Stability in Stock Markets and Sharp Fall in Equity Market | Weekly Share Market Outlook

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 : 2-4)

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 : 5-7)

PNB : "Neutral" 10th Feb 2014

Bank’s profit was declined by 42% YoY largely due to higher provisions despite of reporting stable gross NPA. Bank’s operating profit grew by

0.8% indicating stress in its balance sheet. Loan grew by 9.7% lower than industry average whereas deposits de-grew by 20% YoY led 33%

declined in wholesale deposits. Asset quality was stable sequentially but most of operating as well as financials parameters are struggling. We

lower our price target to Rs.600 from earlier of 770. We have neutral view on the stock. .................................................................. ( Page : 8-

12)

Bajaj Corp : "Waiting for Demand Revival" "Neutral" 10th Feb 2014

After witnessing healthy growth in previous 13 quarters, Bajaj Corp disappoints the street with lumpy set of numbers and ramping down in

margin picture, largely impacted by weak consumer discretionary demand. Sales grew by 6.9%(YoY) led by 11% volume growth.Considering

recent poor demand discretionary environment because of inflationary pressure, we are cautious on the stock.

.................................................................................. ( Page : 13-15)

INGVYSYA BANK : "BUY" 10th Feb 2014

INGVYSYA Bank reported muted growth in profit (3% YoY) largely due to moderate performance all around. Bank’s business grew by sluggish

rate with loan and deposits grew by 8% and 3% YoY respectively. Restructure account as a percentage to total asset increased sequentially to

1.6% from 1.2%. However bank’s CAR and PCR were high at 16.93% and 87.5%, provide strong buffer to the bank in a volatile climate. We value

bank at Rs.682/share which 1.8 times of FY14E book. ............................................ ( Page : 16-20)

10th Feb, 2014

Edition : 202

IEA-Equity

Strategy

Zydus Wellness : "sweeten with sugar free" "BUY" 7th Feb 2014

Inline set of numbers with stable margin;For 3QFY14, Zydus wellness delivered inline set of numbers than street expectation, Because of weak

consumer discretionary demand Sales marginally grew by 2%(YoY). PAT grew by 6% on YoY basis.We retain “Buy” on the stock. However,

considering weak consumer descretionery demand we reduced our target price from Rs725 to Rs 610. At a CMP of Rs 504, stock trades at 5x

FY15E P/BV. ..................................................... ( Page : 21-23)

LUPIN : Strong Results "BUY" 6th Feb 2014

Lupin posted its 3QFY14 results with net sales at Rs 2983 Cr up 20.8% YoY led by strong sales growth in American as well as Indian markets. The

US formulation business sales including (IP Sales) grew by 31 % YoY to Rs 1356 Cr and it constitutes 45 % of the total sales.

........................................................... ( Page :24-25)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

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)

2

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

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

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.

Share Holding Pattern-%

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

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-%

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

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

Previous Target Price

Upside

Change from Previous

"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

3

PAT

ROE% Source - Comapany/EastWind Research

Depriciation

Interest Cost

Tax

Power and fuel

Freight and forwarding

Expenditure

EBITDA

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income

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.

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


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 :

4


Cash from Operation

Cash From Investment

Cash from Finance

ROCE%

Debt/Equity

Current Ratio

P/E

EV/EBIDTA

Dividend Yield%

Creditors to Turnover%

Inventories to Turnover%

EV

RATIOS

P/B

EPS

Debtor to Turnover%

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances

Total Assets

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Short-term provisions

ACC Ltd.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity


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)

5

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



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.


212/148

Mkt Capital (Rs Crores)

Average Daily Volume (Nos.)

Nifty

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

52wk Range H/L

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

"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

6

PAT

ROE% Source - Comapany/EastWind Research

Depriciation

Interest Cost

Tax

Power and fuel

Freight and forwarding

Expenditure

EBITDA

P/L PERFORMANCE

Net Revenue from Operation

Other Income Source - Comapany/EastWind Research

Total Income

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

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.

Volumes mT

Realization(Rs/T)

R&M Cost(Rs/T)

P&F Cost(Rs/T)

Freight Cost(Rs/T)


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

7


Cash from Operation

Cash From Investment

Cash from Finance

ROCE%

Debt/Equity

Current Ratio Source - Comapany/EastWind Research

P/E

EV/EBIDTA

Dividend Yield%

Creditors to Turnover%

Inventories to Turnover%

EV

RATIOS

P/B

EPS

Debtor to Turnover%

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances

Total Assets

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Short-term provisions

Ambuja Cements Ltd.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity


556

600

770

8

-22.1

1M 1yr YTD

Absolute -8.9 -36.8 -36.8

Rel.to Nifty -7.1 -38.6 -38.6

Current 4QFY13 3QFY1

3Promoters 58.9 57.9 57.9

FII 17.5 17.9 18.0

DII 18.5 18.4 19.1

Others 5.1 5.9 5.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 11807 13414 14857 16536 17691

Total Income 15420 17617 19072 20775 21930

PPP 9056 10614 10907 11155 12500

Net Profit 4433 4884 4748 3408 5209

EPS 140.6 144.0 134.3 94.1 143.9

8

Result update NEUTRAL

CMP

PNB

Higher operating cost led 0.8% YoY growth in operating profit

Bank’s profit was declined by 42% YoY largely due to higher provisions

despite of reporting stable gross NPA. Bank’s operating profit grew by 0.8%

indicating stress in its balance sheet. Loan grew by 9.7% lower than industry

average whereas deposits de-grew by 20% YoY led 33% declined in wholesale

deposits. Asset quality was stable sequentially but most of operating as well

as financials parameters are struggling. We lower our price target to Rs.600

from earlier of 770. We have neutral view on the stock.

Sluggish growth registered in NII due to muted loan growth

During quarter bank’s NII grew by 13.1% YoY to Rs.4221 cr versus our expectation

of Rs.4201 cr. Despite of muted loan and deposits growth along with lower credit

deposits ratio, bank NII grew on account of higher interest income than interest

expenses. During quarter, bank’s wholesale deposits de-grew by 33% YoY which

was partly upset by foreign currency borrowing and CASA deposits which escalated

down overall interest expenses. Other income was Rs.938 Cr versus Rs.971 cr in

last quarter and Rs.899 Cr in previous quarter helped total revenue growth to 9.7%

YoY.

Market Data

Upside

890/402

BSE Code 532461

Target Price


Operating expenses increased by 21.5% YoY in which employee cost and other

operating expenses increased by 25% and 14% YoY respectively. Cost to income

ratio increased to 47.6% from 43% in last quarter. Operating leverage for the quarter

stood at 0.47% versus 0.43% in last quarter. Due to higher operating cost and

sluggish revenue growth, operating profit increased mere by 0.8% YoY.

Average Daily Volume

19646

NSE Symbol PNB

Mkt Capital (Rs Cr)


(Source: Company/Eastwind)

Stock Performance

52wk Range H/L

Stable asset quality and lower slippage surprise us positively

On asset quality front, bank reported stability as GNPA increased by 0.4% QoQ in

absolute term whereas in percentage to gross advance, it stood at 5.09% (5.27% in

2QFY14). Fresh slippages were surprised us positively and was 1.4% (annualized)

versus 3% in previous quarter. Provisions were increased by 8.6% QoQ taking net

NPA declined to 5.5% on sequential basis. In percentage to net advances, it

improved to 2.79% from 3.06% in 2QFY14. With the support from higher provisions

despite of stable gross NPA, provision coverage ratio increased to 45.3% from 42%

in previous quarter.


PNB Vs Nifty


7.4 cr

Nifty 6063

"NEUTRAL"10h Feb2014


9

PNB


Profit declined due to lower NII growth, higher operating expenses and provisions

PNB delivered muted set of numbers with net profit declined by 42% YoY largely due to

higher provisions and contingencies which was up by almost 100% YoY. With the higher

provisions, we could not anticipate bank’s deteriorating asset quality. Sequentially bank

reported improvement in asset quality and in fresh slippage front it surprises us positively.

Valuation & View

Bank’s profit was declined by 42% YoY largely due to higher provisions despite of

reporting stable gross NPA. Bank’s operating profit grew by 0.8% indicating stress in its

balance sheet. Loan grew by 9.7% lower than industry average whereas deposits de-

grew by 20% YoY led 33% declined in wholesale deposits. Asset quality was stable

sequentially but most of operating as well as financials parameters are struggling. We

lower our price target to Rs.600 from earlier of 770. We have neutral view on the stock.

Deposits de-grew by 20% YoY led by 33% YoY de-growth in wholesale deposits

Deposits of the bank was declined by 20% due to 33% negative growth in term deposits.

Current deposits and saving deposits grew by 7% and 14% YoY respectively taking

overall CASA ratio to 38.3% from 27% in last quarter. Loan grew by 9.7% YoY in which

MSME and retail advances registered growth of 21.6% and 17.5% YoY respectively.

Corporate loan grew by 7.3% YoY whereas retail advances, housing and car/vehicle

loans grew at a healthy pace of 16.7% and 16.3% yoy, respectively. Overseas loan grew

by 15.9% YoY and it constitute 10% bank’s total loan book. Management guided loan

growth would be 14-15% in FY14.

Margin expansion sequentially

Net interest margin of bank expand by 10 bps QoQ due to lower cost of fund than yield

on loan. Cost of fund declined by 25 bps due to higher share of CASA franchise. Yield on

loan remained at 10.1% whereas yield on investment declined to 7.3% from 7.7%

sequentially. Management guided NIM for FY14 would be 3.25% to 3.5%. This could be

possible because of low cost franchise network.


10

PNB


Chart Focus

Sluggish growth registered in NII due to

muted loan growth

Higher operating cost led 0.8% YoY growth in

operating profit

Profit declined due to lower NII growth,

higher operating expenses and provisions


11

PNB

Source : Eastwind/ Company



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

Interest/discount on advances / bills 8246 8023 7891 4.5 2.8 8361 -1.4

Income on investments 2599 2568 2518 3.2 1.2 2649 -1.9

Interest on balances with Reserve Bank of India 95 101 113 -16.0 -5.9 90 5.8

Others 44 41 27 62.5 5.5 27 63.9

Total Interest Income 10984 10734 10548 4.1 2.3 11127 -1.3

Others Income 938 899 971 -3.3 4.3 1121 -16.3

Total Income 10045 9834 11519 -12.8 2.1 10006 0.4

Interest on deposits 6315 6335 6407 -1.4 -0.3

Interest on RBI/Inter bank borrowings 178 116 112 58.9 53.4

Others 270 267 296 -8.8 1.1

Interest Expended 6763 6718 6815 -0.8 0.7 6926 -2.4

NII 4221 4016 3733 13.1 5.1 4201 0.5

Other Income 938 899 971 -3.3 4.3 1121 -16.3

Total Income 5160 4915 4704 9.7 5.0 5322 -3.0

Employee 1758 1659 1407 24.9 6.0 1714 2.6

Other Expenses 699 721 614 13.8 -3.1 734 -4.8

Operating Expenses 2457 2380 2022 21.5 3.2 2448 0.4

PPP( Rs Cr) 2702 2535 2682 0.8 6.6 2874 -6.0

Provisions 1590 1899 802 98.4 -16.3 2007 -20.8

PBT 1112 636 1880 -40.8 74.9 867 28.3

Tax 357 131 575 -37.9 173.3 260 37.2

Net Profit 755 505 1306 -42.1 49.4 607 24.5

Balance Sheet Date

Equity Capital 362 353 362 353 2.4

Reserve & Surplus 34972 34152 34972 34759 0.6

Deposits 420647 405699 420647 426195 -1.3

Borrowings 49163 40888 49163 42711 15.1

Investment 143368 134125 143368 141287 1.5

Advance 326133 313852 326133 334443 -2.5

Asset Quality

GNPA 16595 16526 13990

NPA 9084 9609 7586

GNPA(%) 5.09 5.27 4.60

NPA(%) 2.79 3.06 2.60

PCR(%) Without technical write off 45.3 41.9 45.8

12

PNB

Financial & Assuption




Income Statement 2011 2012 2013 2014E 2015EInterest Income 26986 36476 41893 43513 49565

Interest Expense 15179 23062 27037 26977 31875

NII 11807 13414 14857 16536 17691

Change (%) 39.3 13.6 10.8 11.3 7.0

Non Interest Income 3613 4203 4216 4240 4240

Total Income 15420 17617 19072 20775 21930

Change (%) 27.6 14.2 8.3 8.9 5.6

Operating Expenses 6364 7003 8165 9621 9430

Pre Provision Profits 9056 10614 10907 11155 12500

Change (%) 23.6 17.2 2.8 2.3 12.1

Provisions 4622 3577 4386 6253 5059

PBT 4433 7037 6522 4902 7442

PAT 4433 4884 4748 3408 5209

Change (%) 13.5 10.2 -2.8 -28.2 52.8

Balance SheetDeposits( Rs Cr) 312899 379588 391560 450294 517838

Change (%) 25 21 3 15 15

of which CASA Dep 120325 134129 153344 139752 153766

Change (%) 18 11 14 -9 10

Borrowings( Rs Cr) 31590 37264 39621 47857 44728

Investments( Rs Cr) 95162 122703 129896 143572 149094

Loans( Rs Cr) 242107 293775 308725 339598 356578

Change (%) 30 21 5 10 5

RatioAvg. Yield on loans 8.7 9.7 10.3 9.6 10.5

Avg. Yield on Investments 6.0 6.4 7.4 7.2 7.8

Avg. Cost of Deposit 4.4 5.6 6.5 6.4 6.6

Avg. Cost of Borrowimgs 4.4 4.5 3.9 4.0 4.1

Valuation

Book Value 682 820 924 1000 1107

CMP 1220 926 759 543 543

P/BV 1.8 1.1 0.8 0.5 0.5

Bajaj Corp

1M 1yr YTD

Absolute -4.1 -10.9 -22.9

Rel. to Nifty -2 -12.6 -22.2


Promoters 75 75 75

FII 12.87 13.28 12.08

DII 2.08 2.29 2.5

Others 10.05 9.43 10.42

Financials Rs, Cr

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

Revenue 158.2 158.25 0.0% 148.06 6.8%

EBITDA 42.8 42.9 -0.2% 43.2 -0.9%

PAT 38.38 40.03 -4.1% 42.4 -9.5%

EBITDA Margin 27.1% 27.1% - 29.2% (210bps)

PAT Margin 24.3% 25.3% (100bps) 28.6% (430bps)

13

Softness in RM cost: During the quarter average price of LLP decreased to Rs 75.85/Kg

from Rs 78.63/Kg in corresponding quarter of previous year. Prices of Refined oil

decreased from Rs 79.71/Kg in Q3FY13 to Rs 76.16/Kg in Q3FY14.

1 yr Forward P/B No marks on No Marks Brand: First time, new acquired (from Ozone Ayurvedics) anti

acne No Marks brand added Rs 6cr revenue during the quarter with 54% margin.

However, this revenue was reported for only 1.5months without any effort of promotion

activities. Management expects to see better numbers in near future and also envisages

for promotional activities through Advertisement and expansion of channel of

distributions.

View and Valuation: Company is well placed in the fast growing light hair oil segment,

led by steady volume growth, better pricing strategy and sustained market leadership

position. Considering recent poor demand discretionary environment because of

inflationary pressure, we are cautious on the stock. Hence, we downgrade our view

from“ Buy” to "Neutral" on the stock. At a CMP of Rs 208, stock trades at P/BV of 4.9x

FY15E.



Stock Performance Mix performance across segments: Its flagship brand Bajaj Almond Drops Hair Oil

(contributes 94% of sales) marginally grew by 3.5%. During the quarter, its market share

expanded to 60% and this brand has created a unique positioning for itself through

initiatives like product differentiation (Almond based), focused marketing, unique

packaging.

Share Holding Pattern-% Strong distribution network: The Company reaches consumers through 2.62mn retail

outlets serviced by 6889 distributors and 15,122 wholesalers. It is panning out across

1.6mn retail outlet in rural area and 1.04mn retail outlet s in urban area. However,

management is confident to see healthy distribution reach.

52wk Range H/L 287/198 Margin declined: Despite softening in LLP prices and lower exposure of Ad spend during

the quarter, EBITDA margin declined by 210bps(YoY) to 27% and PAT margin drastically

down by 430bps(YoY) to 24.2%. However, company has been efficient to maintain its

EBITDA margin above the mark of 27% and PAT margin at 24%. Still, sitting on attractive

margin pictures than its nearest peers.

Mkt Capital (Rs Crores) 3071

Average Daily Volume 37072

Nifty 6063

Market Data The strong earnings visibility and robust cash generation ability of the company make

Bajaj Corp one of the better picks in the FMCG .The management expects to increase

Almond Drops Hair Oil volume mkt- share to 65% v/s 55% by FY16E.

BSE Code 533229

NSE Symbol BAJAJCORP

-

Upside -

Change from Previous -

" Waiting for Demand Revival"

Results update Neutral Bajaj Corp reported below numbers than street:CMP 208 After witnessing healthy growth in previous 13 quarters, Bajaj Corp disappoints the

street with lumpy set of numbers and ramping down in margin picture, largely

impacted by weak consumer discretionary demand. Sales grew by 6.9%(YoY) led by

11% volume growth consolidated with 11.9%(YoY) rural growth and 11.7%(YoY) urban

growth in value term. PAT was seen on reverse mood and they reported 9.5% decline

on YoY basis.

Target Price


"NEUTRAL"10th Feb' 14


14

Expenses on Sales



Margin-%

Still company has been efficient to maintain

its EBITDA and PAT margin over 23% mark.


Sales Mix-Brands

The management expects to increase Almond

Drops Hair Oil volume mkt- share to 65% v/s

55% by FY16E.


Bajaj Corp

Sales and Sales Growth(%)

sales grew by 7%(YoY) led by 11% overall

volume growth



Brands 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY14 1QFY14 2QFY14 3QFY142

Bajaj Almond Drops Hair Oil 93.6% 94.5% 94.1% 93.8% 96.0% 97.0% 94.7% 95.0% 96.2% 94.0%

Bajaj Kailash Parbat Thanda Tel 3.1% 2.1% 2.8% 3.9% 1.1% 0.1% 3.5% 2.5% 2.0% 0.2%

Bajaj Brahmi Amla Hair Oil 2.1% 2.3% 2.0% 1.5% 2.1% 2.0% 1.2% 1.1% 1.2% 1.3%

Bajaj Amla Shikakai Hair Oil 0.4% 0.4% 0.4% 0.2% 0.3% 0.2% 0.1% 0.1% 0.1% 0.2%

Others+Nomarks 0.5% 0.5% 0.4% 0.3% 0.5% 0.4% 0.5% 0.3% 0.3% 4.3%

15



(3) NOMARKS is majorly sold through chemist shops. The mgmt said that NOMARKS will

see boost in sales once its sales is pushed in general stores also.

(4) Tax rate at 20% in near term.

(5) On the full year basis, the mgmt assigned Rs 28.6 crore as amortization cost related to

NOMARKS brand. In next four years (FY14-17), total acquisition cost of Rs 140.9 crore will

be amortized

Financials

Bajaj Corp

Key take-aways from Conference Call (attended on 7th Feb 2014)

(1)Management is not thinking of any price hike as the company still has inventory of low

cost LLP. The mgmt expects LLP to come down with appreciation in Rupee and crude oil

decline (after improvement in Syria situation.

(2) The mgmt said that it is now more focused on volume growth, as there is no issue with

margin.


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 294.6 358.7 473.3 606.7 692.6 792.5

RM Cost 116.8 156.6 194.4 237.4 214.7 261.5

Purchases of stock-in-trade 0 0.0 34.4 24.4 58.9 67.4

WIP 0 0.0 -9.0 -2.8 -1.4 -1.6

Employee Cost 14 16.3 22.9 29.2 36.4 43.6

Ad Spend 37.3 40.5 64.7 71.2 51.9 71.3

Other expenses 29.4 37.3 49.3 74.2 145.4 150.6

Total expenses 197.3 250.6 356.8 433.7 505.9 592.8

EBITDA 97.3 108.1 116.5 173.1 186.6 199.7

Depreciation and Amortisation 0.8 1.8 2.6 3.3 3.8 5.3

Other Income 5.1 17.8 37.4 40.1 42.6 47.6

EBIT 101.6 124.0 151.3 209.8 225.4 242.0

Interest 0.0 0.0 0.1 0.1 7.0 7.0

PBT 101.6 124.0 151.2 209.8 218.4 235.0

Tax Exp 17.6 21.0 31.1 42.2 42.6 47.0

PAT 83.9 103.1 120.1 167.6 175.8 188.0

Growth-% (YoY)

Sales 97.4% 21.8% 32.0% 28.2% 14.1% 14.4%

EBITDA 82.5% 11.1% 7.8% 48.5% 7.8% 7.0%

PAT 78.6% 22.8% 16.5% 39.6% 4.9% 6.9%

Expenses on Sales-%

RM Cost 39.6% 43.7% 41.1% 39.1% 31.0% 33.0%

Ad Spend 12.7% 11.3% 13.7% 11.7% 7.5% 9.0%

Employee Cost 4.7% 4.5% 4.8% 4.8% 5.3% 5.5%

Other expenses 10.0% 10.4% 10.4% 12.2% 21.0% 19.0%

Tax rate 17.4% 16.9% 20.6% 20.1% 19.5% 20.0%

Margin-%

EBITDA 33.0% 30.1% 24.6% 28.5% 27.0% 25.2%

EBIT 34.5% 34.6% 32.0% 34.6% 32.5% 30.5%

PAT 28.5% 28.7% 25.4% 27.6% 25.4% 23.7%

Valuation:

CMP 132.0 100.1 115.7 275.0 208.0 208.0

No of Share 14.8 14.8 14.8 14.8 14.8 14.8

NW 27.9 376.3 427.8 483.8 547.4 623.3

EPS 5.7 7.0 8.1 11.4 11.9 12.7

BVPS 1.9 25.5 29.0 32.8 37.1 42.3

RoE-% 300.7% 27.4% 28.1% 34.6% 32.1% 30.2%

P/BV 69.8 3.9 4.0 8.4 5.6 4.9

P/E 23.2 14.3 14.2 24.2 17.5 16.3

538

682

677

27

0.7

1M 1yr YTD

Absolute -8.8 -8.5 -8.5

Rel.to Nifty -7.0 -10.3 -10.3


3Promoters 43.2 43.4 43.6

FII 28.8 28.9 28.6

DII 14.4 13.6 14.8

Others 13.6 14.1 13.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1007 1208 1539 1696 2058

Total Income 1661 1878 2266 2555 2916

PPP 635 768 993 1167 1283

Net Profit 319 456 613 701 739

EPS 26.3 30.4 39.6 37.1 39.2

16



Operating leverage (Operating cost to total assets) remained stable at 0.6% which

indicated stable cost management. In absolute term, operating expenses increased

by 9% YoY in which employee cost and other operating cost increased by 12% and

5% YoY respectively. Cost to income ratio increased by 117 bps YoY to 56.5% from

55.3%. Operating profit increased by 4% YoY to Rs.274 cr.


Improvement in asset quality

Sequentially bank reported improvement in asset quality with GNPA stood at 1.71%

versus 1.75% in percentage to gross advances. In absolute term GNPA increased

by 2% QoQ while loan loss provision was remain same as in previous quarter. This

had resulted of increased net NPA by 17% sequentially in absoluter term and as a

percentage to net advance, it stood at 0.21% versus 0.19% in 2QFY14.

Consequently provisions coverage ratio declined to 87.5% from 89.1% in previous

quarter. Bank’s outstanding restructure account increased in sequential basis to

1.6% versus 1.2% to total advances.

INGVYSYA Bank Vs Nifty

Nifty 6063

Stock Performance

Operating expenses higher and operating leverage remain stable

52wk Range H/L 667/405

Mkt Capital (Rs Cr) 10164

Average Daily Volume 19.97lakhs


Market Data NII growth of 3% YoY due to lower interest income

BSE Code 531807 During quarter, bank reported NII growth of 3% YoY largely due to lower interest

income and higher cost of deposits. Term deposits have been continuously declining

from past three quarters whereas borrowing as a percentage of NDTL (net demand

time liability) increased sequentially to 18.1% from 14.1%. During quarter wholesale

deposits are offset by foreign currency borrowings. This had increased cost of fund

despite of CASA growth. Other income was Rs.215 Cr versus Rs.187 cr in last

quarter and Rs.185 cr in previous quarter. With the support from other income, total

revenue grew by 7% YoY to Rs.631 cr.

NSE Symbol INGVYSYABK

INGVYSYA BANK

Result update BUY INGVYSYA Bank reported muted growth in profit (3% YoY) largely due to

moderate performance all around. Bank’s business grew by sluggish rate with

loan and deposits grew by 8% and 3% YoY respectively. Restructure account

as a percentage to total asset increased sequentially to 1.6% from 1.2%.

However bank’s CAR and PCR were high at 16.93% and 87.5%, provide strong

buffer to the bank in a volatile climate. We value bank at Rs.682/share which

1.8 times of book.

CMP

Target Price


Upside

"BUY"10h Feb2014


17


NIM squeeze by 11 bps QoQ to 3.35% as compare to 3.45% in previous quarter largely

on account of restructure few account as the part of corporate debt restructure which

resulted interest reversal of Rs.25.7 cr. Adjusting for the interest reversal, NIM was higher

at 3.55% in the current quarter. Capital adequacy ratio of the bank stands at 16.93% in

which tier 1 capital of 14.4%, according to basel-3 norms.

Profit lower on account of muted performance all around

Ingvysya Bank reported net profit growth of 3% YoY to Rs.167 cr versus our expectation

of Rs.173 cr. Lower profit growth was largely due to muted growth at NII level led by

lower loan and deposits growth. Operating expenses were by and large stable and

improvement in asset quality provided some cushion to profit. Tax rate was higher at

33.4% versus 31.7% in previous quarter and 32% in 3QFY13.

Valuation & View

INGVYSYA Bank reported muted growth in profit (3% YoY) largely due to moderate

performance all around. Bank’s business grew by sluggish rate with loan and deposits

grew by 8% and 3% YoY respectively. Restructure account as a percentage to total asset

increased sequentially to 1.6% from 1.2%. However bank’s CAR and PCR were high at

16.93% and 87.5%, provide strong buffer to the bank in a volatile climate. We value bank

at Rs.682/share which 1.8 times of book.

Valuation Band

INGVYSYA BANK

Business growth sluggish, wholesale deposits replace by foreign currency

borrowings

On business growth parameters, bank reported muted growth in deposits which grew by

3% in which CASA deposits grew by 13% YoY. Term deposits de-grew by 1% YoY and -

6% QoQ to Rs.254 bn. During quarter bank’s wholesale deposits replace by foreign

currency borrowings under RBI’s special concession window. CASA in percentage term

stood at 34.7% versus 31.7% in 3QFY13 and 32.5% in previous quarter. Loan grew by

8% YoY led by SME loan growth of 25% YoY followed by agriculture loan (56% YoY).

Credit deposits ratio improved to 87.4% versus 84% in last quarter and 82% in previous

quarter.

NIM narrow on account of reversal of interest income


18

Profit lower on account of muted

performance all around


INGVYSYA BANK

Chart Focus

NII lower on account of sluggish interest

income

Operating expenses higher and operating

leverage remain stable


19

INGVYSYA BANK




Quarterly Performance 3QFY14 2QFY13 3QFY13 % Chg(YoY) % Chg(QoQ) 3QFY14E Varaition(%)

Interest/discount on advances / bills 936 961 906 3.3 -2.5 975 -3.9

Income on investments 336 353 332 1.2 -4.9 390 -14.0

Interest on balances with Reserve Bank of India 0 0 0 266.7 -51.1 0

Others 1 3 1 50.8 -70.6 0

Total Interest Income 1273 1317 1239 2.8 -3.3 1365 -6.7

Others Income 215 185 187 15.0 16.2 215 0.0

Total Income 1488 1502 1425 4.4 -0.9 1580 -5.8

Interest Expended 857 877 836 2.5 -2.3 968 -11.4

NII 416 440 403 3.3 -5.5 397 4.7

Other Income 215 185 187 15.0 16.2 215 0.0

Total Income 631 625 590 7.0 0.9 612 3.1

Employee 214 207 191 12.2 3.7 202 6.2

Other Expenses 142 142 135 5.1 0.1 135 5.4

Operating Expenses 356 349 326 9.2 2.2 337 5.9

PPP( Rs Cr) 274 276 263 4.2 -0.7 275 -0.4

Provisions 23 18 25 -6.5 27.3 17 35.7

Tax 84 82 76 9.9 2.4 85 -1.6

Net Profit 167 176 162 3.1 -5.1 173 -3.4

Key balance sheet data (Rs Cr)

Advances 34048 32856 31599 7.8 3.6 33903 0.4

Deposits 38956 40030 37691 3.4 -2.7 43989 -11.4

CASA(%) 34.7 32.5 31.7

Asset Quality

Gross NPLs (Rs Cr) 583 574 571

Gross NPLs (%) 1.7 1.7 1.8

Net NPLs (Rs Cr) 73 62 16

Net NPLs (%) 0.21 0.19 0.05

Provision Coverage (%) 87.5 89.1 97.2

20

INGVYSYA BANK

Financial & Assuption




P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 2033 2868 3550 3824 4501

Income on investments 646 982 1307 1476 1616

Interest on balances with Reserve Bank of India 2 1 2 1 1

Others 13 7 3 13 13

Total Interest Income 2694 3857 4862 5314 6132

Others Income 655 670 727 858 858

Total Income 3349 4527 5588 6172 6990

Interest on deposits 1357 2153 2579 2619 3038

Interest on RBI/Inter bank borrowings 48 247 393 923 1033

Others 283 249 351 0 0

Interest Expended 1688 2648 3323 3618 4074

NII 1007 1208 1539 1696 2058

NII Growth(%) 21.3 20.1 27.3 10.3 21.3

Other Income 655 670 727 858 858

Total Income 1661 1878 2266 2555 2916

Employee 606 651 751 819 964

Other Expenses 420 459 522 569 670

Operating Expenses 1026 1110 1273 1388 1633

PPP( Rs Cr) 635 768 993 1167 1283

Provisions 317 312 380 127 181

Net Profit 319 456 613 701 739

31.6 43.2 34.3 14.4 5.4

Key Balance sheet dataDeposits 30194 35195 41334 45467 50923

Deposits Growth(%) 16.7 16.6 17.4 10.0 12.0

Borrowings 4147 5696 6511 8024 8986

Borrowings Growth(%) 13.0 37.4 14.3 23.2 12.0

Loan 23602 28721 31772 34949 40192

Loan Growth(%) 27.5 21.7 10.6 10.0 15.0

Investments 11021 12715 18278 20327 22766

Investments Growth(%) 5.2 15.4 43.7 11.2 12.0

Eastwind CalculationYield on Advances 8.6 10.0 11.2 10.9 11.2

Yield on Investments 5.9 7.7 7.1 7.3 7.1

Yield on Funds 7.3 8.8 9.3 9.6 9.7

Cost of deposits 4.5 6.1 6.2 5.8 6.0

Cost of Borrowings 8.0 8.7 11.4 11.4 11.5

Cost of fund 4.9 6.5 6.9 6.8 6.8

ValuationBook Value 217 265 299 379 418

P/BV 1.5 1.3 1.9 1.4 1.3

P/E 12.2 11.7 14.1 14.5 13.7

Zydus Wellness.

Buy

-16%

13282

1M 1yr YTD

Absolute -6.9% 1.5% -4.9%

Rel.to Nifty -4.10% 0% -7.1%


Promoters 72.54 72.54 72.54

FII 8.17 7.91 5.12

DII 8.07 8.39 10.85

Others 11.22 11.16 11.49

Financials


Revenue 103.39 103.92 (0.5) 101.77 1.6

EBITDA 26.83 25.51 5.2 26.32 1.9

PAT 27.27 25.7 6.1 22.88 19.2

EBITDA Margin 26.0% 24.5% 150bps 25.9% 10bps

PAT Margin 26.4% 24.7% 130bps 22.5% 390bps

21

Market Data

BSE Code 531335

Stock Performance

Average Daily Volume

Nifty 6036

P/BV(x)-1year forward

Rs, Crore



Aggressive target on capturing Everyuth market share: Recently, company re launched

its Everyuth brand with innovative packaging, strong distribution network and expensive

media initiatives. The company decided to increase its prices in the range of 10-15% in

Everyuth brand at the time of relauch and extended its everyuth brand to the premium

soap in 3 variants, like Fruit bathing bar, Neem bathing bar and Lemon.


NSE Symbol ZYDUS

1969

52wk Range H/L 749/415

Mkt Capital (Rs Cr)

Upside 21%


"sweeten with sugar free"

Result Update

CMP 504

Target Price 610

For 3QFY14, Zydus wellness delivered inline set of numbers than street expectation,

Because of weak consumer discretionary demand Sales marginally grew by 2%(YoY).

PAT grew by 6% on YoY basis.Previous Target Price 725

Inline set of numbers with stable margin;

Company’s half of revenue come from Sugar Free and Ever yuth, We expect these two

products continue to generate revenue and some support to over all margins, now

vegetable oil prices are going down.

Due to expected decline in Advertisement cost, softness in Palm Oil, Crude Derivatives

and better realization in Ever Youth could help to improve its margin in next couple of

quarters.

View and Valuation: Taking into consideration of product re-launch, strong distribution

reach under a beneficiary scenario of margin, management is very confident to achieve

revenue at 500cr in FY15E, expecting growth rate by 21.5%. Its large market share and

aggressive promotions in its pillar brand (Sugar Free, Everyuth) would energize its

revenue growth in near future. We retain “Buy” on the stock. However, considering

weak consumer descretionery demand we reduced our target price from Rs725 to Rs

610. At a CMP of Rs 504, stock trades at 5x FY15E P/BV.

Stable margin: During the quarter, its EBITDA margin was flat at 26% on YoY basis;

while, it improved 150bps sequentially because of cost rationalization in RM and Ad

spend. PAT margin up by 390bps to 26.4%, favorably impacted by lower provision for

tax and extra other income.

Woprking on cost rationalization: Considering slower demand and high competitive

intensity, company has been able to manage its normal range of margin by reducing

cost. During the quarter, RM cost on sales declined from 30.3%(3QFY13) to 26.7% and

Ad spend down from 15.2% (3QFY13) to 13.8%.

Strong brand value in sugar free products: Over the year, Sugar Free Brand has

successfully captured 92% market Share. Sugar Free product has very strong brand

equity and it is always on the top of the buyers' mind when it comes to the sugar

substitute. Considering the entry of other players in same product, it has rolled out an

aggressive ad campaign and expended this brand on different segments like, Sugar Free

Gold (Aspartame based), Sugar Free Natrura (Sucralose based), Sugar Free Herbvia

(Stevia) and Sugar Free D'lite (Drink).

"BUY"7th Feb' 14


22

Focus on expansion of Distribution network: The Company has been increasing its

distribution network to improve its growth of its cash-cow brand. Everyuth scrub and peel-

off are sold through 3.3 to 4.0 lakh retail outlets while Zydus Wellness is sold through 3.4

lakh retail outlets (an increase of 11% YoY). The company targets to increase the

distribution reach by 15-20% per annum.


Margin-%

It expects expansion in gross margin,

which will help it to fund new product

launches.


Expenses-(% of Sales)



Zydus Wellness.

Sales and its Growth(%)

Sales marginally grew by 2%(YoY).


23



Zydus Wellness.

Financials and Valuation


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Total Sales 267.5 335.5 344.6 410.0 446.9 500.5

Less: Excise Duty 0.0 0.1 9.2 22.9 29.05 32.53

Net Sales 267.5 335.4 335.5 387.1 417.8 467.9

Other Operating Income 0.6 1.0 1.3 0.9 1.6 1.8

Total income from operations 268.1 336.4 336.8 388.0 419.4 469.7

RM Cost 37.5 49.9 94.1 119.1 106.9 124.5

Purchases of stock-in-trade 54.0 74.9 23.7 14.7 22.70 25.42

WIP (5) (5) 4 (10) 16 18

Employee Cost 9.3 18.3 20.6 27.3 31.45 37.58

Ad Spend 61.0 59.2 59.7 69.8 75.5 86.9

Other expenses 44.4 54.5 57.4 70.1 73.39 84.55

Total expenses 201.0 252.1 259.7 291.4 325.91 376.76

EBITDA 67.1 84.2 77.1 96.6 93.47 92.94

Depreciation and Amortisation 1.6 1.5 3.9 4.5 4.7 4.5

Other Income 6.0 7.2 9.0 15.8 20.1 22.5

EBIT 71.4 90.0 82.2 107.9 108.89 111.01

Interest 0.0 0.0 0.0 0.1 0.0 0.0

PBT 69.2 90.0 82.2 107.8 108.9 111.0

Tax Exp 24.0 30.5 13.7 8.8 8.2 8.9

PAT 45.2 59.5 68.6 98.9 100.72 102.13

Growth-% (YoY)

Sales -94.8% 25.5% 0.1% 15.2% 8.1% 12.0%

EBITDA -93.7% 25.6% -8.5% 25.3% -3.2% -0.6%

PAT -93.1% 31.7% 15.3% 44.2% 1.8% 1.4%

Expenses on Sales-%

RM Cost 14.0% 14.8% 28.0% 30.7% 25.5% 26.5%

Ad Spend 22.7% 17.6% 17.7% 18.0% 18.0% 18.5%

Employee Cost 3.5% 5.4% 6.1% 7.0% 7.5% 8.0%

Other expenses 16.6% 16.2% 17.0% 18.1% 17.5% 18.0%

Tax rate 34.7% 33.9% 16.6% 8.2% 7.5% 8.0%

Margin-%

EBITDA 25.0% 25.0% 22.9% 24.9% 22.3% 19.8%

EBIT 26.6% 26.7% 24.4% 27.8% 26.0% 23.6%

PAT 16.9% 17.7% 20.4% 25.5% 24.0% 21.7%

Valuation:

CMP 381.7 597.3 380.4 456.5 504.0 504.0

No of Share 3.9 3.9 3.9 3.9 3.91 3.91

NW 100.6 141.9 186.9 256.5 329.8 399.9

EPS 11.6 15.2 17.5 25.3 25.76 26.12

BVPS 25.7 36.3 47.8 65.6 84.4 102.3

RoE-% 44.9% 41.9% 36.7% 38.6% 30.5% 25.5%

P/BV 14.8 16.5 8.0 7.0 6.0 4.9

P/E 33.0 39.3 21.7 18.0 19.57 19.30

BUY

1M 1yr YTD

Absolute -2 53.4 48.3

Rel. to Nifty 1 52.8 35.9


4Promoters 46.8 46.8 46.8

FII 31.9 31.5 30.7

DII 11.3 12.1 12.4

Others 10.0 9.7 10.1

Financials Rs, Crore


Revenue 3022 2668 13.3 2501 20.8

EBITDA 773 660 17.1 606 27.6

PAT 484 417 16.1 342 41.5

EBITDA Margin 25.6% 24.7% 80bps 24.2% 130bps

PAT Margin 16.0% 15.6% 40bps 13.7% 230bps

24

The operating EBITDA for the quarter came at Rs 773 Cr and OPM at 25.6%.The material

cost during the quarter decreased by 30bps to Rs 1121 Cr and this constitutes 37.6%

of net sales. The manufacturing and other expenses decreased by 90 bps to Rs 749 Cr for

the quarter while employ cost deceased by 30 bps to Rs 387 Cr. The revenue expenditure

on R&D stands at Rs 271 Cr which is 9.1 % of the 3QFY14 sales.

The net profits for the quarter came at Rs 484 Cr and NPM at 15.8 % .The overall impact of

Forex on net profits was a loss of Rs 68.8 Cr of which Rs 25.5 Cr forex gain is reflected in

other income while the corresponding forex loss is captured across various other P&L

Lines.

One Year Price vs Nifty


41,018

Average Daily Volume 395892

Nifty 6022

> Capital Expenditure was Rs 104.1 Cr in the quarter


Stock Performance-%


Strong Results

1000

9%

Result Update

CMP 915

Target Price

Upside



LUPIN

The company at its CMP of Rs 915 is trading at 23 times of one year forward FY14 EPS of

Rs 39.In the light of strong results ,management commentary and strong business

outlook going forward we maintain BUY for the stock with Target price 1000.

951/569

NSE Symbol LUPIN

Market Data

BSE Code

View & Valuation

Recent Developments

Company filed 5 ANDA approvals in the quarter .Cumulative ANDA filings with US FDA now

stands at 186 with the company having received 96 approvals till date. The company

received 5 approvals from European regulatory authorities in the quarter.

Company acquired Nanomi B.V of Netherlands and with this acquisition company has

forayed into technology intensive complex injectables space. As per management with the

use of Nanomi’s proprietary technology platform, Lupin would be able to make significant in

roads into the niche area of complex injectables.

500257

52wk Range H/L

Balance Sheet Highlights

> Operating WC increased to Rs 2769.5 Cr as on 31st

Dec 2013 as against Rs 2674.3 Cr as

on September 2013.The working capital number of days stood at 94 days as on 31St

Dec

2013.

Mkt Capital (Rs, Cr)

Lupin posted its 3QFY14 results with net sales at Rs 2983 Cr up 20.8% YoY led by strong

sales growth in American as well as Indian markets. The US formulation business sales

including (IP Sales) grew by 31 % YoY to Rs 1356 Cr and it constitutes 45 % of the total

sales. The Indian formulation business grew by 14% YoY to Rs 650 Cr and it contributed

22% of the company’s overall revenue for the quarter .The business from other geographies

viz Japan and South Africa also have grown well with registering growth of 10% and 18%

respectively.API (Active Pharmaceutical Ingredient) net sales grew by 26% to Rs 297.3 Cr

during the quarter as compared to Rs 235.3 Cr for 3QFY13 and contributed 10% of

company’s consolidated revenues.

"BUY"06th Feb' 14


25

LUPIN

Sales and PAT Trend (Rs)


Company posted its 3QFY14 results with net

sales at Rs 2983 Cr up 20.8% YoY led by

strong sales growth in American as well as

Indian markets.

OPM %


NPM %



The material cost during the quarter

decreased by 30bps to Rs 1121 Cr and this

constitutes 37.6% of net sales.

The overall impact of Forex on net profits

was a loss of Rs 68.8 Cr of which Rs 25.5 Cr

forex gain is reflected in other income while

the corresponding forex loss is captured

across various other P&L Lines.


Narnolia Securities Ltd402, 4th floor 7/ 1, Lords Sinha Road Kolkata 700071, Ph

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

email: [email protected],

website : www.narnolia.com

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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

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