Stock Investment Tips Recommendation Today - Buy Stocks of Tata Motors with Target Price Rs.425.
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Transcript of Stock Investment Tips Recommendation Today - Buy Stocks of Tata Motors with Target Price Rs.425.
TATAMOTORS :Strong Results "BUY" 11th Feb 2014
Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back of strong demand ,Growth in volume and favourable
product mix and geography mix of Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new Range Rover Sport,
New Range Rover and Jaguar F-Type . ........................................................... ( Page :2-3)
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 : 23-25)
11th Feb, 2014
Edition : 203
IEA-Equity
Strategy
Zydus Wellness : "sweeten with sugar free" "BUY" 7th Feb 2014
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 : 18- 22)
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 : 15-17)
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 : 10-
14)
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 : 7-9)
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 : 4-6)
Narnolia Securities Ltd,
India Equity AnalyticsDaily Fundamental Report on Indian Equities
BUY
1M 1yr YTD
Absolute -1.1 27.5 48.6
Rel. to Nifty 0.8 25 35.6
Current 2QFY14 1QFY1
4Promoters 34.3 34.3 34.3
FII 28.0 26.7 26.6
DII 9.6 11.7 11.4
Others 28.1 27.3 27.7
Financials Rs, Crore
3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%
Revenue 63877 56882 12.3 46090 38.6
EBITDA 9948 8635 15.2 5657 75.9
PAT 4863 3559 36.6 1636 197.2
EBITDA Margin 15.6% 15.2% 40bps 12.3% 330bps
PAT Margin 7.6% 6.3% 140bps 3.5% 410bps
2
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
The consolidated adjusted net profits surged almost by 200 % YoY to Rs 4863 Cr. The
sharp rise in the profits came in due to an exceptional income of Rs 1,948 Cr accruing to
the local business, which came from a sale of stake in its Korean subsidiary to its Singapore
subsidiary.
The management of the company after the results said that it expects capital expenditure of
about 3.5 billion pounds to 3.7 billion pounds in fiscal 2015 from an estimated 2.75 billion
pounds in fiscal 2014, raising worries that the increased spend would hurt free cash flow.One Year Price vs Nifty
The company lost his Managing Director Karl Slym last week in an accident, and company
has set up a panel, headed by Tata Sons chairman Cyrus P. Mistry, to oversee its
operations and strategy as an interim measure after Slym's death.
View And Valuation
The stock at its CMP of Rs 364 is trading at 7.34 x of one year forward FY14E EPS of Rs
50.The robust 3QFY14 results, Strong cash flows by JLR and better demand outlook, new
product mix of JLR with brand positioning makes us positive for the company .We Maintain
BUY for the stock with Target Price Rs 425.
Stock Performance-%
The consolidated operating EBITDA for the quarter came at Rs 9948 Cr and OPM at 15.5
%.The OPM surges by 330 bps due to improvement in operational metrics. The RM cost as
percentage of sales stands 59% in comparison to 62 % for 3QFY13.The company spends
nearly 1% of sales for its R&D. There is improvement of almost 100bps in other expenses
as percentage of sales on yearly basis.Share Holding Pattern-%
Mkt Capital (Rs, Cr) 98,064
Average Daily Volume 4681598
Nifty 6053
Market Data
BSE Code 500570
NSE Symbol TATAMOTORS
52wk Range H/L 405/252
Upside 17%
Change from Previous
TATAMOTORSStrong Results
Result Update Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back
of strong demand ,Growth in volume and favorable product mix and geography mix of
Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new
Range Rover Sport, New Range Rover and Jaguar F-Type, along side higher volume of the
newer XF and XJ derivatives. JLR whole sales volume for the 3QFY14 grew by 22.7 %
YoY to 116357 units while its retail volume grew by 26.5 5 to 112172 units. The revenues
for JLR for the 3QFY14 came at GBP 5328 Mn representing growth of 40 %YoY. Amidst
of splendid performance by British subsidiary, the domestic operations still acting as
dragger to the consolidated performance. The domestic business once again for the quarter
under review posted declining performance. The sales (including exports ) of the
commercial and passenger vehicles for the 3QFY14 stood at 132087 units translating a
decline of 35.7% YoY. The revenues for the quarter from domestic business came at Rs
7770 Cr as compared to Rs 10630 Cr for the same time last fiscal. This weak performance
in the quarter came on the back of prolonged slowdown in economic activities, weak
consumer segment, tight financing norms with high interest rates, weak operating
economics for the transporters due to lower fleet utilization and stagnant fright rates
combined with fuel price hikes.
CMP 364
Target Price 425
Previous Target Price
"BUY"11th Feb' 14
Narnolia Securities Ltd,
3
Please refer to the Disclaimers at the end of this Report.
OPM % & NPM %
The OPM surges by 330 bps due to
improvement in operational metrics.The
sharp rise in the profits came in due to an
exceptional income of Rs 1,948 Cr accruing to
the local business
(Source: Company/Eastwind)
JLR Whole Sales Vol. Trend
The growth in the sales volume come from all
geographies including Brazil, China, India and
the United States.
(Source: Company/Eastwind)
TATAMOTORS
Sales and PAT Trend (Rs)
The revenue jumps by 38.59% YoY on the
back of strong demand ,Growth in volume
and favorable product mix and geography
mix of Jaguar and land Rover.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
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)
4
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
Market Data ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC
declined a mere 2% to Rs 10,908.41 crore, as the sales relaisations remained low and
Cost remained stable. Cement sales volumes remained flat for ACC .
BSE Code
NSE Symbol ACC
52wk Range H/L 1355/912 Lower Cement Volume Impacted the Bottomline Growth
Mkt Capital (Rs Crores) What is more worrying for the company is that it sold less cement in 2013 than what it
did in 2012. This comes as a major jolt for the cement giant which saw its cement sales
volume dropping to 23.93 million tonne compared with 24.11 million tonne. It not only
impacted its bottom-line growth but also hit its revenues.
Average Daily Volume (Nos.)
Nifty
Stock Performance-%
According to Management the economic environment in the country was sluggish, thus
impacting the demand for cement and concrete. As a result, the company's cement
volumes remained almost flat. The company appears not enthusiastic for demand growth
going forward. Based on current demand indications, we do not foresee any significant
improvement in the cement.
Source - Comapany/EastWind Research
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
"BUY"10th Feb' 14
Narnolia Securities Ltd,
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
5
ACC Ltd.
Cement Sales Volume
Company has made several capacity expansion plans in the region. ACC is replacing the
existing facilities at Jamul, Chhattisgarh with a clinker plant with an annual production
capacity of 2.8 MT and local grinding capacity of 1.1 MT of cement, while a new plant
with annual capacity of 2.7 MT is scheduled to be built in Kharagpur. The capacity
expansion plant will increase the company's total cement production capacity to 35 MT
from the existing 30 MT.On a QoQ basis, the EBITDA/tonne improved 10.4% due to an
improvement in realisations & comparatively lower increase in total expenditure/tonne,
it shows a positive view for the further quarters.onsidering the expansion plans we
expect 4% growth in sales volume and 10% growth in realization for CY14.
Cement Realization
Cement prices witnessed an increase during Oct-Nov,13 but also witnessed a sharp fall
during Dec,13 which has contributed towards lower average realizations for the year for
the company. Further, with a strong balance sheet with zero debt and better dividend
yield of 3%, we continue to remain positive despite near term challenges. We revise our
estimates downwards to factor in lower demand growth scenario. At current price of Rs
1046, stock is trading at 2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks
good from current level, hence we recommend Buy on the stock at CMP Rs.1046 for a
target price Rs.1257.
Cement Realization
ACC Limited (ACC) is engaged in manufacture of cement & ready mixed concrete. The
Company has grinding plants in Karnataka and clinkering line in Maharashtra. The
Company’s subsidiaries include ACC Mineral Resources Limited, Lucky Minmat Limited,
Bulk Cement Corporation (India) Limited, National Limestone Company Private Limited
and Encore Cement and Additives Private Limited. The Company is subsidiary of Ambuja
Cement India Private Limited.
EBITDA
P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Power and fuel
Freight and forwarding
Expenditure
PAT
ROE% Source - Comapany/EastWind Research
Depriciation
Interest Cost
Tax
Narnolia Securities Ltd,
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 :
6
Short-term provisions
ACC Ltd.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Total Assets
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Debtor to Turnover%
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
RATIOS
P/B
EPS
Dividend Yield%
Creditors to Turnover%
Inventories to Turnover%
EV
P/E
EV/EBIDTA
ROCE%
Debt/Equity
Current Ratio
Source - Comapany/EastWind Research
Cash from Operation
Cash From Investment
Cash from Finance
Narnolia Securities Ltd,
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)
7
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
Previous Target Price
Upside
Change from Previous Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -
1.9% YoY) .
Market Data During the CY13 Ambuja Cement suffered through sluggish demand and at the same time
with increasing cost. Company unable to pass on the cost to the consumer due to lower
sales volume. Sales Volume come to 21.6 Mmt form 21.99 Mmt(down by ~2%). Rising
Input Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 63%
to Rs.358/ton from Rs.219/ton and freight cost increased ~5% Rs.1097/ton from
Rs.1046/ton. Other expenses increased 8% to Rs.847/ton from Rs.742/ton.
BSE Code
NSE Symbol AMBUJACEM
52wk Range H/L 212/148
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty
Please refer to the Disclaimers at the end of this Report.
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.
Share Holding Pattern-%
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
Source - Comapany/EastWind Research
"Neutral"10th Feb' 14
Narnolia Securities Ltd,
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
8
Freight Cost(Rs/T)
Ambuja Cements Ltd.
Volumes mT
Realization(Rs/T)
R&M Cost(Rs/T)
P&F Cost(Rs/T)
Employee(Rs/T)
Others(Rs/T)
India average cement price is still down 0.5 percent Y-o-Y, making Q3CY13 the third
consecutive quarter of Y-o-Y decline. On a QoQ basis, the EBITDA/tonne improved 6%
due to an improvement in realisations & comparatively lower increase in total
expenditure/tonne. The outlook continues to remain challenging due to difficult macro-
economic condition and resultant subdued cement demand. At current price of Rs 163,
stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP
Rs.163 for a target price Rs.165.
Source - Comapany/EastWind Research
Ambuja Cements Ltd. (ACL) is a cement manufacturing company in India. The Company
has five integrated cement manufacturing plants and eight cement grinding units. The
Company is engaged in manufacturing of Portland cement. The Company manufactures
Portland Pozollana cement and ordinary Portland cement. The Company operates in
Cementitious Materials segment . Source - Comapany/EastWind Research
EBITDA
P/L PERFORMANCE
Net Revenue from Operation
Other Income Source - Comapany/EastWind Research
Total Income
Power and fuel
Freight and forwarding
Expenditure
PAT
ROE% Source - Comapany/EastWind Research
Depriciation
Interest Cost
Tax
Narnolia Securities Ltd,
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
9
Short-term provisions
Ambuja Cements Ltd.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Total Assets
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Debtor to Turnover%
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
RATIOS
P/B
EPS
Dividend Yield%
Creditors to Turnover%
Inventories to Turnover%
EV
P/E
EV/EBIDTA
ROCE%
Debt/Equity
Current Ratio Source - Comapany/EastWind Research
Source - Comapany/EastWind Research
Cash from Operation
Cash From Investment
Cash from Finance
Narnolia Securities Ltd,
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
10
Change from Previous
PNB Vs Nifty
Share Holding Pattern-%
7.4 cr
Nifty 6063
Please refer to the Disclaimers at the end of this Report.
(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.
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)
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
Previous Target Price
Result update NEUTRAL
CMP
PNB "NEUTRAL"10h Feb2014
Narnolia Securities Ltd,
11
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.
PNB
Please refer to the Disclaimers at the end of this Report.
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.
Narnolia Securities Ltd,
12
PNB
Please refer to the Disclaimers at the end of this Report.
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
Narnolia Securities Ltd,
13
PNB
Source : Eastwind/ Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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
14
PNB
Financial & Assuption
Source : Eastwind/ Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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
Current 2QFY14 1QFY14
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)
15
" 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
Previous Target Price -
Upside -
Change from Previous -
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
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
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.
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.
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
"NEUTRAL"10th Feb' 14
Narnolia Securities Ltd,
16
(Source: Company/Eastwind)
Bajaj Corp
Sales and Sales Growth(%)
sales grew by 7%(YoY) led by 11% overall
volume growth
(Source: Company/Eastwind)
Margin-%
Still company has been efficient to maintain
its EBITDA and PAT margin over 23% mark.
(Source: Company/Eastwind)
Sales Mix-Brands
The management expects to increase Almond
Drops Hair Oil volume mkt- share to 65% v/s
55% by FY16E.
Expenses on Sales
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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%
17
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.
(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
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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
Current 4QFY13 3QFY1
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
18
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
Previous Target Price
Upside
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
Change from Previous
Market Data NII growth of 3% YoY due to lower interest income
Operating expenses higher and operating leverage remain stable
52wk Range H/L 667/405
Mkt Capital (Rs Cr) 10164
Average Daily Volume 19.97lakhs
Nifty 6063
Stock Performance
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
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.
Share Holding Pattern-%
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
"BUY"10h Feb2014
Narnolia Securities Ltd,
19
NIM narrow on account of reversal of interest income
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.
Please refer to the Disclaimers at the end of this Report.
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
Narnolia Securities Ltd,
20
Profit lower on account of muted
performance all around
Please refer to the Disclaimers at the end of this Report.
INGVYSYA BANK
Chart Focus
NII lower on account of sluggish interest
income
Operating expenses higher and operating
leverage remain stable
Narnolia Securities Ltd,
21
INGVYSYA BANK
Source : Eastwind/ Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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
22
INGVYSYA BANK
Financial & Assuption
Source : Eastwind/ Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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%
Current 2QFY14 1QFY14
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
3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%
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
23
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).
"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;
Upside 21%
Change from Previous
Share Holding Pattern-%
NSE Symbol ZYDUS
1969
52wk Range H/L 749/415
Mkt Capital (Rs Cr)
P/BV(x)-1year forward
Rs, Crore
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
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.
Market Data
BSE Code 531335
Stock Performance
Average Daily Volume
Nifty 6036
"BUY"7th Feb' 14
Narnolia Securities Ltd,
24
(Source: Company/Eastwind)
Zydus Wellness.
Sales and its Growth(%)
Sales marginally grew by 2%(YoY).
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.
Please refer to the Disclaimers at the end of this Report.
Margin-%
It expects expansion in gross margin,
which will help it to fund new product
launches.
(Source: Company/Eastwind)
Expenses-(% of Sales)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
25
Zydus Wellness.
Financials and Valuation
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
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
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
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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.