TopPicks PL 090313

7/28/2019 TopPicks PL 090313

1/86

India Strategy & Top Ideas

Benign global liquidity & supportive domestic policy

environment ranged against galloping current

account, large supply of paper and fair valuation.

Upmove to be earnings-upgrade driven

Ajay Bodke

[email protected]

+91-22-66322210

Click to edit Master title styleLilladherPrabhudas March 2013

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that

the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.Please refer to important disclosures and disclaimers at the end of the report.

7/28/2019 TopPicks PL 090313

2/86

Lilladher

Prabhudas Contents

March 08, 2013 2

(Prices as on March 7, 2012)

Page No.

Global Economy

US: Economy on the mend 5

US: Ultra-loose monetary policy looks likely to persist for some time 6

Europe: Record unemployment, contracting GDPs & squabbling between austerity v/s growth continues 7

Europe: Political gridlock in Italy and credit downgrade in the UK 8

China: Focus on shifting gears from export-dependent investment-led growth to domestic consumption 9

Japan: New BOJ Governor Toes Abenomics- To do whatever it takes to fight deflation 10

Indian economy

India: Decade-low qtrly growth, cooling WPI (except food), falling exports and rapidly slowing consumption 12

India: Plunging savings & corporate capex, massive rise of stalled projects, drying up of new investment projects-All eyes on CCI 13Budget: A bold gambit on revival of growth, Key Legislative reforms needed to stimulate growth, Galloping CAD-the biggest worry 14

Markets

Global Equity Markets Performance 15

Indian Equities Sector Performance 16

India: Marketcap-wise Performance 17

Global Currency Movement 18

India: FII/DII Equity Flows 19

Global Agricultural Commodities 20

Global Industrial Commodities 21

Nifty Valuations: Historic Trends 22

Markets: Limited room for rate cuts, large supply of paper and hope for continuance of reforms 23

Markets: Tailwinds-Strong policy initiatives, Headwinds-Weak current account 24

Nifty Valuation 25

7/28/2019 TopPicks PL 090313

3/86

Lilladher

Prabhudas Contents

March 08, 2013 3

Page No.

Mid-Caps

Petronet LNG 70

Bharat Electronics 73

Federal Bank 75

Jammu & Kashmir Bank 77

United Phosphorus 79

Apollo Tyres 81

NIIT Technologies 84

Page No.

Top Pick Summary 26

Large-Caps

ITC 28

ICICI Bank 31

NTPC 33

Wipro 36

Tata Motors 38

Larsen & Toubro 42

Axis Bank 45

Cairn India 47

Hindustan Zinc 50

DLF 52

Maruti Suzuki 55

Adani Port & SEZ 58

NHPC 62

IDFC 64

Shree Cement 66

(Prices as on March 7, 2012)

7/28/2019 TopPicks PL 090313

4/86

Lilladher

Prabhudas

GLOBAL ECONOMY

March 08, 2013 4

7/28/2019 TopPicks PL 090313

5/86

Lilladher

Prabhudas US: Economy on the mend

Employers added 198000 jobs in February 2013 as per the ADP Research Institute, beating the median economic

forecast of 170000, with service sector adding 164000 jobs. Industry added 32000 including 21000 jobs in the

construction sector

US Government data is estimated to show a growth in private payrolls of 167000 jobs and a steady 7.9%

unemployment rate. The steady growth in payrolls must be seen in the face of strong fiscal headwinds like automatic

spending cuts that came into effect on March 1, 2013, a rise by nearly a third in payroll taxes with effect from

January 1, 2013 and higher petrol prices.

Ample credit and rebounding home prices have seen US Auto sales, posting a 4% jump on strong year-ago numbersto 15.4 million, the fourth straight month above 15 million.

After three years of above 4% same store sales (SSS) growth in the month of February, SSS in February 2013 is

expected to be slow at 2.7% due to delays in getting refunds to taxpayers and cooler weather which delayed the

start of sales of spring clothing.

ISMs non-manufacturing PMI rose to 56 in February (the highest since February 2012) from 55.2 in January,expanding for 38 consecutive months. The survey indicated a growing optimism about the trend of the economy and

overall business conditions.

ISM manufacturing PMI rose unexpectedly in February to 54.2 from 53.1 in January and against a consensus of fall to

52.5 in February. The survey indicated strengthening demand amidst intensifying cost pressures.

March 08, 2013 5

7/28/2019 TopPicks PL 090313

6/86

Lilladher

Prabhudas US: Ultra-loose monetary policy looks likely to

persist for some time US home prices rose the most in seven years at 9.7% YoY in January 2013 and 0.7% MoM. This rise is despite sales

usually being slow in the winter months. A combination of rising demand with fewer available homes is pushing up

prices. Home prices across the entire US are still 26% down from their peak in April 2006 but in 15 states home

prices are within 10% of their peak values.

The US economy is expected to grow at around 2.5% in 2013 on the back of a tepid 1.3% growth in 2012. 2013

estimate factors in a shaving of 0.6% growth due to the sequestration or automatic spending cuts with effect from

March 1, 2013. Jobless rate is expected to fall to 7.4% by end-2013.

Feds loose monetary policy of holding down interest rates between 0 and 0.25% and purchase of US$85bn of

treasuries and mortgage bonds every month is expected to continue till jobless rate falls to 6.5% from 7.9% at

present.

March 08, 2013 6

7/28/2019 TopPicks PL 090313

7/86

Lilladher

Prabhudas Europe: Record unemployment, contracting GDPs &

squabbling between austerity v/s growth continues

The EUs economy is likely to shrink by 0.3% in 2013, with a flattish growth in France at 0.1% and a growth of 0.5% in

Germany. In Q4CY12, the 17-member Eurozones GDP shrank by 0.6% on the back of 0.1% drop in Q3CY12. The 27-

member EUs GDP also contracted by 0.5% in Q4CY12 after gaining marginally 0.1% in Q3CY12. Both Eurozone andEUs economy contracted by 0.6% and 0.3%, respectively, in 2012.

Unemployment rate in Eurozone reached a record high of 11.9% in January from 11.8% in December 2012, with

Greece at 27% and Spain at 26.2% at the higher end and Austria at 4.9% at the lower end. Jobless rate in EU rose to

10.8% in January vis-a-vis 10.7% in December 2012.

Eurozones inflation came in at 1.7% below the ECBs target of 2%. Record high unemployment rate and benigninflationary trends lead us to believe that the ECB would look at cutting rates later in the year. In its last meeting on

March 6, 2013 it has kept its main refinancing rate steady for the eight-straight month at 0.75% despite record

unemployment, a falling rate of inflation and fifth straight quarter of economic contraction.

Eurozones services PMI unexpectedly shrank in February to 49.4 from 50.4 in January signalling contraction in

activity. PMI for manufacturing barely inched up to 49 from 48.8 in January, the seventh consecutive month below

50 with the reading still in the zone of contraction.

France, Spain and Italy have appealed for less painful austerity measures to help raise growth and avoid popular

discontent. They have warned that merely emphasising on austerity without credible growth strategy would

ultimately backfire. Germany has signalled its openness to consider a Eurozone Budget to finance growth and help in

job creation but has proposed a maximum ceiling of just Euro15bn as compared to Eurozones annual GDP of Euro 10

trillion.

March 08, 2013 7

7/28/2019 TopPicks PL 090313

8/86

Lilladher

Prabhudas Europe: Political gridlock in Italy and credit

downgrade in the UK All eyes are on March 15 when both the Houses of Italian Parliament meet for the first time to choose their Speakers

followed by the President holding rounds of negotiations with various political groupings to form the government.

The political uncertainty will continue to weigh.

Italys recently concluded elections produced a hung Parliament with three rivals each, winning more than 25% of

the vote. With a limited possibility of any two rivals coming together as also the inability of the current President to

dissolve the Parliament and call for fresh elections (the Presidents term is getting over in May 2013 and under Italys

constitution he cannot dissolve Parliament in last six months of his term), the country is headed towards a short-

lived, unstable minority government till fresh elections can be called by a New President post May 2013 that would

have to strike a balance between the much-reviled yet economically necessary austerity drive and policies that

induce growth.

Moodys downgraded UKs credit rating from Aaa to Aa1 citing weak medium-term growth outlook and the risk

this poses to governments fiscal consolidation programme as also the risk of high and rising debt burden to the

government balance-sheets shock-absorbing capacity. It did recognise credit strengths of highly diversified and

competitive economy with proven track record of fiscal consolidation, robust institutional structure and favourable

long-maturity domestically demand-driven debt structure containing fears of interest rate risks.

Bank of England (BOE) has kept its interest rates unchanged at record low of 0.5% (the same level since March 2009)

as also the bond buying program target at 375 billion pounds. Inflation in January was at 2.7% as against the BOEstarget of 2%.

The British economy is expected to grow at around 0.6% in 2013. Unemployment rate in UK is at 7.8% but the

economy is on the brink of a triple dip recession having shrunk by 0.3% in Q4CY12.

March 08, 2013 8

7/28/2019 TopPicks PL 090313

9/86

Lilladher

Prabhudas China: Focus on shifting gears from export-dependent

investment-led growth to domestic consumption

In his last speech before stepping down, the outgoing Chinese Premier Wen Jiabao has warned that unbalanced,

uncoordinated and unsustainable development remains a problem and has set a growth target of 7.5% for the

economy in 2013, the same as in 2012 and down from 8% target between 2005 to 2011. Chinas GDP grew by 7.8%in 2012.

China is attempting to fuel a domestic consumption led growth as against an investment led growth dependent on

exports. Domestic consumptions share of GDP has steadily fallen from 46% in 2000 to 33% in 2010.

Raising pensions and subsistence allowances for urban & rural poor, improvement in public health services and

building 4.7 million government-subsidised cheap apartments will be the focus. Chinese government plans to

increase its budget deficit by 50% (i.e. US$193bn) in 2013 to 2% of GDP to fund this shift.

Inflation target for 2013 is at 3.5% down from 4% in 2012, whereas, the actual inflation in 2012 was at 2.6%. Risks

from overheated property bubbles and massive increase in the shadow banking system remain two largest risks to

the economy. Chinese banks have sold about US$1.6trillion of wealth management products (WMP) to savers by

offering returns higher than bank deposits. The funds raised are typically short-term (6 months to a year) andinvested in long-term risky assets with extremely poor disclosure standards. To cool off the overheated property

prices, China recently brought stricter controls on who can buy a house and imposed a capital gains tax to 20% on

property market transactions.

March 08, 2013 9

7/28/2019 TopPicks PL 090313

10/86

Lilladher

Prabhudas Japan: New BOJ Governor Toes Abenomics- To

do whatever it takes to fight deflation Newly announced Governor of Bank of Japan (BOJ) has vowed to do whatever it takes to fight deflation that has

eroded profits and wages and crippled spending. The government of Prime Minister Shinzo Abe has prevailed upon

the BOJ to launch an open-ended commitment to end deflation by adopting a firm 2% inflation target (as against itsprevious goal of 1%) and agreeing to work jointly to restore growth. BOJ would increase its asset purchases by Yen

110trn in 2014 over and above Yen 101trn in 2013.

Mr. Abe has also increased fiscal spending by Yen 10 trillion (US$110bn or 2% of GDP) through a supplementary

budget which is expected to raise fiscal deficit to 11.5% of GDP and will push BOJ to finance it.

Japan will begin negotiations with the US to join Pacific free trade pact to counter Chinas growing economic clout.This would force Japan to open up its markets (especially for farm products) which it has been loath to do for nearly

20 years.

Fears of further pile up of public debt, race-to-base & unleashing of competitive currency wars and flooding of

emerging markets with cheap Japanese money-fuelling asset bubbles are some of the potential risks faced by this

ultra-loose monetary measures.

Abenomics has resulted in the Yen falling by 15.7% versus the US Dollar over the last three months, making it

among the worst performing currencies and has led to a surge in profits among the Japanese export-led auto and

consumer companies propelling a sharp rise in the stock market. Nikkei is up by 28.3% over the last quarter.

March 08, 2013 10

7/28/2019 TopPicks PL 090313

11/86

Lilladher

Prabhudas

INDIAN ECONOMY

March 08, 2013 11

7/28/2019 TopPicks PL 090313

12/86

Lilladher

Prabhudas India: Decade-low qtrly growth, cooling WPI (except

food), falling exports and rapidly slowing consumption

Indias Q3FY13 GDP grew at a decade-low of 4.5% compared to 6% YoY. GDP growth stood at 5.5% and 5.3% in the

first and second quarter of FY13. For the 9-month period ending December 2012, GDP grew at 5% vis-a-vis 6.6% YoY.

In the Oct-Dec quarter, manufacturing grew marginally at 2.5% (last year 0.7% growth); agriculture saw a sharpslowdown and grew by just 1.1% due to delay in onset of monsoon impacting the kharif harvest (last years growth

was at 4.4%), services sector growth slowed down considerably to 7.9% versus 11.4% YoY.

WPI inflation in January rose to a 38-month low of 6.62% as compared to 7.18% in December. Core inflation growth

appreciably to just 4.08% in January, while food inflation continued to remain stubbornly high at 11.88% and fuel

inflation rose by 7.06%. Apart from monetary measures taken by the RBI, softening of international and domestic

prices of metals, chemicals and textiles have contributed to the moderation of core inflation. Given the higher

weightage to food in CPI, CPI has remained close to double digits mainly due to sharp rise in price of cereals like

wheat, rice and maize. Rise in minimum support prices and inadequate open market availability relative to demand

are responsible for the build up in price.

Indias export growth in dollar terms during the April 2012-January 2013 period was at -4.9% compared to 21.9% in

FY12. The Finance Minister has announced a few measures in the budget to boost exports like drastic reduction of

duty on exports ofpre-forms of semi-precious stones from 10% to 2%, reduction in duty on specified machinery for

manufacture of leather goods and footwear by 2.5% etc.

CSO estimates that consumption after being the main engine of growth over the last seven years and growing at a

CAGR of around 8% between FY06 and FY12 would plunge to 4.1% in FY13 mainly due to reduction in real disposable

incomes of households due to elevated inflation and high interest rates.

March 08, 2013 12

7/28/2019 TopPicks PL 090313

13/86

Lilladher

Prabhudas India: Plunging savings & corporate capex, massive rise of stalled

projects, drying up of new investment projects-All eyes on CCI

Gross domestic savings have fallen sharply from 36.8% of GDP in FY08 to 30.8% in FY12 and gross capital formation

has declined from 38.1% in FY08 to 35% in FY12. Corporate sectors gross capital formation has plunged from 17.3%

of GDP in FY08 to 10.6% in FY12. This can be attributed to policy bottlenecks and inordinate delays in obtaining

various approvals like forest clearance, environmental clearance, carrying out land acquisition etc; high interest rates

and slowing demand both domestically and exports.

The Economic survey mentions a humungous rise in projects where implementation has stalled both in value and

volume terms. From Rs500bn (US$9.8bn) in Dec 05, the total stalled projects have zoomed up to Rs7500bn

(US$139bn). A total of 700 large projects are stuck up at some stage of approvals with six sectors accounting for 80%

of all stalled projects electricity, roads, telecom, steel, real estate and mining.

Inability of firms to start new projects as a result of the rising stalled projects has led to new investment projects

drying up across sectors. From Rs2000bn, the new projects have plunged to just around Rs500bn.

A lot of hope is riding on the government avowed intention to expedite clearances for projects above Rs10bn

through the Cabinet Committee on Investments (CCI). Government needs to quickly reach across the political

spectrum and evolve a broad agreement on the Land Acquisition Bill whose draft has been cleared by the Cabinet.

The draft is heavily favoured towards sellers who will have to be paid four times the market price in rural areas &

twice in urban areas and give displaced people jobs and homes. Consent of 80% of land owners is a must for the

acquisition to go through. Industry believes that although the Bill in its present form would jack up the land

acquisition costs impinging on the viability of some projects, it could yet bring some clarity to the process of land

acquisition. Some opposition parties are opposed to governments involvement in any acquisition process for private

projects and some want it to be sent back to the Standing Committee for further consultation.

March 08, 2013 13

7/28/2019 TopPicks PL 090313

14/86

Lilladher

Prabhudas Budget: A bold gambit on revival of growth, Key Legislative reforms

needed to stimulate growth, Galloping CAD-the biggest worry

Fiscal deficit target a tad optimistic: In the wake of rising current account deficit and fiscal deficit, the Finance

Minister (FM) had given an iron clad commitment to contain the fiscal deficit to 5.3% and 4.8% of GDP in FY13 and

FY14 respectively which has been achieved by effecting a savage cut in Plan expenditure to the tune of Rs 1000 bn

(around 7% of budgeted expenditure or 1% of GDP). We believe that the government has been a tad optimistic on

the assumptions on revenue front especially on service tax, divestments, telecom receipts and dividends to the

extent of approximately Rs 500 to Rs 600 bn. On the positives, the subsidy outlays look realistic while the sharp jump

in plan expenditure outlays may end up becoming a casualty once again in order to achieve 4.8% fiscal deficit target

in FY14 if the revival of growth does not pan out as per expectations. Budgets nominal GDP growth assumption for

FY14 is at 13.4% and with the Economic survey pegging the real GDP growth between 6.1% to 6.7%, implying

inflation at around 6.5% to 7%. Control over fiscal deficit is necessary for anchoring inflationary expectations and

achieving reduction in interest rates.

Key reforms still hostage to achievement of legislative consensus: Several key reform initiatives expected by the

market to stimulate investments and kick-start growth like GST, dismantling of Coal Indias monopoly and allowing

commercial miners to bridge the yawning gap between the consumption and production, DTC, increase in FDI limits

in Pensions & Insurance remain mired in uncertainty due to lack of consensus among the ruling combine and the

opposition.

CAD a clear and present danger to the BOP and macro-economic stability: Although we are not too unhappy withthe Budget, our real concern lies in the limited leeway that the government has to control the ever-widening current

account deficit (CAD). With global growth remaining anemic possibility of large rise in exports looks remote and

with both oil as well as gold imports showing no signs of abating, Indias dependence on volatile FII flows is rising

rapidly. We remain highly vulnerable to any change in global risk-on trade. Any increase in risk averseness due to

resurgence of problems in Europe or gridlock in the US over debt ceiling debate would lead to sharp slowdown (or

worse a reversal) in FII flows. This has the potential to upset the perilously balanced BOP and with large twin deficits

indeed the macro-economic stability.

March 08, 2013 14

7/28/2019 TopPicks PL 090313

15/86

Lilladher

Prabhudas Global Equity Markets Performance

MoM & YoY: Race to debase its currency by

adoption of reflationary policy by the Bank of Japan

sharp rise in Japanese Equities.

Source: Bloomberg, PL Research


Month-on-Month

Year-on-Year


Calendar Year-to-date

March 08, 2013 15

6.1% 5.8%

4.0% 3.9% 2.7% 2.4% 1.9%

-2.5% -2.6%-3.6%

-4.4%-5.9%-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

In

donesia

Japan

S.Korea

A

ustralia

G

ermany

FTSE

S&P

Ho

ngKong

India

Russia

China

Brazil

16% 15%

-1%

17%

12%11% 10%

8%12%

-2%

2%

-14%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Indonesia

Japan

S.Korea

Australia

Germany

FTSE

S&P

HongKong

India

Russia

China

Brazil

19% 20%

0%

19%

14.6%

9%13%

6%10%

-9%-5%

-16%-20%

-15%

-10%

-5%

0%5%

10%

15%

20%

25%

Indonesia

Japan

S.Korea

Australia

Germany

FTSE

S&P

HongKong

India

Russia

China

Brazil

7/28/2019 TopPicks PL 090313

16/86

Lilladher

Prabhudas Indian Equities Sector Performance

MoM: IT outperforms while Metal & Power sector

underperform

CYTD & YoY: Defensives like FMCG & Healthcare leadthe outperformance, while global cyclical like Metals

and Infrastructure-led Power and Capital Goods

underperform



Month-on-Month

Year-on-Year



March 08, 2013 16

9.1%

-1.2% -1.9%

-5.3% -5.8% -6.3%-8.0% -8.8% -8.8% -9.6%

-11.4%-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

16.7%

8.5%

21.9%26.5%

12.3% 13.8%17.5%

-3.1% -3.1%

-14.2% -15.7%-20.0%-15.0%-10.0%

-5.0%0.0%

5.0%10.0%15.0%20.0%25.0%30.0%

13.3%9.7%

24.7%

34.8%

7.6%12.1% 14.5%

-3.0% -3.0%

-19.0%-15.1%

-30.0%

-20.0%

-10.0%0.0%

10.0%

20.0%

30.0%

40.0%

7/28/2019 TopPicks PL 090313

17/86

Lilladher

Prabhudas India: Market cap-wise Performance

MoM: Small-Caps outperform Mid-Caps, which in

turn, outperform Large-Caps

YoY: Large-Caps return more than twice as much asSmall-Caps



Month-on-Month

Year-on-Year



March 08, 2013 17

11.45%

7.10%

3.67%3.09%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

B SES MCAP Index B SEMDCAP Index B SE500 Index B SE100 Index

-1.72%

-1.51%

-1.24% -1.19%

-2.00%

-1.80%

-1.60%

-1.40%

-1.20%

-1.00%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

BS ES MCAP Index B SEMDCAP Index B SE500 Index BS E100 Index

7.01%

10.72%

14.45%15.65%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

BS ESMCAP Index BSEMDCAP Index BSE500 Index BSE100 Index

7/28/2019 TopPicks PL 090313

18/86

Lilladher

Prabhudas Global Currency Movement

MoM: The British Pound saw the sharpest fall of 4%

due to Moodys downgrade of the UK credit rating

from AAA to Aa1

CYTD & YoY: Bank of Japans (BOJs) commitment to

its government to adopt ultra loose monetary policy

to fuel inflation to 2%, along with expanding bond

buying program as well as the new governments

massive fiscal stimulus amounting to roughly 2% of

GDP leads to sharp plunge in the Japanese Yen

against all major currencies



Month-on-Month

Year-on-Year



March 08, 2013 18

1%

1%

1%

0%

0

%

0%

0%

0%

-1%

-1%

-3%

-3%

-3%

-3%

-4%

-4%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

-7%

5%

-1%

-5%

4%

1%

6%

0%

-12%

-1%

-4%

-3%

-6%

-4%

-5%

-2%

-14%-12%-10%

-8%-6%-4%-2%

0%2%4%6%8%

-10%

3%

-3%

-5%

4%

1%

6%

-1%

-13%

-2.8%

-3%

-2%

-8%

-2%

-4% -0

.5%

-15%

-10%

-5%

0%

5%

10%

7/28/2019 TopPicks PL 090313

19/86

Lilladher

Prabhudas India: FII/DII Equity Flows

India acts as a magnet for FII flows on the back of flurry of announcements of much needed reforms to contain fiscal

deficit and opening up of capital-starved sectors for increased foreign participation

Net selling by DIIs continues unabated

March 08, 2013 19

-200.0

-100.0

0.0

100.0

200.0

300.0

Ja

n-12

Fe

b-12

Ma

r-12

Ap

r-12

Ma

y-12

Jun-12

Ju

l-12

Au

g-12

Se

p-12

Oc

t-12

No

v-12

De

c-12

Ja

n-13

Fe

b-13

FII Net Cash Market DII Net Cash Market

CY12 - Total FII buying

Rs1,068.4bn against DII net

selling at Rs-711.1bn

YTD CY13

FII Rs307.6bn

DII Rs-267.6bn

7/28/2019 TopPicks PL 090313

20/86

Lilladher

Prabhudas Global Agricultural Commodities


Performance of Global Agricultural Commodities

Source: Bloomberg, PL Research *Price in US$

Month-on-Month Performance

March 08, 2013 20

YoY: Sharp rebound seen over the last two

months in Corn and Soya prices while Rice,

Wheat and Palm Oil see a sharp reversal.

Sugar continues to remain steady over thelast couple of months

MoM: Soya and Sugar lead the

outperformance

-1%

-3%-4% -4%

-5%

-8%-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Soya Sugar Corn Palm Oil Rice Wheat

Rice

Wheat

Corn

Soya

Palm Oil

Sugar

60

70

80

90

100

110

120

130

140

150

Mar-12

Apr-12

Apr-12

May-12

Jun-12

Jun-12

Jul-12

Aug-12

Aug-12

Sep-12

Oct-12

Nov-12

Nov-12

Dec-12

Jan-13

Jan-13

Feb-13

Mar-13

7/28/2019 TopPicks PL 090313

21/86

Lilladher

Prabhudas Global Industrial Commodities

MoM: Base Metals Aluminium, Nickel and Lead are

the biggest losers.

YoY: Thermal Coal falls the most, whereas Lead is thestrongest outperformer



Month-on-Month

Year-on-Year



March 08, 2013 21

1%

-4%

-6%

-10%-10% -10%-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

Thermal Coal Brent crude Copper Lead Nickel Aluminium

-20%

-11%-10%

2%

-14%-15%

-25%

-20%

-15%

-10%

-5%

0%

5%


0.7%

-0.8%

-5.4%

-9.0%

-5.7%

-9.2%-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%


7/28/2019 TopPicks PL 090313

22/86

Lilladher

Prabhudas Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (ExJapan)

March 08, 2013 22

5.0

10.0

15.0

20.0

25.0

30.0

Ma

r-03

Ju

l-03

No

v-03

Ma

r-04

Ju

l-04

No

v-04

Ma

r-05

Ju

l-05

No

v-05

Ma

r-06

Ju

l-06

No

v-06

Ma

r-07

Ju

l-07

No

v-07

Ma

r-08

Ju

l-08

No

v-08

Ma

r-09

Ju

l-09

No

v-09

Ma

r-10

Ju

l-10

No

v-10

Ma

r-11

Ju

l-11

No

v-11

Ma

r-12

Ju

l-12

No

v-12

Ma

r-13

Average

13.6

-20%

0%

20%

40%

60%

80%

100%

120%

Mar-03

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

10 year Avg.

34%

Markets: Limited room for rate cuts large supply

7/28/2019 TopPicks PL 090313

23/86

Lilladher

Prabhudas Markets: Limited room for rate cuts, large supply

of paper and hope for continuance of reforms A growing CAD, elevated CPI (especially food inflation) and worries over the governments ability to mop up the budgeted

amounts for divestments, telecom receipts as well also revenue receipts would, in our view, constrain RBI from aggressively

reduce rates, going forward. As a gesture to acknowledge the governments fiscal consolidation efforts, we expect RBI to cut

rates by 0.25% in its next meeting scheduled on March 19, 2013 but see limited room for further large rate cuts. We model ina 0.5% cut in rates over the next 12 months.

FY 14 would witness a large amount of supply of paper from the government totalling Rs558bn (Rs400bn of divestment and

Rs158bn from sale of shares in non-government companies). SEBIs directive to all private companies to bring down their

promoter holdings to 75% (in case of government companies the free float must be atleast 90%) by June 30, 2013 would

result in further Rs160bn of fresh offerings in the market. Promoters have the option to buy-back the minority holders in full

and take the company private but very few promoters have exercised this option. This technical overhang would continue to

weigh on the markets and a successful completion is dependent on the market remaining buoyant with torrent of FII inflows

continuing and possibly aided by purchases from domestic institutions and as-yet apathetic retail investors.

We would recommend investors to assign certain portion of their portfolio to hedge against any possible fall in the Rupee if

risk-aversion were to increase due to any global tremors and lead to slowdown (or worse a reversal) in FII inflows. With

domestic institutional investors remaining net sellers in Jan-Feb 2013 to the tune of Rs267.2bn (as against a net FII inflow of

Rs307.6bn in the same period) and retail investors displaying compete apathy, the markets are at the mercy of fickle FII flows.

Continuance on the path of fiscal consolidation with special emphasis on reducing revenue deficit, opening up of more

sectors like pensions & insurance for increased foreign direct investment, expediting clearance of the humongous pile of

stalled projects through CCI, improving supply side bottlenecks in agriculture sector to control food inflation, getting abalanced land acquisition bill cleared, solving the seemingly-intractable problems facing the coal mining, gas exploration and

power sectors, offering more sops to exporters to make them more competitive in global markets and quickening the pace of

rationalisation of prices of not just diesel but also LPG, kerosene and urea to bring them in line with international prices is

the way forward. The path is strewn with many potential political landmines with opposition expected to be fierce from not

just the Opposition but also some allies and members with socialist leaning within the Congress Party. But the need to

continue pursuit of reforms started from mid-September 2012 by the Prime Minister and Finance Minister has never been

more acute to help maintain confidence of market participants and buoyancy in the markets.

March 08, 2013 23

Markets: Tailwinds Strong policy initiatives

7/28/2019 TopPicks PL 090313

24/86

Lilladher

Prabhudas Markets: Tailwinds-Strong policy initiatives,

Headwinds-Weak current account After showing an anemic growth of 0.6% in FY12 (Rs 339.6) over FY11 (Rs 337.8), we expect free float Nifty EPS to

rise 8.8% to Rs 369.5 in FY13 and 17.2% to Rs 432.9 in FY14 . The earnings downgrade cycle still continues as

evidenced in a 2.2% fall in our estimates of FY13 EPS from Rs 378 on Feb 7, 2013 to Rs 369.5 now.

At 5,863 levels as on March 7,2013, Nifty is trading at 15.9x FY13E earnings and 13.5x FY14E earnings. The last ten-

year average for Niftys one-year forward multiple is 13.6x. Thus, Nifty is currently trading in line with its ten year

average.

MSCI India is currently trading at a premium of 27% to MSCI Asia (ex-Japan). Last ten-years-average premium at

which India has traded is 34%

We expect any further upside will be less re-rating driven and more earnings-upgrade driven. Relief in the form of

fall albeit at a slower pace in interest rates and hopes of continuance of benign commodity prices ( propelled by no

large scale liquidity-driven up move and weakish global demand environment) and moderate pick-up in demand due

to slightly better growth prospects in FY14 would underpin any earnings upgrade.

We expect the market to trade in a band between 5600 and 6200. A large current account deficit would act as a drag

on the currency limiting RBIs ability to reduce interest rates aggressively and this may act as a headwind for the

equity markets. On the positives, a strong-willed government resolutely committed to the path of fiscalconsolidation, reviving growth through policy enablers to kick start the investment cycle and creating a more-

welcoming policy environment for foreign investments both through the FII and FDI route would act as strong

tailwinds for the equity markets.

March 08, 2013 24

7/28/2019 TopPicks PL 090313

25/86

Lilladher

Prabhudas Nifty Valuation

March 08, 2013 25

Weight-

age (%)FY11 FY12 FY13E FY14E

Weight-

age (%)FY11 FY12 FY13E FY14E

Banking & Fin. 28.5% Cement 3.5%

PER (x) 19.4 15.2 12.7 11.1 PER (x) 23.8 21.6 16.8 14.2

PAT Growth (%) 26.8 27.3 19.9 14.7 PAT Growth (%) (18.5) 10.1 28.7 18.5

Technology 14.4% Telecom 2.1%

PER (x) 28.2 23.9 19.1 17.0 PER (x) 20.0 26.7 14.3 11.2

PAT Growth (%) 23.4 17.8 25.1 12.6 PAT Growth (%) (37.9) (25.1) 86.5 28.2

Oil & Gas 12.7% Real Estate 0.5%

PER (x) 10.7 9.9 10.9 9.5 PER (x) 30.8 38.7 39.8 30.6

PAT Growth (%) 23.6 7.9 (9.1) 14.8 PAT Growth (%) (15.0) (20.5) (2.7) 30.0

FMCG 12.0% Nifty as on Mar 7 5,863

PER (x) 46.4 37.5 31.3 26.8

PAT Growth (%) 33.1 23.7 19.6 16.8 EPS (Rs) - Free Float 337.8 339.6 369.5 432.9

Growth (%) 16.6 0.6 8.8 17.2

Eng. & Power 8.8% PER (x) 17.4 17.3 15.9 13.5

PER (x) 14.8 14.0 13.5 12.2

PAT Growth (%) 11.0 5.3 3.9 10.3 EPS (Rs) - Free Float

Nifty Cons. 337.8 339.6 375.1 441.1

Auto 8.4% Var. (PLe v/s Cons.) (%) - - (1.5) (1.8)

PER (x) 15.0 12.4 14.1 11.2PAT Growth (%) 90.0 21.3 (11.9) 25.1

Sensex as on Mar 7 19,414

Metals 4.1%

PER (x) 10.9 12.3 11.7 9.8 EPS (Rs) - Free Float 1,109.6 1,100.9 1,191.3 1,402.7

PAT Growth (%) 48.0 (11.1) 5.5 19.5 Growth (%) 9.5 (0.8) 8.2 17.8

PER (x) 17.5 17.6 16.3 13.8

Pharma 5.0%

PER (x) 43.2 31.4 25.1 19.4 Sensex Cons. 1,109.6 1,100.9 1,202.4 1,415.8

PAT Growth (%) 59.9 37.6 25.1 29.8 Var. (PLe v/s Cons.) (%) - - (0.9) (0.9)

P bh d

7/28/2019 TopPicks PL 090313

26/86

Lilladher

Prabhudas Top Pick Summary

March 08, 2013 26

2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E

Large Cap

ITC 292 330 12.8% 2,285.7 16.7 16.8 15.7 21.0 38.0 40.5 26.8 22.2 9.6 8.4

ICICI Bank 1,117 1,325 18.6% 1,290.5 16.5 18.8 9.5 18.6 12.9 14.0 14.4 12.1 1.8 1.6

NTPC 148 180 21.4% 1,221.6 12.7 15.3 16.9 9.6 13.2 13.3 11.1 10.1 1.4 1.3

Wipro 449 480 6.8% 1,104.7 12.7 12.6 12.3 10.1 20.8 19.8 14.9 13.5 2.9 2.5

Tata Motors 306 360 17.8% 1,020.2 21.7 14.7 33.9 21.7 27.3 27.5 8.0 6.6 2.0 1.7

Larsen & Toubro 1,464 1,704 16.4% 896.4 20.9 17.9 11.9 10.9 17.3 16.7 16.8 15.1 2.7 2.3

Axis Bank 1,403 1,650 17.6% 579.8 20.9 22.6 13.9 22.8 19.6 20.4 10.4 8.5 1.9 1.6

Cairn India 298 401 34.7% 571.5 0.1 (1.3) (11.7) (14.9) 16.8 12.8 5.6 6.6 0.9 0.8

Hindustan Zinc 120 150 25.4% 505.6 9.7 3.6 10.1 5.8 20.4 18.5 7.1 6.7 1.3 1.2

DLF 279 298 6.7% 474.3 24.7 8.5 24.4 22.8 5.6 6.4 32.0 26.0 1.7 1.6

Maruti Suzuki 1,449 1,715 18.3% 418.9 14.4 18.6 34.7 28.5 13.8 15.6 16.4 12.7 2.1 1.9

Adani Port & SEZ 146 165 13.1% 292.3 38.2 28.2 62.0 50.0 32.1 36.4 14.1 9.4 4.0 3.0

NHPC 21 23 11.1% 255.2 7.3 21.8 8.9 12.3 8.3 8.8 10.7 9.5 0.9 0.8

IDFC 154 180 17.0% 232.8 15.8 19.9 20.3 19.6 15.3 16.2 10.4 8.7 1.5 1.3

Shree Cement 4,245 5,000 17.8% 147.9 17.6 16.6 6.0 20.8 23.9 23.0 13.5 11.2 2.9 2.3

Mid-CapsPetronet LNG 147 180 22.3% 110.2 19.3 11.7 (15.6) 21.6 20.7 21.6 11.1 9.1 2.1 1.8

Bharat Electronics 1,241 1,433 15.4% 99.3 13.0 10.0 20.3 10.1 15.3 14.5 9.5 8.7 1.4 1.2

Federal Bank 490 580 18.4% 83.8 21.5 18.2 14.1 21.7 14.6 15.8 8.6 7.0 1.2 1.0

Jammu & Kashmir Bank 1,269 1,650 30.0% 61.5 13.5 16.6 (5.6) 15.9 20.3 20.1 5.5 4.8 1.0 0.9

United Phosphorus 124 170 37.4% 54.7 12.4 10.5 18.2 18.5 17.3 17.8 6.5 5.5 1.1 0.9

Apollo Tyres 92 100 8.7% 48.9 10.2 10.9 15.2 17.3 19.5 19.4 6.4 5.5 1.2 1.0

NIIT Technologies 281 350 24.6% 16.7 15.1 13.6 15.2 12.3 22.2 21.4 6.5 5.7 1.3 1.1

PER (x) P/BV (x)CMP (Rs.) TP (Rs)

Re ve nue Gr owth (%) Ear nings Gr owth (%) RoE (%)Upside

Mcap

(Rs bn)

P bh d

7/28/2019 TopPicks PL 090313

27/86

Lilladher

Prabhudas

LARGE CAP

March 08, 2013 27

P bh d ITC

7/28/2019 TopPicks PL 090313

28/86

Lilladher

Prabhudas ITCCMP: Rs292 TP: Rs330 Rating: BUY MCap: Rs2,285.7bn

Cigarettes: second year of hefty excise increase to moderate EBIT

growth: FY14 budget has proposed 18% increase in excise duty (except

7/28/2019 TopPicks PL 090313

29/86

Lilladher

Prabhudas Segmental PerformanceITC

Source: Company Data, PL Research


Excise duty on cigarettes

FMCG and Hotel Business key profit drivers

March 08, 2013 29

FY10 FY11 FY12 FY13E FY14E FY15E

Net Sales (Rs m)

Cigarettes 93,212 105,737 123,244 140,770 155,422 176,772

FMCG 36,339 44,716 55,256 71,439 88,907 108,900

Hotels 8,507 10,008 10,062 10,529 12,139 13,038

Agri Business 38,621 47,480 56,953 70,512 84,441 100,950

Paperboards & Paper 31,078 35,072 39,234 41,526 48,662 53,875

EBIT (Rs m)

Cigarettes 49,381 57,668 69,077 83,477 95,584 110,483

FMCG (3,495) (2,976) (1,955) (1,250) 89 2,178

Hotels 2,166 2,666 2,794 1,370 2,309 3,132

Agri Business 4,478 5,663 6,432 7,756 9,542 11,609

Paperboards & Paper 6,843 8,192 9,368 9,851 11,803 13,325

EBIT Margin (%)

Cigarettes 53.0 54.5 56.0 59.3 61.5 62.5

FMCG (9.6) (6.7) (3.5) (1.8) 0.1 2.0

Hotels 25.5 26.6 27.8 13.0 19.0 24.0

Agri Business 11.6 11.9 11.3 11.0 11.3 11.5

Paperboards & Paper 22.0 23.4 23.9 23.7 24.3 24.7

EBIT Growth (%)

Cigarettes 18.0 16.8 19.8 20.8 14.5 15.6

FMCG (27.7) (14.9) (34.3) (36.0) (107.1) 2349.7

Hotels (31.5) 23.0 4.8 (51.0) 68.5 35.7

Agri Business 74.8 26.5 13.6 20.6 23.0 21.7

Paperboards & Paper 34.5 19.7 14.3 5.2 19.8 12.9

Non Cigarette Businesses

Net Sales 114,545 137,277 161,505 194,006 234,149 276,762

Growth % 9.8 19.8 17.6 20.1 20.7 18.2

EBIT 9,991 13,545 16,638 17,728 23,743 30,245

EBIT Growth (%) 67.2 35.6 22.8 6.5 33.9 27.4

EBIT Margin (%) 8.7 9.9 10.3 9.1 10.1 10.9


Rs/1,000 sticks Length (mm) FY11 FY12 FY13E FY14E FY15EPlains 65-70 1,473 1,473 1,768 2,086 2,242Small Filter

7/28/2019 TopPicks PL 090313

30/86

Lilladher

Prabhudas FinancialsITC

March 08, 2013 30

Income Statement (Rs m)

Y/e March FY11 FY12 FY13E FY14E FY15E

Net Revenue 214,590 251,738 295,883 345,328 403,182

Direct Expenses 97,750 114,369 134,829 156,496 182,346

% of Net Sales 45.6 45.4 45.6 45.3 45.2

Employee Cost 11,400 12,654 14,179 16,128 18,384

% of Net Sales 5.3 5.0 4.8 4.7 4.6

SG&A Expenses 31,312 36,229 40,949 47,387 54,854

% of Net Sales 14.6 14.4 13.8 13.7 13.6

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 74,127 88,486 105,926 125,317 147,598

Margin (%) 34.5 35.2 35.8 36.3 36.6

Depreciation 6,560 6,985 8,109 9,069 9,933

PBIT 67,568 81,501 97,817 116,248 137,665

Interest Expenses 684 779 650 650 650

PBT 72,682 88,976 105,984 125,558 148,412

Total tax 22,806 27,352 32,325 40,304 45,266

Effective Tax rate (%) 31.4 30.7 30.5 32.1 30.5

PAT 49,876 61,624 73,659 85,254 103,146Extra ordi na ry Ga in/(Los s) - - - - -

Adjusted PAT 49,876 61,624 73,659 85,254 103,146


Balance Sheet (Rs m)


Share Capital 7,738 7,818 7,818 7,818 7,818

Reserves & Surplus 133,742 154,478 178,169 203,964 238,973

Shareholder's Fund 159,533 187,919 211,610 237,405 272,414

Preference Share Capital - - - - -

Total Debt 992 891 791 791 791

Other Liabil ities(net) - - - - -

Deferred Tax Liabil ity 8,019 8,727 7,918 5,744 4,176

Total Liabilities 168,543 197,537 220,320 243,940 277,381

Gross Block 127,659 141,444 168,944 188,944 206,944

Less: Depreciation 44,208 50,452 58,561 67,630 77,563Net Block 83,451 90,992 110,383 121,313 129,380

Capita l Work in Progress 13,334 22,768 12,000 13,000 14,000

Ca sh & Ca sh Equi val ent 16,621 20,938 21,492 21,593 21,802

Total Current Assets 141,920 156,372 186,965 216,934 260,267

Tota l Curr ent Liabi l ities 85,795 92,127 108,561 126,840 145,799

Net Current Assets 56,125 64,245 78,404 90,094 114,468

Other Assets - - - - -

Total Assets 168,543 197,537 220,320 243,940 277,381Source: Company Data, PL Research

P bh d ICICI Bank

7/28/2019 TopPicks PL 090313

31/86

Lilladher

Prabhudas ICICI BankCMP: Rs1,117 TP: Rs1,325 Rating: BUY MCap: Rs1,290.5bn

Pick-up in growth in domestic loon book: The banks domestic book has

been showing growth pick up with 20.0% YoY and 4.4% QoQ growth in

Q3FY13 driven by domestic corporate and revival in growth in retail assets.

NIM continues to surprise: ICICIs margins have improved from 2.6-2.7%to ~3.0 %. With easing rates and higher growth in the domestic book

(higher margins), we believe ICICIs NIM performance can further surprise

the street.

Improving lending business return ratios: ICICI has been steadily closing

the ROA/ROE gap v/s peers. ROAs have inched up from ~1.0% in FY09 to

~1.5% in FY12 and we expect margin expansion to drive ROAs to ~1.7%.

Core lending business ROEs is expected to improve from ~11% in FY10 to

15% in FY13/14.

Asset quality stable; some lumpy risks remain: We factor in ~80bps creditcosts v/s management guidance of 75bps as we believe risks still remain

from lumpy corporate exposures as the reform process has still not

addressed power fuel/pricing issues.

Valuations: Current valuations are trading at 1.8x FY14 book and given

improving ROEs and potential margin improvement, we remain positive.

We have March-14 target price of Rs 1,325 per share for the bank.

March 08, 2013 31

Key Financials (Rs m)


Net interest income 90,169 107,342 137,247 159,901 189,975

Growth (%) 11.1 19.0 27.9 16.5 18.8Operating profit 90,476 103,865 130,569 149,732 176,899

PAT 51,514 64,653 82,007 89,828 106,500

EPS (Rs) 44.7 56.0 71.0 77.8 92.2

Growth (%) 23.9 25.1 26.8 9.5 18.6

Net DPS (Rs) 14.0 14.0 17.8 19.5 23.1


Profitability & valuationY/e March FY11 FY12 FY13E FY14E FY15E

NIM (%) 100.3 96.8 95.1 93.6 93.1

RoAE (%) 9.7 11.2 13.0 12.9 14.0

RoAA (%) 1.3 1.5 1.6 1.6 1.6

P / BV (x) 2.3 2.1 1.9 1.8 1.6

P / ABV (x) 2.3 2.1 1.9 1.8 1.6

PE (x) 25.0 20.0 15.7 14.4 12.1

Net dividend yield (%) 1.3 1.3 1.6 1.7 2.1Source: Company Data, PL Research

Stock Performance

(%) 1M 6M 12M

Absolute (2.4) 19.1 29.9

Relative to Sensex (1.6) 9.3 16.7

Prabh das Fi i l

7/28/2019 TopPicks PL 090313

32/86

Lilladher

Prabhudas FinancialsICICI Bank

March 08, 2013 32



I nt. Ea rned fr om Adv. 164,248 221,299 274,574 309,685 354,175

Int. Ea rned from Invt. 79,052 96,840 110,483 123,489 140,320Others - - - - -

Tota l Interes t Inc ome 2 59 ,7 40 335,427 400,616 450,961 514,955

Interest expense 169,571 228,085 263,369 291,060 324,980

NII 90,169 107,342 137,247 159,901 189,975

Growth (%) 11.1 19.0 27.9 16.5 18.8

Treasury Income (2,023) (757) 5,000 4,500 5,000

NTNII 68,501 75,784 80,363 90,611 103,423

Non Interest Income 66,479 75,028 85,363 95,111 108,423Total Income 326,219 410,454 485,978 546,071 623,378

Growth (%) (1.7) 25.8 18.4 12.4 14.2

Operating Expense 66,172 78,504 92,040 105,280 121,499

Operating Profit 90,476 103,865 130,569 149,732 176,899

Growth (%) (7.0) 14.8 25.7 14.7 18.1

NPA Provisions 19,769 9,932 17,230 25,680 30,008

Investment Provisi ons 2,038 4,132 1,000 1,000 1,000

Total Provisions 22,868 15,891 18,230 26,680 31,008PBT 67,607 87,973 112,339 123,052 145,890

Tax Provisions 16,093 23,321 30,332 33,224 39,390

Effective Tax Rate (%) 23.8 26.5 27.0 27.0 27.0

PAT 51,514 64,653 82,007 89,828 106,500

Growth (%) 28.0 25.5 26.8 9.5 18.6




Par Value 10 10 10 10 10

No. of equity shares 1,152 1,155 1,155 1,155 1,155

Equity 11,518 11,552 11,552 11,552 11,552

Networth 550,909 604,052 662,059 725,598 800,929

Adj. Networth 526,836 585,444 642,424 701,509 771,644

Deposits 2,256,021 2,555,000 2,891,718 3,405,747 3,982,891

Growth (%) 11.6 13.3 13.2 17.8 16.9

Low Cost deposits 1,016,465 1,110,194 1,259,396 1,486,670 1,748,561

% of total deposits 45.1 43.5 43.6 43.7 43.9

Total Liabilities 4,062,336 4,736,471 5,273,399 6,119,118 7,052,025

Net Advances 2,163,659 2,537,277 2,943,241 3,428,876 4,011,784

Growth (%) 19.4 17.3 16.0 16.5 17.0

Investments 1,346,859 1,595,600 1,701,660 1,951,990 2,181,917

Total Assets 4,062,336 4,736,471 5,273,399 6,119,118 7,052,025


Prabhudas NTPC

7/28/2019 TopPicks PL 090313

33/86

Lilladher

Prabhudas NTPCCMP: Rs148 TP: Rs180 Rating: Accumulate MCap: Rs1,221.6bn

Capacity addition on track: NTPC has commissioned close to 3820MWs

(from our estimated 4160MWs for FY13E) of capacity during 9MFY13

which is one of the fastest and highest additions as compared to its past.

On account of this and improved coal availability, NTPCs PLFs, which

suffered on account of lower coal supplies and grid restrictions in H1FY13,improved to 84% in Q3FY13, leading to a 7% YoY growth at 60.1bn units.

However, the availability (PAF) showed a robust increase to 88.5% from

80.4% in Q2FY12, leading to higher incentives. Availability of Gas stations

increased to 93.8% from 90% in Q2FY12. Further, we expect 3500MWs

commercialization in FY14E and 4000MWs in FY15E.

Coal supply situation under control: NTPC has always enjoyed merit in

dispatches of coal and will continue to do so in the future. The shortages in

domestic coal supply will be met by imports of 3-5mt every year. The new

scheme of coal pooling, where CIL will be supplying imported coal, will alsoaugur well for the company as it will receive close to 5-8MTs from it. Pakri-

Barwadih captive mine, is also expected to contribute from FY14E, with 2-

5MTs initially. Above this, reallocation of three captive blocks, which can

contribute close to 10MT (initially) from FY15E, should mitigate long-term

fuel supply risks.

Valuations: With close to 38GWs of operating capacity and further 15GWS

in the offering all on a regulated model, provides limited downside risks

within the volatile power sector environment. Thus, it always remains a

favorite candidate for disinvestment for the GOI. Risks do pertain to PAFand ROEs moderation. However, it has bottomed-out according to our

expectations. At 1.3x FY15E, with zero-balance sheet problems, the stock

offers a defensive play within the sector. Maintain Accumulate.

March 08, 2013 33



Revenue (Rs m) 549,387 611,963 662,980 747,123 861,413

Growth (%) 18.6 11.4 8.3 12.7 15.3EBITDA (Rs m) 125,770 131,938 144,739 190,044 222,698

PAT (Rs m) 88,332 82,608 94,125 110,056 120,661

EPS (Rs) 10.7 10.0 11.4 13.3 14.6

Growth (%) 4.5 (6.5) 13.9 16.9 9.6

Net DPS (Rs) 3.8 3.9 4.2 4.2 5.0



EBITDA margin (%) 22.9 21.6 21.8 25.4 25.9

RoE (%) 13.6 11.7 12.3 13.2 13.3

RoCE (%) 9.6 8.0 8.2 8.6 8.8

EV / sales (x) 2.7 2.5 2.5 2.4 2.1

EV / EBITDA (x) 11.9 11.6 11.7 9.4 8.2

PER (x) 13.8 14.8 13.0 11.1 10.1

P / BV (x) 1.8 1.7 1.5 1.4 1.3Net dividend yield (%) 2.6 2.6 2.9 2.9 3.4


Stock Performance

(%) 1M 6M 12M

Absolute 0.1 (14.0) (13.0)

Relative to Sensex 0.9 (23.8) (26.2)

Prabhudas

7/28/2019 TopPicks PL 090313

34/86

Lilladher

Prabhudas Operating Metrics



PLF and PAF Scenario

Returns have bottomed-out


BVPS on a rise


Trend in Installed Capacity

March 08, 2013 34

0

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

(MWs)

Total capacity (incl JV) Standalone capacity Standalone capacity only coal

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

96.0


(%)

PLF (coal) PAF (coal)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0

100,000

200,000

300,000

400,000

500,000


Regulated equity (Rs m) BV (Rs)

10.0

11.0

12.0

13.0

14.0

15.0

16.0


(%)

RoE RoE on regulated equity

Prabhudas Financials

7/28/2019 TopPicks PL 090313

35/86

Lilladher

Prabhudas FinancialsNTPC

March 08, 2013 35



Net Revenue 549,387 611,963 662,980 747,123 861,413

Direct Expenses 423,617 480,025 518,241 557,079 638,715% of Net Sales 77.1 78.4 78.2 74.6 74.1

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 125,770 131,938 144,739 190,044 222,698Margin (%) 22.9 21.6 21.8 25.4 25.9

Depreciation 24,857 27,917 32,000 44,000 50,412

PBIT 100,913 104,021 112,739 146,044 172,286

Interest Expenses 21,491 17,116 22,241 29,983 36,944

PBT 120,496 123,763 125,503 144,812 167,586

Total tax 29,470 31,024 31,376 34,755 46,924


PAT 91,026 92,738 94,125 110,056 120,661Extraordinary Gain/(Loss) 2,694 10,131 - - -

Adjusted PAT 88,332 82,608 94,125 110,056 120,661




Share Capital 82,455 82,455 82,455 82,455 82,455

Reserves & Surplus 596,468 650,457 713,966 789,618 859,593Shareholder's Fund 678,923 732,912 796,421 872,073 942,048


Total Debt 431,882 482,403 629,540 717,240 776,010

Other Liabilities(net) 4,919 14,301 (1,441) (2,372) (3,103)

Deferred Tax Liability 6,030 6,369 6,241 6,541 6,874


Gross Block 727,552 818,303 1,138,643 1,276,884 1,401,884

Less: Depreciation 335,192 365,719 404,900 448,900 499,312

Net Block 392,360 452,584 733,743 827,984 902,572

Capital Work in Progress 333,263 418,279 214,965 298,220 305,849

Ca sh & Ca sh Equi va lent 285,301 279,554 286,046 286,474 323,088


Total Current Liabi l ities 130,729 178,423 148,032 166,730 180,989


Other Assets - 1 2 3 4

Total Assets 1,121,753 1,235,985 1,430,761 1,593,482 1,721,829


Prabhudas Wipro

7/28/2019 TopPicks PL 090313

36/86

Lilladher

Prabhudas WiproCMP: Rs449 TP: Rs480 Rating: BUY MCap: Rs1,104.7bn

Q3FY13 in-line with expectation, but guidance cautious: Wipro reported

another quarter of a weak revenue growth of 2.4% QoQ (TCS: 3.3%, INFO:

4.2%, HCLT: 3.6%), led by realization improvement 3.8% QoQ (Onsite:

3.6%, Offshore: 3.4%). However, volume decline by 1% QoQ is weaker by

~2pp compared to peers. Moreover, the company guided for 0.5% to 3%QoQ growth which accounts for fiscal uncertainty and possible delay in

ramp-up. We see high likelihood of Wipro delivering quarter towards the

upper end of guidance.

Investment to S&M to be steady: Wipro likely to have steady investment

in S&M (i.e. not to grow ahead of revenue). We do not expect it to decline

on a QoQ basis, neither do we expect as a percentage of revenue. The

companys structure to mine its top clients (farming) have started showing

results and so is new client addition (hunting). We see improved deal

pipeline, pick-up in sales cycle and better win ratio to help pushing bettergrowth in CY13.

Towards the tail end of restructuring: Wipro has gone through

organizational restructuring over the last eight quarters. The restructuring

has been a bumpy ride where it has seen changes at the senior

management levels, organizational structure (Service verticalization), S&M

investment and tail-trimming of clients. The company is now reaching the

end of restructuring process.

Improved client composition and deal pipeline to give stronger CY13:

Management indicated 1.7x stronger deal pipeline in Q3FY13 (v/s

Q3FY12). Also, the deal wins have improved on QoQ basis. The company

has reduced its non-productive tail of 80 clients to 20 with 181 new clients

addition since Q4FY12. We expect improved client composition (due to

strong clients addition and tail trimming) to result in improved business

momentum in FY14.

March 08, 2013 36



Revenue (Rs m) 310,542 371,972 433,582 488,766 550,362


PAT (Rs m) 53,004 55,732 66,201 74,320 81,831

EPS (Rs) 21.6 22.7 26.9 30.2 33.3

Growth (%) (29.4) 5.0 18.8 12.3 10.1

Net DPS (Rs) 6.4 7.0 8.0 9.0 9.0



EBITDA margin (%) 21.1 19.1 19.5 19.4 18.5

RoE (%) 24.3 21.2 21.5 20.8 19.8

RoCE (%) 22.0 19.6 20.0 19.7 19.0

EV / sales (x) 3.4 2.8 2.4 2.0 1.7

EV / EBITDA (x) 16.2 14.8 12.1 10.5 9.4

PER (x) 20.8 19.8 16.7 14.9 13.5



Stock Performance

(%) 1M 6M 12M

Absolute 10.8 18.9 2.1

Relative to Sensex 11.6 9.2 (11.1)


7/28/2019 TopPicks PL 090313

37/86

Lilladher

Prabhudas FinancialsWipro

March 08, 2013 37



Net Revenue 310,542 371,972 433,582 488,766 550,362

Direct Expenses 212,823 263,174 299,668 340,069 386,355

% of Net Sales 68.5 70.8 69.1 69.6 70.2

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 32,256 37,933 49,520 53,892 62,360

% of Net Sales 10.4 10.2 11.4 11.0 11.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 65,463 70,865 84,394 94,806 101,647

Margin (%) 21.1 19.1 19.5 19.4 18.5

Depreciation 8,211 10,129 11,199 13,206 14,857

PBIT 57,252 60,736 73,194 81,600 86,789

Interest Expenses (11) 1,115 1,164 1,785 2,500

PBT 63,063 69,750 84,839 96,212 104,607

Total tax 9,714 13,762 18,649 22,092 22,976


PAT 53,004 55,732 66,201 74,320 81,831

Extraordi nary Ga in/(Los s) - - - - -

Adjusted PAT 53,004 55,732 66,201 74,320 81,831




Share Capital 4,908 4,917 4,917 4,917 4,917




Total Debt 19,759 22,510 22,510 22,510 22,510

Other Liabil ities(net) 6,064 4,736 4,736 4,736 4,736



Gross Block 94,554 109,736 135,751 165,077 198,099


Net Block 47,846 53,529 68,344 84,464 102,629

Ca pi ta l Work in Pr ogress 7 ,248 5,459 - - -

Cash & Cash Equiva lent 113,407 123,089 152,432 181,177 215,423


Total Current Liabil ities 100,618 117,685 137,001 151,588 168,838


Other Assets 86,006 105,698 105,173 104,823 104,637

Total Assets 270,825 318,316 364,918 417,189 476,971


Prabhudas Tata Motors

7/28/2019 TopPicks PL 090313

38/86

Lilladher

Prabhudas Tata MotorsCMP: Rs306 TP: Rs360 Rating: BUY MCap: Rs1,020.2bn

New platform for Land Rover models to lead to a 12.6% CAGR in

volumes: JLR recently launched the all-aluminium bodied new Range

Rover which has generated a huge response. Given the fact that there was

no platform change over the last decade, there could be a pent-up

demand for the new RangeRover and the upcoming product launches onthe new platform. In addition to the new Range Rover, JLR is likely to start

the wholesale sales of the new Range Rover Sport by June13.

Jaguar to address newer segments leading to a 20.0% CAGR in volumes:

Jaguar has just three models - XF, XJ and XK - in the higher-priced

segments. To increase its addressable markets, Jaguar has planned few

launches mainly 1) Station wagon XF to address ~45% of the European

Market and 2) New All-wheel drive (AWD) products 40% of the US

market remained untapped. At the same time, XF and XJ with a 2 litre

engine have been launched in China which are expected to lead to betterpricing as it would attract lower consumption tax. Increase in addressable

segments would lead to a 20.0% CAGR in volumes over FY13-FY15E period.

Rising share of China in sales and richer product mix to improve JLRs

margins: JLR enjoys higher ASPs and margins in China than in any other

geography due to the stronger demand environment in the country. At the

same time, the new Range Rover and Range Rover Sport are likely to

account for 34.6% of JLR volumes in FY15E as against 21.8% in FY13E. Most

of JLRs new product launches are either new models in higher priced

segments or more expensive product upgrades of existing products (newRange Rover). We expect JLRs blended ASPs to rise over the next two

years and forecast a 9-10% ASP increase over FY13-15E period.

Upgrade to BUY with a SOTP based TP of Rs360/share: We value JLR at

3.5x FY15E EV/EBITDA multiple at Rs296/share. We value standalone

business at Rs41/share, whereas, we value the other subsidiaries at

Rs23/share. The stock is currently trading at 8.0x FY14E EPS and 6.6x

FY15E EPS. However, adjusting for R&D expense, the valuation stands at

9.4x FY14E and 8.0x FY15E..

March 08, 2013 38



Revenue (Rs m) 1,221,279 1,656,545 1,847,595 2,249,192 2,580,047

Growth (%) 32.0 35.6 11.5 21.7 14.7 EBITDA (Rs m) 178,150 237,005 252,732 325,117 380,308

PAT (Rs m) 90,425 125,224 94,716 126,782 154,306

EPS (Rs) 28.4 39.5 28.4 38.0 46.3

Growth (%) 649.8 39.1 (28.0) 33.9 21.7

Net DPS (Rs) 4.0 4.2 3.5 4.0 4.5



EBITDA margin (%) 14.6 14.3 13.7 14.5 14.7

RoE (%) 66.1 47.9 25.3 27.3 27.5

RoCE (%) 22.1 21.6 13.3 15.2 16.4

EV / sales (x) 1.0 0.8 0.7 0.6 0.5

EV / EBITDA (x) 6.7 5.3 5.2 4.2 3.5

PER (x) 10.8 7.8 10.8 8.0 6.6



Stock Performance

(%) 1M 6M 12M

Absolute 6.0 25.7 14.2

Relative to Sensex 6.8 15.9 0.9

Prabhudas Volume Estimates

7/28/2019 TopPicks PL 090313

39/86

Lilladher

Prabhudas Volume EstimatesTata Motors


Volume Estimates


Jaguar: Volume Estimates


Land Rover: Volume Estimates

March 08, 2013 39

('000) FY11 FY12 FY13E FY14E FY15E

Defender 18 19 15 15 15

Discovery 41 47 42 45 44

Evoque 60 112 115 120

Freelander 57 46 53 53 65

Old RR 26 30 15

New RR 12 45 52

Range Rover Sport 49 57 54 67 76

Total 191 259 303 340 372

YoY gr. (%) 35.6 17.0 12.2 9.4

('000) FY11 FY12 FY13E FY14E FY15E

XF 32 33 33 36 38

XJ 16 16 16 17 18

XK 5 5 4.5 4 3

F-Type 10 10

Small Jag 8

Total 53 54 53.5 67 77

Yoy gr. (%) 1.9 (0.9) 25.2 14.9

FY11 FY12 FY13E FY14E FY15E

Land Rover

North America 36,766 45,097 51,000 55,000 58,000

UK 42,608 47,894 45,000 52,000 57,000

Europe (excluding UK) 43,659 61,026 69,000 75,000 80,000

Asia Pac 7,911 11,051 14,000 17,000 22,000

China 25,187 46,806 69,000 82,000 90,500

Rest of the world 34,497 48,520 55,000 59,000 64,500

Total 190,628 260,394 303,000 340,000 372,000

Jaguar

North America 15,757 13,230 14,300 18,000 20,000

UK 15,950 13,902 12,200 16,000 18,000


Asia Pac 3,485 3,416 3,700 5,500 6,500

China 2,414 7,726 8,000 10,500 12,500

Rest of the world 4,513 5,211 6,000 7,000 8,000

Total 52,993 54,039 53,500 67,000 77,000

Total - Jaguar & Land Rover

North America 52,523 58,327 65,300 73,000 78,000

UK 58,558 61,796 57,200 68,000 75,000


Russia 11,396 14,467 17,700 22,500 28,500

China 27,601 54,532 77,000 92,500 103,000

Rest of the world 39,010 53,731 61,000 66,000 72,500

Total 243,621 314,433 356,500 407,000 449,000

Prabhudas Geographical Mix

7/28/2019 TopPicks PL 090313

40/86

Lilladher

Prabhudas Geographical MixTata Motors


Land Rover Wholesale volumes . Geographical Mix

March 08, 2013 40


Jaguar Wholesale volumes . Geographical Mix

North America

17.3%

UK

18.4%

Europe

(excluding UK)

23.4%

Russia

4.2%

China

18.0%

Rest of the world

18.6%

FY12 North America15.6%

UK

15.3%

Europe

(excluding UK)

21.5%

Russia

5.9%

China

24.3%

Rest of the world

17.3%

FY15E

North America

24.5%

UK

25.7%Europe

(excluding UK)

19.5%

Russia

6.3%

China

14.3%

Rest of the world

9.6%FY12

North America

26.0%

UK

23.4%Europe

(excluding UK)

15.6%

Russia

8.4%

China

16.2%

Rest of the world

10.4%FY15E


7/28/2019 TopPicks PL 090313

41/86

Lilladher

Prabhudas FinancialsTata Motors

March 08, 2013 41



Net Revenue 1,221,279 1,656,545 1,847,595 2,249,192 2,580,047

Direct Expenses 790,084 1,094,676 1,193,692 1,450,643 1,666,337

% of Net Sales 64.7 66.1 64.6 64.5 64.6

Employee Cost 93,427 122,985 161,557 185,713 205,541

% of Net Sales 7.6 7.4 8.7 8.3 8.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 159,618 201,880 239,615 287,720 327,860

% of Net Sales 13.1 12.2 13.0 12.8 12.7

EBITDA 178,150 237,005 252,732 325,117 380,308Margin (%) 14.6 14.3 13.7 14.5 14.7

Depreciation 56,531 70,146 92,873 115,400 129,880

PBIT 121,619 166,859 159,859 209,717 250,428


PBT 102,061 127,025 122,455 184,403 224,549

Total tax 12,164 (404) 38,960 55,980 68,191

Effective Tax rate (%) 11.9 (0.3) 31.8 30.4 30.4

PAT 92,726 135,170 88,474 126,782 154,306

Extraordinary Gain/(Loss) 2,301 9,946 (6,242) - -

Adjusted PAT 90,425 125,224 94,716 126,782 154,306




Share Capital 6,377 6,348 6,670 6,670 6,670




Total Debt 327,914 471,489 496,097 503,019 500,103

Other Liabil ities(net) 2,466 27,657 31,545 35,986 41,063

Deferred Tax Li abi li ty 20,962 21,651 21,651 21,651 21,651

Total Liabilities 543,057 852,296 966,498 1,073,244 1,170,787

Gross Block 714,629 897,791 1,082,991 1,297,196 1,487,683


Net Block 317,643 530,910 694,688 870,343 1,017,389

Capital Work in Progress 117,289 31,215 43,793 43,243 41,803

Ca sh & Ca sh Equi va lent 134,922 271,558 259,903 247,403 257,719


Tota l Current Li abi li ti es 469,837 601,530 681,744 812,505 912,422

Net Current Assets 40,513 104,402 67,248 (1,111) (49,175)

Other Assets 42,171 96,592 91,592 86,592 81,592

Total Assets 543,058 852,296 966,498 1,073,244 1,170,787


Prabhudas Larsen & Toubro

7/28/2019 TopPicks PL 090313

42/86

Lilladher

Prabhudas Larsen & ToubroCMP: Rs1,464 TP: Rs1,704 Rating: BUY MCap: Rs896.4bn

At attractive valuations: L&T is certainly facing the turmoil of a slow

economic growth environment. With a recent price fall (3M

underperformance 12.2% relative to Nifty and 13.7% on Absolute basis),

despite a healthy set of announcements in the recently announced

Budget, L&T is trading at P/E of 10.7x FY15E core earnings. However, withthe recent news flow in terms of order intake being positive, L&T looks on

a comfortable wicket and poised to end the year with a 15% order inflow

growth. Hence, we believe that the sheer underperformance is

unwarranted for an infrastructure giant like L&T.

Order book at comfortable footing: Order wins in Jan-Feb 2013 were

close to Rs39bn which were a mix of B&F (Government), Defence,

Hydrocarbon and Power. Further, with the impetus given to DMIC, DFC

and other BOT projects in transportation (Budget 2013-14), along with a

strong financial backing, we expect L&T to be able to secure sizeableorders. Though we have not factored in a major downfall in the EBITDA

margins (11%) over FY14E-15E, we have also not kept it higher. However,

any adverse mix in terms of order inflow may alter the margins. We are

expecting a 10% CAGR in standalone earnings for the period of FY12-15E

which is again not an out-of-reach assumption.

Valuation still in safe zone: Though the price points have corrected

sharply in the recent times, we see these levels as an entry

point/increasing exposure to a stock in volatile times. At CMP, the stock is

trading at a core P/E of 11.8x FY14E and 10.7x FY15E. We have also rolledover our valuations to FY15E. With no near-term risks attached and sheer

under performance of the stock,

March 08, 2013 42



Revenue (Rs m) 434,959 531,705 649,286 785,292 925,541


PAT (Rs m) 36,720 44,196 47,750 53,443 59,256

EPS (Rs) 60.3 72.2 78.0 87.3 96.8

Growth (%) 14.7 19.7 8.0 11.9 10.9

Net DPS (Rs) 11.5 16.6 19.6 22.9 22.9



EBITDA margin (%) 12.0 11.8 11.3 11.3 11.0

RoE (%) 18.3 18.8 17.7 17.3 16.7

RoCE (%) 15.2 15.2 14.1 13.9 13.5

EV / sales (x) 2.2 1.8 1.5 1.3 1.1

EV / EBITDA (x) 18.1 15.5 13.6 11.5 10.1

PER (x) 24.3 20.3 18.8 16.8 15.1



Stock Performance

(%) 1M 6M 12M

Absolute (2.2) 7.0 18.3

Relative to Sensex (1.3) (2.8) 5.1

Prabhudas O ti M t i

7/28/2019 TopPicks PL 090313

43/86

Lilladher



Order Book Break-up


Order Inflow (Rs bn)

March 08, 2013 43

SOTP Valuation

Sectors Valuation Parameter Rs / Share

L&T Standalone 12.5x FY15 EPS of Rs96 1,210

L&T Infotech 10x FY14E PAT of Rs 5.9 bn @25% HOLDCO 73

L&T Finance 1.5x FY13E BV 57L&T Infra Finance 1.5x FY13 BV 46

L & T IDPL & developmet project 1x Equity in FY13E of Rs55bn @ HOLDCO of 25% 82

LT Power Equi pement P/E 6.9x FY14E PAT of Rs 2.9bn on USD 1bn s al es @ HOLDCO of 25% 24

L & T Manufacturing 5x FY14E Rs3bn PAT of various facilities 25

Others 5x FY14E Rs8bn PAT of various businesses 30

Total Value 1,704

Source: PL Research

Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

Order inflow Composites

In-house 14 53 48 22 75 29 20 0 0 86 0 0

Third Party 231 103 157 111 226 133 141 171 211 110 196 110

Total 245 156 205 133 301 162 161 171 211 196 196 110

Order Inflow by sectors (Eng)

Infra 76 39 62 77 163 83 50 102 110 127 126 70

Hydrocarbon 61 11 18 0 0 15 40 65 25 4 26 8

Process 45 13 20 0 72 0 16 11 22 10 2 0

Power 42 81 88 44 61 35 42 22 36 41 22 19

Others 21 13 16 12 6 20 13 19 17 14 20 13

Infrastructure

49%

Power

26%

Hydro carbon

8%

Process

13%

Others

4%


7/28/2019 TopPicks PL 090313

44/86

Lilladher

Prabhudas FinancialsLarsen & Toubro

March 08, 2013 44



Net Revenue 434,959 531,705 649,286 785,292 925,541

Direct Expenses 100,640 242,424 505,031 616,888 732,659% of Net Sales 23.1 45.6 77.8 78.6 79.2

Employee Cost 28,845 9,754 39,887 45,828 53,658

% of Net Sales 6.6 1.8 6.1 5.8 5.8

SG&A Expenses - 19,867 31,073 34,033 37,140

% of Net Sales 0.0 3.7 4.8 4.3 4.0

Other Expenses 253,338 196,834 - - -

% of Net Sales 58.2 37.0 0.0 0.0 0.0

EBITDA 52,136 62,826 73,295 88,543 102,083

Margin (%) 12.0 11.8 11.3 11.3 11.0

Depreciation 5,992 6,995 7,952 9,000 11,412

PBIT 46,144 55,831 65,343 79,543 90,671


PBT 56,181 62,553 71,268 80,974 91,182

Total tax 19,459 18,357 23,518 27,531 31,926


PAT 39,580 44,564 47,750 53,443 59,256Extra ordi na ry Ga in/(Los s) - - - - -

Adjusted PAT 36,720 44,196 47,750 53,443 59,256




Share Capital 1,218 1,225 1,225 1,225 1,225

Reserves & Surplus 217,245 251,005 287,236 327,365 380,892Shareholder's Fund 218,463 252,231 288,461 328,590 382,117


Total Debt 71,611 98,969 121,753 142,746 163,965

Other Liabil ities(net) - 1 2 3 4



Gross Block 89,567 105,364 116,757 129,143 141,981

Less: Depreciation 23,125 29,242 37,205 46,105 57,629Net Block 66,442 76,122 79,553 83,039 84,353

Ca pi ta l Work in Pr ogress 8 ,139 7,587 6,950 6,850 7,572

Cash & Cash Equiva lent 164,152 177,772 192,993 201,500 225,161

Total Current Ass ets 349,511 505,245 531,704 595,947 672,972

Total Current Liabil ities 278,233 395,142 381,739 395,362 417,073


Other Assets - - 56 42 43

Total Assets 292,708 352,532 411,778 473,330 548,072Source: Company Data, PL Research

Prabhudas Axis Bank

7/28/2019 TopPicks PL 090313

45/86

Lilladher

Prabhudas Axis BankCMP: Rs1,403 TP: Rs1,650 Rating: BUY MCap: Rs595.5bn

High return ratios: Axis has been generating best in class ROAs at ~1.6%

and ROEs at ~19%, underpinned by strong liability and fee income

franchise. Valuations look undemanding at 1.8x FY14 book, especially

considering post dilution ROEs of +17.5% in FY14-15.

Retail build up positive: Over the past 12 months ~50% of the incremental

loan growth has come from retail advances, with retail book now

constituting 26.8% of the book, as against 20.9% in 2QFY12. We believe

that focus towards retail book would provide opportunity to maintain the

growth trajectory in a scenario of low loan demand from corporate and is

also aiding core fees.

Asset quality to remain manageable: We believe asset quality stability

over the last 23 quarters would have addressed some investor concerns.

Gross NPA + Restructured book accretion of Rs9bn was lower than

management guidance of Rs10-11bn quarterly slippage. Management

expects slippages to be contained at similar levels and have maintained

their near-term credit cost guidance of ~90bps.

Valuations: The bank is currently trading at ~1.8x FY14 book. We have

March-14 target of Rs 1,650 per share.

March 08, 2013 45



Net interest income 65,630 80,177 95,008 114,854 140,802

Growth (%) 31.1 22.2 18.5 20.9 22.6Operating profit 64,157 74,309 88,294 105,098 127,301

PAT 33,884 42,422 48,851 57,166 70,178

EPS (Rs) 82.5 102.7 118.2 134.7 165.4

Growth (%) 34.9 24.4 15.2 13.9 22.8

Net DPS (Rs) 14.0 16.0 18.4 21.2 24.3



NIM (%) 97.8 92.7 92.9 91.5 90.4

RoAE (%) 19.3 20.3 19.7 19.6 20.4

RoAA (%) 1.6 1.6 1.6 1.6 1.6

P / BV (x) 3.0 2.5 2.2 1.9 1.6

P / ABV (x) 3.0 2.5 2.2 1.9 1.6

PE (x) 17.0 13.7 11.9 10.4 8.5

Net dividend yield (%) 1.0 1.1 1.3 1.5 1.7Source: Company Data, PL Research

Stock Performance

(%) 1M 6M 12M

Absolute (3.9) 43.7 20.5

Relative to Sensex (3.1) 33.9 7.2


7/28/2019 TopPicks PL 090313

46/86

Lilladher

Prabhudas FinancialsAxis Bank

March 08, 2013 46



I nt. Ea rned from Adv. 104,031 153,794 184,063 211,501 248,686

I nt. Earned from I nvt. 44,387 63,943 78,897 94,739 113,360Others - - - - -

Tota l Interes t Inc ome 1 51 ,54 8 219,946 265,416 308,990 365,149

Interest expense 85,918 139,769 170,409 194,135 224,347

NII 65,630 80,177 95,008 114,854 140,802

Growth (%) 31.1 22.2 18.5 20.9 22.6

Treasury Income 3,593 931 5,000 5,000 5,000

NTNII 42,728 53,271 58,796 70,018 82,626

Non Interest Income 46,321 54,202 63,796 75,018 87,626Total Income 197,869 274,149 329,213 384,007 452,775

Growth (%) 26.8 38.6 20.1 16.6 17.9

Operating Expense 47,794 60,071 70,510 84,774 101,127

Operating Profit 64,157 74,309 88,294 105,098 127,301

Growth (%) 23.2 15.8 18.8 19.0 21.1

NPA Provisions 11,363 10,996 16,487 20,366 23,283

Investment Provisions 993 581 (600) - -

Total Provisions 12,800 11,430 15,887 20,366 23,283PBT 51,356 62,878 72,407 84,732 104,018

Tax Provisions 17,472 20,456 23,556 27,566 33,840

Effective Tax Rate (%) 34.0 32.5 32.5 32.5 32.5

PAT 33,884 42,422 48,851 57,166 70,178

Growth (%) 36.7 25.2 15.2 17.0 22.8




Par Value 10 10 10 10 10

No. of equity shares 411 413 413 424 424

Equity 4,105 4,132 4,132 4,244 4,244

Networth 189,988 228,085 268,041 314,812 372,908

Adj. Networth 185,884 223,359 260,980 304,111 357,242

Deposits 1,892,376 2,201,043 2,585,272 3,065,331 3,671,582

Growth (%) 33.9 16.3 17.5 18.6 19.8

Low Cost deposits 777,673 914,220 1 ,072 ,888 1 ,275 ,178 1 ,536 ,557

% of total deposits 41.1 41.5 41.5 41.6 41.8


Net Advances 1,424,076 1,697,595 2,003,163 2,383,763 2,860,516Growth (%) 36.5 19.2 18.0 19.0 20.0

Investments 719,916 931,921 1 ,094 ,203 1 ,293 ,424 1 ,522 ,094

Total Assets 2,427,129 2,856,278 3,362,327 3,988,118 4,749,560

Source: Company Da ta, PL Research

Prabhudas Cairn India

7/28/2019 TopPicks PL 090313

47/86

Lilladher

Prabhudas Cairn IndiaCMP: Rs298 TP: Rs401 Rating: Accumulate MCap: Rs571.5bn

Exploratory approvals to provide a fillip to production: Cairn upgraded its

estimate of gross risked prospective resources to 530m boe from 250m

boe in April 2012. However, as exploration period for the Rajasthan block

had expired in 2005, street was not according value to the exploratory

upsides. Now that the government has granted go-ahead on theexploratory front, management is expecting to spend ~US$1.2bn in

Rajasthan and drill ~100 prospects in the next three years. This would help

CIL achieve their guided production exit rate of 200-215 kbpd at the end of

FY14 and help assuage production growth concerns stemming from delay

in ramp-up at Bhagyam field. However, a delay in getting the regulatory

approval for Mangala EOR could lead to a temporary decline at Mangala,

denting production growth in the near term. We ascribe a value of

Rs88/share to 530m boe (at 40% discount to MBA implied EV/boe).

Strong business fundamentals: Strong production volumes growth (~20%over next two years) backed up by a strong reserve base (1.7bn boe) along

with high FCF yields (~10% at current market price) makes Cairn India a

strong fundamental investment idea. Pending clarity on ring fencing, we

believe, increased capex to increase production is likely to defer peak

government profit share. Moreover, targeted production increase to

300kbpd is likely to provide further growth visibility over the current

estimated peak output of 240kbpd, which might lead investors to value

Cairn as a going concern entity.

Hedge against rupee and inflation: With crude oil increasingly beingtreated as a financial asset, there is a strong negative correlation between

dollar index and crude oil prices. At times of correction in crude, weakness

in rupee is likely to support earnings. On the other hand, Cairn India also

tends to be best placed in a inflation scenario arising out of rising crude oil

prices. We estimate crude oil prices to average at US$105/bbls for FY14,

with OPEC playing the balancing act in case of demand decline.

March 08, 2013 47



Revenue (Rs m) 102,779 118,607 175,072 175,307 173,037

Growth (%) 533.3 15.4 47.6 0.1 (1.3)EBITDA (Rs m) 84,117 95,533 135,585 129,681 116,655

PAT (Rs m) 63,344 79,377 115,688 102,165 86,940

EPS (Rs) 32.4 41.4 60.3 53.3 45.3

Growth (%) 696.0 27.9 45.7 (11.7) (14.9)

Net DPS (Rs) 0.0 0.0 12.1 10.7 9.1


Profitability & valuation


EBITDA margin (%) 81.8 80.5 77.4 74.0 67.4

RoE (%) 17.1 17.9 22.0 16.8 12.8

RoCE (%) 16.3 17.5 21.7 16.6 12.8

EV / sales (x) 5.5 4.3 2.4 2.2 1.8

EV / EBITDA (x) 6.7 5.4 3.1 3.0 2.7

PER (x) 9.2 7.2 4.9 5.6 6.6



Stock Performance

(%) 1M 6M 12M

Absolute (6.9) (11.6) (16.6)

Relative to Sensex (6.1) (21.4) (29.8)


7/28/2019 TopPicks PL 090313

48/86

LilladherOperating MetricsCairn India

Source: PL Research

SOTP (Rs m)

Source: PL Research

Target Price Sensitivity with Crude and Discount Rate

Source: PL Research

Target Price Sensitivity with Crude and Exchange Rate

March 08, 2013 48

Particulars FY2014Rajasthan BlockRJ-ON-90/1(MBA block) 264,799Value per share 138.8RJ-ON-90/1(MBA EOR) 91,491Value per share 48.0RJ-ON-90/1(Barmer Hill) 27,923Value per share 14.6RJ-ON-90/1(Southern fields) 11,889Value per share 6.2RJ-ON-90/1(Other fields) 55,483Value per share 29.1Value of Rajasthan Block 451,586Value per share 236.8CB-OS-2 3,530Value per share 1.9Ravva 12,798Value per share 6.7Exploratory portfolio upsides 163,836Value per share 85.9Total 631,749Net debt (151,161)Value per share (79.2)Corporate expenditure 17,570Value per share 9.2Equity value 765,340Equity value per share (Rs/share) 401Equity shares (m) 1,907

Exchange

Rate

(Rs / US$)

Crude Oil Prices (US$ / bbl)

80.0 85.0 90.0 95.0 100.0 105.0 1

TopPicks PL 090313

Documents

Transcript of TopPicks PL 090313