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Emkay Global Financial Services Ltd. January 06, 2010 | 1
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Result UpdateYour success is our success
Contents
Equity Advisory February 1, 2013
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Standalone) (Rs mn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY12A 23,674 3,540 15.0 2,151 12.6 45.2 29.3 24.8 14.7 6.5
FY13E 29,942 4,780 16.0 3,104 18.2 44.3 32.6 17.2 11.2 4.9
FY14E 35,556 5,693 16.0 3,457 20.2 11.4 28.3 15.4 9.5 3.9
FY15E 43,307 6,920 16.0 4,315 25.3 24.8 27.9 12.4 7.7 3.1
Amara Raja Batteries
Consistent performance, Maintain BUY
January 31, 2013
Rating
Buy
Previous Reco
Buy
CMP
Rs313
Target Price
Rs380
EPS Chg FY13E/FY14E (%) 3.5/(5.7)
Target Price change (%) 19
Nifty 6,056
Sensex 20,005
Price Performance
(%) 1M 3M 6M 12M
Absolute 29 42 111 206
Rel. to Nifty 26 31 81 158
Source: Bloomberg
Relative price chart
100
145
190
235
280
325
Feb-12 Apr-12 Jun-12 Jul-12 Sep-12 Nov-12 Jan-13
Rs
0
30
60
90
120
150%
Amara Raja Batteries (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock Details
Sector Auto AncillariesBloomberg AMRJ IB
Equity Capital (Rs mn) 171
Face Value(Rs) 1
No of shares o/s (mn) 171
52 Week H/L 328/ 101
Market Cap (Rs bn/USD mn) 53/ 1,000
Daily Avg Volume (No of sh) 465,021
Daily Avg Turnover (US$mn) 2.4
Shareholding Pattern (%)
Dec'12 Sep'12 Jun'12
Promoters 52.1 52.1 52.1
FII/NRI 6.8 6.3 6.4
Institutions 17.6 18.6 19.4
Private Corp 3.4 3.2 3.0
Public 20.1 19.8 19.1
Source: Bloomberg
n Q3FY13 results surprised positively with EBITDA margins at
16% and beat our profit est by ~14%; lag effect of lead prices
protected margins despite 13% higher avg. lead prices
n Mgmt expects replacement demand to grow at 16-18%; price
hike of ~4% in replacement and pass-through in other
segments should help retain margins above the 15% mark
n Capacity constraints being addressed with a higher than
expected capex plan of Rs 7.5bn - we cut FY14/15 EPS
marginally by 6%/1% on higher capex assumptions
n Remain fundamentally positive - case for valuation re-rating
has been supported by markets quicker than anticipated
n Maintain BUY and revise our TP to Rs 380 based on 15x FY15
EPS (vs 12.5x earlier). Stock currently trading at 15.4x/12.4xFY14/FY15 est
Good operating performance
AMRJ reported Q3FY13 results which were above our and street estimates. Net sales at
Rs 7.6 bn (+23.8% YoY, +5.6% QoQ) was ~3% above estimates. EBITDA at Rs 1.2 bn
(+14.6% YoY, +3.3% QoQ) was ~10% above est. EBITDA margins surprised positively
at 16% (-130 bps YoY, -40 bps QoQ) vs est. of 15%. Key positive was only 30 bps QoQ
increase in RM/sales at 66% despite ~13% QoQ increase in global lead prices
management comments suggest that the impact of higher lead prices was with a two
month lag therefore not impacting the quarters margins. However the pass-through in
OEM/industrial segment would ensure that the margin impact is not as high as in the
case for Exide. Net profits at Rs 809 mn (+22.7% YoY, +5.6% QoQ) was ~14% above
estimates. Lower than anticipated tax rates at ~30% (vs est. of 31%) and better
operating performance led to the beat.
Outlook remains bright
AMRJ has taken a price hike of ~4% in the replacement segment and higher lead prices
have luckily been passed on timely in the OEM/industrial segment. This should help
sustain margins northwards of 15%. It is expected to start 2W OEM supplies from
Q1FY14 onwards to Honda and talks are on for supplies to Hero/Bajaj. Conscious focus
on replacement demand is here to stay; however, the company could be grappling under
capacity constraints in FY14 to address which it has already announced a capex plan of
Rs 7.5bn.
Remain positive; Maintain BUYWe cut FY14/15 EPS marginally by 5.7%/1.3% on higher capex assumptions (higher
depreciation and lower other income) however we remain fundamentally positive on
AMRJ. We have always been advocating that AMRJ deserves to re-rate given its
consistent performance, strengthening brand equity and quasi consumption nature of
business. We further increase our target price to Rs 380, as we raise our target multiple
to 15xFY15E EPS - a zero discount to Exide Industries.
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Amara Raja Batteries Result Update
Emkay Research January 31, 2013 2
Exhibit 1: Quarterly financial summary
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTDFY13 YTDFY12 YoY (%)
Revenue 6,131 6,711 6,938 7,187 7,592 23.8 5.6 21,717 16,990 27.8
Expenditure 5,068 5,757 5,743 6,008 6,373 25.7 6.1 18,123 14,367 26.1
as % of sales 82.7 85.8 82.8 83.6 84.0 83.5 84.6
Consumption of RM 4,067 4,436 4,628 4,720 5,009 23.2 6.1 14,357 11,511 24.7
as % of sales 66.3 66.1 66.7 65.7 66.0 66.1 67.8
Employee Cost 215 243 292 302 320 49.0 6.1 914 633 44.3
as % of sales 3.5 3.6 4.2 4.2 4.2 4.2 3.7
Other expenditure 787 1,078 822 986 1,045 32.7 6.0 2,852 2,222 28.3
as % of sales 12.8 16.1 11.8 13.7 13.8 13.1 13.1
EBITDA 1,063 954 1,195 1,180 1,218 14.6 3.3 3,593 2,623 37.0
Depreciation 120 122 129 132 132 10.4 0.1 394 342 14.9
EBIT 943 832 1,066 1,048 1,086 15.2 3.7 3,200 2,280 40.3
Other Income 52 36 59 70 71 35.2 0.8 199 75 164.3
Interest 15 2 1 7 2 (89.8) (76.2) 9 28 (66.6)
PBT 980 866 1,123 1,111 1,155 17.9 4.0 3,390 2,328 45.6
Total Tax 321 283 362 345 346 7.8 0.4 1,053 760 38.5Adjusted PAT after MI 659 583 761 766 809 22.7 5.6 2,337 1,568 49.0
Extra ordinary items Loss/(Gain) 0 0 0 65 0 65 0
Reported PAT 659 583 761 701 809 22.7 15.4 2,271 1,568 44.9
Adjusted EPS 3.9 3.4 4.5 4.5 4.7 22.7 5.6 13.7 9.2 49.0
Margins (%) (bps) (bps) (bps)
EBIDTA 17.3 14.2 17.2 16.4 16.0 (129) (37) 16.5 15.4 111
EBIT 15.4 12.4 15.4 14.6 14.3 (108) (27) 14.7 13.4 131
EBT 16.0 12.9 16.2 15.5 15.2 (77) (24) 15.6 13.7 191
PAT 10.8 8.7 11.0 10.7 10.7 (9) (1) 10.8 9.2 153
Effective Tax rate 32.7 32.7 32.3 31.0 30.0 (278) (107) 31.1 32.7 (159)
Source: Company, Emkay Research
Exhibit 2: Actual vs estimated performance
Rs mn Actual Estimated % Variance Consensus Variance
Net sales 7,592 7,358 3.2 7,517 1.0
EBITDA 1,218 1,103 10.5 1,188 2.5
EBITDA margin (%) 16.0 15.0 106 15.8 24
Adj net income 809 707 14.4 764 5.9
FDEPS (Rs) 4.7 4.1 14.4 4.5 5.9
Source: Emkay Research, Bloomberg
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Amara Raja Batteries Result Update
Emkay Research January 31, 2013 3
Key takeaways from management discussion
Q3 margins were better than anticipated given the two months lag the company sawon the lead prices
It has taken a price hike of ~4% recently in the replacement segment and timelypass through of higher lead prices in the OEM/industrial space could save from
severe margin impact of higher lead prices.
AMRJ targets to maintain EBITDA margins at 14-16% depending upon lead prices
AMRJ has been consciously focusing on the replacement demand. It achieved amarket share of ~36% in 4W replacement and ~25% in 2W replacement segments.
It expects replacement demand to grow 15-18% in the next 2 years.
Currently, OEM demand has been very weak. AMRJ has a 28-29% market share inthe 4W OEM segment
AMRJ is witnessing strong growth in the entry level diesel segment where it hadentered two years back
Telecom: Expect 6-8% growth driven by resilient replacement demand. Plans to
enhance capacity as utilisation levels are at 90%+. EBITDA margins in this segment
are at ~12%
UPS: Expect growth of 12-14%. AMRJ has increased its market share to 30% (vs~6% - 5 years back) and sees potential of increasing it further. It is investing USD
30 mn in new capacities which would come on-stream from H2FY14. EBITDA
margin stands at 13-14% for this segment. Competition from organised Chinese
players remains significant (~10-15% of the segment). However, these are more
rational players and price their products competitively
AMRJ is in the process of near doubling its 2W capacity to ~8.4 mn and ramping up4w capacity to 8.5 units with a total capex of Rs 7.45bn spread over FY13-FY14.
2W battery sales are growing at strong double digits (40-50%) on a low base. Bigvolume growth area would be to supply to OEMs in FY14, as AMRJ is likely to startsupplying to Hondas new plant in Karnataka from Q1FY14, albeit at lower margins,
Also looking to enter the home inverter segment in the near future. Currently, ittrades these batteries through the private label program so as to prevent dealers to
start stocking other brand batteries
Exhibit 3: Earnings revision: Marginal cut in estimates as higher capex assumptions lead tohigher depreciation and lower other income
FY13E FY14E FY15E
Old New % Chng Old New % Chng Est. % YoY
Net Sales 29,449 29,942 1.7 35,292 35,556 0.7 43,307 21.8
EBITDA 4,701 4,780 1.7 5,651 5,693 0.7 6,920 21.6Margin (%) 16.0 16.0 0 bps 16.0 16.0 0 bps 16.0 -
APAT 2,998 3,104 3.5 3,668 3,457 (5.7) 4,315 24.8
EPS 17.6 18.2 3.5 21.5 20.2 (5.7) 25.3 24.8
Source: Emkay Research
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Amara Raja Batteries Result Update
Emkay Research January 31, 2013 4
Consistent performance leads to sharp re-rating
Exhibit 4: PE (1 yr fwd) band chart
-30
20
70
120
170
220
270
320
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
4x
8x
12x
16x
Source: Bloomberg, Emkay Research
Exhibit 5: AMRJ: Discount with EXID has narrowed considerably
-80
-60
-40
-20
0
20
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
(%) AMRJ PE Prem /(Disc) vs EXID
Source: Bloomberg, Emkay Research
Exhibit 6: AMRJ looks attractive on P/B vs ROE metrics
Berger PaintsVIP
Havell
Asian Paints
Akzo Nobel
Kansai
Nerolac
Britannia
Bajaj ElectricalExide
Amara Raja
-
5
10
15
20
25
30
35
40
45
- 2 4 6 8 10 12 14
P/BV vs ROE
Source: Bloomberg, Emkay Research
Exhibit 7: Despite inline returns vs peers, valuations look cheap
PEG
-
0.5
1.0
1.5
2.0
2.5
Asian
Paints
Berger
Paints
Akzo
Nobel
Kansai
Nerolac
Britannia Havell Bajaj
Electrical
EXID AMRJ
Source: Bloomberg, Emkay Research
Exhibit 8: P/BV and ROE trend for select consumer stocks
P/BV ROE
P/B FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14
Asian Paints 19.6 15.6 12.4 10.4 43 40 38 36
Berger Paints 8.6 7.5 6.3 5.4 23 24 24 24
Akzo Nobel 3.0 2.7 3.1 2.9 14 15 15 17
Kansai Nerolac 5.5 4.7 4.8 4.1 23 22 19 20
Britannia 12.2 11.3 9.8 7.6 33 42 40 40
Havell 12.5 8.5 5.8 4.7 58 46 34 30
Bajaj Electrical 3.0 2.6 2.3 2.0 26 19 20 21
Exide 3.5 3.1 2.8 2.4 24 16 16 18
Amara Raja 8.2 6.4 4.9 3.9 25 29 33 28Source: Bloomberg, Emkay Research
Exhibit 9: Valuation ratios of select consumer and battery stocks
P/E EV-EBITDA
P/E FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14
Asian Paints 50.9 43.4 36.1 31.1 31.7 27.5 23.0 19.3
Berger Paints 39.6 33.0 28.5 24.7 24.3 19.7 17.6 14.9
Akzo Nobel 21.7 18.5 20.3 17.3 18.7 22.5 19.7 15.3
Kansai Nerolac 23.2 22.7 26.0 21.8 16.4 13.9 16.1 13.4
Britannia 41.7 29.0 27.6 21.2 27.7 19.4 17.6 14.0
Havell 26.6 22.1 20.6 17.3 16.1 13.0 12.2 10.2
Bajaj Electrical 12.5 14.1 12.4 9.9 9.4 9.5 8.5 6.9Exide 15.8 20.6 18.1 14.7 9.3 11.8 9.8 7.9
Amara Raja 36.0 24.8 17.2 15.4 20.9 14.7 11.2 9.5
Source: Bloomberg, Emkay Research
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Amara Raja Batteries Result Update
Emkay Research January 31, 2013 5
Key Financials (Standalone)
Income Statement
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Net Sales 23,674 29,942 35,556 43,307
Growth (%) 34.4 26.5 18.8 21.8
Expenditure 20,134 25,162 29,863 36,386Raw Materials 15,955 19,802 23,285 28,461
Employee Cost 1,003 1,198 1,493 1,776
Other Exp 3,176 4,162 5,085 6,150
EBITDA 3,540 4,780 5,693 6,920
Growth (%) 37.5 35.0 19.1 21.6
EBITDA margin (%) 15.0 16.0 16.0 16.0
Depreciation 465 533 820 1,012
EBIT 3,075 4,247 4,873 5,908
EBIT margin (%) 13.0 14.2 13.7 13.6
Other Income 152 270 155 364
Interest expenses 41 18 18 18
PBT 3,186 4,499 5,010 6,254Tax 1,036 1,395 1,553 1,939
Effective tax rate (%) 32.5 31.0 31.0 31.0
Adjusted PAT 2,151 3,104 3,457 4,315
Growth (%) 45.2 44.3 11.4 24.8
Net Margin (%) 9.1 10.4 9.7 10.0
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 2,151 3,104 3,457 4,315
E/O items 0 0 0 0
Reported PAT 2,151 3,104 3,457 4,315
PAT after MI 2,151 3,104 3,457 4,315
Growth (%) 45.2 44.3 11.4 24.8
Balance Sheet
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Equity share capital 171 171 171 171
Reserves & surplus 8,064 10,630 13,488 17,056
Net worth 8,235 10,801 13,659 17,227Minority Interest 0 0 0 0
Secured Loans 56 100 100 100
Unsecured Loans 785 785 785 785
Loan Funds 841 885 885 885
Net deferred tax liability 220 220 220 220
Total Liabilities 9,295 11,905 14,763 18,331
Gross Block 6,212 9,712 13,712 15,212
Less: Depreciation 2,667 3,200 4,020 5,033
Net block 3,546 6,512 9,692 10,180
Capital work in progress 315 315 315 315
Investment 161 1,661 1,161 3,661
Current Assets 9,493 8,604 9,463 11,215Inventories 2,666 2,984 3,381 3,899
Sundry debtors 3,197 3,609 3,897 4,390
Cash & bank balance 2,292 510 459 941
Loans & advances 1,306 1,501 1,727 1,986
Other current assets 33 0 0 0
Current lia & Prov 4,220 5,187 5,868 7,040
Current liabilities 2,013 2,461 2,922 3,559
Provisions 2,207 2,726 2,946 3,480
Net current assets 5,274 3,417 3,595 4,175
Misc. exp 0 0 0 0
Total Assets 9,295 11,905 14,763 18,331
Cash Flow
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
PBT (Ex-Other income) 3,035 4,229 4,855 5,890
Depreciation 465 533 820 1,012
Interest Provided 41 18 18 18
Other Non-Cash items 0 0 0 0
Chg in working cap 461 74 -229 -99
Tax paid -1,036 -1,395 -1,553 -1,939
Operating Cashflow 2,963 3,459 3,911 4,883
Capital expenditure -765 -3,500 -4,000 -1,500
Free Cash Flow 2,198 -41 -89 3,383
Other income 152 270 155 364Investments 0 -1,500 500 -2,500
Investing Cashflow -696 -4,730 -3,345 -3,636
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) -60 44 0 0
Interest Paid -41 -18 -18 -18
Dividend paid (incl tax) -375 -538 -599 -748
Income from investments 0 0 0 0
Others -29 0 0 0
Financing Cashflow -505 -512 -617 -765
Net chg in cash 1,762 -1,783 -51 482
Opening cash position 451 2,292 510 459
Closing cash position 2,213 510 459 941
Key Ratios
Y/E Mar FY12A FY13E FY14E FY15E
Profitability (%)
EBITDA Margin 15.0 16.0 16.0 16.0
Net Margin 9.1 10.4 9.7 10.0
ROCE 38.3 42.6 37.7 37.9
ROE 29.3 32.6 28.3 27.9
RoIC 46.9 53.3 43.8 45.0
Per Share Data (Rs)
EPS 12.6 18.2 20.2 25.3
CEPS 15.3 21.3 25.0 31.2
BVPS 48.2 63.2 80.0 100.9DPS 1.9 2.7 3.0 3.8
Valuations (x)
PER 24.8 17.2 15.4 12.4
P/CEPS 20.4 14.7 12.5 10.0
P/BV 6.5 4.9 3.9 3.1
EV / Sales 2.2 1.8 1.5 1.2
EV / EBITDA 14.7 11.2 9.5 7.7
Dividend Yield (%) 0.6 0.9 1.0 1.2
Gearing Ratio (x)
Net Debt/ Equity -0.2 0.0 0.0 0.0
Net Debt/EBIDTA -0.4 0.1 0.1 0.0
Working Cap Cycle (days) 46.0 35.4 32.2 27.3
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY12A 17,893 2,367 13.2 1,302 5.3 -16.6 23.1 15.4 8.0 3.2
FY13E 19,266 2,532 13.1 1,538 6.3 18.2 22.9 13.1 6.9 2.8
FY14E 21,744 2,948 13.6 1,793 7.3 16.6 23.2 11.2 5.6 2.4
FY15E 24,554 3,337 13.6 2,059 8.4 14.9 23.2 9.8 4.6 2.1
Greaves Cotton
All revved up, Reiterate Buy
January 31, 2013
Rating
Buy
Previous Reco
Buy
CMP
Rs82
Target Price
Rs100
EPS Chg FY13E/FY14E (%) +5/+4
Target Price change (%) 11
Nifty 6,035
Sensex 19,895
Price Performance
(%) 1M 3M 6M 12M
Absolute 1 6 28 -4
Rel. to Nifty -1 -1 11 -17
Source: Bloomberg
Relative price chart
60
66
72
78
84
90
Feb-12 Apr-12 Jun-12 Aug-12 Sep-12 Nov-12 Jan-13
Rs
-30
-22
-14
-6
2
10%
Greaves Co tton (LHS) Rel to Ni ft y (RHS) Source: Bloomberg
Stock Details
Sector Engineering & Capital GoodsBloomberg GRV IB
Equity Capital (Rs mn) 488
Face Value(Rs) 2
No of shares o/s (mn) 244
52 Week H/L 99/ 60
Market Cap (Rs bn/USD mn) 20/ 378
Daily Avg Volume (No of sh) 342,876
Daily Avg Turnover (US$mn) 0.5
Shareholding Pattern (%)
Dec'12 Sep'12 Jun'12
Promoters 51.6 51.6 51.6
FII/NRI 8.4 7.9 7.6
Institutions 27.2 27.2 27.9
Private Corp 3.3 3.4 3.5
Public 9.6 9.9 9.4
Source: Bloomberg
n Stellar performance Revenue up 11% yoy to Rs, EBITDA
margins expand 150 bps yoy to 13.9% and APAT up 42% yoy
to Rs486 mn above estimates
n Key highlight Revenue growth driven by volume pick-up in
both 3-W and 4-W segment addressing key concern.
Further, GCL has favourable base in 3W for next 3-4 quarters
n Upgrade earnings by 5% for FY13E & by 4% for FY14E.
Robust return ratios at +30% levels and 8% FCF yield.
Reiterate Buy with price target of Rs100
Stellar performance Driven by volume growth and margin expansion
Greaves Cotton (GCL) Q3FY13 performance beat estimates by a wide margin with net
profit growth at 42% yoy to Rs486 mn. Strong performance was driven by (1) 11% yoy
revenue growth (comes after 3 quarters of muted growth) to Rs5.2 bn led by stronggrowth in 4-W segment and selective prise rise (2) 150 bps yoy expansion in gross
margins attributed to improved revenue mix, selective price rise and lower material
cost (3) EBITDA up 24% yoy to Rs718 mn (4) High other income at Rs69 mn Vs Rs4
mn in Q3FY12 (includes gain on sale of property). Reported net profit at Rs344 mn due
to provision for diminution in value of investment in Greaves Farymann Diesel GmbH.
Key highlight - Volume growth in both 4-W & 3-W segment
Improved Q3FY13 performance was driven by pick-up in volumes in both 3-W and 4-W
After declining for 10 months, the 3-W industry witnessed volume growth in Q3FY13(Oct-Dec12). 3-W growth for GCL stood at 2% in Q3FY13 to 93,000 units.
Sustained ramp-up in volumes with Tata Motors monthly run rate improved from6,000 units in Q2FY13 to 7,300 units per month in Q3FY13. Q3FY13 volume growthstood at 65% yoy to 22,000 units.
Strong growth also witnessed in diesel & industrial gensets sold 1200 sets Vs 900sets in Q3FY12, led by gains in market share in the 60-120kVa range.
Farm equipments continued to decline though decline for GCL was partially offsetby increase in market share.
Future growth drivers Increasing customer penetration
Piaggio is planning to launch new 4-W goods carrier (0.5 ton) in FY14E fitted withGraves Cotton Engine
GCL will also be supplying engines for CNG version of Tata Motors Ace Zip model most likely to be introduced in FY14E.
Retain Buy rating with price target of Rs95
We expect GCL to continue to benefit from pick-up in 3-W industry and steady ramp-up
with Tata Motors. Further, GCL has favourable base effect for next 4 quarters expect
continued earnings growth. With attractive return ratios at +30% levels (though lower
then historical levels) and FCF yield of 8% on FY14E cashflow, we retain our Buy rating
with target price of Rs100/Share (@12X FY15E earnings).
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Greaves Cotton Result Update
Emkay Research January 31, 2013 2
Exhibit 1: Quarterly Table - Standalone
Y/E, Mar (Rs. mn) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD'13 YTD'12 Gr (%)
Revenue 4,651 4,454 4,116 4,501 5,158 10.9 14.6 13,775 13,066 5.4
Expenditure 4,074 3,858 3,619 3,925 4,440 9.0 13.1 11,984 11,288 6.2
Consumption of RM 3,338 3,044 2,870 3,145 3,622 8.5 15.2 9,637 9,283 3.8
as % of sales 71.8 68.3 69.7 69.9 70.2 70.0 71.0
Employee Cost 344 342 366 359 377 9.7 5.0 1,102 933 18.1as % of sales 7.4 7.7 8.9 8.0 7.3 8.0 7.1
Other expenditure 393 471 383 421 441 12.3 4.7 1,246 1,073 16.1
as % of sales 8.4 10.6 9.3 9.4 8.6 9.0 8.2
EBITDA 577 597 497 577 718 24.4 24.5 1,791 1,778 0.8
Depreciation 83 88 89 94 100 20.6 6.0 283 230 23.0
EBIT 495 509 408 483 618 25.1 28.2 1,509 1,548 -2.5
Other Income 4 34 29 20 69 1495.3 236.3 118 40 193.8
Interest 11 14 3 2 2 -80.8 35.9 7 45 -84.7
PBT 488 530 434 501 685 40.5 36.6 1,620 1,543 5.0
Total Tax 146 185 129 131 199 36.6 51.7 460 466 -1.2
Adjusted PAT 342 345 305 370 486 42.1 31.3 1,160 1,078 7.7
Extra ordinary items 0 433 11 -34 -142 NA 313.4 -165 0 -Reported PAT 342 777 316 336 344 0.6 2.4 995 1,078 -7.7
Adjusted EPS 1.4 3.2 1.3 1.4 1.4 0.6 2.4 4.1 4.4 -7.7
Margins (%) (bps) (bps) (bps)
EBIDTA 12.4 13.4 12.1 12.8 13.9 150 110 13.0 13.6 -60
EBIT 10.6 11.4 9.9 10.7 12.0 140 130 11.0 11.8 -90
PBT 10.5 11.9 10.5 11.1 13.3 280 210 11.8 11.8 0
PAT 7.3 7.7 7.4 8.2 9.4 210 120 8.4 8.2 20
Effective Tax rate 29.9 35.0 29.8 26.2 29.1 -80 290 28.4 30.2 -180
Source: Company, Emkay Research
Engines Benefits from pick-up in 3W & sustained ramp-up in 4W
Engines segment revenues grew by 12% yoy to Rs4.6 bn (ahead estimates) on the back
growth in both 3W & 4W segments as well as selective price rise. Segment EBIT margins
also improved by 30 bps yoy to 17.0% (ahead estimates) while EBIT increased by 19% yoy
to Rs4755 mn.
Infrastructure 18% yoy revenue growth, Reduction in EBIT loss
Infrastructure reported improved performance led by (1) introduction of new products in
concreting segment and (2) improvement in underlying demand in road making
equipments. Though overall demand for concreting equipment continues to remain muted.
Segment revenues grew by 18% yoy to Rs430 mn while EBIT loss fell down to Rs11 mn
(Vs loss of Rs30 mn in Q2FY13 and Rs28 mn in Q3FY12).
Upsides to earnings estimates exist Upsides to revenue (1) 3-W segment - has favourable base effect for the next 3
quarters. Already witnessed initial glimpse of pick-up in demand momentum in
Q3FY13. (2) 4-W segment - Sustained ramp-up have achieved monthly run rate of
7300 units Vs 6000 units in Mar12.
Upsides to EBITDA GCL has indicated benefits of cost (raw material) optimisationmeasures to sustain in the ensuing quarters - witnessed initial glimpse in Q3FY13.
Besides higher revenue contribution from 3-W to also positively impact margins.
Turnaround of Infrastructure division GCL has highlighted improvement indemand in road making equipments. Besides revenue growth in FY14E to be driven by
introduction of new products in FY14E (1) Stationary concrete pump S1 market
growth at 18-20% (2) Boom pump market growth at +20%. Pick-up in revenue
growth will trigger benefits from operating leverage (incurred EBIT loss of Rs58 mn in
9MFY13)
Emkay estimates We have factored 3-W volume growth at 7% in FY14E andvolumes of 0.1 mn units for 4-W (Tata Motors).
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Greaves Cotton Result Update
Emkay Research January 31, 2013 3
Upgrade earnings by 4-5%
We have revised upwards our consolidated earnings estimates for FY13E by 5% to Rs6.3
and by 4% to Rs7.3 for FY14E to factor (1) strong Q3FY13 performance and (2) higher
volumes in 4-W segment. We introduce FY15E consolidated earnings at Rs8.3 per share.
Exhibit 2: Revision in Consolidated Earning Estimates
FY13E FY14E
Y/E, Mar (Rs. mn) Earlier Revised % Change Earlier Revised % Change
Revenues 19,124 19,266 0.7 21,489 21,744 1.2
EBITDA 2,469 2,533 2.6 2,863 2,949 3.0
EBITDA Margin (%) 12.9 13.2 20 bps 13.3 13.6 20 bps
APAT 1,462 1,538 5.2 1,709 1,793 4.9
EPS (Rs) 6.0 6.3 5.2 7.0 7.3 4.9
Source: Emkay Research
Exhibit 3: Segmental Performance
Y/E, Mar (Rs. mn) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD'13 YTD'12 Gr (%)
Segment Revenues
Engines 4,094 3,947 3,623 4,083 4,578 11.8 12.1 12,284 11,364 8.1
Infrastructure 364 383 355 319 430 18.3 34.9 1,104 1,188 -7.1
Others 195 126 141 111 164 -15.8 48.5 416 516 -19.3
Less: Intersegment Revenues 9 2 4 11 14 - - 0 0 -
Total 4,644 4,454 4,116 4,501 5,158 11.1 14.6 13,775 13,058 5.5
Segment Results
Engines 684 733 584 664 778 13.8 17.2 2,025 1,926 5.2
Infrastructure -28 -42 -16 -30 -11 -59.6 -62.0 -58 -37 57.1
Others 6 -2 11 25 30 401.7 19.8 65 78 -16.5
Total 662 689 578 658 796 20.4 20.9 2,033 1,967 3.3
Add- Unall Income / (Exp) 163 146 141 156 109 - - 405 378 -
Less- Interest Exp 11 14 3 2 2 -80.8 35.9 7 45 -84.7PBT 488 97 424 536 827 69.6 54.3 1,620 1,543 5.0
Segment Capital Employed
Engines 4,007 3,807 4,144 4,228 4,755 18.6 12.4 4,755 4,007 18.6
Infrastructure 1,303 1,154 1,149 1,125 1,101 -15.5 -2.1 1,101 1,303 -15.5
Others -50 4 -9 -8 -14 -72.2 64.3 -14 -50 -72.2
Unallocated 850 1,529 1,526 1,715 1,448 70.3 -15.6 1,448 850 70.3
Total 6,110 6,494 6,809 7,059 7,289 19.3 3.3 7,289 6,110 19.3
Segment Margins (%) (bps) (bps) (bps)
Engines 16.7 18.6 16.1 16.3 17.0 30 70 16.5 16.9 -50
Infrastructure (7.8) (10.9) (4.6) (9.4) (2.6) 510 680 (5.2) (3.1) -210
Others 3.0 (1.3) 7.6 22.3 18.0 1500 -430 15.6 15.1 50Average 14.2 15.5 14.0 14.6 15.4 120 80 14.7 15.1 -30
Source: Company, Emkay Research
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Greaves Cotton Result Update
Emkay Research January 31, 2013 4
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Net Sales 17,893 19,266 21,744 24,554
Growth (%) 4.8 7.7 12.9 12.9
Expenditure 15,526 16,733 18,796 21,217Raw Materials 12,478 13,375 15,091 17,130
Employee Cost 1,426 1,640 1,835 2,056
Other Exp 1,572 1,680 1,830 1,988
EBITDA 2,367 2,532 2,948 3,337
Growth (%) -8.8 7.0 16.4 13.2
EBITDA margin (%) 13.2 13.1 13.6 13.6
Depreciation 416 434 500 552
EBIT 1,951 2,098 2,447 2,785
EBIT margin (%) 10.9 10.9 11.3 11.3
Other Income 48 130 147 194
Interest expenses 37 11 11 11
PBT 1,961 2,217 2,584 2,968Tax 660 679 791 909
Effective tax rate (%) 33.6 30.6 30.6 30.6
Adjusted PAT 1,302 1,538 1,793 2,059
Growth (%) -16.6 18.2 16.6 14.9
Net Margin (%) 7.3 8.0 8.2 8.4
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 1,302 1,538 1,793 2,059
E/O items 588 0 0 0
Reported PAT 1,889 1,538 1,793 2,059
PAT after MI 1,302 1,538 1,793 2,059
Growth (%) -16.6 18.2 16.6 14.9
Balance Sheet
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Equity share capital 488 488 488 488
Reserves & surplus 5,822 6,740 7,811 9,041
Net worth 6,310 7,229 8,299 9,530Minority Interest 0 0 0 0
Secured Loans 0 0 0 0
Unsecured Loans 330 330 330 330
Loan Funds 330 330 330 330
Net deferred tax liability 301 301 301 301
Total Liabilities 6,941 7,860 8,931 10,161
Gross Block 5,525 6,125 6,725 7,325
Less: Depreciation 2,218 2,652 3,153 3,704
Net block 3,307 3,472 3,572 3,621
Capital work in progress 203 103 3 -97
Investment 937 937 937 937
Current Assets 6,472 8,275 9,954 11,948Inventories 1,821 2,011 2,270 2,563
Sundry debtors 2,567 2,709 3,057 3,452
Cash & bank balance 715 2,322 3,238 4,367
Loans & advances 1,351 1,214 1,370 1,547
Other current assets 19 19 19 19
Current lia & Prov 3,978 4,928 5,535 6,248
Current liabilities 2,803 3,557 3,996 4,510
Provisions 1,175 1,370 1,539 1,737
Net current assets 2,495 3,347 4,419 5,700
Misc. exp 0 0 0 0
Total Assets 6,941 7,860 8,931 10,161
Cash Flow
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
PBT (Ex-Other income) 1,914 2,087 2,436 2,774
Depreciation 416 434 500 552
Interest Provided 37 11 11 11
Other Non-Cash items -795 0 0 0
Chg in working cap -310 755 -156 -153
Tax paid -656 -679 -791 -909
Operating Cashflow 1,899 2,609 2,001 2,276
Capital expenditure -1,059 -500 -500 -500
Free Cash Flow 839 2,109 1,501 1,776
Other income 48 130 147 194Investments -405 0 0 0
Investing Cashflow -1,416 -370 -353 -306
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) 196 0 0 0
Interest Paid -37 -11 -11 -11
Dividend paid (incl tax) -539 -619 -722 -829
Income from investments 0 0 0 0
Others 0 0 0 0
Financing Cashflow -380 -631 -733 -841
Net chg in cash 102 1,608 915 1,129
Opening cash position 612 715 2,322 3,238
Closing cash position 715 2,322 3,238 4,367
Key Ratios
Y/E Mar FY12A FY13E FY14E FY15E
Profitability (%)
EBITDA Margin 13.2 13.1 13.6 13.6
Net Margin 7.3 8.0 8.2 8.4
ROCE 32.5 30.3 31.1 31.3
ROE 23.1 22.9 23.2 23.2
RoIC 42.4 44.2 53.4 57.9
Per Share Data (Rs)
EPS 5.3 6.3 7.3 8.4
CEPS 7.0 8.1 9.4 10.7
BVPS 25.7 29.4 33.8 38.9DPS 2.2 2.2 2.6 3.0
Valuations (x)
PER 15.4 13.1 11.2 9.8
P/CEPS 11.7 10.2 8.8 7.7
P/BV 3.2 2.8 2.4 2.1
EV / Sales 1.1 0.9 0.8 0.6
EV / EBITDA 8.0 6.9 5.6 4.6
Dividend Yield (%) 2.7 2.7 3.1 3.6
Gearing Ratio (x)
Net Debt/ Equity -0.2 -0.4 -0.4 -0.5
Net Debt/EBIDTA -0.5 -1.1 -1.2 -1.4
Working Cap Cycle (days) 36.3 19.4 19.8 19.8
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY11A 58,320 11,911 20.4 8,625 19.3 22.4 29.5 31.3 23.3 8.2
FY12A 70,830 14,448 20.4 9,479 21.2 9.9 23.9 28.4 19.1 6.8
FY13E 89,382 20,053 22.4 12,650 28.4 33.4 27.9 21.3 13.6 5.3
FY14E 106,058 23,823 22.5 15,780 35.4 24.7 27.3 17.1 11.2 4.2
Lupin
Rocking results Maintain buy
January 31, 2013
Rating
Buy
Previous Reco
Buy
CMP
Rs604
Target Price
Rs708
EPS Chg FY13E/FY14E (%) 9/12
Target Price change (%) 11
Nifty 6,035
Sensex 19,895
Price Performance
(%) 1M 3M 6M 12M
Absolute -2 7 1 27
Rel. to Nifty -4 -1 -13 10
Source: Bloomberg
Relative price chart
450
490
530
570
610
650
Feb-12 Apr-12 Jun-12 Aug-12 Sep-12 Nov-12 Jan-13
Rs
-10
-2
6
14
22
30%
Lupin (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock Details
Sector PharmaceuticalsBloomberg LPC IB
Equity Capital (Rs mn) 895
Face Value(Rs) 2
No of shares o/s (mn) 447
52 Week H/L 632/ 412
Market Cap (Rs bn/USD mn) 270/ 5,085
Daily Avg Volume (No of sh) 720,193
Daily Avg Turnover (US$mn) 8.0
Shareholding Pattern (%)
Dec'12 Sep'12 Jun'12
Promoters 46.9 46.9 46.9
FII/NRI 27.8 28.0 27.9
Institutions 15.6 15.4 16.1
Private Corp 1.1 0.8 0.7
Public 8.7 9.0 8.4
Source: Bloomberg
n Lupin Q3FY13 Results, above expectations a) Revenue up
by 38% YoY to Rs25bn, b) EBIDTA up by 62% YoY to Rs6bn
and c) RPAT up by 43% YoY to Rs3.4bn
n US business grew 54% YoY to US$193mn on back of Tricor
which contributed $30-35mn. India grew 14% YoY and Japan
grew 48%
n Going forward, Lupin will launch 3 products in Q413 and 20
products in FY14 which includes, Solodyn, Yasmin,
Symbalta, Asacol and Cipro OS among others in US
n On back of strong outlook we have upgraded Lupins
earnings by 9%/12% for FY13/14. Maintain Buy with a revised
target price of Rs708 (20x FY14E EPS of Rs35.4)
All round performance
US business (contr. 35%) grew 54% YoY to USD193mn on back of launch of Tricor,Kurvelo, Avapro and Seasonale in the quarter. Tricor contributed approx. $35
million with 35% Market share and 40% price erosion.
India formulations (contr. 27%) grew by 14% Japan biz (contr. 15%) grew 43% in yen term and 48% in INR term led by Irom
acquisition & on back of 2 new products launched last quarter and 7 launched in
first quarter.
EBITDA margins expanded 365bps YoY and 176bps QoQ to 24.2%. PAT increasedby 43% YoY to Rs3.4bn and EPS stood at Rs7.1 for Q2FY13 & Rs20.4 for 9M FY13
Going forward Strong growth outlook in US & India In the US, Lupin has re-iterated its guidance of 20 ANDA launches in FY13
including 10 OCs and 120 products over the next 3 years addressing USD48bn
market
High profile products launches like Tricor, Seasonale, Solodyn, Ambien CR,Yasmin, Cymbalta, Asacol and Cipro OS will lead to 29% CAGR in US business
over FY12-14
There are 100 Para IVs addressing market size of USD30bn and 25 FTFs (marketsize of USD11bn) including 9 exclusivities (USD830mn)
Domestic business is expected to grow at 18-20% CAGR over FY12-FY14E
Valuations
We expect Lupin to report 27% revenue growth in FY13E and 19% growth in FY14E.
EBIDTA margins are expected to move from 20.4% in FY12 to 22.4% in FY14E.
Earnings will grow by 29% CAGR over FY12-14E. We maintain Buy rating on the stock
with a revised target price of Rs708. At CMP, the stock trades at 21xFY13E and
17xFY14E EPS.
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Lupin Result Update
Emkay Research January 31, 2013 2
Exhibit 1: Quarterly Financials
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) 9M FY13 9MFY12 YoY (%)
Revenue 18,189 19,237 22,537 23,007 25,009 37.5 8.7 70,553 51,591 36.8
Expenditure 14,454 15,510 17,961 17,847 18,959 31.2 6.2 54,767 40,871 34.0
as % of sales 79.5 80.6 79.7 77.6 75.8 (5) (2) 233.1 237.9
Consumption of RM 6,259 7,632 8,187 8,898 9,355 49.5 5.1 26,440 18,407 43.6
as % of sales 34.4 39.7 36.3 38.7 37.4 9 (3) 112.4 107.5
Employee Cost 2,524 2,702 3,014 3,000 3,165 25.4 5.5 9,179 6,992 31.3
as % of sales 13.9 14.0 13.4 13.0 12.7 (9) (3) 39.1 40.7
Other expenditure 5,671 5,176 6,760 5,949 6,439 13.6 8.2 19,148 15,472 23.8
as % of sales 31.2 26.9 30.0 25.9 25.7 (17) (0) 81.6 89.7
EBITDA 3,736 3,727 4,576 5,160 6,050 62.0 17.3 15,786 9,740 62.1
Depreciation 576 706 654 690 688 19.4 (0.3) 2,032 1,569 29.5
EBIT 3,160 3,021 3,923 4,470 5,362 69.7 20.0 13,755 8,171 68.3
Other Income 33 82 236 43 265 700.6 513.4 544 61 790.0
Interest 86 145 101 100 76 (11.2) (24.0) 277 210 31.9
PBT 3,107 2,958 4,058 4,413 5,551 78.7 25.8 14,022 9,002 55.8
Total Tax 701 1,348 1,208 1,438 2,116 201.9 47.1 4,762 1,738 174.0Adjusted PAT 2,406 1,610 2,850 2,975 3,435 42.8 15.5 9,260 7,264 27.5
(Profit)/loss from JV's/Ass/MI 54.9 -77.3 46.2 69.0 81.5 48.5 18.1 196.7 552.5 (64.4)
APAT after MI 2,351 1,688 2,804 2,906 3,354 42.6 15.4 9,063 6,711 35.0
Extra ordinary items 0 -133 0 0 0 0.0 409
Reported PAT 2,351 1,555 2,804 2,906 3,354 42.6 15.4 9,063 7,121 27.3
FD EPS 5.3 3.5 6.3 6.5 7.5 42.6 15.4 20.4 16.0 27.3
Margins (%) (bps) (bps) (bps)
EBIDTA 20.5 19.4 20.3 22.4 24.2 365 176 22.4 18.9 350
EBIT 17.4 15.7 17.4 19.4 21.4 407 201 19.5 15.8 366
EBT 17.1 15.4 18.0 19.2 22.2 511 302 19.9 17.4 243
PAT 12.9 8.8 12.4 12.6 13.4 48 78 12.8 13.0 -16
Effective Tax rate 22.6 45.6 29.8 32.6 38.1 1556 553 34.0 19.3 1465
Source: Company, Emkay Research
Exhibit 2: Sales & Margins Trend
18189 19237 22537 23007 25009
12.9%
8.8%
12.4% 12.6% 13.4%
24.2%22.4%
20.3%19.4%20.5%
05000
10000
15000
20000
25000
30000
Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
0%
8%
16%
24%
32%
40%
Revenue (Rs mn) EBIDTA PAT
Source: Company, Emkay Research
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Lupin Result Update
Emkay Research January 31, 2013 3
Lupins Domestic Metrics
Exhibit 3: Therapeutic growth
Therapies % ContributionMAT
Dec'12
MAT
Dec'11
YoY
Gr. %
Cardiac 22.7% 454 397 14.3%Anti-infectives 18.3% 366 326 12.3%
Respiratory 9.7% 194 185 5.4%
Gastro 7.1% 142 120 18.5%
Anti Diabetic 5.9% 118 100 18.4%
Anti-diabetic 8.4% 169 139 21.4%
CNS 5.7% 114 94 20.7%
Vitamins/miner
als 4.6% 92 81 14.0%
Gynaecology 4.1% 83 69 20.0%
Others 13.6% 272 279 -2.6%
Acute 52.3% 1048 956 9.6%
Chronic 47.7% 956 833 14.7%Total Sales 100.0% 2004 1789 12.0%
Source: IMS, Emkay Research
Exhibit 4: Field force productivity
4.03.6
4.64.9
4.7
4.1
3.7
0
1000
2000
3000
4000
5000
6000
FY06 FY07 FY08 FY09 FY10 FY11 FY12
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Field force Productivity
Source: IMS, Emkay Research
Exhibit 5: Growth drivers - Volume/ Price/ New launches
2
6.0
5.2
7.2
4.2
-1.2Lupin IndustryVol Gr. Price Gr. New launches
Total Gr. 12%
Total Gr. 11.4%
Source: IMS, Emkay Research
Exhibit 6: Top 10 brand performance
Rs Cr TherapyMAT
Aug'12
MAT
Aug'11
YoY
Gr.
Tonact CVS 69 61 11.7%
Gluconorm-G Anti-Diab 61 45 37.2%
Budamate Resp 40 36 12.8%
Ramistar CVS 38 35 8.0%
Gluconorm-PG Anti-Diab 34 27 24.7%
R-CINEX Anti-Infective 33 31 4.7%
L-CIN Anti-Infective 31 31 0.9%
Cefaxone Gastro 31 19 65.0%
RABLET CVS 30 28 9.4%
MEROTROL Resp 29 24 21.7%
Total 396 337 17.7%
Source: IMS, Emkay Research
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Lupin Result Update
Emkay Research January 31, 2013 4
Exhibit 7: Financial Snapshot
(Rs mn) FY11 YoY % FY12 YoY % FY13E YoY % FY14E YoY %
Formulations 49069 19.7% 61526 25.4% 79990 30.0% 96300 20.4%
Domestic 15509 14.9% 19059 22.9% 22496 18.0% 26545 18.0%
US 20798 23.7% 25303 21.7% 34181 35.1% 42641 24.7%
Europe 1809 -16.8% 1975 9.2% 2116 7.1% 2257 6.7%
Japan 6212 16.3% 8607 38.6% 13298 54.5% 15380 15.6%SRM 4741 49.3% 6582 38.8% 7898 20.0% 9478 20.0%
API's 8589 10.5% 8491 -1.1% 9232 8.7% 9694 5.0%
Domestic API 2431 10.0% 2164 -11.0% 2272 5.0% 2385 5.0%
Export API 6158 10.7% 6327 2.8% 6960 10.0% 7308 5.0%
Other operating income 1252 - 1232 - 1053 - 1124 -
Total Sales 58910 20.8% 71250 20.9% 90274 26.7% 107118 18.7%
FTF Sales 0 - 1010 - 1440 - 1289 -
Base Sales 58910 20.8% 70239 19.2% 88834 26.5% 105829 19.1%
EBITDA 11,911 22.4% 14,448 21.3% 20,053 38.8% 23,823 18.8%
EBITDA % 20.2% 20.3% 22.4% 22.5%
FTF EBITDA 0 - 707 - 1,008 - 902 -
Base EBITDA 0 - 13,740 - 19,045 - 22,920 20.3%
PAT 8,625 26.0% 9,479 9.9% 12,650 33.5% 15,780 24.7%
PAT % 14.6% 13.3% 14.0% 14.7%
FTF PAT 0 - 0 - 469 - 730 -
Base - PAT 8625 - 9479 9.9% 12181 28.5% 15050 23.5%
EPS 19.3 25.6% 21.2 9.9% 28.4 33.5% 35.4 24.7%
FTF EPS 0.0 - 0.0 - 1.1 - 1.6 -
Base EPS 19.3 - 21.2 - 27.3 - 33.7 -
PE - 21.2 - 17.0 -
Source: Company, Emkay Research
Exhibit 8: Revised Financials
Rs mn Old Financials New Financials % Change
FY13E FY14E FY13E FY14E FY13E FY14E
Sales 89555 103142 90,274 10,7118 0.8 3.8
EBITDA 19,028 21,928 20,053 23,823 5.3 8.6
PAT 11,588 14,056 12,650 15,780 9.1 12.2
EPS 26.0 31.5 28.4 35.4 9.1 12.2
Rating Buy Buy
Source: Company, Emkay Research
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Lupin Result Update
Emkay Research January 31, 2013 5
Conference Call Highlights
US
US business grew 54% in $ terms and 68% in rupee terms to USD 193 millioncompared to USD 125 million in Q2FY13 This is on back of launch of Tricor,
Kurvelo, Avapro and Seasonale in the quarter.
16 ANDAs withdrawn from US FDA on cost benefit consideration after GDUFA feesapplicable. Total ANDAs filing is 168. Out of this Para-IVs 100 and FTF-25
Company expects 2-3 products in current quarter and 20 products launch in FY14 Branded Portfolio -
Branded generic sale is USD 48 million in Q3 FY13
Suprax grew by 48% in the current quarter, best season in the last 10 years
Suprax drops will be launched in 4QFY13 and will replace part of sale of
suspension and tablet. Suspension contributes 2/3rd and tablet 1/3rd of suprax
sales.
After launch of Tricor, there is 25% decline in total fenofibrate market. There is
no impact on Antara sale. In this quarter, prescriptions were flat for Antara.
Oral Contraceptives(OCs) Total ANDA filed in OCs are 31 and till date launched six only i.e. Nor QD, Lo-
Seasonique, Femcon, Kurvelo, Seasonale and Yasmin. Last 3 are launched in
Q3FY13
Yazmin still to be launched in the market. Company is still weighing the risks.
There is a liability claims of USD 750 million in this product
OC market in US is 5 billion in US
Tricor: Lupin MS - 35%, 25% Price erosion. Valiant MS 15%. Mylan also got theapproval but still to launch the product. Company dont expect any more competition
for next one year.
Diovan Company launch to happen only after 180 daysAsacol Lupin is AG. Moment Roxane will come, Lupin wil l also come. Expected in
Q1 2014
Renegal Company has exclusivity in certain strenghts
Domestic formulations grew at 14%
Company expects 18-20% growth in domestic market in FY13 and FY14 Company recasted Rs. 200mn sale in domestic market in Q3FY13, otherwise
growth was only 10%
Japan and Europe Japanese business grew by 43% in yen term and 48% in INR term Growth was on back of 2 new products launched last quarter and 7 launched in first
quarter.
Europe declined by 7% in the quarter on back strong growth of 36% in last quarter
Financial Highlights
Tax rate has gone up on back of dispatch of inventory from India to US subsidiarywhich has not been sold in the market. This can be in tune of USD 50 million
Tax rate for the quarter was 38% company guided for 28-29% in FY13 Forex gains and losses Net forex loss of Rs.350million in various line items
Rs230mn forex gain is in other operating income
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Emkay Research January 31, 2013 6
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
Net Sales 57,068 69,597 88,329 104,934
Growth (%) 20.4 22.0 26.9 18.8
Expenditure 46,410 56,382 69,329 82,235Raw Materials 22,379 26,039 31,799 37,986
Employee Cost 7,677 9,695 11,483 13,641
Other Exp 0 5,916 7,508 8,919
EBITDA 11,911 14,448 20,053 23,823
Growth (%) 22.4 21.3 38.8 18.8
EBITDA margin (%) 20.4 20.4 22.4 22.5
Depreciation 1,712 2,275 2,455 2,597
EBIT 10,199 12,172 17,598 21,226
EBIT margin (%) 17.5 17.2 19.7 20.0
Other Income 89 153 601 801
Interest expenses 325 355 270 267
PBT 9,963 11,970 17,928 21,759Tax 1,169 3,086 5,020 5,657
Effective tax rate (%) 11.7 25.8 28.0 26.0
Adjusted PAT 8,794 8,885 12,908 16,102
Growth (%) 25.2 1.0 45.3 24.7
Net Margin (%) 15.1 12.5 14.4 15.2
(Profit)/loss from JVs/Ass/MI 168 199 258 322
Adj. PAT After JVs/Ass/MI 8,625 8,686 12,650 15,780
E/O items 0 0 0 0
Reported PAT 8,625 8,686 12,650 15,780
PAT after MI 8,625 8,686 12,650 15,780
Growth (%) 22.8 0.7 45.6 24.7
Balance Sheet
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
Equity share capital 892 892 892 892
Reserves & surplus 31,918 38,952 49,950 64,078
Net worth 32,811 39,845 50,842 64,970Minority Interest 515 714 925 1,247
Secured Loans 3,348 2,848 2,348 2,348
Unsecured Loans 8,277 7,277 5,777 5,277
Loan Funds 11,624 10,124 8,124 7,624
Net deferred tax liability 1,411 1,411 1,458 1,458
Total Liabilities 46,361 52,094 61,350 75,299
Gross Block 29,643 34,143 39,143 45,143
Less: Depreciation 9,075 11,040 13,496 16,093
Net block 20,568 23,103 25,648 29,051
Capital work in progress 5,312 5,312 5,312 5,312
Investment 32 676 676 676
Current Assets 34,967 46,834 59,022 77,798Inventories 12,000 17,266 22,347 27,283
Sundry debtors 12,558 18,931 24,026 29,382
Cash & bank balance 4,201 4,025 5,053 10,640
Loans & advances 0 0 0 0
Other current assets 6,208 6,612 7,596 10,493
Current lia & Prov 14,518 23,832 29,309 37,537
Current liabilities 11,800 19,487 24,732 32,530
Provisions 2,718 4,344 4,577 5,008
Net current assets 20,449 23,002 29,714 40,260
Misc. exp 0 0 0 0
Total Assets 46,361 52,094 61,350 75,299
Cash Flow
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
PBT (Ex-Other income) 9,874 11,818 17,327 20,958
Depreciation 1,712 2,275 2,455 2,597
Interest Provided 325 355 270 267
Other Non-Cash items 0 0 0 0
Chg in working cap -2,425 -2,729 -5,637 -4,960
Tax paid 0 0 0 0
Operating Cashflow 9,486 11,719 14,416 18,863
Capital expenditure -4,952 -4,810 -5,000 -6,000
Free Cash Flow 4,534 6,909 9,416 12,863
Other income 89 153 601 801Investments 233 -645 0 0
Investing Cashflow -4,630 -5,302 -4,399 -5,199
Equity Capital Raised 138 0 0 0
Loans Taken / (Repaid) 226 -1,500 -2,000 -500
Interest Paid -325 -355 -270 -267
Dividend paid (incl tax) 0 0 0 0
Income from investments 0 0 0 0
Others -693 698 -1,984 -737
Financing Cashflow -654 -1,157 -4,254 -1,504
Net chg in cash 4,201 5,259 5,763 12,159
Opening cash position 2,015 4,201 4,025 5,053
Closing cash position 4,201 4,025 5,053 10,640
Key Ratios
Y/E Mar FY11A FY12A FY13E FY14E
Profitability (%)
EBITDA Margin 20.4 20.4 22.4 22.5
Net Margin 15.1 12.5 14.4 15.2
ROCE 24.2 25.0 32.1 32.2
ROE 29.5 23.9 27.9 27.3
RoIC 29.3 30.9 38.1 39.0
Per Share Data (Rs)
EPS 19.3 21.2 28.4 35.4
CEPS 23.2 24.6 33.9 41.2
BVPS 73.5 89.3 113.9 145.6DPS 3.2 3.2 3.2 3.2
Valuations (x)
PER 31.3 28.4 21.3 17.1
P/CEPS 26.1 24.6 17.9 14.7
P/BV 8.2 6.8 5.3 4.2
EV / Sales 4.9 4.0 3.1 2.5
EV / EBITDA 23.3 19.1 13.6 11.2
Dividend Yield (%) 0.5 0.5 0.5 0.5
Gearing Ratio (x)
Net Debt/ Equity 0.2 0.2 0.1 0.0
Net Debt/EBIDTA 0.6 0.4 0.2 -0.1
Working Cap Cycle (days) 101.7 97.8 100.7 101.9
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Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY11A 13,945 3,600 25.8 1,813 18.5 35.2 10.2 23.2 15.1 2.3
FY12A 14,079 4,665 33.1 2,059 21.0 13.6 10.7 20.4 11.5 2.1
FY13E 18,338 5,777 31.5 2,364 24.1 14.8 11.3 17.8 9.7 1.9
FY14E 25,386 7,683 30.3 3,517 35.9 48.8 15.1 12.0 7.1 1.7
Sobha Developers
Reiterate bullish outlook
January 31, 2013
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs429
Target Price
Rs484
EPS Chg FY13E/FY14E (%) -7.8 / 17
Target Price change (%) NA
Nifty 6,035
Sensex 19,895
Price Performance
(%) 1M 3M 6M 12M
Absolute 13 20 23 64
Rel. to Nifty 10 11 7 42
Source: Bloomberg
Relative price chart
250
290
330
370
410
450
Feb-12 Apr-12 Jun-12 Aug-12 Sep-12 Nov-12 Jan-13
Rs
-10
0
10
20
30
40%
Sobha Developers (LHS) Rel to Nif ty (RHS) Source: Bloomberg
Stock Details
Sector Real EstateBloomberg SOBHA IB
Equity Capital (Rs mn) 981
Face Value(Rs) 10
No of shares o/s (mn) 98
52 Week H/L 447/ 250
Market Cap (Rs bn/USD mn) 42/ 791
Daily Avg Volume (No of sh) 178,657
Daily Avg Turnover (US$mn) 1.3
Shareholding Pattern (%)
Dec'12 Sep'12 Jun'12
Promoters 60.6 60.6 60.6
FII/NRI 31.8 32.8 33.0
Institutions 4.3 3.1 2.6
Private Corp 0.9 0.9 0.8
Public 2.5 2.7 2.9
Source: Bloomberg
n SDL sells 0.9msf for Rs 5.3bn in Q3FY13. Mgmt. is quite
confident of attaining highest quarterly sales booking in Q4
and crossing the target of Rs 20bn for FY13
n Generates cash surplus of ~Rs 0.5bn in the Q3FY13 which is
utilized towards payments for new JD projects. Capex of Rs
230mn leads to increase in gross debt by Rs 244mn QoQ
n SDL to inch up its housing space scalability in FY14 - to
enter new markets viz. Kochi & Kozikhode, penetrate
Chennai and look for opportunities in Noida & Hyderabad
n Maintain Accumulate rating with TP of Rs 484. Mgmt.
reiterates our recent report on Bangalore housing markets,
wherein demand and pricing both look strong
Reported P&L marginally below estimates; cashflows improvessignificantly QoQ as expected
SDL reports topline of Rs 4.3bn, up 3.6% QoQ and 11% below estimates.. EBITDA
stood at Rs 1.37bn, up 6.9% QoQ and in-line with our estimates. EBITDA margin stood
at 32%, up 99bps QoQ. PAT at Rs 526mn is up 5% QoQ and 4% below estimates.
Company generated operating cashflows of Rs 893mn in the quarter and post payment
of Rs 473mn towards interest, the cash available for equity shareholders stood at Rs
419mn. The same for 9MFY13 stood at minus (-) Rs 185mn. Post capex of Rs 291mn
and land payments of Rs 1.7bn, the cash generation from operations is at minus (-) Rs
2.14bn in 9MFY13. This gap was financed by debt borrowings of Rs 2.5bn since FY12.
Gross debt for the quarter increases by Rs 244mn to Rs 14.5bn. Mgmt. guides capex
spend of Rs 200-250mn per quarter till FY14.
Launch pipeline for next 4 quarters is increased by 1.8msf mainly due to
new acquisitions done in new cities
At end of Q2FY13, SDL had launch pipeline of 6.04msf across 3 cities. The same is
increased to 8.8msf with addition of 2 new cities and penetration of Chennai. This
increase will inch up the potential to sell more considering new cities are been added.
With another 2 new cities viz. Noida & Hyderabad considered, this launch pipeline would
be further enhanced adding to the higher potential of sales bookings in FY14. In
Q4FY13, SDL expects to launch 2.3msf across 5 projects.
Mgmt. reiterates our bullish outlook on the Bangalore housing markets
(our recent report), wherein housing demand and pricing both look strong
SDL mgmt did state that demand for housing space looks considerably strong inBangalore despite of 5-7% hike in pricing seen in some of their projects. Also, the
demand from NRIs continues to be healthy with nearly 24% of sales booking contributed
by them in the quarter. In our recently released report we have attributed to Bangalore
housing market entering a spiral wherein higher demand leads to higher pricing leading
to higher speculation which is again leading to higher demand. We believe this spiral to
continue for 3-4 quarters and only deterrent to it is further fragmentation of the
Bangalore market leading to higher supply and INR appreciation leading to lower
demand.
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Although SDL would do well in Bangalore, its large project in Gurgaon can
face threat from DLFs launches
DLF is planning to launch a premium project in Gurgaon Phase V at a similar ticket size at
which SDL sells its villas in Gurgaon. Considering DLF is launching after long time and
most of the Gurgaon housing market is driven by investors, the launch can affect SDLs
sales booking at Sobha International City (SIC). Currently SIC contributes 20-25% of SDLs
sales booking in value terms and more so in collections. Hence, any depletion in salesbooking from SIC would affect SDLs cashflows significantly. We are not building in this
threat in our numbers as of now considering that different formats (villas v/s condominiums)
may lead to SDL unaffected.
Exhibit 1: Sales Booking Trend
0.0
0.2
0.4
0.6
0.8
1.0
Q111 Q211 Q311 Q411 Q112 Q212 Q312
0
1200
2400
3600
4800
6000
Sales Bookings Avg. Realisation (RHS) Source: Company, Emkay Research
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Exhibit 2: Quarterly Summary (Consolidated)
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD FY13 YTD FY12 YoY (%)
Revenue 3,032 5,230 4,332 4,148 4,298 41.8 3.6 12,778 9,154 39.6
Expenditure 2,084 3,247 3,134 2,863 2,924 40.3 2.1 8,921 6,628 34.6
as % of sales 68.7 62.1 72.3 69.0 68.0 100.0 100.0
Cost of Sales 1,380 2,427 2,239 1,987 2,086 6,312 4,414 43.0
as % of sales 45.5 46.4 51.7 47.9 48.5 70.8 66.6
Employee Cost 303 342 412 404 397 31.0 (1.7) 1,213 925 31.1
as % of sales 10.0 6.5 9.5 9.7 9.2 13.6 14.0
Other expenditure 401 478 483 472 441 10.0 (6.6) 1,396 1,289 8.3
as % of sales 13.2 9.1 11.1 11.4 10.3 15.6 19.4
EBITDA 948 1,983 1,198 1,285 1,374 44.9 6.9 3,857 2,526 52.7
Depreciation 106 117 140 141 153 44.3 8.5 434 271 60.1
EBIT 842 1,866 1,058 1,144 1,221 45.0 6.7 3,423 2,255 51.8
Other Income 21 13 16 14 15 (28.6) 7.1 45 54 (16.7)
Interest 286 406 377 443 439 53.5 (0.9) 1,259 728 72.9
PBT 577 1,473 697 715 797 38.1 11.5 2,209 1,581 39.7
Total Tax 176 497 247 214 271 732 517Adjusted PAT 401 976 450 501 526 31.2 5.0 1,477 1,064 38.8
(Profit)/loss from JV's/Ass/MI 0 0 0 0 0 0 15
APAT after MI 401 976 450 501 526 31.2 5.0 1,477 1,049 40.8
Extra ordinary items 0 0 0 0 0 0 0
Reported PAT 401 976 450 501 526 31.2 5.0 1,477 1,049 40.8
Reported EPS 4.1 10.0 4.6 5.1 5.4 15.1 10.7
Margins (%) (bps) (bps) (bps)
EBIDTA 31.3 37.9 27.7 31.0 32.0 70 99 43.2 38.1 512
EBIT 27.8 35.7 24.4 27.6 28.4 64 83 38.4 34.0 435
EBT 19.0 28.2 16.1 17.2 18.5 (49) 131 24.8 23.9 91
PAT 13.2 18.7 10.4 12.1 12.2 (99) 16 16.6 16.1 50
Effective Tax rate 30.5 33.7 35.4 29.9 34.0 350 407 33 33 44
Operating Cashflows 2003 1320 730 544 1113
Land Monetisation Value 0 1360 957 64 0
Gross Debt 13364 12031 12307 14246 14490
Net Debt 12743 11443 11806 12922 13100
Sales Bookings (msf) 0.82 0.86 0.84 0.95 0.90
Sales Bookings (Rs mn) 4483 4644 4794 5275 5335
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Emkay Research January 31, 2013 4
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
Net Sales 13,945 14,079 18,338 25,386
Growth (%) 23.4 1.0 30.3 38.4
Expenditure 10,345 9,414 12,562 17,703Raw Materials 0 0 0 0
Employee Cost 1,035 1,268 1,584 1,743
Other Exp 9,310 8,146 10,977 15,961
EBITDA 3,600 4,665 5,777 7,683
Growth (%) 46.2 29.6 23.8 33.0
EBITDA margin (%) 25.8 33.1 31.5 30.3
Depreciation 278 388 478 514
EBIT 3,322 4,278 5,299 7,168
EBIT margin (%) 23.8 30.4 28.9 28.2
Other Income 51 65 60 0
Interest expenses 860 1,165 1,644 1,716
PBT 2,514 3,177 3,715 5,452Tax 669 1,077 1,301 1,885
Effective tax rate (%) 26.6 33.9 35.0 34.6
Adjusted PAT 1,845 2,100 2,414 3,567
Growth (%) 33.4 13.8 14.9 47.8
Net Margin (%) 13.2 14.9 13.2 14.1
(Profit)/loss from JVs/Ass/MI -33 -41 -50 -50
Adj. PAT After JVs/Ass/MI 1,813 2,059 2,364 3,517
E/O items 0 0 0 0
Reported PAT 1,813 2,059 2,364 3,517
PAT after MI 1,813 2,059 2,364 3,517
Growth (%) 35.2 13.6 14.8 48.8
Balance Sheet
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
Equity share capital 981 981 981 981
Reserves & surplus 17,527 19,017 20,807 23,751
Net worth 18,508 19,998 21,788 24,731Minority Interest 324 355 405 455
Secured Loans 12,332 12,338 14,548 13,498
Unsecured Loans 84 70 100 100
Loan Funds 12,416 12,408 14,648 13,598
Net deferred tax liability -74 330 461 599
Total Liabilities 31,174 33,091 37,302 39,383
Gross Block 3,148 4,998 5,476 5,790
Less: Depreciation 1,775 2,158 2,636 3,151
Net block 1,373 2,840 2,840 2,640
Capital work in progress 647 13 50 1,100
Investment 37 0 500 500
Current Assets 36,816 39,520 42,438 45,660Inventories 10,685 16,759 17,641 18,585
Sundry debtors 4,252 3,803 5,024 6,955
Cash & bank balance 288 690 904 1,252
Loans & advances 21,592 18,268 18,868 18,868
Other current assets 0 0 0 0
Current lia & Prov 7,699 9,282 8,526 10,516
Current liabilities 6,758 7,895 7,226 8,925
Provisions 942 1,386 1,299 1,591
Net current assets 29,117 30,238 33,912 35,144
Misc. exp 0 0 0 0
Total Assets 31,174 33,091 37,302 39,383
Cash Flow
Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E
PBT (Ex-Other income) 2,463 3,112 3,655 5,452
Depreciation 278 388 478 514
Interest Provided 860 1,165 1,644 1,716
Other Non-Cash items 0 0 0 0
Chg in working cap 253 -316 -3,328 -746
Tax paid -669 -1,077 -1,301 -1,885
Operating Cashflow 3,185 3,273 1,148 5,051
Capital expenditure -236 -1,221 -515 -1,364
Free Cash Flow 2,949 2,052 632 3,687
Other income 51 65 60 0Investments -10 37 -500 0
Investing Cashflow -195 -1,119 -955 -1,364
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) -2,325 -8 2,240 -1,050
Interest Paid -860 -1,165 -1,644 -1,716
Dividend paid (incl tax) -343 -574 -574 -574
Income from investments 0 0 0 0
Others 0 -10 0 0
Financing Cashflow -3,527 -1,757 23 -3,339
Net chg in cash -537 397 215 348
Opening cash position 826 288 690 904
Closing cash position 288 685 905 1,252
Key Ratios
Y/E Mar FY11A FY12A FY13E FY14E
Profitability (%)
EBITDA Margin 25.8 33.1 31.5 30.3
Net Margin 13.2 14.9 13.2 14.1
ROCE 10.7 13.5 15.2 18.7
ROE 10.2 10.7 11.3 15.1
RoIC 10.9 13.7 15.5 19.8
Per Share Data (Rs)
EPS 18.5 21.0 24.1 35.9
CEPS 21.3 25.0 29.0 41.1
BVPS 188.7 203.9 222.2 252.2DPS 3.0 5.0 5.0 5.0
Valuations (x)
PER 23.2 20.4 17.8 12.0
P/CEPS 20.1 17.2 14.8 10.4
P/BV 2.3 2.1 1.9 1.7
EV / Sales 3.9 3.8 3.0 2.1
EV / EBITDA 15.1 11.5 9.7 7.1
Dividend Yield (%) 0.7 1.2 1.2 1.2
Gearing Ratio (x)
Net Debt/ Equity 0.7 0.6 0.6 0.5
Net Debt/EBIDTA 3.4 2.5 2.4 1.6
Working Cap Cycle (days) 754.6 766.1 657.0 487.3
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Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY12A 63,956 10,240 16.0 11,967 10.1 142.3 26.0 11.8 12.2 3.1
FY13E 77,602 16,624 21.4 13,161 11.2 10.0 25.1 10.8 7.0 2.4
FY14E 81,943 15,978 19.5 12,909 10.9 -1.9 19.7 11.0 6.5 2.0
FY15E 91,689 17,427 19.0 14,273 12.1 10.6 24.3 9.9 5.2 3.1
Mahindra Satyam
Inline operating performance
January 31, 2013
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs120
Target Price
Rs125
EPS Chg FY13E/FY14E (%) 7/0
Target Price change (%) NA
Nifty 6,035
Sensex 19,895
Price Performance
(%) 1M 3M 6M 12M
Absolute 12 10 46 63
Rel. to Nifty 9 2 27 41
Source: Bloomberg
Relative price chart
60
73
86
99
112
125
Feb-12 Apr-12 Jun-12 Aug-12 Sep-12 Nov-12 Jan-13
Rs
-20
-6
8
22
36
50%
Mahindra Satyam (LHS) Rel to Ni fty (RHS) Source: Bloomberg
Stock Details
Sector IT ServicesBloomberg SCS IB
Equity Capital (Rs mn) 2,354
Face Value(Rs) 2
No of shares o/s (mn) 1,177
52 Week H/L 125/ 65
Market Cap (Rs bn/USD mn) 141/ 2,650
Daily Avg Volume (No of sh) 3,767,703
Daily Avg Turnover (US$mn) 7.7
Shareholding Pattern (%)Dec12 Sep12 Jun12
Promoters 42.6 42.6 42.6
FII/NRI 27.8 26.0 22.3
Institutions 8.5 8.7 7.0
Private Corp 2.4 2.9 5.1
Public 18.7 19.8 23.0
Source: Bloomberg
n Inline operating performance with revenues at US$ 356 mn
(+0.5% QoQ) and a better margin performance (21.6%, flat
QoQ) aided by provision reversals(1.7% of revenues)
n Europe drives growth with a 9.6% sequential increase. Top
client metrics remain tardy with non 10 clients driving rev
performance after strong client mining through recent qtrs
n Management hopeful of pickup in revenue growth in FY14
aided by new logo wins and deal wins in Manufacturing,
Retail and Healthcare
n See pause to outperformance ahead with Dec12 qtr breaking
the trend of strong beat on operational performance through
FY12-H1FY13. Retain ACCUMULATE, TP Rs 125
Inline operational performance, profit beat driven by forex gainsMahindra Satyam reported revenues at US$ 356 mn (+0.5% QoQ), a tad lower than
expectations however EBITDA margins came in at 21.6% (up ~10 bps sequentially),
higher than Emkay est( we estimated a 70 bps QoQ decline) but were aided largely by
reversal of provisions of ~Rs 335 mn (1.7% of revenues). Profits (ex one off write-off of
costs related to Aberdeen settlement) came in at Rs 3.7 bn (+35% QoQ), significantly
ahead of Emkay estimates but was aided by forex gains of ~Rs 336 mn (V/s est of ~Rs
167 mn of losses). Net headcount addition remained muted with co adding ~169 people
during the quarter after relatively stronger additions through recent quarters. Growth was
largely led by Non top 10 clients (revenues grew by ~8.5% sequentially) with top clients
revenue performance relatively tardy after several quarters of decent client mining.
Amongst geographies, European revenues grew by ~9.5% QoQ with US revenues down
by 3.3% QoQ
Better FY14 ahead, Fortune 500 logo wins support confidence
Mahindra Satyam indicated that it sees better revenue growth in FY14 aided both by
decent logo wins (company indicated that it has won 2 Fortune 500 logos during the
current quarter) as well as deal wins in Manufacturing, Retail and Healthcare. While top
clients rev performance was tardy in the current qtr (a slight disappointment given
that cos rev growth through the past 4-6 qtrs has been led by top client mining),
management indicated that it was impacted adversely by seasonal weakness in a
couple of large Technology clients and expects improvement going forward.
Raise FY13E earnings higher by 7%, retain ACCUMULATE, TP Rs 125
We raise our FY13E EPS higher by 7% while leaving our FY14E EPS unchanged.
After several quarters of strong operational performance which drove earnings
upgrade across the street and a 60%+ upmove in the stock price in the past 12
months, we see near term pause to out performance ahead. We would be reviewing
our ratings/TP post TechMs results on Feb 62013. We continue to retain our
ACCUMULATE rating and TP of Rs 125, based on a share swap ratio of 8.5:1 and TP of
Rs 1,050 for Tech Mahindra.
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Emkay Research January 31, 2013 2
Exhibit 1: Quarterly Performance at a glance
Rs mn Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 QoQ (%) YoY % FYTD'13 FYTD'12 YoY %
Revenues(US$ mn) 320 330 325 332 342 354 356 0.5 9.4 1,052 975 7.9
Revenue 14,339 15,777 17,181 16,658 18,799 19,384 19,395 0.1 12.9 57,578 47,297 21.7
Operating Expenditure 12,206 13,360 14,400 13,750 14,720 15,210 15,210 0.0 5.6 45,140 39,966 12.9
Cost of revenues 10,033 10,502 11,449 11,140 12,160 12,310 12,130 (1.5) 5.9 36,600 31,984 14.4
as % of sales 70.0 66.6 66.6 66.9 64.7 63.5 62.5 63.6 67.6
SG&A expenses 2,173 2,858 2,951 2,610 2,560 2,900 3,080 6.2 4.4 8,540 7,982 7.0
as % of sales 15.2 18.1 17.2 15.7 13.6 15.0 15.9 14.8 16.9
EBITDA 2,133 2,417 2,781 2,908 4,079 4,174 4,185 0.3 50.5 12,438 7,331 69.7
Depreciation 380 396 385 415 494 428 361 1,283 1,162 10.4
EBIT 1,753 2,021 2,396 2,493 3,585 3,746 3,824 2.1 59.6 11,155 6,170 80.8
Other Income 937 947 1,486 701 1,308 (26) 1,078 2,360 3,370 (30.0)
PBT 2,690 2,968 3,881 3,195 4,893 3,720 4,902 31.8 26.3 13,515 9,539 41.7
Total Tax 426 578 790 (943) 1,326 925 1,123 3,374 1,794 88.1
Adjusted PAT 2,264 2,390 3,091 4,137 3,567 2,795 3,779 35.2 22.3 10,141 7,745 30.9
(Profit)/loss from JV's/Ass/MI 5.5 7.1 7.0 (104.0) 40.1 14.6 38.0 93 20
APAT after MI 2,259 2,383 3,084 4,241 3,527 2,780 3,741 34.6 21.3 10,048 7,726 30.1Extra ordinary items 0 0 0 -1094 0 0 -2940 -2,940 0
Reported PAT 2,259 2,383 3,084 3,147 3,527 2,780 801 -71.2 -74.0 7,107 7,726 (8.0)
Reported EPS 1.9 2.0 2.6 4.5 3.0 2.4 0.7 -71.2 -74.0 6.0 6.6 (7.9)
Margins (%) (bps) (bps) (bps)
EBIDTA 14.9 15.3 16.2 17.5 21.7 21.5 21.6 5 539 21.6 15.5 610
EBIT 12.2 12.8 13.9 15.0 19.1 19.3 19.7 39 577 19.4 13.0 633
EBT 18.8 18.8 22.6 19.2 26.0 19.2 25.3 608 268 23.5 20.2 330
PAT 15.8 15.1 18.0 18.9 18.8 14.3 4.1 (1,021) (1,382) 17.5 16.3 112
Effective Tax rate 15.8 19.5 20.4 (29.5) 27.1 24.9 22.9 (197) 255 25.0 18.8 616.1
Source: Company, Emkay Research
Exhibit 2: Changes in earnings estimates
(All fig in Rs mn FY13E FY14E FY15E
except EPS) Old New % Chg Old New % Chg New % growth
Revenues(US$ mn) 1,436 1,416 -1.4% 1,608 1,576 -2.0% 1,763 11.9%
Revenues 77,396 77,602 0.3% 83,630 81,943 -2.0% 91,689 11.9%
EBITDA 16,271 16,624 2.2% 16,253 15,978 -1.7% 17,427 9.1%
EBITDA margins, % 21.0 21.4 19.4 19.5 19.0
Net profits 12,337 13,161 6.7% 12,949 12,909 -0.3% 14,273 10.6%
EPS 10.5 11.2 6.7% 11.0 10.9 -0.3% 12.1 10.6%
Source: Company, Emkay Research
Exhibit 3: Dec12 qtr margins came in flat QoQ aided by provision reversals
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
June'10 Sep'10 Dec'10 Mar'11 Jun'11 Sep'11 Dec'11 Mar'12 Jun'12 Sep'12 Dec'12
Satyam's EBITDA margins
Source: Company, Emkay Research
Dec12 quarters show doesnt
continue the strong beat on
operational performance that
has aided earnings upgrades
and a 60%+ upmove in the past
12 months
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Mahindra Satyam Result Update
Emkay Research January 31, 2013 3
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Net Sales 63,956 77,602 81,943 91,689
Growth (%) 24.3 21.3 5.6 11.9
Expenditure 53,716 60,979 65,965 74,262Raw Materials 0 0 0 0
Employee Cost 43,124 49,335 53,673 60,509
Other Exp 10,592 11,644 12,291 13,753
EBITDA 10,240 16,624 15,978 17,427
Growth (%) 125.0 62.3 -3.9 9.1
EBITDA margin (%) 16.0 21.4 19.5 19.0
Depreciation 1,577 1,697 1,818 2,025
EBIT 8,663 14,926 14,160 15,402
EBIT margin (%) 13.5 19.2 17.3 16.8
Other Income 4,071 2,850 3,265 3,842
Interest expenses 0 0 0 0
PBT 12,734 17,776 17,425 19,244Tax 852 4,482 4,356 4,811
Effective tax rate (%) 6.7 25.2 25.0 25.0
Adjusted PAT 11,882 13,294 13,069 14,433
Growth (%) 139.0 11.9 -1.7 10.4
Net Margin (%) 18.6 17.1 15.9 15.7
(Profit)/loss from JVs/Ass/MI 84 -133 -160 -160
Adj. PAT After JVs/Ass/MI 11,967 13,161 12,909 14,273
E/O items 0 0 0 0
Reported PAT 11,967 13,161 12,909 14,273
PAT after MI 11,967 13,161 12,909 14,273
Growth (%) 142.3 10.0 -1.9 10.6
Balance Sheet
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Equity share capital 2,354 2,354 2,354 2,354
Reserves & surplus 43,423 56,584 69,493 43,460
Net worth 45,777 58,938 71,847 45,814Minority Interest 150 150 150 150
Secured Loans 234 234 234 234
Unsecured Loans 12,304 12,304 12,304 12,305
Loan Funds 12,538 12,538 12,538 12,539
Net deferred tax liability -1,681 -1,681 -1,681 -1,681
Total Liabilities 56,784 69,945 82,854 56,822
Gross Block 21,674 23,174 24,974 26,774
Less: Depreciation 13,585 15,282 17,100 19,125
Net block 8,089 7,892 7,874 7,649
Capital work in progress 2,006 2,006 2,006 2,006
Investment 972 972 972 972
Current Assets 68,778 87,140 101,636 119,660Inventories 146 146 146 146
Sundry debtors 14,018 17,221 18,185 20,348
Cash & bank balance 28,519 36,435 49,441 63,166
Loans & advances 24,580 26,534 27,129 28,464
Other current assets 1,515 6,803 6,735 7,536
Current lia & Prov 27,063 32,954 34,798 38,937
Current liabilities 13,984 17,009 17,960 20,096
Provisions 13,079 15,946 16,838 18,840
Net current assets 41,715 54,186 66,838 80,723
Misc. exp 0 0 0 0
Total Assets 52,782 65,055 77,690 91,351
Cash Flow
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
PBT (Ex-Other income) 8,663 14,926 14,160 15,402
Depreciation 1,577 1,697 1,818 2,025
Interest Provided 0 0 0 0
Other Non-Cash items 0 0 0 0
Chg in working cap -6 -4,555 354 -160
Tax paid -852 -4,482 -4,356 -4,811
Operating Cashflow 1,087 7,586 11,976 12,456
Capital expenditure -1,037 -1,500 -1,800 -1,800
Free Cash Flow 50 6,086 10,176 10,656
Other income 4,071 2,850 3,265 3,842Investments 3,376 0 0 0
Investing Cashflow 6,410 1,350 1,465 2,042
Equity Capital Raised 111 0 0 0
Loans Taken / (Repaid) 14 0 0 1
Interest Paid 0 0 0 0
Dividend paid (incl tax) 0 0 0 0
Income from investments 0 0 0 0
Others -6,556 -1,021 -434 -774
Financing Cashflow -6,431 -1,021 -434 -773
Net chg in cash 1,067 7,916 13,006 13,725
Opening cash position 27,452 28,519 36,435 49,441
Closing cash position 28,519 36,435 49,441 63,166
Key Ratios
Y/E Mar FY12A FY13E FY14E FY15E
Profitability (%)
EBITDA Margin 16.0 21.4 19.5 19.0
Net Margin 18.6 17.1 15.9 15.7
ROCE 22.0 28.1 22.8 27.6
ROE 26.0 25.1 19.7 24.3
RoIC 40.3 63.6 55.6 61.0
Per Share Data (Rs)
EPS 10.1 11.2 10.9 12.1
CEPS 11.5 12.6 12.5 13.8
BVPS 38.8 49.9 60.9 38.8DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 11.8 10.8 11.0 9.9
P/CEPS 10.5 9.5 9.6 8.7
P/BV 3.1 2.4 2.0 3.1
EV / Sales 1.9 1.5 1.3 1.0
EV / EBITDA 12.2 7.0 6.5 5.2
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity -0.4 -0.4 -0.5 -1.1
Net Debt/EBIDTA -1.7 -1.5 -2.4 -3.0
Working Cap Cycle (days) 75.3 83.5 77.5 69.9
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Your success is our success
Emkay
Res
ultUpdate
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Standalone) (Rsmn)
Y/E Net Net EPS ABV RoA RoE PE P/ABV
Mar Income Profit (Rs) (Rs) (%) (%) (x) (x)
FY11A 53,929 14,231 29.9 145.0 1.0 18.7 5.7 1.1FY12A 64,613 18,668 37.3 171.1 1.1 19.6 4.4 1.0
FY13A 66,064 14,632 29.3 162.7 0.8 13.2 5.6 1.0
FY14E 76,264 17,465 34.9 190.7 0.8 14.2 4.7 0.9
Allahabad Bank
Additions to stressed assets continues to decline
January 31, 2013
Rating
Hold
Previous Reco
Hold
CMP
Rs164
Target Price
Rs170
EPS Chg FY13E/FY14E (%) -6/-20
Target Price change (%) 17
Nifty 6,035
Sensex 19,895
Price Performance
(%) 1M 3M 6M 12M
Absolute -4 20 22 1
Rel. to Nifty -6 12 6 -13
Source: Bloomberg
Relative price chart
100
125
150
175
200
225
Feb-12 Apr-12 Jun-12 Aug-12 Sep-12 Nov-12 Jan-13
Rs
-40
-28
-16
-4
8
20%
Allahabad Bank (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock Details
Sector Banking & Financial ServicesBloomberg ALBK IB
Equity Capital (Rs mn) 5,000
Face Value(Rs) 10
No of shares o/s (mn) 500
52 Week H/L 211/ 103
Market Cap (Rs bn/USD mn) 82/ 1,538
Daily Avg Volume (No of sh) 2,525,594
Daily Avg Turnover (US$mn) 7.5
Shareholding Pattern (%)
Dec'12 Sep'12 Jun'12
Promoters 55.2 55.2 55.2
FII/NRI 9.6 11.5 11.9
Institutions 22.8 20.3 20.9
Private Corp 1.6 1.8 1.6
Public 10.9 11.2 10.4
Source: Bloomberg
n ALBKs Q3FY13 NII/PAT at Rs13.3bn/3.1bn in line with
estimates. Enthused by consecutive decline in addition to
stress assets Rs18bn vs. Rs37bn in Q2 and Rs54bn in Q1
n Loan growth jumps back to 19% yoy with 8.5% qoq growth.
ALBK confident of 18% growth for FY13 implying 9% qoq
growth in Q4FY13 even as we remain unsure of the same
n Slippages at Rs10bn (3.3% annualized), ALBK confident of
Rs7-8bn slippage in Q4FY13. CDR pipeline at Rs4.3bn only.
As with other PSU banks, recoveries remain strong
n Cutting our FY13/14E estimates by 6%/20% for wage revision
and higher NPA provisions. Retain HOLD rating with TP of
Rs170
Results inline; stable PCR at 61% levels provides comfort
Allahabad Bank (ALBK) Q3FY13 NII at Rs13.3bn grew +13% qoq (-4% yoy) as expected
and was on back of healthy 22bps qoq expansion in NIM (reported) to 3% and 9% qoq
growth in loan portfolio. Non-interest income at Rs3.4bn was up +13% qoq and offset
the steep rise in operating expense (+20% qoq driven by Rs400mn of wage provisions
for expected hikes), thereby resulting in moderate 7% qoq growth in operating profit to
Rs8.6bn. While GNPA at Rs35bn and NNPA at Rs25bn were +6% qoq each, we
continue to drive comfort from the fact that a) PCR (including tech-w/off) still
remains high at 61% b) addition to stress asset addition (ie fresh slippages +
restructuring) has eased to Rs17.8bn (1.5% of loans) vs Rs37.4bn in Q2FY13 and
Rs54bn in Q1FY13 and c) recovery / up-gradation stands at 65% of Op NPA.Fresh
slippages during the quarter stood at Rs10bn (3.3% of loans) and included one large
account of Rs1bn. Restructuring for the quarter was at Rs7.9bn (0.7% of loans) and waswitnessed in segments of steel (one account of Rs3.7bn) and textile (Rs1.1bn)
On the balance sheet front: Loan portfolio expanded 20% yoy / 9% qoq against 17.4%
yoy / 5.4% qoq growth in deposits. Resultant, LDR at 70.5% expanded 200bps qoq.
CASA ratio stood at 30.2% with growth in CASA deposits at 16% yoy / 5% qoq. The
share of high cost deposits stands reduced to sub-10% now.
Exhibit 1: Yield analysis
YoY QoQ% Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
(bps) (bps)
Yield on advances* 11.9 11.6 11.9 11.2 11.2 -74 3
Yield on investments* 7.4 7.9 7.9 8.2 7.8 39 -41
Yield on assets* 9.4 9.5 9.8 9.3 9.3 -15 -7Cost of funds* 6.1 6.6 7.0 6.8 6.5 40 -28
NIM* 3.3 2.9 2.9 2.6 2.8 -55 21
Yield on advances # 12.2 12.0 12.4 11.5 11.4 -78 -10
Yield on assets # 10.5 10.5 10.8 10.2 10.1 -41 -9
Cost of Deposit # 6.8 7.3 7.8 7.6 7.4 59 -17
Cost of funds # 6.8 7.2 7.7 7.4 7.2 42 -18
NIM # 3.7 3.2 3.2 2.8 3.0 -71 22
Source: Company, Emkay Research Note:* Calculated on basis of average quarterly balances # Reported
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Allahabad Bank Result Update
Emkay Research January 31, 2013 2
Exhibit 2: Quarterly results
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD' 13 YTD' 12 YoY (%)
Net Interest Income 13,805 12,882 13,062 11,743 13,303 -3.6 13.3 38,107 38,743 -1.6
Other Income 3,484 3,551 3,096 3,021 3,407 -2.2 12.8 9,524 9,435 0.9
Fee Income 2,130 2,360 2,070 1,730 2,170 1.9 25.4 5,970 6,175 -3.3
Net Income 17,289 16,433 16,157 14,764 16,709 -3.4 13.2 47,631 48,178 -1.1
Total Operating Expenses 6,990 7,424 6,598 6,741 8,109 16.0 20.3 21,448 19,490 10.0
As % Of Net Income 40.4 45.2 40.8 45.7 48.5 45.0 40.5
Employee Expenses 4,898 4,950 4,356 4,418 5,635 15.0 27.5 14,410 13,395 7.6
As % Of Net Income 28.3 30.1 27.0 29.9 33.7 30.3 27.8
Other Expenses 2,092 2,474 2,242 2,323 2,474 18.3 6.5 7,039 6,095 15.5
As % Of Net Income 12.1 15.1 13.9 15.7 14.8 14.8 12.7
Operating Profit 10,300 9,009 9,559 8,023 8,601 -16.5 7.2 26,183 28,689 -8.7
As % Of Net Income 59.6 54.8 59.2 54.3 51.5 55.0 59.5
Provisions 4,212 4,550 3,132 4,645 4,324 2.7 -6.9 12,101 11,526 5.0
Prov for NPA 3,057 4,110 2,700 3,550 3,435 12.4 -3.2 9,685 7,728 25.3
PBT 6,087 4,459 6,428 3,378 4,277 -29.7 26.6 14,082 17,163 -17.9
Total Tax 483 447 1,284 1,036 1,168 141.8 12.7 3,488 2,497 39.7Adjusted PAT 5,604 4,012 5,143 2,342 3,109 -44.5 32.7 10,594 14,666 -27.8
Extra Ordinary Items 0 0 0 0 0 0 0
Reported PAT 5,604 4,012 5,143 2,342 3,109 -44.5 32.7 10,594 14,666 -27.8
Reported EPS 11.8 8.0 10.3 4.7 6.2 -47.2 32.7 21.2 30.8 -31.2
Source: Company, Emkay Research
Key highlights:
Addition to stress asset has eased materially: Q3FY13 saw substantial reduction inaddition to stress asset at Rs17.8bn (1.5% of loans). This compares against Rs37.4bn
(3.4% of loans) in Q2FY13 and Rs54bn (4.9% of loans) in Q1FY13.
Even after adjusting for one-offs (Q2FY13 adjusted slippages at Rs10bn andQ1FY13 restructuring adjusted for SEB at Rs25.5bn), stress addition remains
lower.
Recovery / up-gradation for M9FY13 have improved to 65% of opening NPA.
PCR ratio (including tech-w/off) too remains higher at 61% (albeit declined from
78% in Q3FY12).
Restructuring during the quarter stood at Rs7.9bn (0.7% of loans) and was
broadly in segments of steel and textile. Slippages from restructured portfolio too
remain comfortable at 12% of opening restructured loans.
Guides to further lower additions in Q4FY13: ALBK has guided that the slippagesduring Q4FY13 may remain Rs7-8bn from larger accounts. However, we are building
Rs12bn of slippages for Q4FY13 to take into account the low value accounts. The total
pipeline of CDR cases is Rs4.3bn as of now.Thus, total stressed assets additions
under our numbers would still remain at Rs16bn, in line with Q3FY13. ALBK has
guided to GNPAs at 2.8% (vs. 2.9%) and NNPAs at 1.9% (vs. 2.1%) for FY13E
even as it looks to sell Rs5.4bn assets to ARCs.
Loan growth remained broad based: Q3FY13 loan growth at 20% yoy was broadbased across all segments agri (+27% yoy / 1% qoq), large corporate (+20% yoy /
13% qoq), SME (+17% yoy / 5% qoq) and retail (+14% yoy / 4% qoq). Amongst retail,
growth was witnessed in pockets of CV (+18% yoy), trade loans (+49% yoy).
Margin expansion led by declining share of bulk deposits: Margins (reported)at3% expanded 22bps qoq and were on back of healthy 16% yoy growth in CASA
deposits, decline in share of high cost bulk deposits (CDs account for 9% of deposits
vs 13% in Q3FY12) and relatively higher 15% yoy / 5% qoq growth in high yieldingsegments of retail and MSME.
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Allahabad Bank Result Update
Emkay Research January 31, 2013 3
Non-interest income surprises on upside and offsets higher Opex: Non-interestincome at Rs3.4bn (+13% qoq) was marginally ahead of our estimates and aided by
healthy 25% qoq growth in fee income and 13% qoq growth in trading income.
However, with 16% yoy (20% qoq) growth in operating expenses, operating profit at
Rs8.6bn grew by mere 7% qoq.
Cost/income ratio had inched to multi-quarter high of 49% and was primarily due
to Rs400mn of provisions of expected wage hike (implies 13-14% expected hike)and Rs750mn of extra AS-15 due to change in wage increase assumptions.
Capital adequacy comfortable; likely to get capital from govt in Q1FY14: ALBKstier I CAR (excluding M9FY13 profits) stood at comfortable 8.8%. ALBK has guided
that the central government has agreed to sanction capital of Rs15bn for ALBK in
Q1FY14. However, we havent built that in our numbers.
Valuations and view
Allahabad Bank Q3FY13 results provide comfort in terms of a) limited addition to stress
addition (1.5% of loans), b) Recovery / up-grades at 65% of opening NPA YTD and c)
improving operating matrix in form of 22bps qoq rise in margins to 3%, CASA at 30% and
declining share of bulk deposits. However, we have still cut our earning estimates for
FY13E/14E to take into account wage provisions for expected hike and slightly higher NPAprovisions. While PCR at 61% was stable qoq, problem loans at 13% of loans will warrant
higher provisioning. We are factoring 100bps of credit cost over FY12-14E. We retain
HOLD rating on the stock with TP of Rs170, valuing the stock at 0.9x FY14E ABV vs.
average of FY13/14E earlier.
Exhibit 3: Earnings revision
Rs mn FY13E FY14E
New Old % chg New Old % chg
NII 52,876 52,847 0.1 61,868 63,206 -2.1
PAT 14,632 15,640 -6.4 17,465 21,926 -20.3
EPS (Rs) 29 31 -6.4 35 44 -20.3
ABV (Rs) 163 167 -2.5 191 196 -2.9
Source: Company
Exhibit 4: Loan mix
Rs bn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%)
Retail 144 151 153 157 164 14.0 4.3
Agriculture 134 166 162 168 170 26.8 1.1
SME 161 184 182 179 188 16.7 5.2
Others 566 610 608 605 681 20.4 12.6
Total 1,004 1,111 1,105 1,108 1,203 19.7 8.5
Source: Company, Emkay Research
Exhibit 5: Deposit profileRs bn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%)
Current Deposits 76 95 79 88 90 19.1 2.0
Savings Deposits 369 391 386 402 425 15.2 5.7
CASA 445 487 465 491 515 15.8 5.0
Term deposits 1,008 1,109 1,104 1,129 1,191 18.2 5.5
Total Deposits 1,453 1,596 1,569 1,620 1,706 17.4 5.4
CASA (%) 30.6 30.5 29.6 30.3 30.2 -42 -9
Source: Company, Emkay Research
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Allahabad Bank Result Update
Emkay Research January 31, 2013 4
Exhibit 6: Other income
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD' 13 YTD' 12 YoY (%)
Fee/Commission income 2,130 2,360 2,070 1,730 2,170 1.9 25.4 5,970 6,175 -3.3
Trading gains/(losses) 210 590 550 470 530 152.4 12.8 1,550 541 186.3
Forex gains/(losses) 300 410 320 320 0 -100.0 -100.0 640 890 -28.1
Other non int income 844 191 156 501 707 -16.3 41.0 1,364 1,829 -25.4
Total 3,484 3,551 3,096 3,021 3,407 -2.2 12.8 9,524 9,435 0.9
Source: Company, Emkay Research
Exhibit 7: Asset quality
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%)
Gross NPA 18,870 20,590 21,622 33,114 35,316 87.2 6.7
Net NPA 7,960 10,917 11,910 23,306 24,775 211.3 6.3
Gross NPA (%) 1.9 1.8 2.0 3.0 2.9
Net NPA (%) 0.8 1.0 1.1 2.1 2.1
Net NPLs/Net worth (%) 8.0 11.3 11.7 20.7 21.4
Provision cover (%) 57.8 47.0 44.9 29.6 29.8
Provision cover (incl tech w/off) 78.0 74.0 73.6 60.8 61.0
Source: Company, Emkay Research
Exhibit 8: Provision breakdown
Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 YoY (%) QoQ (%) YTD' 13 YTD' 12 YoY (%)
On NPL 3,057 4,110 2,700 3,550 3,435 12.4 -3.2 9,685 7,728 25.3
As % of advances 0.30 0.37 0.24 0.32 0.29 0.8 0.8
On Standard Assets 272 710 622 260 1,325 386.6 409.7 2,207 734 200.6
Investment Depreciation 633 -380 -960 -390 -723 NA 85.3 -2,072 2,586 -180.1
Others 251 110 769 1,225 287 14.4 -76.6 2,281 478 377.3
Total 4,212 4,550 3,132 4,645 4,324 2.7 -6.9 12,101 11,526 5.0
Source: Company, Emkay Research
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Allahabad Bank Result Update
Emkay Research January 31, 2013 5
Key Financials
Income Statement
Y/E Mar (Rsmn) FY11A FY12A FY13A FY14E
Net interest income 40,225 51,627 52,876 61,868
Other income 13,704 12,987 13,188 14,396
Net income 53,929 64,613 66,064 76,264Operating expenses 23,383 26,914 29,552 36,195
Pre provision profit 30,546 37,699 36,512 40,069
PPP excl treasury 0 0 0 0
Provisions 11,239 16,074 17,003 14,758
Profit before tax 19,307 21,626 19,509 25,312
Tax 5,076 2,958 4,877 7,847
Tax rate 26.3 13.7 25.0 31.0
Profit after tax 14,231 18,668 14,632 17,465
Balance Sheet
Y/E Mar (Rsmn) FY11A FY12A FY13A FY14E
Liabilities
Equity 4,762 5,000 5,000 5,000
Reserves 80,312 100,066 111,480 125,143Net worth 85,074 105,066 116,480 130,143
Deposits 1,318,872 1,595,931 1,737,593 2,016,442
Borrowing & Others 108,965 128,579 150,677 173,866
Total liabilities 1,512,911 1,829,576 2,004,750 2,320,451
Assets
Cash and bank 110,274 140,252 155,714 180,696
Investme