India Equity Analytics Today- Buy Stock of Oriental Bank and Finolex Cables Ltd

13th Feb 2014

Finolex Cables’ (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales and EBITDA margin. Decline in communication

cable segment segments as well as high raw material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore in

the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter ended December 2012. Third Quarter result were

marginally below our expectaton which led us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even after

posting marginally below result the stock is quite attractive at current market price of Rs. 81 and left a limited upside of 11%, however we

advised our reader to book a part profit on stock . ......................................... ( Page : 2-3)

"BUY"Finolex Cables Ltd: "Reasonable prospects…..."

13th Feb 2014

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to grow by 9-12% based on broad feedback loop from

companies and captives. Overall, Indian IT Industry is expected to reach the mark of USD130billion. For FY14, Indian IT industry is expected to

report 13% growth, in line with NASSCOM guidance at 12-14%. ....................................................... ( Page : 4-6)

IT Industry;NASSCOM Guidance :"FY15E; a year of growth opportunity"

ORIENTAL BANK : "BUY" 13th Feb 2014

Orient Bank’s profitability declined by 31% YoY on the back of subdues growth at NII level led by margin compression. Higher operating

expenses and tax rate caused muted return ratios. Asset quality pressure remained persist and asset impaired (GNPA + Restructure advance)

remained at elevated level. We have buy rating on the stock due to inexpensive valuation. We value bank at Rs.216/share which is 0.4 times of

FY14E’s book. ................................................. ( Page : 7- 11)

TATAMOTORS :Strong Results "BUY" 11th Feb 2014

Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back of strong demand ,Growth in volume and favourable

product mix and geography mix of Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new Range Rover Sport,

New Range Rover and Jaguar F-Type . ........................................................... ( Page :17- 18)

13th Feb, 2014

Edition : 205

IEA-Equity

Strategy

Ambuja Cements Ltd: "Neutral" 10th Feb 2014

For the full year,net profit declined 1% to Rs 1278 crore as against Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs

9795 crore in CY12.Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -1.9% YoY) . At current price of Rs 163,

stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP Rs.163 for a target price Rs.165.

........................................................... ( Page : 22-24)

ACC Ltd: "BUY" 10th Feb 2014

ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC declined a mere 2% to Rs 10,908.41 crore, as the sales

relaisations remained low and Cost remained stable. Cement sales volumes remained flat for ACC .At current price of Rs 1046, stock is trading at

2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks good from current level, hence we recommend Buy on the stock at CMP Rs.1046

for a target price Rs.1257. ..................................................... ( Page : 19-21)

UNION BANK : "BUY" 12th Feb 2014

Union Bank’s profit growth was due to lower provisions led by lower slippage and restructure assets. Operating profit was negative due to

muted NII growth and higher operating expenses. Bank’s loan and deposits both are grown by 20% along with improvement in CD ratio. This

would help to expand margin and hence profitability. Like other PSBs, Union bank is trading at attractive valuation and we value Rs.152/share

which is 0.5 times of FY14E’s book ...................................................... ( Page : 12- 16)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

V- Finolex Cables Ltd.

CMP 81

Target Price 90

Previous

Target Price

73

Upside 11%

Change from

Previous

0%

BSE Code 500144

NSE Symbol

52wk Range

H/L

41/92

Mkt Capital

(Rs Crores)

1,238

Average Daily

Volume

94,300

Nifty 6,084

1M 1yr YTD

Absolute (4.1) 46.7 78.0

Rel. to Nifty (2.7) 43.7 71.0

3QFY14 2QFY14 1QFY14

Promoters 35.8 35.8 35.8

FII 1.8 1.1 1.0

DII 9.8 10.2 10.5

Others 52.5 52.9 52.8

Financials Rs, Crore

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

Revenue 563.1 593.1 -5.1% 534.3 5.4%

EBITDA 44.3 76.4 -42.0% 42.9 3.2%

PAT 24.5 80.0 -69.4% 24.0 2.1%

EBITDA Margin 7.9% 9.3% (140) bps 8.0% (10) bps

PAT Margin 4.3% 12.8% (850) bps 4.5% (20) bps

2

Valuation :

FCL being one of the leading players in the cable industry seems well placed to capture huge

opportunities considering the strengths & the industry in which the Company is operating.

Derivative losses coupled with bleak performance by communication cable segment were the

major reasons for de-rating of the stock in past which in our view seems to have been overdone.

The company’s LT division is doing very well, they have recently entered into HT and Extra High

Voltage (EHV) cable verticals. The company has market share of around 15-16 percent in both

electrical and telecommunication verticals. Further the company has approved setting up a

captive 5 MW solar power plant at its manufacturing facilities at Urse, Pune at an estimated cost

of Rs 40 crore.

Outlook :

Market Data

Finolex Cables’ (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales

and EBITDA margin. Decline in communication cable segment segments as well as high raw

material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore

in the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter

ended December 2012. Third Quarter result were marginally below our expectaton which led

us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even

after posting marginally below result the stock is quite attractive at current market price of Rs.

81 and left a limited upside of 11%, however we advised our reader to book a part profit on

stock

The copper rods segment was initially set up as backward integration for the cables segment. The

excess production after captive consumption is sold off to third parties at market price. However,

owing to thin and declining margins from third party transactions, FCL is gradually reducing its

exposure to the segment. The contribution of the segment to the top-line has decreased from

21% in FY2010 to ~5% currently. This trend is expected to continue, thereby improving the

overall EBIT margin of the company.

FINCABLES

Book Partial Profit

(Standalone)

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

(Source: Company/ Eastwind Research)

We cut our earnings estimates to factor volume decline in electrical & communication cable

segment, margin decline in copper rod segment and losses in the others segment. Consequently,

we cut our earnings estimates by 8.6% for FY14E (Rs. 11.6/Share) and 4.1% for FY15E (Rs.

12.6/Share). At the CMP of Rs. 81 stock is trading at PE of 7.0/6.4 of FY14E/15E. We revised our

rating on stock from "Buy" to "Hold". However owing to slower pace of economic growth further

we advised our readers to book part profit on stock and hold the balance with a target price of

Rs. 90

"Reasonable prospects…..."

Result update

1 yr Forward P/B

Share Holding Pattern-%

Stock Performance-%

"Book Partial Profit"13th Feb' 14


3


Finolex Cables Ltd.

Key financials :

(Source: Company/ Eastwind Research)


PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E

Performance

Revenue 1342 1619 2036 2064 2271 2315 2500

Other Income 51 24 26 36 24 47 42

Total Income 1392 1643 2062 2100 2295 2362 2542

EBITDA 100 195 174 175 229 241 258

EBIT 61 157 135 135 182 191 205

Depriciation 39 37 39 39 47 50 53

Intrest Cost 32 19 19 26 12 14 14

PBT -30 89 107 109 171 234 233

TAX 5 32 22 11 26 56 56

Derrivative Loss -109 -74 -34 -36 -23 10 0

Reported PAT -35 58 85 98 145 178 185

Dividend 3 9 11 12 18 23 23

EPS -2.3 3.8 5.6 6.4 9.5 11.6 13.1

DPS 0.2 0.6 0.7 0.8 1.2 1.5 1.5

Yeild %

EBITDA % 7.4% 12.0% 8.5% 8.5% 10.1% 10.4% 10.8%

NPM % -2.5% 3.5% 4.1% 4.7% 6.3% 7.5% 7.3%

Earning Yeild % -12.0% 7.4% 11.7% 20.6% 20.9% 14.3% 16.2%

Dividend Yeild % 1.0% 1.2% 1.5% 2.6% 2.6% 1.9% 1.9%

ROE % -6.0% 9.0% 11.9% 12.3% 15.7% 16.5% 15.4%

ROCE% -4.0% 6.3% 8.7% 10.1% 13.1% 14.3% 13.7%

Position

Net Worth 596 643 717 800 924 1079 1249

Total Debt 296 275 260 172 184 160 160

Capital Employed 892 918 978 972 1109 1239 1409

No of Share 15 15 15 15 15 15 15

CMP 19 51 47 31 46 81 81

Valuation

Book Value 39.0 42.0 46.9 52.3 60.4 70.6 81.7

P/B 0.5 1.2 1.0 0.6 0.8 1.1 1.0

Int/Coverage 1.9 8.4 7.0 5.2 14.6 13.6 14.6

P/E -8.3 13.4 8.5 4.9 4.8 7.0 6.4

IT Industry;NASSCOM Guidance

4Please refer to the Disclaimers at the end of this Report.

For FY14, Indian IT industry is expected to report 13% growth, in line with NASSCOM

guidance at 12-14%. While, domestic revenue could be seen below expectation because

of delay in decision-making and policy paralysis by government.

Despite various challenges across the Industry, overall ecosystem is changing and they

are transforming into dynamic era by adapting new verticals like SMAC (Social, Mobility,

Analytics, and Cloud), Big data and Digital etc. Even, IT players are making its healthy

existence in US and Europe regions. They are also running for new geographies like

Africa, APAC and MEA.

Interesting analytical facts behind NASSCOM Guidance :(a) Growth rate for the Big 4 (Infosys, Wipro, TCS and HCLT) has been better than

industry growth from FY02-08. However, that trend started changing from FY09 with at

least two players underperforming the industry growth every year (with the exception of

FY11). For FY14E, a street expectation also indicates that still 2 players could be

underperformer.

(b) Profitability growth is also equally important than revenue growth. While this may be

nitpicking, even in a healthy year of growth of 16% for the Indian IT industry in FY12, and

EBITDA margins of Tier-1 IT (ex-HCLT) declined 50-180 bps. This was even after 6%

depreciation of the Rupee against the US$ and favorable cross-currency trends.

(c) This is fact; the tempo of market share gain by top players is reducing combined

because of faster growth by global players, faster focus on captives, and dogfight over

bidding and vendors consolidation. For FY15E, Tier-1 players are sanguine on beating

guidance by on an average 1-2% as record of accomplishment of previous 5 years.

Despite above facts, our optimism on Indian IT is based on possibility of accelerated

growth in 2014, on: (1) Improved business sentiment in the US and Europe; (2) signs of

discretionary spending coming back; (3) continued market share gains for Indian

companies; and (4) increased spending due to adoption of new technologies.

INR/USD&CNX IT Performance(2013);

2013 has been a year of innovation and

transformation and 2014 could be an

execution year….

(Tier-1: TCS, INFY, HCLTECH, and WIPRO)

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to

grow by 9-12% based on broad feedback loop from companies and captives. Overall,

Indian IT Industry is expected to reach the mark of USD130billion. Considering the

better economic data, healthy growth pattern of US economy, and the increase in

global IT spending & global sourcing models, Indian IT players are confident to see

3.9% of global IT spending and 5.9% growth in Business Process Management space in

2014.

(Source: Company/Eastwind)

FY14E and NASSCOM Guidance;

Performance of Our IT Coverage Optimistic guidance by NASSCOM (FY15E), IT Industry is fit-well for all grounds;

After 3 consecutive conservative guidance, NASSCOM (National Association of

Software and Services Companies) revealed earning guidance for FY15E with positive

outlook led by favorable demand discretionary environment. Overall, Industry is

cheering with NASSCOM’s fair guidance and they are confident to catch up the growth

target.

"FY15E; a year of growth opportunity"


NASSCOM Guidance and Industry Growth-USD term

Year NASSCOM Guidance-% Actual Growth-%

FY03 30 25

FY04 26-28 34

FY05 30-35 37

FY06 30-32 33

FY07 25-27 32

FY08 24-27 30

FY09 21-24 17

FY10 4-7 5

FY11 13-15 19

FY12 16-18 16

FY13 11-14 10

FY14E 12-14 13

FY15E 13-15 -

Export Revenue (USD, mn)

Year Tier-1 IT Exports

FY04 3670 12900

FY05 5300 17700

FY06 7163 23605

FY07 10142 31206

FY08 14399 40418

FY09 16200 47103

FY10 17100 49690

FY11 21342 59035

FY12 25475 68687

FY13 28165 75800

FY14E 31000-32000 84000-87000

FY15E - -

5

“13-15% (estimate) for exports looks like

a good number,” (CEO, outsourcing

advisory Offshore Insights)

Active participations of new emerging verticals: SMAC is throwing up huge opportunities

as firms want to optimize investments in current technology and drive growth by using

digital technologies and platforms. The digital forces of social, mobile, analytics and cloud

(SMAC), Bigdata and digital will reach mainstream status in 2014 and create

requirements, drive new purchasing and establish new competitive realities.

Favorable supply side scenario: Though attrition remained higher than last year,

especially among the bellwethers, campus hiring and fresh offers declined during the

year. However, utilization rate especially on onsite and offshore are on increasing mode,

it indicates favorable supply side scenario for the industry.

Cost rationalization still a part of agenda: Across the Industry, most of players are

focusing on cost control by improving volume, reducing expenses, and improving attrition

rate to maintain stability on margin front. Considering flat range of currency exchange

rate (INR against USD), we expect to see 50-150bps ups and down in IT industry in FY15E.

Concerns:However, hardening of regulatory related to visa approval in USA, Canada and Australia

could spoil the party. Even, the approval of Immigration Bill attached with higher visa fee,

wage requirements and enhanced audit by US agencies could turn the growth story of

Indian IT players adversely. If passed in its current form, the Bill could hurt the margins

of the Indian IT export sector, which derives almost 55-60% of its revenues from USA.

Underlying strengths to dictate FY15E growth; Performance of Our IT Coverage

Favorable demand discretionary environment: US is witnessing better GDP growth

combined with improving business sentiment, higher consumer spend, lower

Government spending cuts and improving job data. These facts are playing key role to

uptick in discretionary spending in North America. At a same time, revival in Euro zone

has taken place and offshore services from Europe is compounding to revenue traction.

We expect to see potential uptick in IT budget.

No pressure on billing rate: Considering healthy economic scenario across US and Europe,

we are not expecting to see any pressure on billing term. If INR depreciates to the mark of

Rs65 against the USD, then client can go with marginal bargaining. Post earning of

3QFY14E, most of management quoted for stable billing rate and clients confident on

billing front.

Revenue in USD-(mn) term-FY14E

Quote on NASSCOM Guidance





Tier-1 Revenue Growth and Margin

"The guidance is a clear reflection that

the market is strengthening, so 13-15%

overall growth seems like a fair number,”

(CMD, Persistent System)


TCS INFY WIPRO HCL TECH TCS INFY WIPRO HCL TECH

FY05 41.7 51.6 41.6 41.4 32.8 29.3 29.9 22.9

FY06 36.4 35.4 35.9 29.6 32.5 27.7 27.8 21.7

FY07 44.3 43.8 36.5 37.6 31.6 27.2 27.4 21.1

FY08 36.6 35.5 61.3 40.4 31.4 26 24.6 21.2

FY09 7.5 11.7 17.8 18.9 33.2 25.8 24.3 21.4

FY10 4.4 3 0.5 25.3 34.6 28.9 26.7 19.7

FY11 28.4 24.6 18.3 27.6 32.6 30 25.7 16.6

FY12 25.1 15.8 13 22.4 31.8 29.5 23.9 18.7

FY13 15.2 6.7 6 12.9 29.1 29 23.7 21.6

FY14E 18.1 12 6.7 14.8 29.75 27 22.7 25

FY15E 18 17.5 18.5 18.7 28.5 25.5 21.8 24

Revenue Growth-% EBITDA Margin-%Year

6

We have seen a significant increase in global technology spending this year, creating

opportunities for the Indian software services sector to post double-digit growth again

in export as well as in the domestic markets. FY15 promises to be bigger and stronger

than the last 3 years, which were marked by bloodbath in global markets due to Euro-

zone crisis and falling consumer confidence in the US. Demand is set to pick up in

sectors like BFSI, healthcare, retail and transportation globally in the year ahead.

For FY15E, We expect that strong fundamentals should help to sustain earning

momentum in FY15E. Foray into niche verticals and executions of large deal would play an

important factor for better earning visibility in near future. There is a window of

opportunity for competent large caps and midcaps to displace incumbents and gain some

incremental business. In the past 4 quarters, large caps (four companies) have grown at

3.4% CQGR, while midcaps (five companies) at 3.2%which is comparable to larger peers.

On Tier-1 IT players, we are positive on INFY, TCS and HCL Tech. While, across the Mid

cap and niche players we are optimistic view on TECHM, PERSISTENT, ZENSARTECH,

ECLERX and KPIT .

View and Valuation;


Our view on Industry Per se: NIFTY and CNX IT performance




CMP Upside

(12.02.14) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

TCS 2103.8 BUY 2510 19.3% 71.82 95.00 109.31 29.29 22.15 19.25 36.4% 37.5% 34.4%

INFOSYS 3599.6 BUY 3910 8.6% 164.2 188.0 218.2 21.92 19.15 16.50 24.8% 23.7% 22.9%

HCLTECH 1491.6 BUY 1560 4.6% 58.10 79.36 98.11 25.67 18.79 15.20 30.7% 31.5% 29.4%

WIPRO 562.15 NEUTRAL - - 25.0 31.07 33.5 22.44 18.10 16.78 21.7% 22.7% 20.8%

TECHM 1875.55 BUY 2130 13.6% 123.97 155.37 175.50 15.13 12.07 10.69 34.8% 30.7% 26.0%

CMC 1424.45 NEUTRAL - - 75.27 86.04 92.35 18.92 16.56 15.42 24.1% 22.8% 20.7%

NIITTECH 421.55 BUY 443 5.1% 36.28 43.33 54.18 11.62 9.73 7.78 20.0% 19.4% 19.6%

KPIT 167.15 BUY 177 5.9% 10.80 12.63 16.82 15.47 13.23 9.94 20.1% 19.3% 20.7%

HEXAWARE 144.55 NEUTRAL - - 13.9 15.0 16.0 10.40 9.61 9.03 27.4% 24.9% 22.5%

PERSISTENT 1021.8 BUY 1065 4.2% 46.12 61.42 79.08 22.16 16.64 12.92 18.1% 20.3% 21.4%

eCLERX 1203.15 BUY 1358 12.9% 64.25 71.61 83.65 18.72 16.80 14.38 43.8% 37.9% 34.4%

TATAELXSI 392.1 NEUTRAL - - 10.63 24.02 28.36 36.89 16.32 13.83 16.9% 29.7% 27.4%

ZENSARTECH 365.65 BUY 440 20.3% 40.03 52.70 68.97 9.13 6.94 5.30 23.2% 24.5% 25.2%

MINDTREE 1644.45 NEUTRAL - - 89.72 100.94 114.93 18.33 16.29 14.31 28.4% 25.6% 23.6%

RoE-%Company View Target

EPS-Rs P/E-x

43.9%

3.1%

172

216

222

26

-2.703

1M 1yr YTD

Absolute -16.8 -44.4 -44.4

Rel.to Nifty -13.8 -47.4 -47.4

Current 1QFY14 4QFY1

3Promoters 59.1 58.0 58.0

FII 9.6 10.0 10.1

DII 24.9 24.0 24.6

Others 6.4 8.1 7.3

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 4178 4216 4701 5136 6970

Total Income 5138 5456 6356 6724 8558

PPP 3245 3141 3691 3680 4707

Net Profit 1503 1142 1328 1046 1812

EPS 51.5 39.1 45.5 34.9 60.4

7

ORIENTAL BANK

ORIENTBANK

Muted NII growth on the back of margin compression Market Data

Upside

310/12152wk Range H/L

Orient bank reported weak set of quarterly numbers with net profit declined by

31% YoY due to muted growth in NII and higher operating expenses. Asset

quality pressure remain persist with total impaired asset (GNPA+ Restructure

advances) remain high at 11.1% of loan. Bank made lower provisions against

bad loan despite of deterioration in asset. We have buy rating on the stock

due to inexpensive valuation. We Value bank at Rs.216/share which is 0.5

times of FY14E’s book value.

Operating expenses increased by 9% YoY in which employee cost and other

operating cost increased by 1% and 20% respectively. Flat employee cost was due

to lower wage settlement provisions made by bank. Consequently CI ratio declined to

45.4% from 41.5% in last quarter and 48.2% in previous quarter. Muted NII growth,

lower other income and higher operating cost led pre provisioning profit declined to

7% YoY.

Result update BUY

CMP

Target Price

Previous Target Price


During quarter bank’s NII grew by 2% YoY lower than expectation largely due to

margin compression and lower growth in loan and deposits. Margin compression was

on account of lower loan yield as compare to cost of deposits. Total interest income

grew by 6% YoY while interest expenses increased by 18% YoY which drag lower

growth in NII. Other income was lower by 10% YoY to Rs.341 cr versus Rs.378 cr in

last year led by 48% declined in treasury gain. Overall revenue de-grew by 1% YoY

to Rs.1571 cr.


Stock Performance

Average Daily Volume

4920

Asset quality stress persists

During quarter bank made provisions and contingencies to tune of Rs.561 cr as

against Rs.551 cr in previous quarter and Rs.604 cr in last quarter. During quarter

bank reported fresh slippage of Rs. 1043 cr (3.1% annualized) as against Rs.1015 cr

(3.2% annualized) in previous quarter. In absolute term GNPA increased by 6% YoY

to Rs.5184 cr while provision decreased by 8% YoY to Rs.1351 cr. Consequently net

NPA increased by 12% QoQ to Rs.3833 cr. In percentage term, gross GNPA and net

NPA stood at 3.87% and 2.9% from 3.81% and 2.7% respectively sequentially. Due

to lower provisions PCR (without technical write off) declined from 30% to 26%.

Fresh restructure sharply surged to Rs.1365 cr during quarter and outstanding

restructure book stood at Rs. 9687 cr

2.21 cr

Nifty 6084

Mkt Capital (Rs Cr)

BSE Code 500315

NSE Symbol

Subdue NII growth and higher operating expenses led negative growth in PPP

Change from Previous

ORIENT BANK Vs Nifty


"BUY"13h Feb2014


8

Bank reported 15 bps QoQ margin compressions on account of higher cost of fund than

loan yield. During quarter bank’s cost of fund declined by 10 bps QoQ while yield on loan

declined by 38% QoQ to 10.8% from 11.2%. Yield in investment also declined from 7.4%

to 6.9% which also cause margin compression.

Profitability declined on account of muted NII growth, higher operating expenses

and tax rate

Orient bank’s profitability declined by 31% YoY to Rs.224 cr lower than our expectation of

Rs. 269 cr largely due to weak performance all around. During quarter bank reported

muted NII growth, lower other income, higher operating cost and higher tax rate.

Valuation & View

ORIENTAL BANK

Orient bank reported weak set of quarterly numbers with net profit declined by 31% YoY

due to muted growth in NII and higher operating expenses. Asset quality pressure remain

persist with total impaired asset (GNPA+ Restructure advances) remain high at 11.1% of

loan. Bank made lower provisions against bad loan despite of stress in asset. We have

buy rating on the stock due to inexpensive valuation. We Value bank at Rs.216/share

which is 0.5 times of FY14E’s book value.


Margin compression on account of higher cost of fund than loan yield

Subdue loan and deposits growth

On balance sheet front, bank reported very sluggish growth rate with deposits grew by

4% YoY in which current account and saving account deposits grew by 3% and 12%

YoY. CASA deposits in absolute term grew by 10% YoY and in percentage to total

deposits it stood at 24.2% as against 23.9% in last quarter. Loan grew by 8.4% YoY to

Rs.1340 bn led by 16% YoY growth in retail loan followed by mid corporate and large

corporate. Credit deposits ratio for the quarter remained same and it stood at 73.4%.


9

ORIENTAL BANK

Source : Eastwind/ Company


Chart Focus

Muted NII growth on the back of margin

compression

Subdue NII growth and higher operating

expenses led negative growth in PPP

Profitability declined on account of muted NII

growth, higher operating expenses and tax

rate


10

ORIENTAL BANK

Source: Company/Eastwind



Quarterly Result ( Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E

Interest/discount on advances / bills 3622 3591 3507 3.3 0.9 3783

Income on investments 1075 1076 954 12.7 -0.1 1137

Interest on balances with Reserve Bank of India 21 9 8 167.2 135.4 20

Others 6 0 0 2868.4 5027.3 4

Total Interest Income 4723 4676 4469 5.7 1.0 4943

Others Income 341 312 378 -9.8 9.3 425

Total Income 5064 4988 4847 4.5 1.5 5368

Interest on deposits 3322 3234 3150 5.5 2.7 0

Interest on RBI/Inter bank borrowings 93 93 79 17.9 0.0 0

Others 78 68 35 119.1 14.9 0

Interest Expended 3493 3395 3264 7.0 2.9 3548

NII 1230 1281 1204 2.2 -3.9 1395

Other Income 341 312 378 -9.8 9.3 425

Total Income 1571 1593 1582 -0.7 -1.4 1820

Employee 394 446 391 0.8 -11.7 496

Other Expenses 319 322 265 20.3 -0.8 359

Operating Expenses 713 768 656 8.7 -7.1 856

PPP( Rs Cr) 858 825 926 -7.3 4.0 965

Provisions 561 551 604 -7.1 1.9 581

PBT 297 275 323 -7.8 8.3 384

Tax 73 23 -4 -1996.1 215.3 115

Net Profit 224 251 326 -31.3 -10.8 269

Balance Sheet ( Rs Cr)

Deposits 182470 175153 164174 11.1 4.2 184299

Loan 133962 128353 123623 8.4 4.4 135102

Asset Qiality

GNPA 5184 4887 3690 40.5 6.1

NPA 3833 3423 2610 46.9 12.0

% GNPA 3.9 3.8 3.0

% NPA 2.9 2.7 2.1

11



ORIENTAL BANK


P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 8954 12075 13758 14677 16545

Income on investments 2774 3671 3854 4316 4491

Interest on balances with Reserve Bank of India 335 34 31 80 80

Others 25 35 61 17 17

Total Interest Income 12088 15815 17705 19090 21134

Others Income 960 1240 1655 1588 1588

Total Income 13048 17055 19359 20678 22721

Interest on deposits 7474 11213 12553 11765 13408

Interest on RBI/Inter bank borrowings 23 38 111 175 189

Others 413 348 340 525 567

Interest Expended 7910 11599 13004 13954 14164

NII 4178 4216 4701 5136 6970

NII Growth(%) 43.7 0.9 11.5 9.3 35.7

Other Income 960 1240 1655 1588 1588

Total Income 5138 5456 6356 6724 8558

Employee 1048 1357 1576 1796 2272

Other Expenses 844 959 1089 1248 1579

Operating Expenses 1892 2315 2665 3043 3851

PPP( Rs Cr) 3245 3141 3691 3680 4707

Provisions 1742 1999 2363 2243 2118

Net Profit 1503 1142 1328 1046 1812

Net Profit Growth(%) 32.4 -24.0 16.3 -21.2 73.3

Key Balance sheet dataDeposits 139024 155965 175898 189928 205123

Deposits Growth(%) 15.6 12.2 12.8 8.0 8.0

Borrowings 5639 5259 7679 9996 10796

Borrowings Growth(%) 15.4 -6.7 46.0 30.2 8.0

Loan 95908 111978 128955 139271 150413

Loan Growth(%) 14.9 16.8 15.2 8.0 8.0

Investments 42075 52101 58555 63976 69094

Investments Growth(%) 17.6 23.8 12.4 9.3 8.0

Eastwind CalculationYield on Advances 9.3 10.8 10.7 10.5 11.0

Yield on Investments 6.6 7.0 6.6 6.7 6.5

Yield on Funds 7.8 9.2 9.0 9.4 9.6

Cost of deposits 5.4 7.2 7.4 6.2 6.5

Cost of Borrowings 7.7 7.3 5.9 5.9 7.0

Cost of fund 5.5 7.2 7.1 7.0 6.6

ValuationBook Value 380 409 403 433 483

P/BV 1.0 0.6 0.6 0.4 0.4

P/E 7.5 6.4 5.5 5.0 2.9

105.2

152

163

45

-7

1M 1yr YTD

Absolute -15.3 -54.8 -54.8

Rel.to Nifty -11.9 -56.8 -56.8


3Promoters 60.1 57.9 57.9

FII 8.8 10.2 11.9

DII 17.0 17.8 17.7

Others 14.1 14.2 12.8

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 6216 6793 7543 7974 8953

Total Income 8255 9241 10095 10704 11683

PPP 4305 5254 5583 5256 5724

Net Profit 2082 1787 2158 1427 1431

EPS 39.7 29.9 36.2 22.6 22.7

12

UNION BANK

Company Update BUY Union bank reported profit growth of 15.4% largely due to lower provisions

and contingencies led by lower slippage and restructure assets. At operating

profit level bank reported negative growth of 7.1% YoY due to margin

compression and higher operating expenses. Bank’s loan and deposits both

are grown by 20% along with improvement in CD ratio. Like other PBS, Union

Bank also trading at 0.4 times of one year forward book which is impressive.

We value bank at Rs.152/share which is 0.5 times of FY14E’s book value.

CMP

Target Price


Upside


Market Data

BSE Code 532477

Higher operating expenses drag operating profit in negative zone

Muted NII growth due to margin compression

NSE Symbol UNIONBANK During quarter, bank’s NII grew by 3.8% YoY despite of loan and deposits growth of

20%. Lower NII was driven by higher cost of fund than yield on fund (Loan+

Investment). Total interest earned by bank was grown by 19.5% whereas interest

expenses increased by 26.2% which took muted NII growth. Other income was

Rs.680 cr versus Rs.611 cr in previous year and Rs.640 cr in last year. With the little

support from other income, revenue during quarter was grown by 4.4% YoY to

Rs.2643 cr.

52wk Range H/L 255/97

Mkt Capital (Rs Cr) 6281

Average Daily Volume 2.37 cr

Nifty 6063

Stock Performance



Operating expenses during quarter was higher at 17.8% YoY which drag operating

profit growth in negative direction to 7.1% YoY to Rs.1262 cr. Employee cost and

other operating expenses increased by 12.4% and 27% YoY respectively. Operating

leverage (opex to total asset) remained stable at 0.4%.


Provisions lower because of lower slippage and restructure assets

Provisions and contingencies were lower by 29% YoY and 35% QoQ on the back of

lower slippage and restructure assets. During quarter bank witness fresh slippage of

Rs, 1154 cr versus Rs.1657 cr in previous quarter and thereby taking slippage ratio

to 2.1% from 3.1% in previous quarter. Fresh restructure advance was come down to

Rs.1004 cr as compare to Rs.1534 cr in previous quarter and Rs.1205 cr in last

quarter. Sequentially lower recovery (Rs.265 cr Vs Rs.419 cr) and lower write off (Rs.

174 cr Vs Rs.270 cr) caused spike in gross NPA. GNPA as a percentage to gross

advances was increased by 22.5 bps QoQ to 3.9% from 3.7%. Loan loss provisions

was increased by 10% QoQ taking slightly improvement in PCR to 42.5% (without

technical write off) from 42.1% in previous quarter. Net NPA stood at 2.3% as

against 2.1% in previous quarter.

UNION Bank Vs Nifty

"BUY"12h Feb, 2014


13

Margin narrowed due to higher cost of fund and asset yield

UNION BANK

Loan and deposits grew by 20% YoY but CASA declined

On balance sheet front, deposits grew by 19% YoY in which current account and saving

account deposits grew by 3.3% and 12.2% YoY respectively. Overall CASA increased by

10% YoY and in percentage to total deposits CASA ratio declined by 245 bps YoY to

28.8% due to higher growth in wholesale deposits. Term deposits grew by 23.4% YoY

taking overall deposits growth. Due to higher share in bulk deposits, cost of fund spike

from 7.4% to 7.8%. In loan growth perspective, it grew by 20% YoY to Rs.2230 bn.

Incremental loan growth came from MMSE (29.5% YoY) followed by retail (28% YoY) and

agriculture (18.7% YoY). Credit deposits ratio improved by 56 bps to 78.2%.


Margin narrowed by 50 bps on account of higher cost of fund than yield on assets.

Overall cost of fund increased from 7.8% to 7.4% largely due to higher share of bulk

deposits and lower CASA ratio. Yield on loan declined by 30 bps to 10% from 10.3% in

last quarter. Investment yield improved by 28 bps YoY to 8.2% from 7.9% in 3QFY13.

Higher profit on account of lower provisions led by lower slippage and restructure

assets

Union Bank reported net profit growth of 15.4% YoY largely driven by lower provisions

and contingencies. Tax rate was higher at 46.4% versus 28% in previous quarter mainly

due to Rs.44 cr created for deferred tax liabilities on special reverse as per suggestion of

RBI. Bank has also normalized tax rate of 30% in 9MFY14.

Valuation & View

Union bank reported profit growth of 15.4% largely due to lower provisions and

contingencies led by lower slippage and restructure assets. At operating profit level bank

reported negative growth of 7.1% YoY due to margin compression and higher operating

expenses. Bank’s loan and deposits both are grown by 20% along with improvement in

CD ratio. Like other PBS, Union Bank also trading at 0.4 times of one year forward book

which is impressive. We value bank at Rs.152/share which is 0.5 times of FY14E’s book

value.


14

Higher profit on account of lower provisions

led by lower slippage and restructure assets



UNION BANK

Chart Focus

Muted NII growth due to margin compression

Higher operating expenses drag operating

profit in negative zone


15

UNION BANK




Quarterly Performance 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%)

Interest/discount on advances / bills 5565 5288 4775 16.6 5.3 5422 2.6

Income on investments 1911 1890 1478 29.3 1.1 1839 3.9

Interest on balances with Reserve Bank of India 36 51 41 -11.7 -28.6 51 -28.8

Others 38 43 26 46.3 -12.1 44 -14.7

Total Interest Income 7550 7271 6320 19.5 3.8 7356 2.6

Others Income 680 611 640 6.3 11.2 684 -0.6

Total Income 8230 7882 6959 18.3 4.4 8040 2.4

Interest Expended 5587 5317 4428 26.2 5.1 5313 5.1

NII 1964 1954 1891 3.8 0.5 2043 -3.9

Other Income 680 611 640 6.3 11.2 684 -0.6

Total Income 2643 2566 2531 4.4 3.0 2727 -3.1

Employee 823 807 733 12.4 2.0 757 8.8

Other Expenses 559 534 440 27.0 4.6 484 15.4

Operating Expenses 1382 1341 1173 17.8 3.1 1241 11.4

PPP( Rs Cr) 1262 1225 1358 -7.1 3.0 1486 -15.1

Provisions 610 937 857 -28.8 -34.8 913 -33.2

PBT 651 288 501 30.0 126.0 573 13.7

Tax 302 80 199 52.2 277.6 172 75.9

Net Profit 349 208 302 15.4 67.7 401 -13.0

Balance Sheet ( Rs Cr)

Net Worth 18165 18046 15973 13.7 0.7 17847 1.8

Deposits 285125 287029 239355 19.1 -0.7 271558 5.0

Borrowings 31730 27664 22883 38.7 14.7 23945 32.5

Investment 93778 95600 75117 24.8 -1.9 91294 2.7

Advances 223024 217295 185885 20.0 2.6 198543 12.3

Asset Quality

GNPA( Rs Cr) 8776 8061 6384 37.5 8.9

NPA ( Rs Cr) 5048 4670 3168 59.3 8.1

% GNPA 3.9 3.7 3.4

% NPA 2.3 2.1 1.7

PCR(w/o technical write-off) (%) 42.5 42.1 50.4

16

UNION BANK




P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 12031 16027 19140 21702 23074

Income on investments 4003 4570 5671 7428 8313

Interest on balances with Reserve Bank of India 161 331 199 185 185

Others 258 101 115 169 169

Total Interest Income 16453 21028 25125 29483 31741

Others Income 2039 2448 2552 2730 2730

Total Income 18491 23477 27677 32213 34471

Interest on deposits 9538 13406 16551 18844 21106

Interest on RBI/Inter bank borrowings 113 141 274 379 378

Others 585 689 756 1309 1305

Interest Expended 10236 14235 17582 21509 22788

NII 6216 6793 7543 7974 8953

NII Growth(%) 48.3 9.3 11.0 5.7 12.3

Other Income 2039 2448 2552 2730 2730

Total Income 8255 9241 10095 10704 11683

Employee 2600 2479 2755 3323 3634

Other Expenses 1350 1508 1757 2124 2324

Operating Expenses 3950 3988 4512 5447 5958

PPP( Rs Cr) 4305 5254 5583 5256 5724

Provisions 2223 3467 3425 3144 3680

Net Profit 2082 1787 2158 1427 1431

0.3 -14.2 20.7 -33.9 0.3

Key Balance sheet dataDeposits 202461 222869 263762 290138 324954

Deposits Growth(%) 19.1 10.1 18.3 10.0 12.0

Borrowings 13316 17909 23797 32238 32138

Borrowings Growth(%) 44.5 34.5 32.9 35.5 -0.3

Loan 150986 177882 208102 228912 256382

Loan Growth(%) 26.5 17.8 17.0 10.0 12.0

Investments 58399 62364 80830 93811 103914

Investments Growth(%) 7.3 6.8 29.6 16.1 10.8

Eastwind CalculationYield on Advances 8.0 9.0 9.2 9.5 9.0

Yield on Investments 6.9 7.3 7.0 7.9 8.0

Yield on Funds 7.2 8.3 8.3 9.1 8.8

Cost of deposits 4.7 6.0 6.3 6.5 6.5

Cost of Borrowings 5.2 4.6 4.3 4.3 4.5

Cost of fund 4.7 5.9 6.1 6.7 6.4

ValuationBook Value 243 245 290 293 307

P/BV 1.4 1.0 0.7 0.4 0.3

P/E 8.7 7.8 5.8 4.7 4.7

BUY

1M 1yr YTD

Absolute -1.1 27.5 48.6

Rel. to Nifty 0.8 25 35.6


4Promoters 34.3 34.3 34.3

FII 28.0 26.7 26.6

DII 9.6 11.7 11.4

Others 28.1 27.3 27.7

Financials Rs, Crore

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

Revenue 63877 56882 12.3 46090 38.6

EBITDA 9948 8635 15.2 5657 75.9

PAT 4863 3559 36.6 1636 197.2

EBITDA Margin 15.6% 15.2% 40bps 12.3% 330bps

PAT Margin 7.6% 6.3% 140bps 3.5% 410bps

17


The consolidated adjusted net profits surged almost by 200 % YoY to Rs 4863 Cr. The

sharp rise in the profits came in due to an exceptional income of Rs 1,948 Cr accruing to

the local business, which came from a sale of stake in its Korean subsidiary to its Singapore

subsidiary.

The management of the company after the results said that it expects capital expenditure of

about 3.5 billion pounds to 3.7 billion pounds in fiscal 2015 from an estimated 2.75 billion

pounds in fiscal 2014, raising worries that the increased spend would hurt free cash flow.One Year Price vs Nifty

The company lost his Managing Director Karl Slym last week in an accident, and company

has set up a panel, headed by Tata Sons chairman Cyrus P. Mistry, to oversee its

operations and strategy as an interim measure after Slym's death.

View And Valuation

The stock at its CMP of Rs 364 is trading at 7.34 x of one year forward FY14E EPS of Rs

50.The robust 3QFY14 results, Strong cash flows by JLR and better demand outlook, new

product mix of JLR with brand positioning makes us positive for the company .We Maintain

BUY for the stock with Target Price Rs 425.

The consolidated operating EBITDA for the quarter came at Rs 9948 Cr and OPM at 15.5

%.The OPM surges by 330 bps due to improvement in operational metrics. The RM cost as

percentage of sales stands 59% in comparison to 62 % for 3QFY13.The company spends

nearly 1% of sales for its R&D. There is improvement of almost 100bps in other expenses

as percentage of sales on yearly basis.Share Holding Pattern-%


Nifty 6053

Stock Performance-%

NSE Symbol TATAMOTORS

Mkt Capital (Rs, Cr) 98,064

Average Daily Volume 4681598

Market Data

BSE Code 500570

TATAMOTORSStrong Results

Result Update Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back

of strong demand ,Growth in volume and favorable product mix and geography mix of

Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new

Range Rover Sport, New Range Rover and Jaguar F-Type, along side higher volume of the

newer XF and XJ derivatives. JLR whole sales volume for the 3QFY14 grew by 22.7 %

YoY to 116357 units while its retail volume grew by 26.5 5 to 112172 units. The revenues

for JLR for the 3QFY14 came at GBP 5328 Mn representing growth of 40 %YoY. Amidst

of splendid performance by British subsidiary, the domestic operations still acting as

dragger to the consolidated performance. The domestic business once again for the quarter

under review posted declining performance. The sales (including exports ) of the

commercial and passenger vehicles for the 3QFY14 stood at 132087 units translating a

decline of 35.7% YoY. The revenues for the quarter from domestic business came at Rs

7770 Cr as compared to Rs 10630 Cr for the same time last fiscal. This weak performance

in the quarter came on the back of prolonged slowdown in economic activities, weak

consumer segment, tight financing norms with high interest rates, weak operating

economics for the transporters due to lower fleet utilization and stagnant fright rates

combined with fuel price hikes.

CMP 364

Target Price 425



Upside 17%


"BUY"11th Feb' 14


18


OPM % & NPM %

The OPM surges by 330 bps due to

improvement in operational metrics.The

sharp rise in the profits came in due to an

exceptional income of Rs 1,948 Cr accruing to

the local business


JLR Whole Sales Vol. Trend

The growth in the sales volume come from all

geographies including Brazil, China, India and

the United States.



TATAMOTORS

Sales and PAT Trend (Rs)

The revenue jumps by 38.59% YoY on the

back of strong demand ,Growth in volume

and favorable product mix and geography

mix of Jaguar and land Rover.


ACC Ltd.

1046

1257

1122

20%

12%

500410

19634

9817

6063

1M 1yr YTD Poor Operational Performance :Absolute -3.5 -22.3 -21.0

Rel. to Nifty -1.9 -24.4 -22.8

Cureent 3QCY13 2QCY13

Promoters 50.3 50.3 50.3

FII 20.0 20.9 19.5

DII 12.9 11.9 11.7

Others 16.8 16.9 18.6

Management Quotes :

Financials : Q4CY13 Y-o-Y % Q-o-Q % Q4CY12 Q3CY13

Net Revenue 2792 -12.2 8.6 3180 2570

EBITDA 361 -9.3 26.2 398 286

Depriciation 153 -3.2 6.3 158 144

Interest Cost 12 -55.6 9.1 27 11

Tax -36 -190.0 -170.6 40 51

PAT 278 16.3 129.8 239 121(In Crs)

19

Result Update BUY ACC's sales turnover slipped to Rs 11169 crore in 2013 against Rs 11358 crore in the

previous year. At first glance, consolidated net profit growth of 9% from the year-ago

period looked impressive, given the dull market. But a closer look shows that net profit

for the quarter included a tax write-back. PAT was Rs.1094Cr. As this pat is incomparable

with previous year pat due to additional depreciation charge as extra-ordinary item in

previous year, we adjusted the pat and it reported Rs.1081Cr for Cy13 Down by -19%

from Rs 1339Cr in CY12.

CMP

Target Price


Upside


Market Data ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC

declined a mere 2% to Rs 10,908.41 crore, as the sales relaisations remained low and

Cost remained stable. Cement sales volumes remained flat for ACC .

BSE Code

NSE Symbol ACC

52wk Range H/L 1355/912 Lower Cement Volume Impacted the Bottomline Growth

Mkt Capital (Rs Crores) What is more worrying for the company is that it sold less cement in 2013 than what it

did in 2012. This comes as a major jolt for the cement giant which saw its cement sales

volume dropping to 23.93 million tonne compared with 24.11 million tonne. It not only

impacted its bottom-line growth but also hit its revenues.

Average Daily Volume (Nos.)

Nifty

Stock Performance-%

According to Management the economic environment in the country was sluggish, thus

impacting the demand for cement and concrete. As a result, the company's cement

volumes remained almost flat. The company appears not enthusiastic for demand growth

going forward. Based on current demand indications, we do not foresee any significant

improvement in the cement.

Source - Comapany/EastWind Research


At the operating level, poor volumes down by 1.5% from the year-ago period and weak

realizations pulled down revenue during the quarter. Net consolidated sales fell by 13%

to Rs.2,693.1 crore. Profitability was further hit as costs during the quarter, mainly on

freight and power, rose compared with the year-ago period and the September quarter

as well.


During the CY13 Acc suffered through sluggish demand and at the same time with

increasing cost. Company unable to pass on the cost to the consumer due to lower sales

volume. Sales Volume come to 23.93 Mmt form 24.11 Mmt(down by ~1%). Rising Input

Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 5% to

Rs.778/ton from Rs.740/ton and freight cost increased ~5% Rs.961/ton from Rs.920/ton.

Other expenses increased ~9% to Rs.975/ton from Rs.894/ton.1 yr Forward P/B

"BUY"10th Feb' 14


Outlook

Valuation And Recommendation

Company Description :

CY11 CY12 CY13 CY14E

10237 11358 11169 13027

191 263 219 219

10428 11621 11389 19723

2199 2384 2384 0

1940 2219 2299 0

8316 9162 9540 10942

1921 2197 1848 2084

510 569 584 639

97 115 52 50

215 391 132 323

1276 1050 1094 1292

17.7 18.8 13.8 15.3

20

ACC Ltd.

Cement Sales Volume

Company has made several capacity expansion plans in the region. ACC is replacing the

existing facilities at Jamul, Chhattisgarh with a clinker plant with an annual production

capacity of 2.8 MT and local grinding capacity of 1.1 MT of cement, while a new plant

with annual capacity of 2.7 MT is scheduled to be built in Kharagpur. The capacity

expansion plant will increase the company's total cement production capacity to 35 MT

from the existing 30 MT.On a QoQ basis, the EBITDA/tonne improved 10.4% due to an

improvement in realisations & comparatively lower increase in total expenditure/tonne,

it shows a positive view for the further quarters.onsidering the expansion plans we

expect 4% growth in sales volume and 10% growth in realization for CY14.

Cement Realization

Cement prices witnessed an increase during Oct-Nov,13 but also witnessed a sharp fall

during Dec,13 which has contributed towards lower average realizations for the year for

the company. Further, with a strong balance sheet with zero debt and better dividend

yield of 3%, we continue to remain positive despite near term challenges. We revise our

estimates downwards to factor in lower demand growth scenario. At current price of Rs

1046, stock is trading at 2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks

good from current level, hence we recommend Buy on the stock at CMP Rs.1046 for a

target price Rs.1257.

Cement Realization

ACC Limited (ACC) is engaged in manufacture of cement & ready mixed concrete. The

Company has grinding plants in Karnataka and clinkering line in Maharashtra. The

Company’s subsidiaries include ACC Mineral Resources Limited, Lucky Minmat Limited,

Bulk Cement Corporation (India) Limited, National Limestone Company Private Limited

and Encore Cement and Additives Private Limited. The Company is subsidiary of Ambuja

Cement India Private Limited.

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income

Freight and forwarding

Expenditure

PAT

EBITDA

Power and fuel

ROE% Source - Comapany/EastWind Research

Depriciation

Interest Cost

Tax


CY10 CY11 CY12 CY13

188 188 188 188

6093 6791 7184 7625

6281 6979 7372 7813

510 506 85 0

14 0 0 0

188 126 157 89

1581 816 661 642

1466 1051 1227 1081

11041 11921 11928 12101

77 48 39 40

5230 6359 5893 6040

1564 370 314 322

283 461 566 880

926 1113 1134 1122

249 266 303 397

1086 1660 681 506

162 279 325 340

11041 11921 11928 12101

CY10 CY11 CY12 CY13

3.2 3.1 3.6 2.7

57.4 68.7 73.8 57.6

3.0 2.6 2.7 3.6

19.1 8.0 5.8 5.7

1.1 1.1 1.0 1.0

19632 20180 26240 20296

18.7 16.5 19.4 19.2

12.7 10.5 11.9 12.5

2.8 2.5 2.1 2.7

14.6 15.2 16.3 12.3

0.1 0.1 0.0 0.0

1.0 1.3 1.4 1.4

1823 1506 2027 2027

(785) (258) (308) (308)

(641) (768) (1066) (1066)

Trading At :

21

Short-term provisions

ACC Ltd.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Total Assets

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances

RATIOS

P/B

EPS

Dividend Yield%

Debtor to Turnover%

Creditors to Turnover%

Inventories to Turnover%

EV

P/E

EV/EBIDTA

ROCE%

Debt/Equity

Current Ratio


Cash from Operation

Cash From Investment

Cash from Finance


163

165

NA

1%

NA

500425

25166

12583

6063

1M 1yr YTD

Absolute -7.1 -18.6 -19.2 Decline in EBITDA marginRel. to Nifty -5.4 -20.7 -21.0

Cureent 3QCY13 2QCY13

Promoters 50.5 50.5 50.6

FII 30.5 30.1 28.7

DII 9.4 9.6 10.2

Others 9.6 9.8 10.5

Key issues to watch out for1 Volume growth recovery and outlook2

3

Progress in ongoing mining land acquisition and capex in Nagaur plant of 4.5mt

Financials : Q4CY13 Y-o-Y % Q-o-Q % Q4CY12 Q3CY13

Net Revenue 2209 -5.4 9.5 2335 2017

EBITDA 307 -31.8 14.6 450 268

Depriciation 123 -33.9 -1.6 186 125

Interest Cost 17 -29.2 -5.6 24 18

Tax -61 -152.6 -192.4 116 66

PAT 317 49.5 91.0 212 166(In Crs)

22

Ambuja Cements Ltd.

Result Update Neutral Net profit of Ambuja Cements decline 49% to Rs 317 crore in Q4CY13 as against Rs 212

crore during Q4CY12. Sales declined 5% to Rs 2191 crore Q4CY13 as against Rs 2313

crore during Q4CY12. For the full year,net profit declined 1% to Rs 1278 crore as against

Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs 9795 crore in

CY12.

CMP

Target Price


Upside

Change from Previous Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -

1.9% YoY) .

Market Data During the CY13 Ambuja Cement suffered through sluggish demand and at the same time

with increasing cost. Company unable to pass on the cost to the consumer due to lower

sales volume. Sales Volume come to 21.6 Mmt form 21.99 Mmt(down by ~2%). Rising

Input Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 63%

to Rs.358/ton from Rs.219/ton and freight cost increased ~5% Rs.1097/ton from

Rs.1046/ton. Other expenses increased 8% to Rs.847/ton from Rs.742/ton.

BSE Code

NSE Symbol AMBUJACEM


Mkt Capital (Rs Crores)

Average Daily Volume (Nos.)

Nifty


The company is undertaking expansion at Rabriyawas (Rajasthan 0.8 mTPA) and Sankrail

(WB, 0.8 mTPA) to be completed by CY14 and CY15 respectively.Stock Performance-%

Key concerns for EBITDA margins to decline in CY13 are Lower realizations, Cost push and

no seasonal benefits from operating leverage, Weak rupee push fuel costs higher as

rupee depreciation likely to outweigh lower coal prices (more than 35 percent of total

requirement comes by import), Higher freight costs and impact of diesel price hike Inched

up power fuel and Freight cost.


Challenging Outlook

Management views the company was able to keep its production cost flat year-on-year

and would continue to work on improving operational efficiencies, cost optimization and

continued focus on customer and commercial excellence. Board has recommended a final

dividend of Rs 2.20 per share and together with the Rs 1.40 per share of interim dividend,

the total dividend for the year is Rs 3.60 per share.

1 yr Forward P/B

Cement pricing outlook and sustainability, considering recent downtrend in November

and December


"Neutral"10th Feb' 14


PER Ton Analysis 4QCY13 4QCY12 YOY% 3QCY13 QOQ%

5 5 -2 5 8

4177 4332 -4 4126 1

406 266 53 415 -2

946 1015 -7 934 1

1093 1079 1 1073 2

226 254 -11 266 -15

924 884 5 890 4

Valuation and Recommendation

Company Description :

Trading At :

CY10 CY11 CY12 CY13

7390 8571 9795 9192

248 248 349 391

7638 8819 10144 9583

1697 2003 2334 2066

352 1939 2300 2370

5568 6594 7322 7549

1822 1977 2473 1643

387 446 569 494

49 53 78 67

398 474 604 220

1262 1228 1293 1278

16.9 15.5 17.9 13.2

23

Freight Cost(Rs/T)

Ambuja Cements Ltd.

Volumes mT

Realization(Rs/T)

R&M Cost(Rs/T)

P&F Cost(Rs/T)

Employee(Rs/T)

Others(Rs/T)

India average cement price is still down 0.5 percent Y-o-Y, making Q3CY13 the third

consecutive quarter of Y-o-Y decline. On a QoQ basis, the EBITDA/tonne improved 6%

due to an improvement in realisations & comparatively lower increase in total

expenditure/tonne. The outlook continues to remain challenging due to difficult macro-

economic condition and resultant subdued cement demand. At current price of Rs 163,

stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP

Rs.163 for a target price Rs.165.


Ambuja Cements Ltd. (ACL) is a cement manufacturing company in India. The Company

has five integrated cement manufacturing plants and eight cement grinding units. The

Company is engaged in manufacturing of Portland cement. The Company manufactures

Portland Pozollana cement and ordinary Portland cement. The Company operates in

Cementitious Materials segment . Source - Comapany/EastWind Research

EBITDA

P/L PERFORMANCE

Net Revenue from Operation

Other Income Source - Comapany/EastWind Research

Total Income

Power and fuel

Freight and forwarding

Expenditure

PAT

ROE% Source - Comapany/EastWind Research

Depriciation

Interest Cost

Tax


CY10 CY11 CY12 CY13

306 307 308 309

7021 7758 8489 9153

7327 8065 8797 9462

65 51 39 33

0 8 10 1

17 19 22 26

1109 961 949 980

1079 1173 1421 1076

10320 11577 12457 12957

16 42 47 6798

5616 6223 5904 0

931 488 524 0

299 504 641 307

902 928 987 936

128 248 221 235

1648 2073 2260 2345

142 238 251 271

10320 11577 12457 12957

CY10 CY11 CY12 CY13

3.0 3.0 3.5 3.0

8.1 8.2 10.2 8.1

1.7 2.9 2.3 2.6

15.0 11.2 9.7 10.7

1.2 1.1 1.0 1.0

20301 21829 28780 25865

17.7 19.0 19.7 22.5

11.1 11.0 11.6 15.7

1.8 2.1 1.8 2.0

15.6 14.2 16.7 12.4

0.0 0.0 0.0 0.0

1.4 1.5 1.7 1.9

1896 1554 1900 0

(527) (445) (388) 0

(474) (473) (509) 0

24

Short-term provisions

Ambuja Cements Ltd.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Total Assets

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances

RATIOS

P/B

EPS

Dividend Yield%

Debtor to Turnover%

Creditors to Turnover%

Inventories to Turnover%

EV

P/E

EV/EBIDTA

ROCE%

Debt/Equity

Current Ratio Source - Comapany/EastWind Research


Cash from Operation

Cash From Investment

Cash from Finance


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

Risk Disclosure & Disclaimer: This report/message is for the personal information of

the authorized recipient and does not construe to be any investment, legal or taxation

advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any

action based upon it. This report/message is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or

redistributed to any other person in any from. The report/message is based upon publicly

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

consider reliable, but we do not represent that it is accurate or complete and we do not

provide any express or implied warranty of any kind, and also these are subject to change

without notice. The recipients of this report should rely on their own investigations,

should use their own judgment for taking any investment decisions keeping in mind that

past performance is not necessarily a guide to future performance & that the the value of

any investment or income are subject to market and other risks. Further it will be safe to

assume that NSL and /or its Group or associate Companies, their Directors, affiliates

and/or employees may have interests/ positions, financial or otherwise, individually or

otherwise in the recommended/mentioned securities/mutual funds/ model funds and

other investment products which may be added or disposed including & other mentioned

in this report/message.

Date post:	20-Jun-2015
Category:	Economy & Finance
Upload:	narnolia-securities-limited
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