Stock Investment Tips Recommendation Today - Buy Stocks of Tata Motors with Target Price Rs.425.

IEA-Equity
Strategy

India Equity Analytics

11th Feb, 2014

Daily Fundamental Report on Indian Equities

TATAMOTORS :Strong Results

"BUY"

Edition : 203
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)

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)

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)

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 : 1014)

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)

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)

Zydus Wellness : "sweeten with sugar free"

"BUY"

7th Feb 2014

Inline set of numbers with stable margin;For 3QFY14, Zydus wellness delivered inline set of numbers than street expectation, Because of weak
consumer discretionary demand Sales marginally grew by 2%(YoY). PAT grew by 6% on YoY basis.We retain “Buy” on the stock. However,
considering weak consumer descretionery demand we reduced our target price from Rs725 to Rs 610. At a CMP of Rs 504, stock trades at 5x
FY15E P/BV. ..................................................... ( Page : 23-25)
Narnolia Securities Ltd,

TATAMOTORS

"BUY"
11th Feb' 14

Strong Results
Result Update

BUY

CMP
Target Price
Previous Target Price
Upside
Change from Previous

364
425
17%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs, Cr)
Average Daily Volume
Nifty

500570
TATAMOTORS
405/252
98,064
4681598
6053

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.

Stock Performance-%
Absolute
Rel. to Nifty

YTD
48.6
35.6

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.

Current 2QFY14 1QFY1
4
34.3
34.3
34.3
28.0
26.7
26.6
9.6
11.7
11.4
28.1
27.3
27.7

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.

1M
-1.1
0.8

1yr
27.5
25

Share Holding Pattern-%
Promoters
FII
DII
Others

One Year Price vs Nifty

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.
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.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
63877
9948
4863
15.6%
7.6%

2QFY14
56882
8635
3559
15.2%
6.3%

(QoQ)-%
12.3
15.2
36.6
40bps
140bps

3QFY13
46090
5657
1636
12.3%
3.5%

Rs, Crore
(YoY)-%
38.6
75.9
197.2
330bps
410bps

(Source: Company/Eastwind)

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

2

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.


OPM % & NPM %

The OPM surges by 330 bps due to
improvement in operational metrics.The
sharp rise in the profits came in due to an
exceptional income of Rs 1,948 Cr accruing to
the local business


JLR Whole Sales Vol. Trend

The growth in the sales volume come from all
geographies including Brazil, China, India and
the United States.



3

ACC Ltd.
Result Update

BUY

CMP
Target Price
Upside

1046
1257
1122
20%
12%

Market Data
BSE Code
NSE Symbol

500410
ACC

52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty

1355/912
19634
9817
6063

"BUY"
10th Feb' 14

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.
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 .
Lower Cement Volume Impacted the Bottomline Growth
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.

Stock Performance-%
1M
-3.5
-1.9

Absolute
Rel. to Nifty

1yr
-22.3
-24.4

YTD
-21.0
-22.8

Cureent
Promoters
FII
DII
Others

50.3
20.0
12.9
16.8

3QCY13 2QCY13
50.3
20.9
11.9
16.9

50.3
19.5
11.7
18.6

1 yr Forward P/B

Source - Comapany/EastWind Research

Poor Operational Performance :
At the operating level, poor volumes down by 1.5% from the year-ago period and weak
realizations pulled down revenue during the quarter. Net consolidated sales fell by 13%
to Rs.2,693.1 crore. Profitability was further hit as costs during the quarter, mainly on
freight and power, rose compared with the year-ago period and the September quarter
as well.
During the CY13 Acc suffered through sluggish demand and at the same time with
increasing cost. Company unable to pass on the cost to the consumer due to lower sales
volume. Sales Volume come to 23.93 Mmt form 24.11 Mmt(down by ~1%). Rising Input
Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 5% to
Rs.778/ton from Rs.740/ton and freight cost increased ~5% Rs.961/ton from Rs.920/ton.
Other expenses increased ~9% to Rs.975/ton from Rs.894/ton.
Management Quotes :
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.
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

ACC Ltd.
Outlook
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 Sales Volume

Valuation And Recommendation
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
Cement Realization

Company Description :
ACC Limited (ACC) is engaged in manufacture of cement & ready mixed concrete. The
Company has grinding plants in Karnataka and clinkering line in Maharashtra. The
Company’s subsidiaries include ACC Mineral Resources Limited, Lucky Minmat Limited,
Bulk Cement Corporation (India) Limited, National Limestone Company Private Limited
and Encore Cement and Additives Private Limited. The Company is subsidiary of Ambuja
Cement India Private Limited.
P/L PERFORMANCE
CY11
CY12
CY13
CY14E
Net Revenue from Operation
10237
11358
11169
13027
Other Income
191
263
219
219
Total Income
10428
11621
11389
19723
Power and fuel
2199
2384
2384
0
Freight and forwarding
1940
2219
2299
0
Expenditure
8316
9162
9540
10942
EBITDA
1921
2197
1848
2084
Depriciation
510
569
584
639
Interest Cost
97
115
52
50
Tax
215
391
132
323
PAT
1276
1050
1094
1292
ROE%
17.7
18.8
13.8
15.3

5

ACC Ltd.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Total Assets
RATIOS
P/B
EPS
Debtor to Turnover%
Creditors to Turnover%
Inventories to Turnover%
EV
P/E
EV/EBIDTA
Dividend Yield%
ROCE%
Debt/Equity
Current Ratio
Cash from Operation
Cash From Investment
Cash from Finance

CY10
188
6093
6281
510
14
188
1581
1466
11041
77
5230
1564
283
926
249
1086
162
11041
CY10
3.2
57.4
3.0
19.1
1.1
19632
18.7
12.7
2.8
14.6
0.1
1.0
1823
(785)
(641)

CY11
188
6791
6979
506
0
126
816
1051
11921
48
6359
370
461
1113
266
1660
279
11921
CY11
3.1
68.7
2.6
8.0
1.1
20180
16.5
10.5
2.5
15.2
0.1
1.3
1506
(258)
(768)

CY12
188
7184
7372
85
0
157
661
1227
11928
39
5893
314
566
1134
303
681
325
11928
CY12
3.6
73.8
2.7
5.8
1.0
26240
19.4
11.9
2.1
16.3
0.0
1.4
2027
(308)
(1066)

CY13
188
7625
7813
0
0
89
642
1081
12101
40
6040
322
880
1122
397
506
340
12101
CY13
2.7
57.6
3.6
5.7
1.0
20296
19.2
12.5
2.7
12.3
0.0
1.4
2027
(308)
(1066)

Trading At :


6

Ambuja Cements Ltd.
Result Update

Neutral

CMP
Target Price
Upside

163
165
NA
1%
NA

Market Data
BSE Code
NSE Symbol

500425
AMBUJACEM

52wk Range H/L
Average Daily Volume (Nos.)
Nifty

212/148
25166
12583
6063

Absolute
Rel. to Nifty

1yr
-18.6
-20.7

YTD
-19.2
-21.0

Cureent
Promoters
FII
DII
Others

50.5
30.5
9.4
9.6

10th Feb' 14

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.
Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, 1.9% YoY) .
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.
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-%
1M
-7.1
-5.4

"Neutral"

3QCY13 2QCY13
50.5
30.1
9.6
9.8

50.6
28.7
10.2
10.5

1 yr Forward P/B

Decline in EBITDA margin
Key concerns for EBITDA margins to decline in CY13 are Lower realizations, Cost push and
no seasonal benefits from operating leverage, Weak rupee push fuel costs higher as
rupee depreciation likely to outweigh lower coal prices (more than 35 percent of total
requirement comes by import), Higher freight costs and impact of diesel price hike Inched
up power fuel and Freight cost.
Challenging Outlook
Management views the company was able to keep its production cost flat year-on-year
and would continue to work on improving operational efficiencies, cost optimization and
continued focus on customer and commercial excellence. Board has recommended a final
dividend of Rs 2.20 per share and together with the Rs 1.40 per share of interim dividend,
the total dividend for the year is Rs 3.60 per share.
Key issues to watch out for
1 Volume growth recovery and outlook
2 Cement pricing outlook and sustainability, considering recent downtrend in November
3 and December


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.
PER Ton Analysis
4QCY13
4QCY12
YOY%
3QCY13
QOQ%
Volumes mT
5
5
-2
5
8
Realization(Rs/T)
4177
4332
-4
4126
1
R&M Cost(Rs/T)
406
266
53
415
-2
P&F Cost(Rs/T)
946
1015
-7
934
1
Freight Cost(Rs/T)
1093
1079
1
1073
2
Employee(Rs/T)
226
254
-11
266
-15
Others(Rs/T)
924
884
5
890
4
Valuation and Recommendation
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 macroeconomic 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.
Company Description :
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 .
Trading At :

P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Power and fuel
Freight and forwarding
Expenditure
EBITDA
Depriciation
Interest Cost
Tax
PAT
ROE%

CY10
7390
248
7638
1697
352
5568
1822
387
49
398
1262
16.9

CY11
8571
248
8819
2003
1939
6594
1977
446
53
474
1228
15.5

CY12
9795
349
10144
2334
2300
7322
2473
569
78
604
1293
17.9


CY13
9192
391
9583
2066
2370
7549
1643
494
67
220
1278
13.2




8

Ambuja Cements Ltd.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Total Assets
RATIOS
P/B
EPS
Debtor to Turnover%
Creditors to Turnover%
Inventories to Turnover%
EV
P/E
EV/EBIDTA
Dividend Yield%
ROCE%
Debt/Equity
Current Ratio
Cash from Operation
Cash From Investment
Cash from Finance

CY10
306
7021
7327
65
0
17
1109
1079
10320
16
5616
931
299
902
128
1648
142
10320
CY10
3.0
8.1
1.7
15.0
1.2
20301
17.7
11.1
1.8
15.6
0.0
1.4
1896
(527)
(474)

CY11
307
7758
8065
51
8
19
961
1173
11577
42
6223
488
504
928
248
2073
238
11577
CY11
3.0
8.2
2.9
11.2
1.1
21829
19.0
11.0
2.1
14.2
0.0
1.5
1554
(445)
(473)

CY12
308
8489
8797
39
10
22
949
1421
12457
47
5904
524
641
987
221
2260
251
12457
CY12
3.5
10.2
2.3
9.7
1.0
28780
19.7
11.6
1.8
16.7
0.0
1.7
1900
(388)
(509)

CY13
309
9153
9462
33
1
26
980
1076
12957
6798
0
0
307
936
235
2345
271
12957
CY13
3.0
8.1
2.6
10.7
1.0
25865
22.5
15.7
2.0
12.4
0.0
1.9
0
0
0



9

PNB

"NEUTRAL"
10h Feb2014

NEUTRAL
556
600
770
8
-22.1

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.

Market Data
BSE Code
NSE Symbol

532461
PNB

52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

890/402
19646
7.4 cr
6063

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.

Result update
CMP
Target Price
Upside

Stock Performance
1M
Absolute
-8.9
Rel.to Nifty
-7.1

1yr
-36.8
-38.6

YTD
-36.8
-38.6

Higher operating cost led 0.8% YoY growth in operating profit
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

3
Promoters
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
PNB Vs Nifty

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.
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.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
11807
15420
9056
4433
140.6

2012
13414
17617
10614
4884
144.0


Rs, Cr
2013
2014E
2015E
14857
16536
17691
19072
20775
21930
10907
11155
12500
4748
3408
5209
134.3
94.1
143.9
10

PNB
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.
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 degrew 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.


11

PNB
Chart Focus

Sluggish growth registered in NII due to
muted loan growth

Higher operating cost led 0.8% YoY growth in
operating profit

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


12

PNB
Quarterly Result
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit

3QFY14 2QFY13 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%)
8246
8023
7891
4.5
2.8
8361
-1.4
2599
2568
2518
3.2
1.2
2649
-1.9
95
101
113
-16.0
-5.9
90
5.8
44
41
27
62.5
5.5
27
63.9
10984 10734 10548
4.1
2.3
11127
-1.3
938
899
971
-3.3
4.3
1121
-16.3
10045
9834
11519
-12.8
2.1
10006
0.4
6315
6335
6407
-1.4
-0.3
178
116
112
58.9
53.4
270
267
296
-8.8
1.1
6763
6718
6815
-0.8
0.7
6926
-2.4
4221
4016
3733
13.1
5.1
4201
0.5
938
899
971
-3.3
4.3
1121
-16.3
5160
4915
4704
9.7
5.0
5322
-3.0
1758
1659
1407
24.9
6.0
1714
2.6
699
721
614
13.8
-3.1
734
-4.8
2457
2380
2022
21.5
3.2
2448
0.4
2702
2535
2682
0.8
6.6
2874
-6.0
1590
1899
802
98.4
-16.3
2007
-20.8
1112
636
1880
-40.8
74.9
867
28.3
357
131
575
-37.9
173.3
260
37.2
755
505
1306
-42.1
49.4
607
24.5

Balance Sheet Date
Equity Capital
Reserve & Surplus
Deposits
Borrowings
Investment
Advance

362
34972
420647
49163
143368
326133

353
34152
405699
40888
134125
313852

362
34972
420647
49163
143368
326133

Asset Quality
GNPA
NPA
GNPA(%)
NPA(%)
PCR(%) Without technical write off

16595
9084
5.09
2.79
45.3

16526
9609
5.27
3.06
41.9

13990
7586
4.60
2.60
45.8

353
34759
426195
42711
141287
334443

2.4
0.6
-1.3
15.1
1.5
-2.5

Source : Eastwind/ Company

13

PNB
Financial & Assuption

Income Statement

2011

2012

2013

2014E

2015E

Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)

26986
15179
11807
39.3
3613
15420
27.6
6364
9056
23.6
4622
4433
4433
13.5

36476
23062
13414
13.6
4203
17617
14.2
7003
10614
17.2
3577
7037
4884
10.2

41893
27037
14857
10.8
4216
19072
8.3
8165
10907
2.8
4386
6522
4748
-2.8

43513
26977
16536
11.3
4240
20775
8.9
9621
11155
2.3
6253
4902
3408
-28.2

49565
31875
17691
7.0
4240
21930
5.6
9430
12500
12.1
5059
7442
5209
52.8

312899
25
120325
18
31590
95162
242107
30

379588
21
134129
11
37264
122703
293775
21

391560
3
153344
14
39621
129896
308725
5

450294
15
139752
-9
47857
143572
339598
10

517838
15
153766
10
44728
149094
356578
5

8.7
6.0
4.4
4.4

9.7
6.4
5.6
4.5

10.3
7.4
6.5
3.9

9.6
7.2
6.4
4.0

10.5
7.8
6.6
4.1

682
1220
1.8

820
926
1.1

924
759
0.8

1000
543
0.5

1107
543
0.5

Balance Sheet
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)

Ratio
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Deposit
Avg. Cost of Borrowimgs
Valuation
Book Value
CMP
P/BV


14

Bajaj Corp

"NEUTRAL"
10th Feb' 14

" Waiting for Demand Revival"
Results update

Neutral

CMP
Target Price
Upside

208
-

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Nifty

533229
BAJAJCORP
287/198
3071
37072
6063

Stock Performance
1M
-4.1
-2

Absolute
Rel. to Nifty

1yr
-10.9
-12.6

YTD
-22.9
-22.2

Promoters
FII
DII
Others

75
75
75
12.87
13.28
12.08
2.08
2.29
2.5
10.05
9.43
10.42

1 yr Forward P/B

Bajaj Corp reported below numbers than street:
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.
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.
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.
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.
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.
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.
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.
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

Bajaj Corp
Sales and Sales Growth(%)

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


Margin-%

Still company has been efficient to maintain
its EBITDA and PAT margin over 23% mark.

Sales Mix-Brands
Brands
2QFY12 3QFY12 4QFY12
Bajaj Almond Drops Hair Oil
93.6%
94.5% 94.1%
Bajaj Kailash Parbat Thanda Tel 3.1%
2.1%
2.8%
Bajaj Brahmi Amla Hair Oil
2.1%
2.3%
2.0%
Bajaj Amla Shikakai Hair Oil
0.4%
0.4%
0.4%
Others+Nomarks
0.5%
0.5%
0.4%

1QFY13
93.8%
3.9%
1.5%
0.2%
0.3%

2QFY13
96.0%
1.1%
2.1%
0.3%
0.5%

3QFY13
97.0%
0.1%
2.0%
0.2%
0.4%

4QFY14
94.7%
3.5%
1.2%
0.1%
0.5%

95.0% 96.2%
94.0%
2.5%
2.0%
0.2%
1.1%
1.2%
1.3%
0.1%
0.1%
0.2%
0.3%
0.3%
4.3%

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

Expenses on Sales


16

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
Rs in Cr,
Sales
RM Cost
Purchases of stock-in-trade
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
EBIT
Interest
PBT
Tax Exp
PAT
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
RM Cost
Ad Spend
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
P/BV
P/E

FY10
294.6
116.8
0
0
14
37.3
29.4
197.3
97.3
0.8
5.1
101.6
0.0
101.6
17.6
83.9

FY11
358.7
156.6
0.0
0.0
16.3
40.5
37.3
250.6
108.1
1.8
17.8
124.0
0.0
124.0
21.0
103.1

FY12
473.3
194.4
34.4
-9.0
22.9
64.7
49.3
356.8
116.5
2.6
37.4
151.3
0.1
151.2
31.1
120.1

FY13
606.7
237.4
24.4
-2.8
29.2
71.2
74.2
433.7
173.1
3.3
40.1
209.8
0.1
209.8
42.2
167.6

FY14E
692.6
214.7
58.9
-1.4
36.4
51.9
145.4
505.9
186.6
3.8
42.6
225.4
7.0
218.4
42.6
175.8

FY15E
792.5
261.5
67.4
-1.6
43.6
71.3
150.6
592.8
199.7
5.3
47.6
242.0
7.0
235.0
47.0
188.0

97.4%
82.5%
78.6%

21.8%
11.1%
22.8%

32.0%
7.8%
16.5%

28.2%
48.5%
39.6%

14.1%
7.8%
4.9%

14.4%
7.0%
6.9%

39.6%
12.7%
4.7%
10.0%
17.4%

43.7%
11.3%
4.5%
10.4%
16.9%

41.1%
13.7%
4.8%
10.4%
20.6%

39.1%
11.7%
4.8%
12.2%
20.1%

31.0%
7.5%
5.3%
21.0%
19.5%

33.0%
9.0%
5.5%
19.0%
20.0%

33.0%
34.5%
28.5%

30.1%
34.6%
28.7%

24.6%
32.0%
25.4%

28.5%
34.6%
27.6%

27.0%
32.5%
25.4%

25.2%
30.5%
23.7%

132.0
14.8
27.9
5.7
1.9
300.7%
69.8
23.2

100.1
14.8
376.3
7.0
25.5
27.4%
3.9
14.3

115.7
14.8
427.8
8.1
29.0
28.1%
4.0
14.2

275.0
14.8
483.8
11.4
32.8
34.6%
8.4
24.2

208.0
14.8
547.4
11.9
37.1
32.1%
5.6
17.5

208.0
14.8
623.3
12.7
42.3
30.2%
4.9
16.3


17

INGVYSYA BANK
Result update
CMP
Target Price
Upside
Market Data
BSE Code
NSE Symbol

BUY
538
682
677
27
0.7

531807
INGVYSYABK

52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

Stock Performance
1M
Absolute
-8.8
Rel.to Nifty
-7.0

667/405
10164
19.97lakhs
6063

"BUY"
10h Feb2014

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.
NII growth of 3% YoY due to lower interest income
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.

1yr
-8.5
-10.3

YTD
-8.5
-10.3

Operating expenses higher and operating leverage remain stable
Operating leverage (Operating cost to total assets) remained stable at 0.6% which
indicated stable cost management. In absolute term, operating expenses increased

3
Promoters
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
INGVYSYA Bank Vs Nifty

by 9% YoY in which employee cost and other operating cost increased by 12% and
5% YoY respectively. Cost to income ratio increased by 117 bps YoY to 56.5% from
55.3%. Operating profit increased by 4% YoY to Rs.274 cr.
Improvement in asset quality
Sequentially bank reported improvement in asset quality with GNPA stood at 1.71%
versus 1.75% in percentage to gross advances. In absolute term GNPA increased
by 2% QoQ while loan loss provision was remain same as in previous quarter. This
had resulted of increased net NPA by 17% sequentially in absoluter term and as a
percentage to net advance, it stood at 0.21% versus 0.19% in 2QFY14.
Consequently provisions coverage ratio declined to 87.5% from 89.1% in previous
quarter. Bank’s outstanding restructure account increased in sequential basis to
1.6% versus 1.2% to total advances.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
1007
1661
635
319
26.3

2012
1208
1878
768
456
30.4


Rs, Cr
2013
2014E
2015E
1539
1696
2058
2266
2555
2916
993
1167
1283
613
701
739
39.6
37.1
39.2
18

INGVYSYA BANK
Business growth sluggish, wholesale deposits replace by foreign currency
borrowings
On business growth parameters, bank reported muted growth in deposits which grew by
3% in which CASA deposits grew by 13% YoY. Term deposits de-grew by 1% YoY and 6% QoQ to Rs.254 bn. During quarter bank’s wholesale deposits replace by foreign
currency borrowings under RBI’s special concession window. CASA in percentage term
stood at 34.7% versus 31.7% in 3QFY13 and 32.5% in previous quarter. Loan grew by
8% YoY led by SME loan growth of 25% YoY followed by agriculture loan (56% YoY).
Credit deposits ratio improved to 87.4% versus 84% in last quarter and 82% in previous
quarter.
NIM narrow on account of reversal of interest income
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


19

INGVYSYA BANK
Chart Focus

NII lower on account of sluggish interest
income

Operating expenses higher and operating
leverage remain stable

Profit lower on account of muted
performance all around


20

INGVYSYA BANK
Quarterly Performance
Others
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Tax
Net Profit
Key balance sheet data (Rs Cr)
Advances
Deposits
CASA(%)
Asset Quality
Gross NPLs (Rs Cr)
Gross NPLs (%)
Net NPLs (Rs Cr)
Net NPLs (%)
Provision Coverage (%)

936
961
906
336
353
332
0
0
0
1
3
1
1273 1317 1239
215
185
187
1488 1502 1425
857
877
836
416
440
403
215
185
187
631
625
590
214
207
191
142
142
135
356
349
326
274
276
263
23
18
25
84
82
76
167
176
162

34048
38956
34.7

32856
40030
32.5

31599
37691
31.7

583
1.7
73
0.21
87.5

574
1.7
62
0.19
89.1

% Chg(YoY) % Chg(QoQ) 3QFY14E Varaition(%)
3.3
-2.5
975
-3.9
1.2
-4.9
390
-14.0
266.7
-51.1
0
50.8
-70.6
0
2.8
-3.3 1365
-6.7
15.0
16.2
215
0.0
4.4
-0.9 1580
-5.8
2.5
-2.3
968
-11.4
3.3
-5.5
397
4.7
15.0
16.2
215
0.0
7.0
0.9
612
3.1
12.2
3.7
202
6.2
5.1
0.1
135
5.4
9.2
2.2
337
5.9
4.2
-0.7
275
-0.4
-6.5
27.3
17
35.7
9.9
2.4
85
-1.6
3.1
-5.1
173
-3.4

7.8
3.4

3.6
-2.7

33903
43989

571
1.8
16
0.05
97.2

0.4
-11.4


21

INGVYSYA BANK
Financial & Assuption
P/L
Others
Others Income
Total Income
Interest on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
NII Growth(%)
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit

2011

2012

2013

2014E

2015E

2033
646
2
13
2694
655
3349
1357
48
283
1688
1007
21.3
655
1661
606
420
1026
635
317
319
31.6

2868
982
1
7
3857
670
4527
2153
247
249
2648
1208
20.1
670
1878
651
459
1110
768
312
456
43.2

3550
1307
2
3
4862
727
5588
2579
393
351
3323
1539
27.3
727
2266
751
522
1273
993
380
613
34.3

3824
1476
1
13
5314
858
6172
2619
923
0
3618
1696
10.3
858
2555
819
569
1388
1167
127
701
14.4

4501
1616
1
13
6132
858
6990
3038
1033
0
4074
2058
21.3
858
2916
964
670
1633
1283
181
739
5.4

30194
16.7
4147
13.0
23602
27.5
11021
5.2

35195
16.6
5696
37.4
28721
21.7
12715
15.4

41334
17.4
6511
14.3
31772
10.6
18278
43.7

45467
10.0
8024
23.2
34949
10.0
20327
11.2

50923
12.0
8986
12.0
40192
15.0
22766
12.0

8.6
5.9
7.3
4.5
8.0
4.9

10.0
7.7
8.8
6.1
8.7
6.5

11.2
7.1
9.3
6.2
11.4
6.9

10.9
7.3
9.6
5.8
11.4
6.8

11.2
7.1
9.7
6.0
11.5
6.8

217
1.5
12.2

265
1.3
11.7

299
1.9
14.1

379
1.4
14.5

418
1.3
13.7

Key Balance sheet data
Deposits
Deposits Growth(%)
Borrowings
Borrowings Growth(%)
Loan
Loan Growth(%)
Investments
Investments Growth(%)

Eastwind Calculation
Yield on Advances
Yield on Investments
Yield on Funds
Cost of deposits
Cost of Borrowings
Cost of fund

Valuation
Book Value
P/BV
P/E


22

Zydus Wellness.

"BUY"
7th Feb' 14

"sweeten with sugar free"
Result Update
CMP
Target Price
Upside

Buy
504
610
725
21%
-16%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

531335
ZYDUS
749/415
1969
13282
6036

Stock Performance
1M
Absolute
-6.9%
Rel.to Nifty
-4.10%

1yr
1.5%
0%

YTD
-4.9%
-7.1%

Current

Promoters
FII
DII
Others

72.54
8.17
8.07
11.22

P/BV(x)-1year forward

2QFY14 1QFY14

72.54
7.91
8.39
11.16

72.54
5.12
10.85
11.49

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.
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.
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).
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.
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.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
103.39
26.83
27.27
26.0%
26.4%

2QFY14
103.92
25.51
25.7
24.5%
24.7%

(QoQ)-%
(0.5)
5.2
6.1
150bps
130bps

3QFY13
101.77
26.32
22.88
25.9%
22.5%

Rs, Crore
(YoY)-%
1.6
1.9
19.2
10bps
390bps



23

Zydus Wellness.
Sales and its Growth(%)

Sales marginally grew by 2%(YoY).


Margin-%

It expects expansion in gross margin,
which will help it to fund new product
launches.

Expenses-(% of Sales)


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 peeloff 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.


24

Zydus Wellness.
Financials and Valuation
Rs in Cr,
Total Sales
Less: Excise Duty
Net Sales
Other Operating Income
Total income from operations
RM Cost
Purchases of stock-in-trade
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
EBIT
Interest
PBT
Tax Exp
PAT
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
RM Cost
Ad Spend
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
P/BV
P/E

FY10
267.5
0.0
267.5
0.6
268.1
37.5
54.0
(5)
9.3
61.0
44.4
201.0
67.1
1.6
6.0
71.4
0.0
69.2
24.0
45.2

FY11
335.5
0.1
335.4
1.0
336.4
49.9
74.9
(5)
18.3
59.2
54.5
252.1
84.2
1.5
7.2
90.0
0.0
90.0
30.5
59.5

FY12
344.6
9.2
335.5
1.3
336.8
94.1
23.7
4
20.6
59.7
57.4
259.7
77.1
3.9
9.0
82.2
0.0
82.2
13.7
68.6

FY13
410.0
22.9
387.1
0.9
388.0
119.1
14.7
(10)
27.3
69.8
70.1
291.4
96.6
4.5
15.8
107.9
0.1
107.8
8.8
98.9

FY14E
446.9
29.05
417.8
1.6
419.4
106.9
22.70
16
31.45
75.5
73.39
325.91
93.47
4.7
20.1
108.89
0.0
108.9
8.2
100.72

FY15E
500.5
32.53
467.9
1.8
469.7
124.5
25.42
18
37.58
86.9
84.55
376.76
92.94
4.5
22.5
111.01
0.0
111.0
8.9
102.13

-94.8%
-93.7%
-93.1%

25.5%
25.6%
31.7%

0.1%
-8.5%
15.3%

15.2%
25.3%
44.2%

8.1%
-3.2%
1.8%

12.0%
-0.6%
1.4%

14.0%
22.7%
3.5%
16.6%
34.7%

14.8%
17.6%
5.4%
16.2%
33.9%

28.0%
17.7%
6.1%
17.0%
16.6%

30.7%
18.0%
7.0%
18.1%
8.2%

25.5%
18.0%
7.5%
17.5%
7.5%

26.5%
18.5%
8.0%
18.0%
8.0%

25.0%
26.6%
16.9%

25.0%
26.7%
17.7%

22.9%
24.4%
20.4%

24.9%
27.8%
25.5%

22.3%
26.0%
24.0%

19.8%
23.6%
21.7%

381.7
3.9
100.6
11.6
25.7
44.9%
14.8
33.0

597.3
3.9
141.9
15.2
36.3
41.9%
16.5
39.3

380.4
3.9
186.9
17.5
47.8
36.7%
8.0
21.7

456.5
3.9
256.5
25.3
65.6
38.6%
7.0
18.0

504.0
3.91
329.8
25.76
84.4
30.5%
6.0
19.57

504.0
3.91
399.9
26.12
102.3
25.5%
4.9
19.30


25

N arnolia Securities Ltd
402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph
033-32011233 Toll Free no : 1-800-345-4000
em ail: research@narnolia.com ,
w ebsite : w w w .narnolia.com

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