBIDTA growth has been consistently beats the industry average as well as its peers

ACC and Abuja cements. In last few years it also led the industry and its peers on PAT growth .It

beats its peers on account of cement realization and volume sales. Additionally Ultratech has

also been increasing the usage of low cost pet coke in its fuel mix there by moderating its cost

pressure. Strong Brand premium and operational efficiency drives its industry leading

profitability . With the overall slow down in demand, Ultratech will continue to loose its market

share in FY14E on capacity delay. Hence, We are expecting 8%-15% Sales growth with ~19% ROE

in FY15E.We expect cement demand to pick up from 2HFY14 onwards driven by governments

pre-election spending as well as on account of rural demand pick post the good monsoon

witnessed this year. UTCL is a largest cement player in India and we expect it to maintain or

increase the same through timely commissioning of capacities, which are expect to come on

stream by FY15E.We value the stock and arrive at the target price of Rs 1846. As from the

current level the upside is very limited (10%), so we recommend investors to "Buy" the stock

at lower level dips to get a decent returns over a time horizon of 12-18 months.



P/L PERFORMANCE



(20.0)

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

-

1,000

2,000

3,000

4,000

5,000

6,000

Q1

FY1

1

Q2

FY1

1

Q3

FY1

1

Q4

FY1

1

Q1

FY1

2

Q2

FY1

2

Q3

FY1

2

Q4

FY1

2

Q1

FY1

3

Q2

FY1

3

Q3

FY1

3

Q4

FY1

3

Q1

FY1

4

Q2

FY1

4

Q3

FY1

4E

Q4

FY1

4E


Sales Growth

60

65

70

75

80

85

0

10

20

30

40

50

60

FY09 FY10 FY11 FY12 FY13

Capacity Of Cement Production (in MT)

Cement Production

Cement Capacity Utilisation in %

14 15

10

12 12

19

22

13

16 18

24

27

19 21

22

-

5

10

15

20

25

30

FY09 FY10 FY11 FY12 FY13

NPM % OPM % EBITDA %

FY10 FY11 FY12 FY13

124 274 274 274

4495 10373 12550 14955

4620 10647 12824 15230

857 3295 4843 5169

750 727 705 1227

32 113 121 135

683 1830 2207 2338

133 473 709 949

8375 21630 24904 29590

6 39 40 62

4953 12265 12729 14254

260 760 1940 3601

146 583 1544 1066

827 2094 2198 2541

210 825 1089 1376

112 190 214 185

219 873 1041 1048

8375 21630 24904 29590

FY10 FY11 FY12 FY13

3.1 2.9 3.2 3.4

88.1 49.9 87.7 97.7

2.9 6.0 5.7 6.5

9.5 13.3 11.5 11.0

1.2 1.5 1.1 1.2

FY10 FY11 FY12 FY13

1673 2195 3482 4122

-79 -197 -96 -481

1593 1998 3385 3641

-843 -2240 -3050 -4407

-740 248 -353 715

10 6 -18 -51

7

Creditors to Turnover%

Inventories to Turnover%

Short-term loans and advances

Total Assets

P/B

EPS

Debtor to Turnover%

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances


Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Long-term provisions

B/S PERFORMANCE

Trading At :

RATIOS

CASH FLOWS

Capital work-in-progress

Trade payables

Short-term provisions

Total liabilities

Intangibles

Tangible assets


Net Cash From Operation

Cash From Investment

Cash from Finance

Net Cash Flow during year

Cash from Operation

Changes In Working Capital


0

500

1000

1500

2000

2500

0

1000

2000

3000

4000

5000

6000

7000

NIFTY ULTRACEMCO

DB Corp

302

340

-

13%

-

1M 1yr YTD

Absolute 11.5 25.0 -

Rel. to Nift 14.0 21.6 -

Current 2QFY14 1QFY14

Promoters 74.96 74.97 75.0

FII 17.7 16.5 14.7

DII 2.95 4.00 5.34

Others 4.36 4.57 5.02

Financials Rs, Cr

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

Revenue 437.98 449.4 -2.5% 378.37 15.8%

EBITDA 112.45 135.38 -17% 81.36 38%

PAT 63.24 77.71 -19% 45.41 39%

EBITDA Margin 25.7% 30.1% (440 bps) 21.5% 420 bps

PAT Margin 14.4% 17.3% (290 bps) 12.00% 220 bps

8

Market Data

318.65/210

BSE Code 533151

NSE Symbol DBCORP

"On strong footing"

CMP

Upside

Company update BUY

Target Price

Festive season coupled with the recently held state assembly elections in 4 states

(Rajasthan, M.P, Chhattisgarh, and Delhi) will likely drive revenue growth for print

media companies. Across the print media players, DB Corp will be one of the strong

beneficiaries for prospect of revenue generation. These 4 states contribute almost 60%

of its revenue.



Stock Performace with Nifty


25750

Nifty 6273

Recently, Print media companies decided to hike its cover prices selectively in its

mature market to maintain its margin due to increase in news print cost. Going

forward, improving ad revenue, cost control measures and expanding into new area

would energize its revenue visibility in near future.

About the Company: DB Corp, the publisher of Dainik Bhaskar, is a leading publishing

house with its highest readership in the country. It publishes 8 newspapers, 65

newspaper editions and around 200 sub-editions in 4 languages (Hindi, Gujarati, English

and most recently Marathi) in 13 Indian states.

Earning Preview (3QFY14E): DB Corp is like to report 19% (YoY) revenue growth to Rs

366cr led by 18% of revenue growth and 15% of subscription revenue. PAT is expected

to grow by 17% (YoY) to Rs 85Cr. We expect to see EBITDA margin up by 100-150bps

(YoY) to 28-28.5% because of benign RM cost.

Key facts to watch out: Commentary on response of new editions (Patna, Akola and

Amravati), new expansion plan, trend of ad revenue from 4 states poll and from

governments.

Fit well on strong footing: Management is very confident of achieving 17% to 20%

growth rate in upcoming quarter. The Company is following principle of launching at

least 2 editions in a year and enter into at least one 1 market in every 2 years. Company

launched Akola edition in July and Amravati edition in August. Recently company has

launched its Patna edition. According to the company, the initial response in Bihar is

quite encouraging and as per booking, record of new subscription makes it no.1 in the

first day of its launch.

Expanding into new exposure: The company has interest in radio under the MY FM

brand (94.3), operating in 17 FM radio stations across mini metros and small towns. The

company also has exposure to new media with internet and short messaging service

(SMS) portals.


(Source: Company/Eastwind)

Stock Performance

52wk Range H/L

View and Valuation: In view of upcoming general election, we expect government ad

spending to go up substantially. Being one of the biggest player, company will benefit

from this. Considering its long-term growth story with favorable earning scenario and

leadership position in key market, we are positive on the stock. We initiate “BUY” view

on the stock with the target price of Rs 340. At a CMP of Rs 305, stock trades at 4.3x of

FY15E P/BV.

Average Daily Volume

5502Mkt Capital (Rs Cr)

"BUY"14th Jan' 14


9

DB Corp


Financials


Revenue Geography-wise Revenue Segments


Rs,cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 1062.1 1265.18 1451.51 1592.32 1865.97 2182.15

RM Cost 327.87 383.91 508.04 544.54 653.09 763.75

WIP -0.0016 -0.06 -0.04 0.03 0.04 0.04

Employee Cost 131.81 184.56 242.93 279.5 335.88 403.70

Ad Spend 12.98 12.52 15.04 17.21 22.39 28.37

Event Expenses 11.83 16.02 15.04 12.08 18.66 21.82

consumption of store & spare 51.49 58.7 83.62 94.81 115.69 150.57

Distribution expenses 22.81 21.28 24.34 28.01 33.59 41.46

Other expenses 161.24 185.2 216.06 234.07 279.90 329.51

Total expenses 720.0284 862.13 1105.03 1210.25 1459.2 1739.2

EBITDA 342.0716 403.05 346.48 382.07 406.7 442.9

Depreciation and Amortisation 37.83 43.28 50.57 58.06 64.6 75.6

Other Income 11.15 14.18 24.02 21.34 24.3 28.4

EBIT 304.2416 359.77 295.91 324.01 342.1 367.4

Interest 35.69 15.3 9.23 7.99 8.0 5.1

PBT 279.7016 358.65 310.7 337.36 358.4 390.7

Tax Exp 105.72 99.97 98.32 113.18 120.2 131.1

PAT 173.9816 258.68 212.38 224.18 238.2 259.6

Growth-% (YoY)

Sales 10.5% 19.1% 14.7% 9.7% 17.2% 16.9%

EBITDA 132.2% 17.8% -14.0% 10.3% 6.5% 8.9%

PAT 265.4% 48.7% -17.9% 5.6% 6.2% 9.0%

Expenses on Sales-%

RM Cost 30.9% 30.3% 35.0% 34.2% 32.0% 34.3%

Employee Cost 12.4% 14.6% 16.7% 17.6% 16.6% 17.0%

Other expenses 15.2% 14.6% 14.9% 14.7% 15.0% 15.1%

Tax rate 10.0% 7.9% 6.8% 7.1% 6.4% 6.0%

Margin-%

EBITDA 32.2% 31.9% 23.9% 24.0% 21.8% 20.3%

EBIT 28.6% 28.4% 20.4% 20.3% 18.3% 16.8%

PAT 16.4% 20.4% 14.6% 14.1% 12.8% 11.9%

Valuation:

CMP 239.15 246.25 219.45 212.1 302.0 302.0

No of Share 18.15 18.3 18.3 18.33 18.3 18.3

NW 648.7 828.87 927.08 1029.15 1160.1 1301.7

EPS 9.59 14.14 11.61 12.23 12.99 14.16

BVPS 35.74 45.29 50.66 56.15 63.29 71.02

RoE-% 26.8% 31.2% 22.9% 21.8% 20.5% 19.9%

P/BV 6.7 5.4 4.3 3.8 4.8 4.3

P/E 24.9 17.4 18.9 17.3 23.2 21.3

Zensar Tech

1M 1yr YTD Key FactsAbsolute 29.1 49 23.99

Rel. to Nifty 28.5 43.6 21.42


Promoters 48.27 48.35 48.36

FII 11.99 11.68 10.75

DII 0.96 1.26 1.28

Others 38.78 38.71 39.61

Financials2QFY14 1QFY13 (QoQ)-% 2QFY13 (YoY)-%

Revenue 599.7 533.5 12.4 545.05 10.0

EBITDA 102.54 74.1 38.4 81.05 26.5

PAT 70.6 60.9 15.9 32.17 119.5

EBITDA Margin 17.1% 13.9% 320bps 14.9% 220bps

PAT Margin 11.8% 11.4% 40bps 5.9% 590bps

10


CMP 412

Target Price 440

Company update Buy Management expects good growth starting from 4QFY14E with its Infrastructure

Management (IM) business gaining momentum. The deal booking and pipeline is good

and expects to perform well going forward. It expects double-digit growth in the

Enterprise Services business for the FY15 on the back of healthy pipeline. In addition, it

anticipates good growth from the IMS for the FY'15.

Previous Target Price 400

Upside 7%

1 year forward P/E

Rs, Crore


10%

52wk Range H/L

Stock Performance


Strong geographical footing: Given the order book Enterprise, business expects to grow

robustly going forward. It consciously slowed down in the Japan market as it is not

profitable and closed one account in Singapore as well. The Chosen markets to perform

are the Middle East, China and Africa going forward.

Healthy order Pipeline: We are positive on the future prospects on back of the order

bookings and pipeline. The recent measures like lean execution, improved efficiencies,

and best practices are targeted at improving the profitability profile of the company in

FY14E. Recent Management comments also revealed favourable scenario of order

booking.

Inspirational revenue level of $1bn by FY16: The management has detailed the 4 focus

areas, which are expected to take Zensar to an inspirational revenue level of $1bn by

FY16. They will expect to grow its existing US relationships and growing the RIMS

business in European nation like UK, Germany and Benelux.

View and Valuation: The deal booking and pipeline is good and expects to perform well

going forward. It expects double digit growth in the Enterprise Services business for the

FY15E on the back of healthy pipeline. Also, it anticipates good growth from the IMS for

the FY'15E.

Order pipeline continues to be stable at $ 200 mn mainly on the back of good demand

seen in Mobility, Cloud Computing and social networking side. Considering healthy

order pipeline and its earning visibility in near future, we maintain “BUY” view on the

stock and we revise our target price from Rs 400 to Rs 440. At a CMP of Rs 412, stock

trades at 7.2x FY14E EPS.

Average Daily Volume 20884


Nifty 6273

1800

Zensar is on the way to shut down few if its data centre in on site business, and

entering into new emerging space in Social networking, Mobility, Analytics and Cloud

because of good demand. We expect that order pipeline could be healthier on the

back of good demand seen in these emerging areas.

3QFY14E earnings preview: Zensar Tech is likely to report 5-6% (QoQ) sales growth led

by healthy growth across all geographies and PAT growth could be seen at 4-5% (QoQ).

We expect that EBITDA margin could be down by 100-150bps (QoQ) to 16%.

Key things to watch: Updates on new deal win, revenue traction from all geographies &

inorganic initiatives.

424/181

BSE Code 504067

NSE Symbol ZENSARTECH

Market Data


"BUY"14th Jan' 14


11


Financials;

Zensar Tech

Clients/Headcounts Metrics;



$1mn+ 47 43 41 40 49 47

$5mn+ 6 7 7 8 6 6

$10mn+ 1 2 2 2 1 1

$20mn+ 1 1 1 1 1 1

top 5 clients 35% 35% 35% 35% 37% 39%

top 10 clients 40% 42% 42% 43% 43% 46%

DSO 69 59 56 55 66 61

Onsite 69% 72% 70% 69% 68% 67%

Offshore 31% 28% 30% 31% 32% 33%

Utilization (Including Trainees) 81% 82% 83% 82% 81% 80%

Headcount 7286 6825 6504 6508 6519 6657

Number of million dollar

Client Contribution to Business

Effort & Utilization

Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales 497.08 562.56 700.15 2114.52 2403.19 3205.99

Other Operating Income 0.00 15.03 12.57 13.95 16.82 22.44

Total income from operations (net) 497.08 577.59 712.72 2128.47 2420.01 3228.44

Purchases of stock-in-trade 0.00 0.00 0.00 236.86 269.30 359.27

Employee Cost 393.17 343.12 411.36 1177.83 1258.40 1678.79

Other expenses 0.00 135.71 165.98 418.73 532.40 710.26

Total Expenses 393.17 478.83 577.34 1833.42 2060.11 2748.31

EBITDA 103.91 98.76 135.38 295.05 359.90 480.13

Depreciation 24.92 25.88 25.05 33.16 38.59 51.48

Other Income 8.15 14.20 27.91 8.66 72.60 80.71

Extra Ordinery Items 0.00 0.00 0.00 0.00 0.00 0.00

EBIT 78.99 72.88 110.33 261.89 321.31 428.65

Interest Cost 0.55 0.85 1.03 9.95 9.61 7.69

PBT 86.59 86.23 137.21 260.60 384.30 501.67

Tax 2.43 -2.24 42.67 86.07 134.50 175.58

PAT 84.16 88.47 94.54 174.53 249.79 326.08

Growth-%

Sales 17.8% 13.2% 24.5% 202.0% 13.7% 33.4%

EBITDA 28.7% -5.0% 37.1% 117.9% 22.0% 33.4%

PAT 38.9% 5.1% 6.9% 84.6% 43.1% 30.5%

Margin -%

EBITDA 20.9% 17.6% 19.3% 14.0% 15.0% 15.0%

EBIT 15.9% 13.0% 15.8% 12.4% 13.4% 13.4%

PAT 16.9% 15.7% 13.5% 8.3% 10.4% 10.2%

Expenses on Sales-%

Employee Cost 79.1% 59.4% 57.7% 55.3% 52.4% 52.4%

Other expenses 0.0% 23.5% 23.3% 19.7% 11.2% 11.2%

Tax rate 2.8% -2.6% 31.1% 33.0% 35.0% 35.0%

Valuation

CMP 272.10 157.85 180.00 248.58 412.00 412.00

No of Share 2.16 4.34 4.34 4.36 4.37 4.37

NW 293.93 366.96 417.42 751.69 958.03 1238.10

EPS 38.96 20.38 21.78 40.03 57.16 74.62

BVPS 136.08 84.55 96.18 172.41 219.23 283.32

RoE-% 28.6% 24.1% 22.6% 23.2% 26.1% 26.3%

Dividen Payout ratio 16.4% 19.9% 37.3% 21.9% 17.4% 14.1%

P/BV 2.00 1.87 1.87 1.44 1.88 1.45

P/E 6.98 7.74 8.26 6.21 7.21 5.52

Infosys

1M 1yr YTD

Absolute 6.3 52.4 53.1

Rel. to Nifty 3.3 49.1 49.4


Promoters 15.94 16.04 16.04

FII 39.93 39.55 40.52

DII 16.16 18.28 17.51

Others 27.97 26.13 25.93

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 13026 12965 0.47 10424 25.0

EBITDA 3258.9 2836.9 14.88 2677 21.7

PAT 2874.9 2406.9 19.44 2369 21.4

EBITDA Margin 25.0% 21.9% 310bps 25.7% (70bps)

PAT Margin 22.1% 18.6% 350bps 22.7% (60bps)

12

Previous Target Price 3620

Upside 10%

Change from Previous 8%

"On the way of excitement"

CMP 3549

Target Price 3910

Inline sales and beats the street on margin front, upgraded earning guidance;Result update BUY

Infosys largely reported inline set of sales numbers and beats the street on margin

front, In USD term, Sales grew by 1.65%(QoQ) and 0.5%(QoQ) in INR term, led by 0.7%

(QoQ) volume growth and 0.7%(QoQ) pricing growth. However, the good news is that

the PAT grew by 21% because of cost rationalization, sequentially.

1 year forward P/E

Rs, Crore


BSE Code 500209

NSE Symbol INFY


Earning Guidance: Infosys upgrades its earning guidance from 6-10% to 9-10% to 11.5-

12% for FY14E, now nearest to NASSCOM guidance (12-14%). Management is very

confident to achieve the guidance figure and stated much focused on creating superior

financial performance ahead.

1240448

Nifty 6171

Market Data

View and Valuation: Infosys seems to be on its way to rediscovering its past mojo with

revenue momentum kicking, and the NRN invisible hand in play. Further

announcement of strategic acquisitions, better utilization of cash balances, better deal

win, consistent client traction and revenue momentum would help the company to

bridge the gap with rivals such as TCS.

Considering the revised guidance by management and its growth priority than margin

inching up strategy, we upgraded our EPS from Rs 181/208 to Rs 188/218 for

FY14E/15E. At a CMP of Rs 3549, it trades at 16.3x FY15E At a CMP of Rs 3549, it trades

at 16.3x FY15E earnings. We retain our “BUY” view on the stock with a target price of

target price of Rs 3910 (revised from 3620).

On an ongoing basis, Infosys will retain its revenue acceleration and margin expansion,

also operating metrics will turn into greenery from hay. Upgradation of earning

guidance by management hinted to join the party to enjoy with 12-14% earnings

growth for FY14E like its bellwether.

Considering the strategy to build clients relation, execution of growth oriented policy

and combination of reduced onsite costs and higher utilization would be an optimistic

growth story despite recent hiccups of top management exit.

Healthy Margin growth: During the quarter, its EBIT margin expanded by 310 bps (QoQ)

to 25%. The company's cost cutting measures are yielding the expected gains. This again

is in line with what the market was expecting. During the December quarter, Infosys

selling and marketing expenses declined by 13.3% compared to the second quarter.

Administrative expenses too have declined by 18.4% in dollar terms. Both these have

helped improve operating margins.

Steady volume growth: The volume growth in the quarter was weak, 0.7% (QoQ)

growth with stable pricing growth of 0.7%(QoQ), but it is also weak for the group and for

Infosys. we expect it to be improve in the coming quarters.

Healthy deal pipeline: Overall, the company continues to show signs of recovery at the

operational level. The company has added 54 new clients in the quarter and added 15

clients where the deal size is over $100 million. This implies that client confidence is

returning.

52wk Range H/L 35810/2190


Stock Performance


203790

"BUY"13th Jan' 14


Margin-%

On segmental front: Infosys has reported teen set of growth in all segments;

13

Infosys.

Revenue growth in USD term-(QoQ)



In USD term, Sales grew by 1.65%(QoQ)

in USD term and 0.5%(QoQ) in INR term,

led by 0.7% volume growth and

0.7%(QoQ) pricing growth. Mgt revised

revenue growth to 11.5%-12% for FY14E.

EBIT margin expanded by 310 bps (QoQ)

to 25%. Mgt expects to see margin

growth in near term.

Segmental Performance:




With 0.7% pricing growth, volume

growth was reported by 0.7%

growth(QoQ), impacted by seasonal

wave.

On QoQ, Company’s margin improved in

entire segments .

Volume and Pricing Growth (QoQ)-%


QoQ YoY QoQ YoY

BFSI 33.5% 0.8% 24.2% 29.9% 340bps 80bps

Manufacturing 22.8% -1.3% 31.3% 24.2% 340bps (50bps)

Energy&Utilities 19.1% -0.1% 16.4% 28.8% 30bps (130bps)

Retail, Logis-&Life sc- 24.6% 2.1% 27.6% 27.52% 560bps (230bps)

Margin-%Sales contribution-%Segments

Sales Growth-%Margin-%

Utilization:

14

Clients Metrics

The company has added 54 new clients in

the quarter and added 15 clients where

the deal size is over $100 million. This

implies that client confidence is

returning.

Infosys.

Geography wise revenue contribution-

we expect that growth from Euro as well

as Europe would prove a milestone for

the company ahead because of healthy

demand environment and optimistic

tempo of clients expanding.


On geographical front: During the quarter, company has reported 4% revenue growth

from Euro and RoW each, which contributes 25% and 13% of sales. While revenue from

US declined by 2%, it contributes 60% of Sales.

We expect that Infy’s improving

utilization despite higher attrition

compare to its nearest bellwethers is

good sign for its future growth story.

Headcount Metrics: Its attrition increased to 18% from

17.3%(2QFY14) on LTM basis, however

on sequentially basis they have been able

to control its attrition. we hope that the

further salary hikes across the board will

bring down the attrition levels going

forward.

Clients Concentration:

Total Clients and Clients Addition:


The Company's Utilization is likely to keep inching up, which could lead to margin

expansion for a couple of quarters and that is going to be a huge positive for Infosys as a

company.




Clients Category 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Top clients 4.1% 4% 3.60% 3.6% 3.9% 4% 3.70%

Top 5 clients 16.2% 16% 15% 14.7% 14.9% 15% 14%

Top 10 clients 25.3% 25.40% 23.90% 24.0% 24.0% 24.5% 23.5%

Clients, number 3QFY13 4QFY13 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Active clients,nos 665 694 711 715 776 798 836 873 888

New clients 49 52 51 39 89 56 66 68 54

Employee's 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Total Employees (Cons-) 151,151 153,761 155,629 156,688 157,263 160,227 158404

Net additions 1,157 2,610 1,868 1,059 575 2,964 -1823

Laterals hired 5,233 3,656 4,351 3,545 3,008 3,806 3,333

LTM Attrition (Stand-) 14.9% 15.0% 15.1% 16% 16.9% 17.3% 18.10%

15


■ With 85% of the company’s revenues coming from clients based in US and Europe, the

company should hope the current economic recovery in developed countries would help

its revenues.

■They are seeing confidence coming back from client’s metrics. However, they expect

[their] budgets only remain stable from last year. Clients are still focused on cost.

■ The Company is looking to bring in about maximum 6,000 off-campus offers starting

late January early February, so there is a lot of activity going on that is bringing people in,

engaging and developing.

Financials


Infosys.

Key facts from Management Interview;

■ Management upgraded its earning guidance for FY14E from 9-10% to 11.5-12%. This

guidnace means the company only has to achieve flat growth in the fourth quarter to

meet the projection.


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales, INR 22742 27501 33734 40352 50330 59631

Employee Cost 12085 14856 18340 22565 28185 33691

Other expenses 2792 3677 4671 6254 8556 10734

Total Expenses 14877 18533 23011 28819 36741 44425

EBITDA 7865 8968 10723 11533 13589 15206

Depreciation 905 854 928 1099 1371 1624

Other Income 982 1211 1904 2365 2567 3578

EBIT 7942 9325 11699 12799 14785 17160

Interest Cost 0 0 0 0 0 0

PBT 7942 9325 11699 12799 14785 17160

Tax 1681 2490 3367 3370 3992 4633

PAT 6261 6835 8332 9429 10793 12527

Growth-%

Sales 4.8% 20.9% 22.7% 19.6% 24.7% 18.5%

EBITDA 9.3% 14.0% 19.6% 7.6% 17.8% 11.9%

PAT 4.6% 9.2% 21.9% 13.2% 14.5% 16.1%

Margin -%

EBITDA 34.6% 32.6% 31.8% 28.6% 27.0% 25.5%

EBIT 34.9% 33.9% 34.7% 31.7% 29.4% 28.8%

PAT 27.5% 24.9% 24.7% 23.4% 21.4% 21.0%

Expenses on Sales-%

Employee Cost 53.1% 54.0% 54.4% 55.9% 56.0% 56.5%

Other expenses 12.3% 13.4% 13.8% 15.5% 17.0% 18.0%

Tax rate 21.2% 26.7% 28.8% 26.3% 27.0% 27.0%

Valuation

CMP 2615 2765 2865 2400 3549 3549

No of Share 57.4 57.4 57.4 57.4 57.4 57.4

NW 23049.0 25976.0 31332.0 37994.0 45629.8 54797.5

EPS 109.1 119.0 145.1 164.2 188.0 218.2

BVPS 401.7 452.4 545.6 661.7 794.7 954.3

RoE-% 27.2% 26.3% 26.6% 24.8% 23.7% 22.9%

Dividen Payout ratio 25.1% 45.9% 24.0% 45.1% 23.0% 19.8%

P/BV 6.5 6.1 5.3 3.6 4.5 3.7

P/E 24.0 23.2 19.7 14.6 18.9 16.3

INDUSIND BANK

402

428

-

6

-

1M 1yr YTD

Absolute -9.2 -6.9 -6.9

Rel.to Nifty -7.0 -9.7 -9.7

Current 24QFY1

4

3QFY1

3Promoters 15.2 15.2 15.3

FII 41.1 39.9 42.3

DII 7.2 7.4 7.0

Others 36.4 37.5 35.4

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1376 1704 2233 2787 4053

Total Income 2090 2716 3596 4562 5827

PPP 1082 1373 1839 2452 2972

Net Profit 577 803 1061 1320 1633

EPS 12.4 17.2 20.3 25.3 31.1

16

Asset quality witnessed deterioration in sequential basis

During quarter bank witnessed deterioration in asset quality with GNPA and net NPA

in absolute term deteriorated by 14.7% QoQ and 51% QoQ respectively. Fresh

slippages were 1.4% (annualized) as against 1.1% in last quarter. Bank made lower

provisions against loan loss, as the result net NPA as the percentage of net loan

reached to 0.3% as against 0.2% in 2QFY14. Provision coverage ratio (without

technical write off) declined to 73.6% from 80% in 2QFY14 but still above of

regulatory requirement of 70%.


Target Price

Stock Performance

52wk Range H/L 561/318

BSE Code 532187

NSE Symbol

Operating leverage (Operating expenses to total asset) remained at elevated level

but cost to income ratio declined on both front i.e. on sequential and yearly basis as

well. During quarter bank reported employee cost growth of 22% and operating cost

growth of 22% YoY to Rs.206 cr and Rs.563 cr respectively. Cost to income ratio

improved by 80 bps sequentially and 280 bps yearly to 46.5%. This led pre

provisioning profit growth of 37% YoY.

INDUSINDBK


22400Mkt Capital (Rs Cr)

During quarter Indusind bank reported better than expected earnings largely due to

higher loan growth and margin expansion. In 3QF14, bank reported NII growth of

26.4% YoY supported higher yield on asset to 13.7% and margin expansion of 20

bps YoY. Other income grew by 35% YoY to Rs. 480 cr in which fee income

registered growth of 30% and trading, forex and other reported 101% growth in YoY

due to low base.

Declined cost to income ratio boost PPP growth

NEUTRAL

CMP


Market Data

Change from Previous( Rs)

INDUSIND Bank Vs Nifty


7.88

Nifty 6171


Despite of higher profit we remain have neutral view on the stock owing to

shifting of loan mix from retail loan to corporate banking. We anticipate two

things-(a) margin compression, (b) higher slippage. Retail loan generally have

higher yield in nature than corporate loans. Corporate loan has big ticket size

loans and in slowdown of economy, corporate loan emerges as biggest

slippage risk than other loans. At the current price of Rs.405, stock is trading

at 2.4 times of one year forward book. We value bank at Rs.428/share which

would be 2.5 times of FY14E’s book value.

Better than expected earnings led by higher loan growth and margin

Result update

Upside

"NEUTRAL"13th Jan, 2014


17

INDUSIND BANK


Better than expected profit on the back of healthy core earnings, lower CI ratio and

lower provision

With the support of healthy core earnings, improvement in cost income ratio and lower

provisions, net profit grew by 30% YoY to Rs. 347 cr as against our expectation of

Rs.303 cr largely due to higher than expected loan growth and operating leverage.

Healthy profit led ROA and ROE to 1.74% and 16.8% respectively.

Margin expansion of 10 bps YoY to 3.7%

Bank reported NIM expansion of 20 bps YoY to 3.7% largely due to improvement in loan

yield whereas cost of deposits remained flat. Going forward margin would be

compressed due to bank’s strategy to shift loan mix from consumer to corporate. Loan on

yield during quarter was 13.7% versus 13.5% in last quarter while cost of fund by and

large stable at 10%.

Moderate deposits growth due to muted current and term deposits growth

In balance sheet front, bank reported moderate growth 10% YoY in deposits largely due

to stagnant growth in current account and term deposits. Demand deposits grew by 4%

YoY whereas saving deposits grew by 50% YoY. As a percentage of total deposits

demand deposits and saving deport were 15.7% and 16.5% versus 16.6% and 12.1% in

3QFY13 respectively. CASA ratio was remained flat at 29.6% from 31.4% in 2QFY14 and

28.7% in 3QFY13. Term deposited reported growth of 4.7% YoY to Rs.382 bn.

Loan growth higher than industry average and shifting of loan mix

Loan reported 27.4% YoY growth above industry average of 20% despite of slowdown in

economy. During quarter bank witnessed shifting of loan composition from consumer

finance division to corporate finance which would be result of margin compression and

deterioration asset quality. Consumer loan (which is generally high yielding in nature)

composition has changed to 47% of loan advance from 52% in 3QFY13 whereas

corporate banking division constitute 53% of loan. Corporate loans are generally in high

ticket size and in slowdown of economy; there is high chances of such loan slip into NPA.

But this quarter we note that bank is able to improve it yield in both front. Corporate yield

improved to 11.9% from 11.5% and retail loan improved to 15.6% from 15.5% in

sequential basis.


18

Fundamenatl Through Graph

INDUSIND BANK

Source: Eastwind/Company


NII profit led by higher loan growth and

margin expansion

Sequentail and yearly improvement of CI

ratio boosted PPP

Higher core earnings, improvement in CI ratio

and lower provisions support profit growth

higher than expecattion


19

INDUSIND BANK

Fundamenatl Through Graph


Valuation Band (1yr forward book value)

Loan growth higher than industry average

and moderate growth in deposits led by

muted current deposits and term deposits

Margin expansion of 10 bps on account of

increased in loan yiled and stable cost of fund

Trading at 1.5 times of one year forward

book which we believe fair looking at indsury

headwinds and economy



20


INDUSIND BANK

Quarterly Performance



Quarterly Result( Rs. Cr) 3QFY14 2QFY14 3QFY13 % YoY % QoQ

Interest/discount on advances / bills 1739 1611 1455 19.5 7.9

Income on investments 368 365 325 13.5 0.8

Interest on balances with Reserve Bank of India 36 42 21 71.9 -12.9

Others 0 0 0 333.3 -13.3

Total Interest Income 2143 2019 1800 19.1 6.2

Others Income 480 417 356 35.0 15.2

Total Income 2624 2435 2156 21.7 7.7

Interest Expended 1413 1319 1223 15.6 7.2

NII 730 700 578 26.4 4.3

Other Income 480 417 356 35.0 15.2

Total Income 1210 1117 934 29.6 8.4

Employee 206 202 168 22.1 1.9

Other Expenses 357 327 293 21.9 9.3

Operating Expenses 563 529 461 22.0 6.5

PPP( Rs Cr) 647 588 472 37.1 10.1

Provisions 126 89 79 60.3 42.0

PBT 521 499 393 32.5 4.4

Tax 174 169 126 38.1 3.2

Net Profit 347 330 267 29.8 5.0

Balance Sheet data( Rs. Bn)

Net Worth 8664 8313 7495 15.6 4.2

Deposits 56247 53058 51098 10.1 6.0

Borrowings 14771 13995 6567 124.9 5.5

Total Liabilities 81799 77422 67896 20.5 5.7

Investments 20134 19413 17594 14.4 3.7

Advances 52469 48968 42426 23.7 7.1

Total Assets 81799 77422 67896 20.5 5.7

Asset Quality

GNPA 626 546 422 48.3 14.7

NPA 165 109 125 32.0 51.0

% GNPA 1.2 1.1 1.0

% NPA 0.3 0.2 0.3

21

INDUSIND BANK

Financials & Assuptions




Income Statement 2011 2012 2013 2014E 2015Interest Income 3589 5359 6983 8308 10419

Interest Expense 2213 3655 4750 5521 6367

NII 1376 1704 2233 2787 4053

Change (%)

Non Interest Income 714 1012 1363 1775 1775

Total Income 2090 2716 3596 4562 5827

Change (%)

Operating Expenses 1008 1343 1756 2110 2855

Pre Provision Profits 1082 1373 1839 2452 2972

Change (%)

Provisions 504 180 263 455 535

PBT 577 1193 1576 1997 2437

PAT 577 803 1061 1320 1633

Change (%)

Balance Sheet 2011 2012 2013 2014E 2015EDeposits( Rs Cr) 34365 42362 54117 62234 74681

Change (%) 23 28 15 20

of which CASA Dep 9331 11563 15867 20537 22404

Change (%) 24 37 29 9

Borrowings( Rs Cr) 5525 8682 9460 15559 18670

Investments( Rs Cr) 13551 14572 19654 23338 28005

Loans( Rs Cr) 26166 35064 44321 54071 67589

Change (%) 34 26 22 25

Ratio 2011 2012 2013 2014E 2015EAvg. Yield on loans 10.8 12.0 12.7 0.0 12.5

Avg. Yield on Investments 5.4 7.4 6.5 6.6 6.5

Avg. Cost of Deposit 5.3 7.3 8.8 8.9 8.5

Avg. Cost of Borrowimgs 7.0 6.7 7.6 7.5 7.5

Valuation 2011 2012 2013 2014E 2015EBook Value 87 101 146 171 195

CMP 264 321 405 405 405

P/BV 3.0 3.2 2.8 2.4 2.1

22


Asset quality pressure continue to persist

Asset quality pressure is likely to remain in 3QFY14E due to rising interest rate, high

inflation and slower pace of economic growth. Gross slippages are expected to be

elevated as per most of banker. We expect restructure asset in private sector bank

would be less as compare to PSBs. With the implementation of FRP (route through

which loans lead to investment book), banks are expected to report lower less

restructure asset as against previous queerer. In worsen macroeconomic

environment, we expect asset quality to remain at the level of 2QFY14.

Nifty Vs Bank Nifty during Quarter

Loan (Rs tn) and YoY Gr(%)

Muted loan growth reported by system

In 2QFY14 banking industry experience loan growth of 18% YoY led by transfer of

CP/CD borrowings to bank loans while in 3QFY14 loan growth has moderated to

15% YoY (as on 13th Dec.2013) due to revival of bond and lower demand of

corporate loan led by slowdown in economy. We expect loan growth of 15-20% YoY

growth in private sector while DCB and HDFC bank are expected to grow by

20%+YoY loan growth.

Deposits growth lead by flow of FCNR deposits

Deposits growth in the system registered 17% YoY growth as per RBI date (as on

13th Dec.2013) due to flow of FCNR deposits through RBI’s special concession

window. As per RBI data total fund inflow through FCNR is the tune of US$ 26 bn

which would help bank to keep cost of deposits low. But we expect bank would get

benefit from 4QFY14 and onwards. We expect lower cost of deposits of deposits in

private sector banks largely due to strong franchise base network. HDFC bank and

ICICI bank which have CASA of 40%+ would be benefited more than other banks in

term of low cost of fund. Through FCNR deposits we expect Yes Bank would be

leader but actual benefit would come from next quarter.

Operating leverage high provision dent net profit

Profitability of private sector banks are expected to report 11% YoY on the back of

loan loss provisions, MTM provisions, cost income ratio and lower core earnings.

HDFC bank and DCB are expected to report 23% YoY and 26% YoY growth in their

3QFY14E while most of large and mid cap banks are expected to report muted profit

growth. With the flow of FCNR deposits, we expect deposits cost to come down from

present level but most likely the bank get benefit from 4QFY14 and onwards.

Private Bank Result Preview 3QFY14

Revenue growth would be moderate owing to tepid loan growth

Performance of banking sector is likely to remain modest in 3QFY14E as most of

private sector banks in our coverage are expected to reported muted net interest

income owing to tepid loan growth and stress in asset quality. However private sector

banks are expected to report stable asset quality on sequential basis as compare to

PSBs. Loan loss provision are expected to remain high due to higher restructure

assets are in pipeline as per some of key bank management. We expect impairment

of asset in private sector banks are less and slippages are expected to remain same

as in 2QFY14. We expect NII to grow by 23.6% YoY in our private banking

coverage universe. HDFC Bank and DCB are expected to report 34% and 22% YoY

in 3QFY14E led by higher than industry loan growth and stable NIM.

Stock Performance During Quarter


23



Outlook

We expect Axis Bank to report 20% YoY loan growth and 12% YoY deposits growth.

Cost Income ratio is expected to be 42% while loan loss provision was remain same at

sequential basis. Profitability of bank would be muted on account of non improvement of

loan yield.

DCB

We expect loan and deposits growth of DCB would be higher than industry average.

Profitability would be grown on account of stable asset quality. We expect Cost to Income

ratio at 66% and NIM are expected to compression by >10 bps on sequential basis. Key

monitor able would be CI ratio.

HDFC Bank

We expect bank to report loan and deposits growth of 21% and 14% respectively. Asset

quality would be remained under control and profitability are expected to grow on account

of comfortable core earnings and stable asset quality. Operating leverage is expected to

be in better position.

Broadly banking indices outperform Nifty by 6% in third quarter and most of banking

stocks are trading at attractive valuation. Despite of, we have caution view on account of

slowdown in economy, high interest rate and inflationary pressure. High inflation would be

risk for the economy going forward. Any rise in inflation would result of rise in interest

rate by RBI in its third quarter monetary policy review on 28th Jan.2014 which would be

negative for banking industry. Most of banking stocks are expected to report moderate

revenue and profit growth owing to multiple headwinds. In private sector banking

universe we like HDFC Bank, ICICI bank and DCB.

Axis Bank


Rs Cr 3QFY14E 2QFY14 3QFY13 % YoY Growth % QoQ Growth

NII 3006 2937 2495 20.5 2.3

PPP 2772 2750 2311 19.9 0.8

Net Profit 1333 1362 1296 2.9 -2.1

Axis Bank


NII 88 91 72 22.2 -3.3

PPP 42 40 32 31.3 5.0

Net Profit 34 33 27 25.9 3.0

DCB


NII 5087 4477 3799 33.9 13.6

PPP 3695 3387 3024 22.2 9.1

Net Profit 2289 1982 1859 23.1 15.5

HDFC Bank

24

YES Bank

We expect Yes bank to report muted earnings on account of high credit cost and

restructure assets. Loan growth and deposits growth are expected to be line with industry

average. We expect NIM compression on account higher cost of fund and lower loan

yield. NIM is key monitorable for the quarter.

Result Preview ; at a glance



ICICI BANK

We expect loan and deposits growth of 15% and 11% YoY for 3QFY14E respectively.

Revenue growth was due to hike of lending rate and asset quality is expected to be

stable on sequential basis. Operating leverage and cost of fund would be key

monitorable.

J&K BANK

J&K bank is expected to report 17.5% YoY profit growth on account of 20%+loan growth

and stable asset quality. We expect little bit higher of gross slippage during the quarter as

bank reported higher slippage in previous quarter. NIM would be expanded <10 bps

QoQ due to high loan yield and lower cost of fund likely to get benefit from CASA

deposits.



NII 4505 4044 3499 28.8 11.4

PPP 4235 3888 3452 22.7 8.9

Net Profit 2504 2352 2250 11.3 6.5

ICICI BANK


NII 679 682 594 14.3 -0.4

PPP 496 496 435 14.0 0.0

Net Profit 339 303 289 17.5 12.0

J&K BANK


NII 578 672 584 -1.0 -14.0

PPP 664 713 563 17.9 -6.9

Net Profit 358 371 342 4.7 -3.5

YES Bank

NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit

AXISBANK 3006 2772 1333 2937 2750 1362 2495 2311 1296 20.5 19.9 2.9 2.3 0.8 -2.1

CUB 207 152 71 190 141 84 163 131 85 27.0 16.0 -16.5 8.9 7.8 -15.5

DCB 88 42 34 91 40 33 72 32 27 22.2 31.3 25.9 -3.3 5.0 3.0

DHANBANK 96 22 0.72 82 18 -1.85 74 14 4 29.7 57.1 82.0 17.1 22.2 -138.9

FEDERALBNK 609 418 230 548 354 226 497 394 211 22.5 6.1 9.0 11.1 18.1 1.8

HDFCBANK 5087 3695 2289 4477 3387 1982 3799 3024 1859 33.9 22.2 23.1 13.6 9.1 15.5

ICICIBANK 4505 4235 2504 4044 3888 2352 3499 3452 2250 28.8 22.7 11.3 11.4 8.9 6.5

INDUSINDBK 657 561 303 700 588 330 578 472 267 13.7 18.9 13.5 -6.1 -4.6 -8.2

INGVYSYABANK 397 275 173 440 276 176 403 263 162 -1.5 4.6 6.8 -9.8 -0.4 -1.7

J&KBANK 679 496 339 682 496 303 594 435 289 14.3 14.0 17.5 -0.4 0.0 12.0

KARURVYSYA 308 186 41.5 298 157 83 308 212 113 0.0 -12.3 -63.3 3.4 18.5 -50.0

SOUTHBANK 374 255 131 364 212 127 353 235 128 5.9 8.5 2.3 2.7 20.3 3.1

YESBANK 578 664 358 672 713 371 584 563 342 -1.0 17.9 4.7 -14.0 -6.9 -3.5

Total 16591 13773 7808 15525 13020 7427 13419 11538 7033 23.6 19.4 11.0 6.9 5.8 5.1

PRIVATE BANK

YoY Growth QoQ Growth3QFY14E 2QFY14 3QFY13

Narnolia Securities Ltd402, 4th floor 7/ 1, Lords 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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