India Equity Analytics Year 2014 - Greater Share for a IT Industry

India Equity Analytics 1st Janary 2014

2013 NIFTY WEALTH CREATION STOCKNIFTY Return : 6.74 % SENSEX Return: 8.97% EW ALL SHARE Return: 0.77%

Company Mkt Cap Return(%) BSE Code Company Mkt Cap Return(%) BSE Code Mkt Cap

HCLTECH 88268 104 532819 MINDTREE 6368 124 532331 3322

RCOM 26791 76 524804 AUROPHARMA 11441 108 500878 1152

TCS 425230 72 532755 TECHM 42854 97 533573 3970

IDEA 55363 61 533179 PERSISTENT 3920 91 500940 2079

SUNPHARMA 117586 54 532175 INFOTECENT 3812 90 533304 1372

INFY 200150 50 500825 BRITANNIA 11037 84 531522 2947

LUPIN 40725 48 532343 TVSMOTOR 3608 82 533176 362

WIPRO 137834 42 505200 EICHERMOT 13456 71 532830 1854

DRREDDY 43068 39 526612 BLUEDART 8040 65 532689 2575

JSWSTEEL 24598 25 532523 BIOCON 9241 61 532612 1263

Company Mkt Cap Return(%) BSE Code Company Mkt Cap Return(%) BSE Code Mkt Cap

MMTC 5280 (92) 512199 COREEDUTEC 230 (94) 530191 49

HINDCOPPER 6527 (50) 530323 ERAINFRA 272 (89) 532912 14

CANBK 12499 (43) 532715 GITANJALI 663 (86) 533159 40

JINDALSTEL 24394 (42) 532739 PLETHICO 153 (85) 532494 14

IDFC 16625 (36) 502420 ORIENTPPR 255 (84) 533266 85

BANKINDIA 14155 (31) 526881 FINANTECH 854 (84) 533272 59

PNB 22150 (28) 532691 TULIP 88 (81) 522175 65

DLF 29733 (28) 532696 EDUCOMP 348 (80) 532770 54

SBIN 120766 (26) 526015 KEMROCK 37 (79) 533402 103

BANKBARODA 27202 (26) 532391 OPTOCIRCUI 680 (74) 506074 112

500112 INNOIND (86)

532134 ARSHIYA (84)

532461 SHIV-VANI (87)

532868 HANUNG (87)

532659 TECPRO (89)

532149 CEBBCO (88)

532483 AQUA (90)

532286 MICROTECH (90)

513377 CHROMATIC (94)

513599 NET4 (94)

wORST PERFORMANCE wORST PERFORMANCE wORST PERFORMANCE

BSE Code Company Return(%)

500124 PVR 129

500228 INDOCO 115

500257 DQE 144

507685 ASTRAL 134

524715 CMAHENDRA 162

500209 RASOYPR 160

532540 APLLTD 191

532822 FINPIPE 172

532281 AJANTPHARM 271

532712 CEATLTD 205

TOP PERFORMANCE in 2013 TOP PERFORMANCE in 2013 TOP PERFORMANCE in 2013

BSE Code Company Return(%)

HI CAP MIDCAP SMALLCAP

IEA-Equity

Strategy

1st Jan, 2014Edition : 174

INDIAN Contribution to World Mkt Cap(%) SENSEX ROE (%)

CNX MidCap Return : -5.1%

INDIA Market Cap to GDP ( % ) SENSEX P/B(x)

CNX SmallCap Return:-8.28%

India Equity Analytics

3

Index

HINDALCO : "BUY" 24th Dec 2013

DCB : "REDUCE" 27th Dec 2013

Infosys : Bala exit; a pros and cons? "BUY" 26th Dec , 2013

"Neutral" Hindustan Zinc LTD : 31th Dec 2013

With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.The

Rampura Agucha underground mine project is operational via ramps (tunnel driven downward from the surface) and commercial production will

ramp up in Q3 and Q4 of FY14. The Kayad mine project will also commence commercial production in the current fiscal year. A cash-rich balance

sheet, low cost of production and inexpensive valuations make HZL an attractive bet at the current price levels. But looking at the lower LME

prices for silver and lead we are neutral for this financial year.we Valuing the stock at this level, we recommend Neutral rating on HZL with a

target price of Rs.143 for FY14........................ ( Page : 6-8)

Year 2014 promises to be bigger and stronger than the last two 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. FY 15E is going to be better that FY14E, which was better than FY13. It will be good for us as well as the

industry........................................... ( Page : 4-5)

IT Industry; from 2013 to 2014: "a year of innovation and transformation" 1st Jan 2014

Hindalco has expanded its aluminium capacity recently, low aluminium prices, sticky costs, delay in commencement of mining from captive

blocks and higher interest and depreciation costs may hit its profitability. In the near-term, there is lack of clarity over production from the

Mahan coal block for its Mahan smelter. Without captive coal block, the Mahan smelter is expected to face cost pressures, resulting in lower

return ratios over FY2013-15.So Clearance of Mahan coal block will be most awaited trigger for Hindalco. Mean While on the Positive Side We

can expect 7% growth on the Stock with a Target Price of Rs.132....................................... ( Page:20-22)

"HOLD"

Last week, V Balakrishnan a former CFO and member of Board director resigned from the company to turn entrepreneur of Private Equity space.

Currently, he is the head of Infosys business process outsourcing unit, the company's core banking software Finacle, its India business and

chairman of Infosys Lodestone. This was now the 8th senior and top level departure after the taking charges by Company founder Narayana

Murthy. At a CMP of Rs 3486, it trades at 19.2x FY14E and 16.7x FY15E earnings. We retain our “BUY” view on the stock with a target price of

target price of Rs 3620............................... ( Page : 18-19)

DCB is currently trading at 1.3 times of one year forward book which is almost upper side of valuation band. We value the bank at Rs.62/share

which is 1.4 times of one year forward book and 15 times of FY14E earnings. Valuation multiple is justified at present fundamental in our view

but has potential to expand the multiple once visibility of ROE improvement clearly come to on the floor after 1-2 quarters.

......................................................... ( Page : 15-17)

J&K Bank is one of our prefer bank in mid cap private sector banking space. Currently bank is trading at 1 times of one year forward book and 4.6

times of one forward earnings which we believe bank is still trading at attractive valuation post recent rally. We advice our investor to hold the

stock as bank is trading at lower valuation in comparison to private sector banks despite of having sound fundamental. We value bank at

Rs.1578/share which is 1.1 times of FY15’s book and 5.2 times of FY15’s earnings. ................................... ( Page : 12-14)

30th Dec 2013J&K BANK :

"BUY" RELIANCE : Good Growth Ahead

Reliance Industries Limited registered a turnover of Rs 197112 Cr for the half year ended 30th September 2013, up 4.7% YoY while it had made

turnover of Rs 188,193 Cr in 1HFY13. The exports were higher by 19.3% YoY to Rs 134455 Cr for 1HFY14……………….. ( Page : 9-11)

Narnolia Securities Ltd,

IT Industry; from 2013 to 2014

Favorable supply side scenario:

SMAC as new emerging opportunity:

4

INR/USD&CNX IT Performance(2013);

SMAC (social, mobile, analytics and cloud ) is throwing up huge opportunities as firms

want to optimise investments in current technology and drive growth by using digital

technologies and platforms. The digital forces of SMAC will reach mainstream status in

2014 and create requirements, drive new purchasing and establish new competitive

realities.

(Source: Company/Eastwind)


2013 has been a year of innovation and

transformation

The Indian IT governing body NASSCOM is expecting to clock 12-14% revenue growth in

USD term for FY14E, while Industry had reported 10-12% range of growth in FY13E.

Now, we expect higher growth with stable margin trajectory for FY 15E than previous

years led by healthy demand scenario and offering new delivery platform like analytics,

mobility, cloud, social media and emerging verticals such as healthcare and medical

devices.

NASSCOM on positive mood:

The Indian Rupee (INR) has depreciated against USD roughly by around 13-14% since Jan

1, 2013. The INR depreciation is favorable for all exporters and IT companies. As a

thumb rule, a 1% change in value of the rupee against the US dollar has an impact of 30-

40 bps on the operating margins of a company. During the 2QFY14, across the IT space,

companies reported healthy ramp up in operating margin.

With its top 4 bellwethers TCS, Infosys, Wipro and HCL- have been consolidated its

presence in software service sector. Now, new players with expertise in new emerging

services have entered into the marathon race and performing well in all aspects.

Indian IT Industry has been successful to maintain double-digit growth again in export

as well as in the domestic markets.

INR Depreciation: Factors behind the success story of IT Industry in 2013:

Euro zone was a pleasant surprise in 2013 with no bad news surfacing from that part of

the world. But that does not mean the sovereign debt problems have been solved

permanent. The attractiveness of Europe as a market is being reflected in the acquisition

activity within Tier-I IT (Valuesource, Equinox and C1 Group by Cognizant, Alti by TCS and

Infosys' acquisition of Lodestone).

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.Pleasant surprise from Euro zone:

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

Nifty and CNX IT Performance(2013); IT Industry with perception "I can do it better"

The year 2013 has proved a year of innovation and transformation for IT industry

across all verticals and geographies led by healthy demand environment and positive

factors for Industry, Indian IT Industry came to track with positive surprise and

opportunities. The resilient of $120bn plus IT Industry returned to higher growth

trajectory in 2013 and expecting to retain its momentum in the ensuring year for a

greater share of global multi-billion dollar IT Industry.

"a year of innovation and transformation"


59.5%

6.8%

59.5%

13%

- Govt mulls fresh incentives for IT companies,

-Software exports to grow 12-14% to clock $84-87 billion in FY14E,

-Domestic market to also grow 14% to $185 billion in FY14E,

-N.R. Narayana Murthy returns to Infosys as chairman,

-8 top executives quit Infosys in 6 months,

-Wipro hives off non-IT business as separate enterprise,

-Industry diversifies into offering new services & products,

-Campus hiring and fresh offers dip despite higher attrition,

-Thrust on providing IP-led solutions on multiple platforms,

5

IT Industry; from 2013 to 2014


Year 2014 promises to be bigger and stronger than the last two 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.

View and Valuation;

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.

FY 15E is going to be better that FY14E,

which was better than FY13. It will be

good for us as well as the industry


Highlights of 2013: Performance of Our IT Coverage

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.

2014 and IT Industry: Another year of flawless ride

Thanks to playing a pivotal role of technology across transforming delivery of diverse

services in the government and private sector, the domestic market is also maturing and

is one of the fastest in the developing countries.



CMP Upside

(31.12.13) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

TCS 2170.95 BUY 2369.1 9.1% 71.82 90.74 102.37 30.23 23.92 21.21 36.42% 36.22% 32.95%

INFOSYS 3485.5 BUY 3982.7 14.3% 164.2 181.1 208.2 21.23 19.25 16.74 24.8% 23.0% 22.2%

HCLTECH 1263.1 BUY 1415.5 12.1% 58.10 71.87 83.49 21.74 17.57 15.13 30.72% 29.10% 26.39%

WIPRO 559.05 NEUTRAL 469.97 25.0 25.15 27.4 22.32 22.23 20.40 21.7% 18.9% 17.8%

TECHM 1838.05 BUY 2329.5 26.7% 85.48 144.15 161.64 21.50 12.75 11.37 35.91% 38.31% 30.38%

CMC 1632 BUY 1692.5 3.7% 75.27 101.56 110.07 21.68 16.07 14.83 24.10% 25.81% 22.92%

NIITTECH 360.5 BUY 408.32 13.3% 36.28 44.03 53.38 9.94 8.19 6.75 20.0% 19.6% 19.3%

KPIT 171.55 BUY 177.33 3.4% 10.80 13.07 15.95 15.88 13.13 10.75 20.10% 19.80% 19.75%

HEXAWARE 131.75 BUY 140.59 6.7% 11.1 13.1 14.3 11.87 10.09 9.21 27.2% 27.0% 26%

PERSISTENT 980.05 REDUCE 960.51 46.12 63.40 76.92 21.25 15.46 12.74 18.1% 20.5% 20.4%

eCLERX 1068.5 BUY 1357.9 27.1% 64.25 71.61 83.65 16.63 14.92 12.77 43.8% 37.9% 34.4%

TATAELXSI 415.65 REDUCE 236.85 10.63 17.53 19.76 39.10 23.72 21.03 16.94% 23.55% 22.37%

ZENSARTECH 355.85 BUY 439.43 23.5% 40.03 57.16 74.62 8.89 6.23 4.77 23.22% 26.07% 26.34%

RoE-%Company View Target

EPS-Rs P/E-x

Hindustan Zinc LTD.

133

143

NA

8%

NA

500188 Revenue increased due to Depreciation in Rupee

56133

5613

6291

1M 1yr YTD

Absolute 4.3 -1.7 -3.4

Rel. to Nifty 0.0 9.2 11.3

2QFY14 1QFY14 4QFY13

Promoters 64.9 64.9 64.9

FII 1.8 1.5 1.5

DII 31.4 31.5 2.0

Others 1.8 2.1 31.6

Investment Concern

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

Net Revenue 3826 13.0 6.2 3387 3604

EBITDA 1883 28.2 25.3 1469 1503

Depriciation 186 6.3 1.1 175 184

Tax 254 -6.3 -4.9 271 267

PAT 1640 6.5 -1.2 1540 1660(In Crs)

6

The cost of production benefited from higher production volume and operational

efficiencies, which were more than offset by rupee depreciation and over Rs 3000/MT

decline in by-product credits On YoY basis. The Net Realization per tonne of Silver

slumped by 24% on YoY basis. This fall in realization was due to fall in price of silver in

LME as company adopts the import parity price. The Company’s EBIDTA zoomed by 28%

YoY basis at Rs 1,883 Cr and 30% QoQ basis. Net profit was up 7% to Rs. 1,640 Cr in Q2

The positive impact of higher EBITDA was partly offset by lower other income due to

mark-to-market losses on investments during the quarter.

HZL’s revenues are directly linked with the global market for products essentially, Zinc

and Lead which are priced with reference to LME prices and Silver to LBMA (London

Bullion Metal Association) prices.

Disruptions in mining due to equipment failures, unexpected maintenance problems ,

non-availability of raw materials of appropriate price, quantity and quality for our energy

requirements, disruptions to or increased cost of transport services or strikes and

industrial actions or disputes.Lower than expected demand by galvanizing industries for

zinc and industrial batteries, car batteries industries for lead would affect the company

estimates.


Stock Performance-%

Share Holding Pattern-%

1 yr Forward P/B

Source - Comapany/EastWind Research

Nifty

Hind Zinc reported net sales of Rs3559 Cr up by 24% YoY and 19% QoQ. The growth was

mainly due to higher sales volume and improvement in realisation per tonne. The net

realsation per tonne of zinc increased by 15% on YoY basis and 9% QoQ at Rs.131794. The

net realization per tonne of Lead remained almost flat on YoY basis and increased by 5%

in QoQ basis. The increase in net realization per tone is due to depreciation in rupee.

Zinc’s cost of production before royalty during the quarter was Rs.50522 , 8% higher in

Rupee and 3% lower in USD terms on YoY basis.

Upside

Change from Previous

CMP

Target Price

Previous Target Price

Mined metal production in Q2FY14 was 221k tonnes against 190k tonnes YoY basis a

growth of 8.5% and 238k tonnes in Q1 FY14. The increase is due to higher production at

Rampura Agucha and restarting of Zawar mines. Integrated Refined Zinc production was

at 195k tonnes in Q2FY14 against 153k tonnes in Q2FY13 increase of 28%. Integrated

Lead Production was at 29k tonnes against 22k tonnes growth of 31% YoY basis. Silver

production was at 83 tonnes in Q2FY14 against 77 tonnes YoY basis. The increase in

Production of Zinc and lead was on account of improved utilization of smelter capacity.

Company Update Neutral

Market Data

Average Daily Volume (Nos.)

BSE Code

HINDZINCNSE Symbol

52wk Range H/L

Mkt Capital (Rs Crores)

143/94

"Neutral"31st Dec' 13


0

50

100

150

200

250

300

350

400

450

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Lower other income mutes PAT growth: LME Price/Ton

From the Management Corner :

Outlook and valuation: LME Price/Ton

LME Price/Ton

FY11 FY12 FY13 FY14E

9912 11405 12700 13577

979 1543 2032 1787

10891 12948 14732 15364

1023 1228 1070 1291

492 568 696 707

4417 5336 6218 6484

5496 6069 6482 7093

475 611 647 718

19 14 29 37

1059 1419 921 1097

4900 5526 6899 6967

21.8 20.7 21.4 18.5

7



Source - Comapany/EastWind ResearchInterest Cost

Net tax expense / (benefit)

PAT

ROE%

Depriciation

Hindustan Zinc LTD.

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income

The other income declined by 48.7% yoy to 267cr due to mark to market losses booked

by the company during the quarter while depreciation expenses also increased by 6.8%

yoy to 186cr. Consequently the adjusted net profit growth was muted at 10.5% yoy to

1,701cr (in-line with our estimate of 1,722cr).

With a cash-rich balance sheet and strong visibility over production growth of zinc, lead

and silver over FY2013-15, we are positive on HZL.The Rampura Agucha underground

mine project is operational via ramps (tunnel driven downward from the surface) and

commercial production will ramp up in Q3 and Q4 of FY14. The Kayad mine project will

also commence commercial production in the current fiscal year. A cash-rich balance

sheet, low cost of production and inexpensive valuations make HZL an attractive bet at

the current price levels. But looking at the lower LME prices for silver and lead we are

neutral for this financial year.we Valuing the stock at this level, we recommend Neutral

rating on HZL with a target price of Rs.143 for FY14.

Volatile Desel Price and high Sulphuric acid price affecting the company,s PAT

adversly.Company is tracking on 95% capacity utilization.Captive plants enjoy the lower

Tax rate and company enjoys zero tax from tax free geographycal areas. Smelting Plants

are improvised and management is confident that the smelting plants will maintain

their stance for the coming quarters also.

Power, fuel & water

Repairs

Expenditure

EBITDA


0200400600800

10001200140016001800

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

3

De

c-1

3

Silver(rs/ounce)

020000400006000080000

100000120000140000160000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

3

De

c-1

3

Lead

90000

95000

100000

105000

110000

115000

120000

125000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

3

De

c-1

3

Zinc

FY10 FY11 FY12 FY13

Share 423 845 845 845

Reserve & 17701 21688 26036 31431

Total equity 18124 22533 26881 32276

Long-term 0 0 0 0

Short-term 60 0 0 0

Long-term 0 0 0 0

Trade 478 475 410 484

Short-term 340 567 504 825

Total 20238 25053 29485 35465

Intangibles 109 109 47 10

Tangible 6071 7145 8466 8474

Capital 1113 875 445 1082

Long-term 361 594 876 1898

Inventories 452 762 798 1111

Trade 152 209 332 403

Cash and 928 5633 5255 6942

Short-term 96 158 233 373

Total 20238 25053 29485 35465

FY10 FY11 FY12 FY13

P/B 3.2 2.2 2.1 1.7

EPS 95.6 11.6 13.1 16.3

Debtor to 1.9 2.1 2.9 3.2

Creditors to 6.0 4.8 3.6 3.8

Inventories 0.6 0.8 0.7 0.9

FY10 FY11 FY12 FY13

Cash from 4001 4483 4553 4935

Changes In 77 -212 -61 -183

Net Cash 4077 4272 4492 4752

Cash From -3881 -3658 -3499 -3234

Cash from -187 -363 -1242 -1257

Net Cash 8 250 -248 262

8



EBIDTA & Margin :


B/S PERFORMANCE

Trading At :

RATIOS

CASH FLOWS

Hindustan Zinc LTD.

ZinC Productions:


0

20

40

60

80

100

120

140

160

0

1000

2000

3000

4000

5000

6000

7000 NIFTY HINDZINC

BUY

1M 1yr YTD

Absolute 4 6 11

Rel. to Nifty 0.5 -1 -7

Current 1QFY14 4QFY1

3Promoters 45.3 45.3 45.3

FII 17.7 17.4 17.8

DII 11.8 11.6 11.0

Others 25.2 25.7 25.9

Rs, Crore

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

Revenue 103758 90336 14.9 87645 18.4

EBITDA 9909 9610 3.1 9818 0.9

PAT 5490 5352 2.6 5409 1.5

EBITDA Margin 9.6% 10.6% (110bps) 11.2% (170bps)

PAT Margin 5.3% 5.9% (60bps) 6.2% (90bps)

9

CMP 878

Target Price 1040

Previous Target Price -

The profit after tax was higher by 9.4% at Rs 10,842 Cr as against Rs 9,912 Cr in the

corresponding period of the previous year. The other income for 1HFY14 stands Rs 4595 Cr

up 14 % YoY mainly due to higher investment income.

1HFY14 revenue from the Petrochemicals segment increased by 6.7% YoY to Rs 46,842

Cr. Higher prices accounted for 7.4% growth in revenue. EBIT margin improved to 9.4% in

1H FY14 as compared to 8.0% a year ago. The production during 1HFY14 was 11 Mn

Tones verses 11.1 Mn Tonnes in 1HFY13.

RELIANCEGood Growth Ahead

Stock Performance-%


Mkt Capital (Rs, Cr)

Market Data

BSE Code 500325

About the Company

Reliance Industries Limited (RIL) is a conglomerate with business in the energy and

materials value chain. The Company operates in three segments: petrochemicals, refining

and oil & gas.

Company Update

1 Yr Price Movement Vs Nifty


283929

Average Daily Volume 52019

Nifty 6313

Financials

Reliance Industries Limited registered a turnover of Rs 197112 Cr for the half year ended

30th September 2013, up 4.7% YoY while it had made turnover of Rs 188,193 Cr in

1HFY13.The exports were higher by 19.3% YoY to Rs 134455 Cr for 1HFY14.

Revenue from Refining and Marketing segment during 1HFY14 increased by 5.7% YoY to

Rs 178,914 Cr, while EBIT was up 8.3% YoY at Rs 6,125 Cr. GRMs averaged $ 8.0/bbl

during 1H FY14 and the refineries achieved an average utilization rate of 112%. 1H FY14

export of refined products was at 22.1 MMT as compared to 19.2 MMT in 1H FY13.

PETROCHEMICALS BUSINESS


Half Yearly Financial Performance

The operating EBITDA during 1HFY14 was Rs 14924 Cr up 2.3 % YoY on the back of

higher margins in refining and petrochemicals business. The cost RM increased by 3 % to

Rs 162,094 from Rs 156,975 Cr due to higher crude prices. The employee cost for 1HFY14

was Rs 1707 Cr largely flat on yearly basis. The other expenditure increased by 13.6% YoY

to Rs 13,101 Cr primarily due to higher expenses on account of power & fuel consumption

and higher selling expenses on account of higher exports.

Half Yearly Business Performance

52wk Range H/L 954/765

NSE Symbol RELIANCE

OIL AND GAS (EXPLORATION & PRODUCTION) BUSINESS:

Company for half year ended earned Rs 2918 Cr from this business segment down by

38.7% YoY mainly due to Fall in production from KG-D6 owing to geological complexity

and natural decline in the fields.The EBIT margin for the segment in 1HFY14 was 24.3% .

REFINING & MARKETING BUSINESS

Change from Previous -

18%Upside

"BUY" 30th

Dec' 13


10

RELIANCEContinued….

View and Valuation

The stock is trading at Rs 878 and in light of half yearly performance, business outlook and

management commentary we recommend BUY for the stock with Target Price Rs

1040.

2QFY14 SEGMENTAL REVENUE BREAK UP

Graphical Depiction

The net addition to fixed assets for the half year ended 30th September 2013 was Rs

20,154 Cr including exchange rate difference capitalization. Capital expenditure was

principally on account of ongoing expansions projects in the petrochemicals and refining

business at Jamnagar, Dahej, Silvassa and Hazira.

The Outstanding debt as on 30th September 2013 was Rs 83,982 Cr compared to Rs

72,427 Cr as on 31st March 2013. The company had cash and cash equivalents of Rs

90,540 Cr. These were in bank deposits, mutual funds, CDs and Government securities /

bonds. RIL is debt free on a net basis as at 30th September 2013.

Management Commentary

The management of the company on their half yearly performance said that diversified and

integrated petrochemicals business captured margins across segments and delivered near-

record profit levels even as the domestic economy slowed. The management further said

that optimal utilization of best-in-class refinery assets and inherent flexibility in sourcing,

product delivery contributed to healthy operating profits from our refining business.




11


RELIANCE

Sales Trend (Rs/Bn)

A better realisation with a weaker rupee and

improved volume were the key drivers of the

sales growth of both petchem and refinery

businesses.

EBITDA & OPM %


PAT & NPM %



The improved margin and higher volume of

the petrochemical (petchem) business were

the major drivers of the profit in Q2FY2014.

Despite a healthy revenue growth, OPM

remain flat due to a lower margin in the

refining and exploration segments


J&K BANK

1411

1578

1420

12

11

1M 1yr YTD

Absolute 3.6 7.8 7.8

Rel.to Nifty -12.9 -0.8 -0.8


3Promoters 53.2 53.2 53.2

FII 24.8 24.5 24.3

DII 5.0 4.9 4.9

Others 17.1 17.4 17.7

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1544 1838 2316 2595 3091

Total Income 1908 2172 2800 2979 3817

PPP 1149 1370 1811 1906 2443

Net Profit 615 803 1055 1128 1478

EPS 126.9 165.7 217.6 232.6 304.9

12

Mkt Capital (Rs Cr)



Stock Performance

At the end of 2QFY14, bank reported GNPA of 1.7% and in absolute basis, GNPA

grew by mere 4% QoQ despite of current phase of economy cycle. Restructure loans

declined by 70 bps to 3.6% of loans whereas fresh restructure was low at 70 bps of

loan. Provision coverage ratio declined by 250 bps QoQ to 89% (without technical

write-off) made net NPA to 0.2% from 0.1% in 1QFY14.

52wk Range H/L


J&k Bank Vs Nifty


21053

Nifty 6314

Average Daily Volume

6841

1695/1130

NSE Symbol J&KBANK

Company Update HOLD

CMP

Target Price

Jammu and Kashmir Bank (J&K Bank) is one of our prefer bank in mid cap

private sector banking space. Currently bank is trading at 1times of one year

forward book and 4.6 times of one forward earnings which we believe bank is

still trading at attractive valuation despite of recent rally. We advice our

investor to hold the stock as bank is trading at lower valuation premium in

comparison to peers despite of having sound fundamental. We value bank at

Rs.1578/share which is 1.1 times of FY15’s book and 5.2 times of FY15’s

earnings. Looking at bank’s metrics like Tier1 capital of 13.2%, GNPA of 1.7%,

PCR at 92% make it strong for trading at premium valuation as compare to

peers group.


Market Data

Upside

BSE Code 532209

Strong balance sheet growth continued with margin expansion

J&K bank aggressively expanding its loan growth outside of the state and witnessed

20.3% growth whereas within state loan grew by 26.4% in 2QFY14. Management

guided loan growth of 20-25% in FY14 premium of industry average of 15%.

Deposits growth would be 17-18% in FY14 according to management. Bank’s CASA

ratio at the end of 2Q stood at 39% which keep cost of deposits at 6% of level, one

of the lowest in industry. Low cost and high yield asset helped bank to maintain NIM

at 4.33%. Bank’s management guided NIM 4%+ level in FY14.

Sustainable high return ratio makes a strong case to trade at premium

valuation

J&K bank has sustainable high return ratio like ROE of 23%+ and ROA of 1.5%+

which help bank to maintain high valuation premium. Operating leverage (operating

cost to total asset) of the bank remains at 1.4 to 1.6 times in last few quarters which

restrict cost income escalate beyond 36%. Capital adequacy ratio of 13.2%

according to basel-II helps bank to maintain high growth trajectory with raising capital

in next few years.

Stable asset quality with lowest restructure asset comparison to peers

"HOLD"30th Dec, 2013


13

J&K BANK

Source: Eastwind/Company



Quaterly Result (Rs. Cr) 2QFY14 1QFY14 2QFY13 % YoY Gr % QoQ Gr

Interest/discount on advances / bills 1244 1184 1061 17.3 5.0

Income on investments 396 423 417 -5.0 -6.3

Interest on balances with Reserve Bank of India 10 17 23 -57.4 -42.8

Others 0 0 0

Total Interest Income 1650 1624 1501 9.9 1.6

Others Income 99 92 91 9.4 7.9

Total Income 1749 1716 1592 9.9 1.9

Interest Expended 968 969 948 2.1 -0.1

NII 682 655 553 23.4 4.1

Other Income 99 92 91 9.4 7.9

Total Income 781 747 644 21.4 4.6

Employee 177 176 143 23.6 0.6

Other Expenses 108 90 78 38.7 19.4

Operating Expenses 285 266 221 28.9 7.0

PPP( Rs Cr) 496 481 423 17.5 3.2

Provisions 56 36 33 69.7 53.7

PBT 441 445 390 13.1 -0.9

Tax 138 137 120 14.8 1.0

Net Profit 303 308 270 12.3 -1.7

Balance Sheet Data ( Rs Cr)

Net Worth 5475 5173 4609 18.8 5.9

Deposits 61171 58601 54927 11.4 4.4

Borrowings 1346 758 922 45.9 77.7

Advances 41121 39282 34272 20.0 4.7

Investment 22316 21734 22521 -0.9 2.7

Asset Qaulity ( Rs Cr)

GNPA 709 665 709 0.0 6.5

NNPA 78 56 78 0.0 38.2

GNPA(%) 1.7 1.7 2.1

NNPA(%) 0.2 0.1 0.2

PCR(%) 89 92 89

14

J&K BANK

Source: eastwind/Company



P/L 2010 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 2342 2630 3394 4318 4959 5703

Income on investments 705 1066 1403 1723 1892 2085

Interest on balances with Reserve Bank of India 11 17 39 97 53 53

Others 0 0 0 0 0 0

Total Interest Income 3057 3713 4836 6137 6904 7841

Others Income 416 365 334 484 383 727

Total Income 3473 4078 5170 6621 7287 8568

Interest on deposits 1841 2069 2902 3741 4217 4639

Interest on RBI/Inter bank borrowings 83 46 41 26 91 111

Others 14 54 54 54 0 0

Interest Expended 1938 2169 2997 3821 4308 4750

NII 1119 1544 1838 2316 2595 3091

NII Growth(%) 37.9 19.1 26.0 12.1 19.1

Other Income 416 365 334 484 383 727

Total Income 1536 1908 2172 2800 2979 3817

Employee 366 524 521 652 633 811

Other Expenses 211 235 281 337 440 563

Operating Expenses 577 759 802 989 1072 1374

PPP( Rs Cr) 958 1149 1370 1811 1906 2443

Provisions 446 534 567 756 779 965

Net Profit 512 615 803 1055 1128 1478

Net Profit Grwoth(%) 20.1 30.6 31.4 6.9 31.1

Key Balance sheet dataDeposits 37237 44676 53347 64221 70643 77707

Deposits Growth(%) 20.0 19.4 20.4 10.0 10.0

Borrowings 1100 1105 1241 1075 1230 1500

Borrowings Growth(%) 0.4 12.3 -13.4 14.4 22.0

Loan 23057 26194 33077 39200 45080 51843

Loan Growth(%) 13.6 26.3 18.5 15.0 15.0

Investments 13956 19696 21624 25741 20124 22178

Investments Growth(%) 41.1 9.8 19.0 -21.8 10.2

Eastwind CalculationYield on Advances 10.2 10.0 10.3 11.0 11.0 11.0

Yield on Investments 5.0 5.4 6.5 9.4 9.4 9.4

Yield on Funds 7.7 7.5 8.3 8.9 10.6 10.6

Cost of deposits 4.9 4.6 5.4 5.8 6.0 6.0

Cost of Borrowings 8.8 9.1 7.7 7.4 7.4 7.4

Cost of fund 5.1 4.7 5.5 5.9 6.0 6.0

ValuationBook Value 621 718 844 1003 1186 1441

P/BV 1.1 1.2 1.1 1.3 1.2 1.0

P/E 6.4 6.9 5.5 5.9 6.1 4.6

57.25

62

62

8

-

1M 1yr YTD

Absolute 19.2 20.4 20.4

Rel.to Nifty 15.6 13.1 13.1


3Promoters 18.5 18.5 18.5

FII 11.4 11.4 11.1

DII 14.1 12.5 13.0

Others 56.1 57.7 57.5

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 189 228 284 127 190

Total Income 301 328 401 272 334

PPP 86 84 126 95 127

Net Profit 21 55 102 95 127

EPS 1.1 2.3 4.1 3.8 5.1

15

BSE Code 532772

NSE Symbol DCB

52wk Range H/L

Company Update Book Profit

CMP

Target Price

Well capitalized and stable asset quality

Bank is well capitalized with tier 1 ratio of 13% means no need to raise money in

short term. Bank’s management guided loan and deposits growth of 25-27% and 30-

32% in FY14 which seen possible looking at present scenario. Management is also

very focus on low ticket size loan (prefer less than 30 mn) on account of avoiding

large slippage. At the 2QFY14, bank reported slippage of Rs.21 cr which was 1.3%

in annualized basis. Fresh slippage ratio remains in the range of 1.1-1.5 times in last

few quarters, so we believe bank would maintain similar trend in term of fresh

slippage which restrict GNPA out of control. Provision coverage ratio at the end of

2QFY14 stood at 84% (without technical write off) and management reiterate PCR to

maintain above of 80%.

Mkt Capital (Rs Cr)



Potential to expand valuation multiple, need to watch growth trajectory 1-2

quarters more

On valuation front, DCB valuation could be expanded if visibility of ROE

improvement is clearly seen. ROE improvement could be possible in two front- first

reducing cost income ratio which will boost the profit and second loan growth

specially in high yield segment like SME and MSME. We observed that bank’s Cost-

Income ratio was higher at 66.2% at the end of 2QFY14. Cost income ratio would

reduce to less than 65% in FY14 and would further reduce to 60% in FY15 according

to management. To reduce the cost, bank initiated to invest high yield segment,

planning to maintain CASA at 30% in long run while in short term does not expect

below of 27% and escalating branch network. In FY13 bank opened 10 branches but

in 1HFY14, DCB opened 9 branches and will go upto 120-125 branches in FY14.

54.85/38

Stock Performance

DCB


DCB Vs Nifty


2158026

Nifty 6279

Development Credit Bank (DCB) currently trading at 1.3 times of one year

forward book which is now almost of higher side of our valuation range. We

value the bank at Rs.62/share at the higher side which is 1.4 times of one year

forward book and 15 times of FY14E’s earnings. Present valuation multiple

justified on account of DCB’s consistent improvement in its return ratio and

management guided similar trend of growth in FY14,however bank cited

margin could be compressed by 25-30 bps. We can’t rule out the valuation

multiple expansions but there is need to watch 1-2 quarters more as per our

view

Average Daily Volume

1437


Market Data

Upside

"Book Profit"27th Dec,2013


16

DCB

Source: Company/Eastwind



Quarterly Result( Rs Cr) 2QFY14 1QFY14 2QFY13 % YoY % QoQ

Interest/discount on advances / bills 205.2 201.5 170.9 20.1 1.8

Income on investments 57.9 56.7 47.6 21.8 2.1

Interest on balances with Reserve Bank of India 5.5 2.3 1.1 378.2 142.4

Others 0.2 0.2 0.4 -45.6 -9.7

Total Interest Income 268.8 260.7 219.9 22.2 3.1

Others Income 27.3 45.1 27.5 -0.9 -39.5

Total Income 296.1 305.8 247.5 19.6 -3.2

Interest Expended 177.6 177.6 153.0 16.1 0.0

NII 91.3 83.1 67.0 36.3 9.8

Other Income 27.3 45.1 27.5 -0.9 -39.5

Total Income 118.5 128.2 94.5 25.5 -7.6

Employee 38.8 37.7 34.1 13.9 2.9

Other Expenses 39.6 39.2 33.9 16.8 1.1

Operating Expenses 78.4 76.9 68.0 15.4 2.0

PPP( Rs Cr) 40.1 51.3 26.5 51.4 -21.8

Provisions 7.0 8.5 4.4 60.8 -17.4

PBT 33.1 42.8 22.1 49.5 -22.7

Tax 0.0 0.0 0.0

Net Profit 33.1 42.8 22.1 49.5 -22.7

Balance Sheet (Rs Cr)

Net Worth 1079 1046 902 19.6 3.2

Deposits 8788 8320 7137 23.1 5.6

Loan 6677 6472 5671 17.7 3.2

Asset quality (Rs Cr)

GNPA 235 226 226 4.0 4.0

NPA 57 54 38 50.0 5.6

% GNPA 3.5 3.5 4

% NPA 0.9 0.8 0.7

17

DCB

Source: Eastwind/ Company



Income Statement 2010 2011 2012 2013 2014E 2015EInterest Income 459 536 717 916 1090 1279

Interest Expense 317 347 489 632 963 1089

NII 142 189 228 284 127 190

Change (%) -28.2 33.6 20.4 24.9 -55.3 49.1

Non Interest Income 107 112 100 117 145 145

Total Income 249 301 328 401 272 334

Change (%) -21.6 21.2 8.9 22.4 -32.3 23.0

Operating Expenses 201 215 244 275 177 207

Pre Provision Profits 48 86 84 126 95 127

Change (%) -36.5 79.9 -2.6 50.5 -24.5 33.5

Provisions 121 57 29 24 0 0

PBT -73 29 55 102 95 127

PAT -79 21 55 102 95 127

Change (%) -10.1 -127.2 157.1 85.3 -6.7 33.5

Balance SheetDeposits( Rs Cr) 4787 5610 6336 8364 9618 11061

Change (%) 3 17 13 32 15 15

of which CASA Dep 1693 1975 2035 2272 2597 1825

Change (%) 17 17 3 12 14 -30

Borrowings( Rs Cr) 504 861 1123 1526 1697 1952

Investments( Rs Cr) 2018 2295 2518 3359 2886 3318

Loans( Rs Cr) 3460 4271 5284 6586 7903 9484

Change (%) 6 23 24 25 20 20

RatioAvg. Yield on loans 10.4 9.4 10.1 10.8 9.7 9.7

Avg. Yield on Investments 4.7 5.8 6.9 5.8 6.8 6.8

Avg. Cost of Deposit 5.9 5.2 6.4 6.4 5.9 5.9

Avg. Cost of Borrowimgs 6.8 6.4 7.2 6.4 6.0 6.0

Valuation

Book Value 30 31 36 40 44 49

CMP 32.2 45.9 45 45 57.3 57.3

P/BV 1.1 1.5 1.3 1.1 1.3 1.2

Infosys

How do we see the impacts of this buzz?

1M 1yr YTD

Absolute 4.1 52.1 27.2

Rel. to Nifty -0.3 44.9 23.3


Promoters 16.04 16.04 16.04

FII 40.52 40.55 39.42

DII 17.51 18.7 18.33

Others 25.93 24.71 26.21

Financials2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 12965 11267 15.07 9858 31.5

EBITDA 2836.9 2664 6.49 2597 9.2

PAT 2406.9 2374 1.39 2369 1.6

EBITDA Margin 21.9% 23.6% (170bps) 26.3% (440bps)

PAT Margin 18.6% 21.1% (250bps) 24.0% (540bps)

18

NSE Symbol INFY

Change from Previous 7%

Behind the top-level departure, only one cause reflects on the picture that is the tussle

of CEO post. Current CEO Shibulal is going to complete its tenure by next years.

Among the front-runner of this post, Balakrishnan was strong contender for the post

of CEO race.

52wk Range H/L 3570/2190

Stock Performance

160944

(a) We think, there would not be any major impact on qualitative and quantitative sense

and company would not see any major gap between sales executives and clients. Yes,

the magnitude of the exits could create a leadership vacuum. However, very soon

company will try to turn into smoothie organization structure.

Previous Target Price 3390

Upside 4%

BSE Code 500209


Average Daily Volume 1240448

Nifty 6268

Bala exit; a pros and cons?

CMP 3486

Target Price 3622

Company update BUY Does Balakrishnan departure from Infosys would affect the company’s bread and

butter?

Last week, V Balakrishnan a former CFO and member of Board director resigned from

the company to turn entrepreneur of Private Equity space. Currently, he is the head of

Infosys business process outsourcing unit, the company's core banking software

Finacle, its India business and chairman of Infosys Lodestone. This was now the 8th

senior and top level departure after the taking charges by Company founder Narayana

Murthy. Market Data

1 year forward P/E

Rs, Crore



(d) Post Narayana Murthy, company has committed for future transformational changes

and next generation growth plan. Recently, the company has undertaken a clear shift in

direction where it has been focusing on higher-margin businesses, a strategy that rival

TCS that has successfully implemented.

For near term, there could be some small sort of rally on the stock because of this knee

jerk and as the December quarter is generally expected to be a bit tepid for the

technology sector. Although, the street will forget all things after a good quarter

earnings or a strong commentary on the business outlook. For long term, we do not

see any major pressure because of co’s poster boy exit.

(b) V Balakrsihnan’s resignation is not one night decision and not an affect of internal

hiccups. Post declaration of his resignation V Balakrishnan stated to media “it was my

long term plan and we were waiting for SEBI approval for my new Private Equity firm”.

Even, he sold 1,00,000 shares in the company for Rs 33 crore in the open market on 9th

Nov 2013 (50,000 shares each held by his daughters), it indicates its earlier decision.

Therefore, we think Bala’s exit is a part of an ongoing strategy to reshuffle the top

management at Infosys.

(c) The top management conundrum has not been new to Infosys. Even, as Infosys’s

hyper-growth story played out over the course of three decades, powered by not just its

seven cofounders but also several talented employees that came on later on. Even, most

of company founders have churned out and company has been working for growth story

and committing for strategy 3.0.


"BUY"26th Dec' 13


19


Financials


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

inching up strategy, we are positive on the stock. At a CMP of Rs 3486, it trades at 19.2x

FY14E and 16.7x FY15E earnings. We retain our “BUY” view on the stock with a target

price of target price of Rs 3622.

Infosys.

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

kicking, its past strategy of under-promising and over delivering - remember present

guidance now factors flat gorwth in next 2 qtrs, and the NRN invisible hand in play.

Further announcement of strategic acquisitions, better utilization of cash balances, ramp-

up in sales investment ,better deal win, consistent client traction and revenue

momentum would help the company to bridge the gap with rivals such as TCS and HCL

Tech.


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales, INR 22742 27501 33734 40352 48659.6 55939.5

Employee Cost 12085 14856 18340 22565 27736.0 32165.2

Other expenses 2792 3677 4671 6254 7785.5 9230.0

Total Expenses 14877 18533 23011 28819 35521.5 41395.2

EBITDA 7865 8968 10723 11533 13138.1 14544.3

Depreciation 905 854 928 1099 1325.3 1523.5

Other Income 982 1211 1904 2365 2433.0 3356.4

EBIT 7942 9325 11699 12799 14245.8 16377.1

Interest Cost 0 0 0 0 0.0 0.0

PBT 7942 9325 11699 12799 14245.8 16377.1

Tax 1681 2490 3367 3370 3846.4 4421.8

PAT 6261 6835 8332 9429 10399.4 11955.3

Growth-%

Sales 4.8% 20.9% 22.7% 19.6% 20.6% 15.0%

EBITDA 9.3% 14.0% 19.6% 7.6% 13.9% 10.7%

PAT 4.6% 9.2% 21.9% 13.2% 10.3% 15.0%

Margin -%

EBITDA 34.6% 32.6% 31.8% 28.6% 27.0% 26.0%

EBIT 34.9% 33.9% 34.7% 31.7% 29.3% 29.3%

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

Expenses on Sales-%

Employee Cost 53.1% 54.0% 54.4% 55.9% 57.0% 57.5%

Other expenses 12.3% 13.4% 13.8% 15.5% 16.0% 16.5%

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

Valuation

CMP 2615.1 2765.1 2865.0 2400.0 3486 3486

No of Share 57.4 57.4 57.4 57.4 57.4 57.4

NW 23049.0 25976.0 31332.0 37994.0 45236.1 53832.6

EPS 109.1 119.0 145.1 164.2 181.1 208.2

BVPS 401.7 452.4 545.6 661.7 787.8 937.5

RoE-% 27.2% 26.3% 26.6% 24.8% 23.0% 22.2%

Dividen Payout ratio 25.1% 45.9% 24.0% 45.1% 23.8% 20.7%

P/BV 6.5 6.1 5.3 3.6 4.4 3.7

P/E 24.0 23.2 19.7 14.6 19.2 16.7

Hindalco Industries Ltd.

124

132

NA

7%

NA

500440

25497

17848

6284

1M 1yr YTD

Absolute -1.3 11.3 8.7

Rel. to Nifty -2.7 0.5 0.0

2QFY14 1QFY14 4QFY13

Promoters 37.0 37.0 32.1

FII 24.9 24.8 24.5

DII 14.4 14.3 15.5

Others 23.7 23.9 28.0

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

Net Revenue 6585 4.6 5.1 6296 6266

EBITDA 540 4.8 12.8 515 478

Depriciation 196 13.7 7.3 173 183

Tax 83 -5.9 -17.4 88 101

PAT 357 -0.5 -24.7 359 474(In Crs)

20

Average Daily Volume (Nos.)

The PM's Project Monitoring Group has sorted out issues with regards to Hindalco's 7000

Cr rupees Utkal Alumina refinery among others. On a medium-term view we would still

be positive on Hindalco Industries. As the improvement happens across economies

whether it is US, Europe, to an extent in China also we think Hindalco is very well

positioned.

Market DataBSE Code

HINDALCONSE Symbol

52wk Range H/L


137/83

Upside


Company UpdateCMP

Target Price


Novelis, leader in aluminum rolling and recycling completed $400 millionexpansion

program in South Korea. The expansion of its Yeongju and Ulsan plants increases the

company's production capacity in the region by more than 50 percent to approximately

one million metric tons of aluminum sheet per year.Hindalco has expanded its smelting

capacity by 359kt via Mahan greenfield project.Aruna Sundarajan is back and set to

take charge as Industries new additional chief secretary and looks forward

optimistically for a better industrial climate focusing on young entrepreneurship.


Stock Performance-%


1 yr Forward P/B


Hindalco Industries, the world's largest Aluminium rolling company, disappointed with

the second quarter net profit declining marginally to Rs 357Cr from Rs 358.9Cr y-o-y,

dented by higher finance cost. Bottom line was largely supported by other income;

otherwise profit would have much lower than currently reported. Other income, which

included Rs61 Cr non-recurring income and dividend of Rs 100 Cr from subsidiaries, more

than doubled to Rs 280Cr in three-month period ended September 2013 from Rs 132.4Cr

in a year ago period. Net sales increased over 2 percent year-on-year to Rs 6245Cr during

September quarter. EBITDA climbed 3 percent Y-o-Y to Rs 481Cr while operating profit

margin improved marginally to 7.7 percent from 7.63 percent during the same period on

higher inventory. Finance cost surged 6.5 times on a yearly basis to Rs 183Cr in the

quarter gone by, given higher average borrowing. Revenue from Aluminium business

grew 11 percent y-o-y to Rs 2,342.6Cr, driven by higher volumes, but EBIT margin of the

same business declined to 7.1 percent during 2QFY14

During the same period, total metal production increased to 1,32,000 ton (excluding

Mahan production) from 1,28,000 ton while alumina production (excluding Utkal alumina

production) rose to 3,34,000 ton from 3,28,000 ton y-o-y, but sequentially it was down

from 3,48,000 ton due to a planned ramp down at one of refineries. In case of copper

business, revenue slipped 2.2 percent Y-o-Y to Rs 3,974Cr in the quarter gone by, but its

EBIT margin expanded to 6 percent. Cathode production declined to 77,000 ton from

78,000 ton y-o-y.

Nifty

"Buy"24 Dec' 13


0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

100

200

300

400

500

600

700

800

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Mar

-08

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

PRICE BV 1x 2x

3x 4x P/BV

LME Price/Ton

LME Price/Ton

FY10 FY11 FY12 FY13

6761 7965 9041 8779

11752 15902 17575 17305

1963 2004 1822 930

599 602 802 768

138254 74799 178990 225246

FY11 FY12 FY13 FY14E

72078 80821 80193 86000

431 783 1012 1360

72509 81604 81205 87360

64102 72856 72395 78572

7976 7965 7798 7428

2725 2645 2822 2700

1839 1758 2079 2500

964 786 886 825

366 211 -20 0

57 -50 16 0

2456 3397 3027 2763

8.5 10.6 8.6 7.3

21



Copper Revenue

Net Revenue from Operation

Other Income

Total Income


OPERATING MATRIX

Aluminium Revenue

P/L PERFORMANCE

Aluminium Results

Copper Results

Capital Employed

Out Look : Although Hindalco has expanded its aluminium capacity recently, low

aluminium prices, sticky costs, delay in commencement of mining from captive blocks

and higher interest and depreciation costs may hit its profitability. In the near-term,

there is lack of clarity over production from the Mahan coal block for its Mahan smelter.

Without captive coal block, the Mahan smelter is expected to face cost pressures,

resulting in lower return ratios over FY2013-15.So Clearance of Mahan coal block will be

most awaited trigger for Hindalco. Mean While on the Positive Side We can expect 7%

growth on the Stock with a Target Price of Rs.132.


Minority Interest

Share in Profit/(Loss) of Associates

PAT

ROE%

Tax

Interest Cost

Expenditure

EBITDA

Depriciation


90000

95000

100000

105000

110000

115000

120000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

3

De

c-1

3

Primary Aluminium

340000

360000

380000

400000

420000

440000

460000

480000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

3

De

c-1

3

Copper

FY10 FY11 FY12 FY13

191 191 191 191

21346 28824 31179 34597

21545 29023 31911 35330

10763 13736 37127 49857

13236 13956 3731 6442

3901 4138 5289 5691

9742 12980 11052 9613

1016 1077 1377 1610

69235 84376 101402 120590

7876 12272 15429 16435

21124 20133 19871 21490

5801 13131 22798 33831

1983 2035 3774 3170

11275 14096 13246 14332

6544 8000 8017 8952

2195 2556 3296 3770

1134 1164 2159 3257

69235 84376 101402 120590

FY10 FY11 FY12 FY13

1.6 1.4 0.8 0.5

20.5 12.8 17.7 15.8

10.8 11.1 9.9 11.2

16.0 18.0 13.7 12.0

1.9 2.0 1.6 1.8

FY10 FY11 FY12 FY13

5542 6929 8534 6852

-598 -703 -932 -3874

4944 6226 7602 2978

-5448 -6710 -13220 -13765

428 825 6237 10278

-76 341 619 -510

22



Trade payables

Short-term provisions

Total liabilities

Intangibles

Cash and bank balances

Tangible assets

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables


B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Long-term provisions

Cash from Operation

Short-term loans and advances

Total Assets

RATIOS

P/B

EPS

Debtor to Turnover%

Creditors to Turnover%

Inventories to Turnover%


CASH FLOWS

Trading At :

Changes In Working Capital

Net Cash From Operation

Cash From Investment

Cash from Finance

Net Cash Flow during year


0

20

40

60

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100

120

140

160

0

1000

2000

3000

4000

5000

6000

7000

NIFTY HINDALCO

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.

India Equity Analytics Year 2014 - Greater Share for a IT Industry

Economy & Finance

Transcript of India Equity Analytics Year 2014 - Greater Share for a IT Industry