first call april 18, 2013-edel - business...
TRANSCRIPT
1 Edelweiss Securities Limited
CONTENTS
Latest Research
• HCL Technologies - Raring to grow; Buy
• Tata Consultancy Services - Delivering on expectations; Hold
• Yes Bank - Core income steady; bond gains used to shore asset cover; Buy
• Cement Channel Check - Low demand stings prices; monthly update
• Factor Analyser (FA) Apr-13
• Bond Vector - Gilts resume forward march
Regular Features
• Sales Trader’s Commentary
• Insider Trades & Bulk Deals
• Technical Updates
• Eye Catchers
FIRST CALL
DAILY
India Equity Research
April 18, 2013
Sectoral Movements % Change
Ticker 18-Apr-13 1 D 1 M 3 M 1 Y
Banking 13,715 0.9 1.8 (5.7) 13.2
IT 6,236 (1.0) (13.4) (8.3) 7.2
Pharmaceuticals 8,436 1.1 4.4 4.6 24.5
Oil 8,535 (2.1) (2.8) (10.8) 5.4
Power 1,681 (0.2) (4.1) (16.0) (21.6)
Auto 10,189 1.2 (2.7) (9.8) (3.2)
Metals 8,479 1.3 (6.3) (21.3) (24.7)
Real Estate 1,862 0.9 (8.0) (19.4) 3.1
FMCG 6,072 1.3 3.1 5.5 27.7
Capital Goods 9,216 (0.0) (5.8) (12.3) (9.2)
India Change in %
17-A pr-13 1-d 1-mo 3-mo
Nifty 5,689 (0.0) (2.5) (6.2)
Sensex 18,731 (0.1) (2.9) (6.5)
CNX 500 4,462 0.1 (2.4) (7.9)
Global Indices
17-A pr-13 1-d 1-mo 3-mo
DJIA 14,619 (0.9) 1.2 7.1
NASDAQ 3,205 (1.8) (1.0) 2.2
Hang Seng 21,611 0.2 (2.1) (8.4)
Nikkei 225 13,284 (0.7) 8.7 21.7
Net Inv (INR Bn)
15-A pr-13 B uy Sell N et
FII Cash 30.9 24.5 6.4
FII F&O 295.1 288.6 6.5
M F Cash 3.5 4.5 (1.0)
Value Traded - India (INR Bn) Change in %
17-A pr-13 1-d 1-mo 3-mo
BSE Cash 22.8 20.5 0.5 (9.1)
NSE Cash 131.2 22.5 (15.9) (3.8)
NSE F&O 2,003.4 (30.5)
Forex/M oney M arket Change in %
17-A pr-13 1-d 1-mo 3-mo
INR/USD 54.2 (0.1) (0.1) 0.3
USD/EUR 1.3 0.1 0.7 (2.1)
USD/YEN 0.0 0.0 3.1 8.9
10 Yr G-Sec 7.9 - (1.0) (0.6)
Commodities (USD/M t ton) Change in %
17-A pr-13 1-d 1-mo 3-mo
Copper 8,382 (3.0) (8.8) (12.2)
A luminium 2,702 (0.9) (3.0) (7.3)
*Go ld 1,357.8 (1.4) (15.4) (19.4)
*Silver 23.0 (1.6) (20.5) (28.0)
**NYM EX 87 (2.3) (7.2) (9.2)
*USD/Troy Ounce **USD/bbl
Agri Commodities (INR/QT) Change in %
17-A pr-13 1-d 1-mo 3-mo
Sugar 3,349.0 0.1 0.2 (2.8)
^INR/M aund ^^INR/KG
Open Interest ( IN R mn)
Vo lume 17-A pr-13 16-A pr-13 % C hange
Futures 445,357 439,032 1.4
Call 529,412 527,993 0.3
Put 531,627 521,122 2.0
Total 1,506,395 1,488,146 1.2
P ut C all R at io s
Vo lume 17-A pr-13 16-A pr-13 % C hange
PCR 1.04 1.00 3.9
WPCR 0.74 0.65 13.7
OI PCR 0.96 0.95 1.5
Total OI/ Volume 0.75 0.76 (1.4)
Nifty IVs at 15 - 17% levels.
FII Activity* (INR M n) (16-Apr)
2 Edelweiss Securities Limited
First Call
STOCKS IN NEWS
Tata Tele to give up bulk of excess CDMA waves (ET)
US court nod for Lupin’s generic contraceptive (ET)
CCI rejects charges of market abuse against BPCL (ET)
Rel Infra, Tata Power differ over SC’s admission of plea on cross subsidy (ET)
CIL to supply power cos full contracted coal (ET)
Govt may announce sops for exporters, SEZ today (ET)
GMR airports to go public to facilitate PE firm’s exit; co looks to raise INR 20bn from stake sale
this fiscal year (ET)
CIpla launches India’s first biosimilar drug (MINT)
Stride Arcolab unit, Pfenex enter JV (MINT)
3 Edelweiss Securities Limited
First Call
SALES TRADERS COMMENTARY
Indian equities ended a volatile session on a flat note on Wednesday. Metal, FMCG,
healthcare and auto stocks traded higher while oil & gas and IT stocks fell the most.
The BSE Sensex ended 14 points down at 18731 and Nifty down 01 points to 5688.
Major gainers were Sterlite Industries (4.05%), Mahindra & Mahindra (3.91%), Sun
Pharmaceutical Industries (3.01%), State Bank of India (2.87%), ICICI Bank (1.70%) and ITC
(1.59%).
Major losers were Reliance Industries (3.78%), Wipro (1.77%), TCS (1.73%), HDFC 1.57%)
and Tata Power (1.56%).
The Metal index jumped 1.27%. Major gainers were SAIL (6.33%), JSW Steel (5.76%), Sterlite
Industries (4.10%), Sesa Goa (4.05%), Hindustan Zinc (1.85%) and Coal India (0.56%).
The FMCG index gained 1.25%. Major gainers were United Spirits (6.07%), ITC (1.59%),Tata
Global (2.62%), Nestle India (0.96%) JUBLFOOD (0.87%) and Colgate Palmolive (0.80%).
The Auto index was up 1.16%. Major gainers were Mahindra & Mahindra (3.91%), Bajaj
Auto (1.01%), Maruti Suzuki (0.82%), Hero MotoCorp (0.25%), Tata Motors (0.25%) and
Cummins India (0.03%).
The Oil & gas index was down 2.12%. Major losers were Reliance Industries (3.78%), HPCL
(2.37%), BPCL (1.25%), ONGC (0.80%) and Indian Oil Corp (0.64%).
Globally, Asia ended mixed—Nikkei ended 161 points higher at 13382 and Hang Seng
slipped 120 points to 21569. European indices were trading in the red.
RESULTS FOR THE DAY
Name of company Q4FY13E Q4FY12 Y-o-Y Q3FY13 Q-o-Q
Essar Ports 953 676 40.8 904 5.4
IndusInd Bank 2,911 2,234 30.3 2,673 8.9
PAT
Company Date Time Venue Topic
IndusInd Bank 18-Apr-13 3.45 PM IST Regal Room, The Trident,
Nariman Point, Mumbai
Financial Results
ANALYST MEETS
Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
HCL Technologies’ (HCLT) USD1,191mn revenue in Q3FY13 was in line
with our estimate. EBITDA margin, at 22.4%, surpassed Street’s 21.9%
estimate, driven by utilisation (largely due to cut in head count) and
higher fixed-price projects. IMS continued to spur growth (up 8.6% QoQ).
We expect HCLT’s revenue growth momentum to continue over the next
couple of years as it ramps up deals won over the past 18 months. This,
along with an improved EBIT margin trajectory (19% plus) over the past
four quarters is a testimony of its robust execution. We expect margin to
remain in the 18-19% plus (excluding currency) range as it executes the
new deals. We maintain our ~15% revenue growth assumption for FY14
and FY15 each and ‘BUY’ with a target price of INR903.
Utilisation supports margin; IMS continues to lead growth
HCLT reported USD revenue growth of 3.2%. EBIDTA margin, at 22.4%, dipped 20bps
bucking the Street’s expectation of a 70bps decline. This was primarily due to reduction
in head count (791 on overall basis and 1,638 in core software (CS) segment), which
improved blended utilisation 190bps to 83.8% in CS. While CS grew a muted 1%, IMS
surged a robust 8.6% QoQ. Enterprise application services grew 3.2% QoQ.
Ramp up of deals in kitty to aid margin sustenance
The company posted a robust EBIT margin (19% plus) over past four quarters as it
ramped up deals won in FY12. HCLT has bagged deals with a total contract value of
USD2bn over the past two quarters, which will be ramped up in FY14. This along with
rising IMS contribution (590bps over Q3FY12-Q3FY13) lends margin comfort as it will
enable higher fresher intake in the future, which will sustain margin. We expect EBIT
margin to remain in the 18-19% plus range (excl. currency) over FY13E-15E.
Outlook and valuations: On growth path; maintain ‘BUY’
We maintain our positive stance on HCLT based on significant traction in renewal
market, which, in our view, will enable it to post USD revenue growth of 15% in FY14E
and FY15E each. This surge will be driven by IMS, which has been the key growth driver
for the past five quarters. However, we believe increasing reliance on IMS and almost
zero bench can pose headwinds going forward. We maintain ‘BUY/SO’ with a TP of
INR903 (15x FY15E EPS of INR60.2).
RESULT UPDATE
HCL TECHNOLOGIES Raring to grow
EDELWEISS 4D RATINGS
Absolute Rating BUY
Rating Relative to Sector Outperformer
Risk Rating Relative to Sector High
Sector Relative to Market Overweight
MARKET DATA (R: HCLT.BO, B: HCLT IN)
CMP : INR 751
Target Price : INR 903
52-week range (INR) : 810 / 453
Share in issue (mn) : 696.1
M cap (INR bn/USD mn) : 523/ 9,648
Avg. Daily Vol.BSE/NSE(‘000) : 1,392.6
SHARE HOLDING PATTERN (%)
Current Q2FY13 Q1FY13
Promoters *
62.0 62.2 62.2
MF's, FI's & BK’s 6.6 9.3 9.5
FII's 24.3 20.3 20.0
Others 7.1 8.2 8.3
* Promoters pledged shares
(% of share in issue)
: NIL
PRICE PERFORMANCE (%)
Stock Nifty
EW
Technology
Index
1 month (3.7) (3.1) (4.8)
3 months 13.2 (5.2) 13.9
12 months 57.3 8.9 25.3
Sandip Agarwal
+91 22 6623 3474
Omkar Hadkar
+91 22 6620 3147
India Equity Research| IT
April 17, 2013
Financials
Year to June Q3FY13 Q2FY13 Growth % Q3FY12 Growth % FY12 FY13E FY14E
Revenue (INR mn) 64,247 62,737 2.4 52,156 23.2 210,312 255,522 294,151
EBITDA (INR mn) 14,394 14,165 1.6 9,592 50.1 40,252 56,580 60,629
Net profit (INR mn) 10,192 9,444 7.9 5,820 75.1 24,474 37,896 40,050
Diluted EPS (INR) 14.4 13.4 7.7 8.3 73.8 34.8 53.6 56.7
Diluted P/E (x) 21.6 14.0 13.3
EV/EBITDA (x) 12.9 8.8 7.7
EV/Revenues (x) 2.5 2.0 1.6
IT
2 Edelweiss Securities Limited
Key highlights
• Consolidated revenue at USD1,191mn rose 3.2% QoQ, marginally below our USD1,194mn
estimate. In constant currency, QoQ revenue grew 3.8%. In INR terms, revenue at
INR64.3bn increased 2.4% QoQ and 23.2% YoY.
• Gross profit stood at INR23.1bn, up 2.9% QoQ and 36.2% YoY. Gross margin at 36.0%
surged 20bps QoQ due to improvement in utilization. EBITDA stood at INR14.4bn and
EBITDA margin at 22.4% was down 20bps QoQ, above our estimate of 22.0%.
• HCLT’s net profit at INR10.2bn was up 7.9% QoQ. Net margin, at 15.9%, rose 80bps
QoQ due to higher operating profit, other incomes and forex gains.
• Net employees in IT services reduced by 1,000, while the BPO headcount rose by 209.
Segmental performance
• IT services: IT services (contributes over 95% to total revenue) rose 14.1% YoY (up 3.3%
QoQ) to USD1,140mn against USD1,104mn in the previous quarter. Volume growth in
core software came in at 0.4%. Operating margin was flat at 20.5%.
Core software: Revenue, at USD783mn, was up 1.0% QoQ and 4.8% YoY. While
offshore and onsite volume grew 0.4% and 0.3% respectively. Operating margin (EBIT)
at 21.2% was down 20bps sequentially.
IMS: Revenue rose 8.6% QoQ (10.6% QoQ in previous quarter) to USD356mn. EBIT
margin jumped 50bps to 18.9%.
• BPO reports operating profit for five consecutive quarter: BPO revenue, at
USD51.3mn, was up sequentially by 0.6%. It reported an operating profit (EBIT) of
USD3.0mn during the quarter.
Table 1: EBIT margin (%) across three segments
Source: Company, Edelweiss research
Client addition continues to be impressive: HCLT added 37 new clients in the quarter.
Total active clientele is now at 547 (544 in previous quarter). It signed deals with a TCV
of USD1bn during the quarter which it expects to ramp up in FY14.
Number of clients contributing USD1mn and USD5mn plus stood at 422 (418 in
Q2FY13) and 187 (increase of nine from previous quarter), respectively. HCLT added
one client to the USD20mn plus category (50 in the previous quarter).
• Infrastructure services (IS), enterprise application services (EAS) drives growth: IS and
BPO posted sequential growth of 8.6% and 0.8%, respectively, in USD terms. EAS grew
3.2% QoQ (1.1% decline in previous quarter).
Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
Core software 17.3 17.1 21.0 21.1 21.4 21.2
IMS 16.0 14.5 17.9 17.9 18.4 18.9
BPO (7.6) 0.5 1.8 2.1 5.7 5.8
HCL Technologies
3 Edelweiss Securities Limited
Chart 1: IS, EAS spur growth
Source: Company, Edelweiss research
Geo split: While Europe grew 4.6% QoQ on back of 5.9% growth in Q2FY13, America
reported 3.5% sequential growth. APAC saw a decline of 1.1% QoQ (0.2% growth in
Q2FY13).
Chart 2: Europe and America lead growth during the quarter
Source: Company, Edelweiss research
• Manufacturing, energy & utilities and telecom drive growth: Manufacturing, energy &
utilities and telecom sequential growth of 7.7%, 13.5% and 3.2% respectively. BFSI was
sequentially flat.
• Attrition: Attrition in software services increased to 14.3% (LTM basis) from 13.6%
while IMS increased marginally to 14.0% from 13.8% in the previous quarter. Attrition
in BPO increased to 7.9% from 8.7% in the previous quarter.
(3.0)
0.0
3.0
6.0
9.0
12.0
Infrastructure
Services
BPO
Services
Custom
Application
Engineering &
R&D Services
Enterprise
Application
Services
(%)
Q3FY13 Q2FY13
(2.0)
0.0
2.0
4.0
6.0
8.0
Europe US ROW
(%)
Q3FY13 Q2FY13
IT
4 Edelweiss Securities Limited
• Utilisation inches up: Offshore utilisation (including trainees) rose from 75.6% to
79.0%; excluding trainees, it stood at 80.0% versus 77.6% in the previous quarter. On a
blended basis utilisation stood at 83.8% up 190bps QoQ. Onsite utilisation at 97% was
marginally below previous quarter of 97.3%.
• Hedging: HCLT has hedges worth USD1.6bn as on March 2013, of which less than a year
hedges are at exchange rate of 54.27.
• DSO stood at 53 days during the quarter.
HCL Technologies
5 Edelweiss Securities Limited
Financial snapshot (INR mn)
Year to June Q3FY13 Q2FY13 % Change Q3FY12 % Change YTD13 FY13E FY14E
Net revenues 64,247 62,737 2.4 52,156 23.2 187,894 255,522 294,151
Direct costs 41,129 40,262 2.2 35,179 16.9 120,849 164,624 193,936
Gross profit 23,118 22,475 2.9 16,977 36.2 67,045 90,898 100,215
SG&A 8,724 8,310 5.0 7,385 18.1 24,977 34,318 39,587
EBITDA 14,394 14,165 1.6 9,592 50.1 42,068 56,580 60,629
Depreciation 1,634 1,722 (5.1) 1,412 15.7 5,048 6,777 8,613
EBIT 12,760 12,443 2.5 8,180 56.0 37,020 49,803 52,015
Other income 657 279 135.5 227 189.4 1,292 1,489 1,844
Foreign exc. gain / (loss) 231 (125) (284.8) (363) (163.6) (503) (553) -
Profit before tax 13,648 12,597 8.3 8,044 69.7 37,809 50,739 53,859
Provision for taxes 3,249 2,951 10.1 2,016 61.2 8,918 12,021 12,926
Core profit 10,399 9,646 7.8 6,028 72.5 28,891 38,718 40,933
Minority interest
Profit after tax and min. int. 10,399 9,646 7.8 6,028 72.5 28,891 38,718 40,933
Stock based sales incentives 207 202 2.5 208 (0.5) 615 822 882
Net profit 10,192 9,444 7.9 5,820 75.1 28,276 37,896 40,050
Diluted EPS (INR) 14.4 13.4 7.7 8.3 73.8 40.1 53.6 56.7
As % of net revenues
Gross profit 36.0 35.8 32.6 35.7 35.6 34.1
SG&A 13.6 13.2 14.2 13.3 13.4 13.5
EBITDA 22.4 22.6 18.4 22.4 22.1 20.6
EBIT 19.9 19.8 15.7 19.7 19.5 17.7
Reported net profit 15.9 15.1 11.2 15.0 14.8 13.6
Tax rate 23.8 23.4 25.1 23.6 23.7 24.0
IT
6 Edelweiss Securities Limited
Company Description HCLT is India’s fourth-largest IT services company. It provides software-led IT solutions,
remote infrastructure management, and BPO services, focused mainly on transformational
outsourcing. The company leverages its extensive offshore infrastructure and global
network of offices in 26 countries to deliver solutions across select verticals, including
financial services, retail and consumer, life sciences aerospace, automotive, semiconductors,
telecom and media publishing, and entertainment. The company’s employee force stands at
85,194 and its revenues for the past twelve months stood at INR247.1bn (USD4.5bn).
Investment Theme
Industry revenues are forecasted to grow 12.2% over FY12-15E, and as a scale player HCLT is
expected to gradually increase its share of the total pie largely through its rapidly growing
infrastructure management practice. HCLT has been aggressively pursuing large deals in the
past few quarters. Some of the largest deals announced recently by HCLT in the Indian IT
space are Xerox, Sony Corporation, Nokia Corporation, Dr Pepper Snapple Group, The Linde
Group, Agilent Technologies, which provides long-term revenue visibility. Its well-
established infrastructure management practice, combined with its EAS practice, provides
significant cross-selling opportunity, which could help HCLT win some of the large size deals.
Although we believe it will post better growth versus Infosys and Wipro.
Key Risks
Key risks to our investment theme include: (a) sustained slowdown in the US; (b) failure in
maintaining margins at current levels, while pursuing large deals; (c) higher wage inflation
and other costs resulting in significant margin dilution and (d) appreciation of the INR
against the USD, EUR and GBP.
7 Edelweiss Securities Limited
HCL Technologies
Financial Statements
Income statement (INR mn)
Year to June FY12 FY13E FY14E FY15E
Net revenue 210,312 255,522 294,151 329,338
Cost of revenues 140,559 164,624 193,936 220,648
Gross profit 69,753 90,898 100,215 108,689
Total SG&A expenses 29,501 34,318 39,587 44,722
EBITDA 40,252 56,580 60,629 63,967
Depreciation & Amortization 5,639 6,777 8,613 9,649
EBIT 34,613 49,803 52,015 54,318
Other income 706 1,489 1,844 2,997
Foreign exchange gain/(loss) (1,876) (553) - -
Profit before tax 33,443 50,739 53,859 57,316
Provision for tax 8,180 12,021 12,926 13,756
Net profit 25,263 38,718 40,933 43,560
Profit After Tax 25,263 38,718 40,933 43,560
Minority int. and others - 789 822 882 988
Profit after minority interest 24,474 37,896 40,050 42,572
Basic EPS (INR) 34.8 53.6 56.7 60.2
Shares outstanding (mn) 703 707 707 708
Diluted EPS (INR) 34.8 53.6 56.7 60.2
Dividend per share (INR) 10.0 11.0 12.0 12.0
Dividend payout (%) 28.7 20.5 21.2 19.9
Common size metrics
Year to June FY12 FY13E FY14E FY15E
Cost of revenues 66.8 64.4 65.9 67.0
Gross margin 33.2 35.6 34.1 33.0
SG&A expenses 14.0 13.4 13.5 13.6
EBITDA margins 19.1 22.1 20.6 19.4
EBIT margins 16.5 19.5 17.7 16.5
Net profit margins 11.6 14.8 13.6 12.9
Growth ratios (%)
Year to June FY12 FY13E FY14E FY15E
Revenues 31.2 21.5 15.1 12.0
EBITDA 46.4 40.6 7.2 5.5
EBIT 53.7 43.9 4.4 4.4
PBT 52.3 51.7 6.1 6.4
Net profit 51.1 54.8 5.7 6.3
EPS 49.7 54.0 5.7 6.1
Key assumptions
FY12 FY13 FY14E FY15E
Macro - GDP(Y-o-Y %) 6.5 5.0 6.5 7.0
Inflation (Avg) 8.8 7.8 6.0 6.0
Repo rate (exit rate) 8.5 7.5 6.8 6.0
USD/INR (Avg) 47.9 54.5 55.0 53.0
Company
Gross addition (nos)
IT services 14,194 9,000 14,500 14,500
BPO 8,385 7,000 5,500 5,500
IMS 6,241 8,500 11,500 15,000
IT SERVICES
Efforts (as % of total efforts)
Onsite 26.8 25.8 26.0 26.0
Offshore 73.2 74.2 74.0 74.0
Not billed 18.6 17.2 13.0 13.0
Trainee 6.1 2.3 2.5 2.5
Implied Utilization (%) 79.1 86.4 86.0 86.0
Attrition (%) 14.8 13.8 13.0 12.0
Change in pricing
Onsite (%) 1.6 (1.1) 0.5 0.0
Offshore (%) 0.8 1.0 0.5 0.0
Blended (%)
Salary Hikes (%)
Onsite salary (USD) 4.9 3.3 4.1 2.0
Offshore salary 13.7 5.2 6.6 6.0
Cost assumptions (% of revenue)
SG&A 15.0 14.8 15.0 15.5
Depreciation 2.3 2.2 2.7 2.7
BPO
Revenue growth (in USD) (2.7) 7.9 8.4 12.1
Pricing growth (%) 5.1 9.6 (1.6) 0.0
Cost assumptions (% of revenue)
Employee Costs 74.8 67.4 65.3 65.0
SG&A 22.8 21.3 21.6 21.5
Depreciation 5.3 6.1 5.7 5.7
Infrastructure services
Revenue growth (in USD) 21.5 36.1 25.5 20.3
Gross addition 6,241 8,500 11,500 15,000
Cost assumptions (% of revenue)
Employee Costs 71.3 68.4 67.5 67.2
SG&A 9.6 9.2 9.3 9.0
Depreciation 3.2 3.1 3.0 3.0
Financial assumptions
Yield on cash & cash equivalents (%) 3.0 6.0 6.0 5.0
Tax rate as % of PBT 24.5 23.7 24.0 24.0
Capex (INR mn) 15,775 6,751 8,710 9,659
Receivable (days) 76 79 74 72
8 Edelweiss Securities Limited
IT
Peer comparison valuation
Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)
Name (USD mn) FY13E FY14E FY13E FY14E FY13E FY14E
HCL Technologies 9,670 14.0 13.3 8.8 7.7 31.0 26.3
CMC 769 18.3 12.6 12.5 9.0 26.7 31.7
ECLERX SERVICES 359 11.4 8.9 6.3 5.1 43.7 44.2
Hexaware Technologies 489 8.1 7.6 5.1 4.2 30.0 27.9
Info Edge 717 30.6 22.7 23.9 16.5 21.7 23.6
Infosys 24,249 13.9 13.1 9.2 7.9 25.7 23.0
Infotech Enterprises 345 8.2 7.7 3.4 2.9 18.3 17.0
Persistent Systems 403 11.8 9.4 4.8 3.7 20.2 21.3
Tata Consultancy Services 52,716 20.4 18.6 15.0 12.9 38.8 34.5
Wipro 17,057 14.4 12.6 10.2 8.9 20.7 20.4
Median - 13.9 12.6 9.0 7.8 26.2 25.0
AVERAGE - 15.1 12.6 9.9 7.9 27.7 27.0
Source: Edelweiss research
Operating ratios
Year to June FY12 FY13E FY14E FY15E
Total asset turnover 0.5 0.5 0.4 0.4
Fixed asset turnover 3.0 3.4 4.0 4.4
Equity turnover 2.2 2.1 1.9 1.8
Valuation parameters
Year to June FY12 FY13E FY14E FY15E
Diluted EPS (INR) 34.8 53.6 56.7 60.2
Y-o-Y growth (%) 49.7 54.0 5.7 6.1
CEPS (INR) 42.8 63.2 68.9 73.8
Diluted PE (x) 21.6 14.0 13.3 12.5
Price/BV (x) 4.9 3.9 3.2 2.7
EV/Sales (x) 2.5 2.0 1.6 1.3
EV/EBITDA (x) 12.9 8.8 7.7 6.9
EV/EBITDA (x)+1 yr forward 9.2 8.2 7.3 -
Dividend yield (%) 1.3 1.5 1.6 1.6
Balance sheet (INR mn)
As on 30th June FY12 FY13E FY14E FY15E
Equity capital 1,386 1,390 1,392 1,393
Reserves & surplus 105,928 135,729 165,851 198,494
Shareholders funds 107,314 137,119 167,242 199,886
Minority interest (BS) - - - 1
Borrowings 19,222 13,774 12,774 11,774
Sources of funds 126,536 150,893 180,016 211,661
Net block 24,775 28,199 28,296 28,306
Goodwill 49,404 45,954 45,954 45,954
Investments 21,720 32,601 32,601 32,601
Cash and equivalents 6,673 12,835 41,411 72,344
Sundry debtors 53,440 57,613 61,813 68,364
Other current assets 33,264 40,053 42,072 45,222
Total current assets (ex cash) 86,704 97,666 103,885 113,586
Total current liabilities & 62,740 66,362 72,131 81,129
Net current assets (ex cash) 23,964 31,304 31,754 32,456
Uses of funds 126,536 150,893 180,016 211,661
Book value per share (INR) 152.7 194.1 236.7 282.5
Profitability & efficiency ratios
Year to June FY12 FY13E FY14E FY15E
ROAE (%) 25.5 31.0 26.3 23.2
ROACE (%) 36.4 44.6 39.2 33.3
Debtors days 76 79 74 72
Current ratio 1.5 1.7 2.0 2.3
9 Edelweiss Securities Limited
HCL Technologies
Holding - Top10
Perc. Holding Perc. Holding
Life Insurance Corp Of India 4.35 HSBC Global Inv Mauritius 2.09
First State Investments 1.30 Commonwealth Bank Of Australia 1.30
Vanguard Group Inc 0.80 Reliance Capital Trustee Co Ltd 0.65
Blackrock 0.53 Capital International Inc 0.35
UTI AMC 0.32 Guardian Investor Services Llc 0.29
*as per last available data
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
02 May 2012 HCL Holdings Pvt Ltd Sell 189175.00
09 May 2012 Slocum Investments (Delhi) Pvt. Ltd. Sell 10000000.00
12 Jun 2012 Vineet Nayar Sell 2700000.00
06 Sep 2012 HSBC Global Investment Funds Sell 838000.00
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
04 May 2012 The Rbos Plc As Dep Of First St Ap Le Fd A S Fd Of Fi St Inicvc Buy 8119140 500.00
04 May 2012 Slocum Investments (Delhi) Pvt Limted Sell 10000000 500.15
*as per last available data
Additional Data
Directors Data
Mr.Shiv Nadar Chairman & Chief Strategy Officer Mr.Vineet Nayar Vice Chairman & CEO
Ms. Robin Abrams Non- Executive Director Mr. Subroto Bhattacharya Non- Executive Director
Mr. Amal Ganguli Non- Executive Director Mr. R. Srinivasan Non- Executive Director
Mr. Sudhindar Krishan Khanna Non- Executive Director Mr. Drikant Madhav Datar Non- Executive Director
Mr. Sosale Shankara Sastry Non- Executive Director
Auditors - S.R.Batliboi & Co., Chartered Accountants
*as per last annual report
10 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
CMC BUY SO L ECLERX SERVICES BUY SO M
HCL Technologies BUY SO H Hexaware Technologies BUY SO M
Info Edge REDUCE SU M Infosys BUY SP L
Infotech Enterprises BUY SO H Tata Consultancy Services HOLD SP L
Persistent Systems BUY SO L Wipro BUY SO L
Tech Mahindra BUY SO M
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
Tata Consultancy Services’ (TCS) Q4FY13 revenue of USD3,040mn, up
3.1% QoQ, was in line with Street estimate (USD3,036mn), driven by 4.4%
volume surge. EBIT margin, at 26.5%, dipped 80bps, largely due to
settlement-related cost of INR1.6bn. Management reiterated its positive
outlook on account of robust pipeline and uptick in discretionary
spending. We believe TCS will continue to post robust growth as it reaps
benefits of sustained investments in new initiatives along with continued
investments in sales and marketing. However, we deem current
valuations provide limited upside hereon. Hence, we maintain ‘HOLD’
with a target price of INR1,588.
Volume growth surprises; India spurs growth
TCS’s robust volume of 4.4% QoQ was way ahead of our 3.0% estimate. EBIT margin
decline of 80bps to 26.5% was largely due to settlement cost of INR1.6bn; excluding this,
margin would have been 27.5%, up 20bps QoQ. Growth during Q4FY13 was led by the
India business (9% of revenue), which surged a robust 19% QoQ. Deal traction continued
to be strong as it won 11 deals during the quarter and several short term deals in the
digital (new technologies) space, although these are smaller in size. Utilisation (ex
trainees) improved 30bps sequentially to 82.0%.
Robust pipeline, spending uptick underpin positive outlook
Management has reiterated its positive outlook underpinned by the strong pipeline,
uptick in discretionary spending and improved traction in large verticals like BFSI and
telecom. It expects BFSI to grow in line with company growth rate and anticipates
recovery in telecom in FY14. We believe, this, along with its investments in new
technologies like cloud computing, analytics and big data, will lead to robust revenue
growth over the next two years. We have built in 18.2%/13.7% revenue growth for
FY14/FY15.
Outlook and valuations: Rich; maintain ‘HOLD’
While we expect TCS to be the key beneficiary of the uptick in demand and favour it
owing to strong execution, we believe current valuations of 18.1x and 16.5x FY14E and
FY15E earnings, respectively, provide limited upside from the current level. Hence, we
maintain ‘HOLD/Sector Performer’ with target price of INR1,588 (18x FY15E EPS).
RESULT UPDATE
TATA CONSULTANCY SERVICES Delivering on expectations
EDELWEISS 4D RATINGS
Absolute Rating HOLD
Rating Relative to Sector Performer
Risk Rating Relative to Sector Low
Sector Relative to Market Overweight
MARKET DATA (R: TCS.BO, B: TCS IN)
CMP : INR 1,457
Target Price : INR 1,588
52-week range (INR) : 1,598 / 1,040
Share in issue (mn) : 1,957.2
M cap (INR bn/USD mn) : 2,851/ 52,596
Avg. Daily Vol.BSE/NSE(‘000) : 1,421.3
SHARE HOLDING PATTERN (%)
Current Q2FY13 Q1FY13
Promoters *
74.0 74.0 74.0
MF's, FI's & BK’s 6.5 6.5 6.7
FII's 15.0 14.8 14.6
Others 4.6 4.7 4.7
* Promoters pledged shares
(% of share in issue)
: 11.3
PRICE PERFORMANCE (%)
Stock Nifty
EW
Technology
Index
1 month (7.2) (3.1) (4.8)
3 months 6.9 (5.8) 13.9
12 months 34.4 7.5 25.3
Sandip Agarwal
+91 22 6623 3474
Omkar Hadkar
+91 22 6620 3147
India Equity Research| IT
April 17, 2013
Financials (INR mn)
Year to March Q4FY13 Q3FY13 Growth % Q4FY12 Growth % FY13 FY14E FY15E
Revenue 164,301 160,699 2.2 132,593 23.9 629,895 752,249 824,416
EBITDA 46,599 46,540 0.1 39,117 19.1 180,871 209,645 225,213
Net profit 35,969 35,518 1.3 29,324 22.7 139,415 157,636 172,666
Diluted EPS (INR) 18.4 18.1 1.3 15.0 22.7 71.2 80.5 88.2
Diluted P/E (x) 20.4 18.1 16.5
EV/EBITDA (x) 14.9 12.5 11.2
EV/Revenues (x) 4.3 3.5 3.1
IT
2 Edelweiss Securities Limited
Key highlights
• In USD terms, revenue grew 3.1% QoQ to USD3,040mn, marginally above our estimate
of USD3,035mn. Volume growth came in at 4.4% QoQ. In INR terms, revenue at
INR164.3bn was up 2.2% QoQ and 23.9% YoY.
Table 1: Split of revenue growth in INR terms for Q4FY13
Source: Company
• Gross profit for the quarter stood at INR78.5bn, up 3.1% QoQ. Gross margin was 47.8%,
up 40bps QoQ.
• Operating margin: TCS’ operating margin (EBIT) dipped 80bps QoQ to 26.5% due to
settlement cost of USD29mn (one-off) during this quarter. Excluding this, EBIT margin
would have expanded 20bps QoQ to 27.5%.
Table 2: Factors contributing to decline in operating margin
Source: Company
• Net income: TCS reported net income of INR36bn, up 1.3% QoQ. Net profit margin
dipped 20bps to 21.9%.
• Client addition: 52 clients were added during the quarter (31 in Q3FY13). Active
clientele stood at 1,065 versus 1,051 in the previous quarter. The number of USD1mn
clients increased by 5 to 551; there was an increase in USD5mn (4), USD10mn (11),
USD20mn (1) and USD50mn (1) client brackets over the previous quarter. USD100mn
clients remained flat. Deal traction continued to be strong as it won 11 deals during the
quarter and several small deals in the digital (new technologies) space, although these
are smaller in size.
• Geography split: North America, Continental Europe and India reported sequential
growth of 2.1%, 6.5% and 19.4% QoQ, respectively. UK (17% of revenue) declined by
1.0%, whereas APAC grew 0.4%.
Revenue growth break-up (%)
Volumes 4.4
Constant currency realisation 0.0
Currency benefit (1.8)
Offshore shift (0.4)
Q-o-Q impact 2.2
EBIT margin break-up (bps)
Currency (64)
Productivity shift 94
SG&A efficiency (5)
US settlement (98)
Q-o-Q impact (73)
Tata Consultancy Services
3 Edelweiss Securities Limited
Chart 1: Geography growth QoQ in USD terms
Source: Company, Edelweiss research
• All verticals except transportation post growth: BFSI led growth by surging 4.3% QoQ.
Manufacturing, retail and energy & utilities posted grew 3.1% each. Transportation
declined 2.6% QoQ.
Chart 2: BFSI, manufacturing, retail and energy & utilities drive growth
Source: Company, Edelweiss research
• Infra services and assurance services spur growth: Growth during the quarter was
driven by infrastructure services and assurance services, which surged 6.7% and 4.5%
QoQ, respectively. ADM grew 3.1% while enterprise solutions and business intelligence
grew 5.9%. BPO and asset leveraged solutions declined 0.2% and 7.9% QoQ,
respectively.
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IT
4 Edelweiss Securities Limited
Chart 3: Infra services, enterprise solutions and assurance services lead growth
Source: Company, Edelweiss research
• Hiring momentum continues: Gross addition stood at 20,098 on back of 17,145 in the
previous quarter, while net addition was 12,559. Total headcount stands at 276,196.
Attrition (LTM) in IT services declined to 9.4% from 9.8% in the previous quarter. It
plans to hire 45,000 freshers next year. 25,000 offers have already been given.
• Utilisation inches up: Utilisation rate (excluding trainees) inched up 30bps QoQ to
82.0%; including trainees, it was up 10bps QoQ to 72.2%.
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Tata Consultancy Services
5 Edelweiss Securities Limited
Financial snapshot (INR mn)
Year to March Q4FY13 Q3FY13 % Change Q4FY12 % Change FY13 FY14E FY15E
Net revenues 164,301 160,699 2.2 132,593 23.9 629,895 752,249 824,416
Cost of revenue 85,773 84,528 1.5 69,237 23.9 332,544 406,208 449,291
Gross profit 78,528 76,171 3.1 63,356 23.9 297,351 346,042 375,126
SG&A 31,929 29,631 7.8 24,239 31.7 116,480 136,397 149,913
EBITDA 46,599 46,540 0.1 39,117 19.1 180,871 209,645 225,213
Depreciation & amortization 3,015 2,731 10.4 2,398 25.7 10,792 12,784 14,011
EBIT 43,584 43,809 (0.5) 36,719 18.7 170,079 196,861 211,203
Other income 4,185 2,133 96.2 1,077 288.5 11,174 12,560 17,995
Profit before tax 47,769 45,942 4.0 37,796 26.4 181,253 209,421 229,198
Tax 11,419 10,025 13.9 8,174 39.7 40,344 50,261 55,007
Core profit 36,350 35,917 1.2 29,622 22.7 140,909 159,160 174,190
Minority interest 381 399 (4.5) 298 27.9 1,494 1,524 1,524
Net profit 35,969 35,518 1.3 29,324 22.7 139,415 157,636 172,666
Diluted EPS (INR) 18.4 18.1 1.3 15.0 22.7 71.2 80.5 88.2
As % of net revenues
Gross profit 47.8 47.4 47.8 47.2 46.0 45.5
SG&A 19.4 18.4 18.3 18.5 18.1 18.2
EBITDA 28.4 29.0 29.5 28.7 27.9 27.3
Adjusted net profit 22.1 22.4 22.3 22.4 21.2 21.1
Reported net profit 21.9 22.1 22.1 22.1 21.0 20.9
Tax rate 23.9 21.8 21.6 22.3 24.0 24.0
IT
6 Edelweiss Securities Limited
Company Description
TCS is India's largest and one of its oldest IT companies. It commenced operations in 1968
and provides a comprehensive range of IT services to industries such as banking and
financial services, insurance, manufacturing, telecommunications, retail, and transportation.
With a presence in 42 countries, TCS is positioned to deliver its services seamlessly. TCS has
a large diversified client base (1051 active clients), TCS’ employee force stands at 276,196
(including subsidiaries) and its revenues for the last twelve months (TTM) stood at INR630bn
(USD11.6bn).
Investment Theme
As India's largest and most-experienced IT services firm, TCS is well-positioned to benefit
from the growing demand for offshore IT services. It is a serious contender for winning large
deals, as it has more experience than peers in implementing large, complex, and mission-
critical projects. TCS has multiple margin levers at its disposal, which we believe, will sustain
its margins, shielding it from continued pressures on account of wage increases across the
industry. End-to-end full services offerings, traction in emerging markets, ability to roll up
large acquisitions, improving sales and marketing prowess and willingness to take multiple
big bets (different go-to-market models) are among the key rationales for TCS to sustain its
long term hi-growth trajectory. We believe current rich valuations build in a robust revenue
and earnings growth and leave a limited potential upside from current levels.
Key Risks
Key risks to our investment theme include – (1) double dip recession in major market US and
prolonged slowdown in Europe, (2) sharp cross currency movements and appreciation of
rupee against USD, Euro and GBP, (3) pricing pressure and (4) a reduction in margins.
7 Edelweiss Securities Limited
Tata Consultancy Services
Financial Statements
Income statement (INR mn)
Year to March FY12 FY13 FY14E FY15E
Net revenue 488,938 629,895 752,249 824,416
Cost of revenues 258,773 332,544 406,208 449,291
Gross profit 230,165 297,351 346,042 375,126
Total SG&A expenses 85,988 116,480 136,397 149,913
EBITDA 144,177 180,871 209,645 225,213
Depreciation & Amortization 9,036 10,792 12,784 14,011
EBIT 135,141 170,079 196,861 211,203
Other income 4,041 11,174 12,560 17,995
Profit before tax 139,182 181,253 209,421 229,198
Provision for tax 31,688 40,344 50,261 55,007
Net profit 107,494 140,909 159,160 174,190
Profit After Tax 107,494 140,909 159,160 174,190
Minority int. and others - 1,110 1,494 1,524 1,524
Profit after minority interest 106,384 139,415 157,636 172,666
Shares outstanding (mn) 1,957 1,957 1,957 1,957
Diluted EPS (INR) 54.4 71.2 80.5 88.2
Dividend per share (INR) 17.0 22.0 23.1 25.3
Common size metrics
Year to March FY12 FY13 FY14E FY15E
Cost of revenues 52.9 52.8 54.0 54.5
Gross margin 47.1 47.2 46.0 45.5
SG&A expenses 17.6 18.5 18.1 18.2
EBITDA margins 29.5 28.7 27.9 27.3
EBIT margins 27.6 27.0 26.2 25.6
Net profit margins 22.0 22.4 21.2 21.1
Growth ratios (%)
Year to March FY12 FY13 FY14E FY15E
Revenues 31.0 28.8 19.4 9.6
EBITDA 28.7 25.5 15.9 7.4
EBIT 29.0 25.9 15.7 7.3
PBT 26.4 30.2 15.5 9.4
Net profit 21.7 31.1 13.0 9.4
EPS 22.1 31.0 13.1 9.5
Key Assumptions
Year to March FY12 FY13 FY14E FY15E
Macro
GDP(Y-o-Y %) 6.5 5.0 6.5 7.0
Inflation (Avg) 8.8 7.8 6.0 6.0
Repo rate (exit rate) 8.5 7.5 6.8 6.0
USD/INR (Avg) 47.9 54.5 55.0 53.0
Company
Employee Addition (nos)
Gross additions 70,400 69,728 80,187 88,206
Lateral hires (% of Gross Addition) 56.0 44.6 55.0 45.0
Average attrition 14.2 12.7 10.9 11.0
Efforts
Onsite (%) 25.0 25.1 26.1 25.0
Offshore (%) 75.0 74.9 73.9 75.0
Utilisation
Onsite (%) 93.0 93.0 93.0 93.0
Offshore (%) 79.0 78.5 77.5 77.3
Blended (%) 82.2 81.7 81.5 81.2
Pricing change
Onsite (%) (1.2) (1.5) (1.6) -
Offshore (%) 2.2 (4.4) (0.1) -
Cost of sales
Employees cost 38.4 38.4 39.7 40.8
Travelling cost 1.4 1.4 1.5 1.4
Other costs 14.3 14.4 13.9 13.3
SGA cost
Employees cost 12.2 12.7 13.2 13.6
Other cost 6.1 6.3 5.6 5.3
Financial assumptions
Depreciation 1.8 1.7 1.7 1.7
Yield on cash & cash equivalents (%) 7.7 18.8 9.4 8.2
Tax rate as % of PBT 22.8 21.8 24.0 24.0
Capex (INR mn) 19,906 25,921 40,170 42,082
Debtor days 74 74 74 79
Payable days 51 50 52 58
Cash conversion cycle (days) 23 24 22 21
8 Edelweiss Securities Limited
IT
Peer comparison valuation
Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)
Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E
Tata Consultancy Services 52,716 18.1 16.5 12.5 11.2 34.1 30.2
CMC 769 12.6 10.8 9.0 7.6 31.7 30.0
ECLERX SERVICES 359 8.9 8.3 5.1 4.6 44.2 38.1
HCL Technologies 9,670 13.3 12.5 7.7 6.9 26.3 23.2
Hexaware Technologies 489 7.6 7.2 4.2 3.9 27.9 25.8
Info Edge 717 22.7 19.6 16.5 13.2 23.6 22.2
Infosys 24,249 13.1 11.7 7.9 7.1 23.0 22.0
Infotech Enterprises 345 7.7 7.4 2.9 2.6 17.0 15.6
Persistent Systems 403 9.4 8.7 3.7 3.1 21.3 19.3
Wipro 17,057 12.6 11.4 8.9 7.8 20.4 19.3
Median - 12.6 11.1 7.8 7.0 25.0 22.7
AVERAGE - 12.6 11.4 7.8 6.8 27.0 24.6
Source: Edelweiss research
Cash flow metrics
Year to March FY12 FY13 FY14E FY15E
Operating cash flow 75,440 123,260 156,332 168,290
Investing cash flow (29,496) (68,535) (94,640) (91,118)
Financing cash flow (41,528) (56,710) (54,480) (59,380)
Net cash flow 4,417 (1,985) 7,212 17,792
Capex (19,906) (25,921) (40,170) (42,082)
Dividends paid (38,978) (57,024) (54,480) (59,380)
Profitability & efficiency ratios
Year to March FY12 FY13 FY14E FY15E
ROAE (%) 36.7 37.9 34.1 30.2
ROACE (%) 64.8 72.2 78.0 71.6
Debtors days 74 74 74 79
Payable days 51 50 52 58
Cash conversion cycle (days) 23 24 22 21
Current ratio 2.4 2.1 2.0 2.0
Operating ratios
Year to March FY12 FY13 FY14E FY15E
Total asset turnover 1.7 1.8 1.7 1.5
Fixed asset turnover 8.1 8.4 7.8 6.6
Equity turnover 1.7 1.7 1.6 1.4
Valuation parameters
Year to March FY12 FY13 FY14E FY15E
Diluted EPS (INR) 54.4 71.2 80.5 88.2
Y-o-Y growth (%) 22.1 31.0 13.1 9.5
CEPS (INR) 59.0 76.7 87.1 95.4
Diluted PE (x) 26.8 20.4 18.1 16.5
Price/BV (x) 8.8 7.0 5.5 4.5
EV/Sales (x) 5.6 4.3 3.5 3.1
EV/EBITDA (x) 19.1 14.9 12.5 11.2
EV/EBITDA (x)+1 yr forward 15.2 12.8 11.6 -
Dividend yield (%) 1.2 1.5 1.6 1.7
Balance sheet (INR mn)
As on 31st March FY12 FY13 FY14E FY15E
Equity capital 1,957 1,957 1,957 1,957
Reserves & surplus 323,276 407,603 512,283 627,093
Shareholders funds 325,233 409,560 514,240 629,050
Minority interest (BS) 5,276 6,561 6,561 6,561
Borrowings 1,266 2,323 2,323 2,323
Deferred tax liability (13,147) (35,176) (35,176) (35,176)
Sources of funds 318,628 383,267 487,947 602,757
Net block 66,284 83,371 110,756 138,828
Goodwill 33,193 33,636 33,636 33,636
Investments 80,839 149,631 216,662 283,693
Cash and equivalents 19,836 18,432 25,644 43,436
Sundry debtors 114,992 140,766 165,160 190,334
Unbilled revenue 22,478 31,601 31,601 31,601
Prepaid & other current assets 25,045 16,560 16,560 16,560
Total current assets 182,351 207,358 238,964 281,931
Total current liabilities & 75,718 97,311 118,653 141,912
Net current assets 106,633 110,047 120,311 140,019
Uses of funds 318,628 383,267 487,947 602,757
Book value per share (INR) 166.2 209.3 262.7 321.4
Free cash flow (INR mn)
Year to March FY12 FY13 FY14E FY15E
Net profit 106,384 139,415 157,636 172,666
Depreciation 9,036 10,792 12,784 14,011
Others (7,377) (9,163) 599 6,649
Gross cash flow 108,043 141,044 171,019 193,326
Less: Changes in WC 32,603 17,785 14,686 25,036
Operating cash flow 75,440 123,260 156,332 168,290
Less: Capex 19,906 25,921 40,170 42,082
Free cash flow 55,534 97,339 116,163 126,208
9 Edelweiss Securities Limited
Tata Consultancy Services
Holding - Top10
Perc. Holding Perc. Holding
Life Insurance Corp. of India 3.01 Franklin Resources 2.18
Aberdeen 0.82 Vanguard Group Inc 0.62
Oppenheimerfunds Incorporated 0.57 Lazard Asset Management 0.45
Blackrock Fund Advisors 0.37 Templeton Investment Management 0.31
UTI Asset Management Co Ltd 0.27 HDFC Asset Management Co Ltd 0.25
*as per last available data
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
04 May 2012 Tata AIG Life Insurance Compan Buy 30000.00
08 May 2012 Tata AIG Life Insurance Compan Buy 28995.00
10 Sep 2012 Tata Global Beverages Limited Sell 200000.00
11 Sep 2012 Tata Global Beverages Ltd Sell 200000.00
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
No Data Available
*as per last available data
Additional Data
Directors Data
R N Tata Chairman S Ramadorai Vice Chairman
N Chandrasekaran CEO and MD Aman Mehta Director
V Thyagarajan Director Prof. Clayton M Christensen Director
Dr. Ron Sommer Director Laura M Cha Director
S Mahalingam CFO and Executive Director Phiroz Vandrevala Director
Dr. Vijay Kelkar Director Ishaat Hussain Director
O. P. Bhatt Director Cyrus Mistry Director
Auditors - Deloitte Haskins & Sells
*as per last annual report
10 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
CMC BUY SO L ECLERX SERVICES BUY SO M
HCL Technologies BUY SO H Hexaware Technologies BUY SO M
Info Edge REDUCE SU M Infosys BUY SP L
Infotech Enterprises BUY SO H Tata Consultancy Services HOLD SP L
Persistent Systems BUY SO L Wipro BUY SO L
Tech Mahindra BUY SO M
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
Yes Bank’s Q4FY13 PAT at INR3.62bn (up 33.2% YoY) surpassed our
estimate. Key positives were: (1) slippages at a minuscule INR350mn
(0.32% of advances) with no major restructuring pipeline; (2) treasury
gains used to build up counter cyclical buffer (CCB) with provision
coverage ratio (PCR) shoring up to 92.6%; (3) saving bank balances surged
23% QoQ to propel CASA to 18.9% (10.3% in FY11); and (4) despite
expansion phase cost/income ratio maintained at 37.7%, lower-end of
peer group. Although on right track granularity traction in loan book was
slower than expected. We remain confident of the bank’s ability to
execute Version II strategy (30% CASA by FY15E) and consequently tread
the path of re-rating. Maintain ‘BUY’.
This report also contains Q4FY13/Q3FY13 earnings call highlights
Prudent risk management led to higher provisions
Yes Bank’s provisions during the quarter surged to INR975mn (up 72% QoQ) riding
INR250mn provisions towards building up CCB-aided by monetisation of bond
portfolio. PCR now stands at to 92.6%, one of the best among peers. The continued risk
mitigation practices coupled with management’s execution capability infuses us with
confidence that Yes Bank will successfully navigate unscathed through the current
cyclical slowdown. The bank has guided for total credit cost of 50-60bps for FY14.
CASA: Success story continues; on track to achieve Version II
In line with its Version II strategy, Yes Bank has been aggressive in garnering saving
account (SA) balances, post the interest rate deregulation, by offering 6-7%. CASA rose
from 18.3% to 18.9% QoQ, largely contributed by traction in SA, up 23% QoQ. While SA
at ~9.0% is currently tiny to make any significant dent in cost of funds, it is a step in the
right direction as the bank targets high profile clients who can be tapped for cross sell.
Outlook and valuations: Improving profitability; maintain ‘BUY’
We expect Yes Bank to grow well above the system, with a well entrenched fee income
platform, improving CASA and lower credit costs, delivering superior earnings (~25%
CAGR over FY13-15E) and best-in-class RoA/RoE of 1.6%/25% by FY15E. The stock is
trading at 1.9x FY15E adj. BV. Maintain ‘BUY/ SO’ with TP of INR615 (2.5x FY15E adj. BV).
RESULT UPDATE
YES BANK Core income steady; bond gains used to shore asset cover
EDELWEISS 4D RATINGS
Absolute Rating BUY
Rating Relative to Sector Outperformer
Risk Rating Relative to Sector Medium
Sector Relative to Market Equalweight
MARKET DATA (R: YESB.BO, B: YES IN)
CMP : INR 479
Target Price : INR 615
52-week range (INR) : 545 / 285
Share in issue (mn) : 358.6
M cap (INR bn/USD mn) : 172/ 3,172
Avg. Daily Vol.BSE/NSE(‘000) : 2,804.1
SHARE HOLDING PATTERN (%)
Current Q2FY13 Q1FY13
Promoters *
25.8 25.9 26.1
MF's, FI's & BK’s 14.7 15.5 15.3
FII's 48.3 46.4 41.7
Others 11.2 12.3 16.9
* Promoters pledged shares
(% of share in issue)
: 1.0
PRICE PERFORMANCE (%)
Stock Nifty
EW Banks and
Financial
Services Index
1 month 1.2 (3.1) (7.7)
3 months (8.5) (5.8) (12.3)
12 months 29.1 7.5 9.6
Nilesh Parikh
+91 22 4063 5470
Kunal Shah
+91 22 4040 7579
Prakhar Agarwal
+91 22 6620 3076
India Equity Research| Banking and Financial Services
April 17, 2013
Financials (INR mn)
Year to March Q4FY13 Q4FY12 Growth % Q3FY13 Growth % FY13 FY14E FY15E
Net int. inc. 6,381 4,482 42.4 5,843 9.2 22,188 28,554 35,594
Net profit 3,622 2,718 33.2 3,423 5.8 13,007 16,473 20,342
Adj.B/V / share (INR) 162 200 247
Diluted EPS (INR) 9.9 7.6 31.0 9.4 5.3 36.3 45.9 56.7
Price / Adj. book (x) 3.0 2.4 1.9
Price/ PPOP (x) 8.1 6.4 5.2
Diluted P/E (x) 13.2 10.4 8.4
Banking and Financial Services
2 Edelweiss Securities Limited
Zero net exposure towards Deccan
Yes Bank had exposure of INR1.6bn to Deccan, of which it recovered INR400mn and
provided about INR450mn in Q2FY13 and another INR450mn in Q3FY13. Against the net
book value of INR300mn it sold the exposure to an Asset Reconstruction Company (ARC) for
which it received Security Receipts (SRs) of ~INR510mn and cash of INR32.5mn. So,
effectively, the bank does not have any P&L impact due to Deccan.
Customer asset growth impressive; granularity to be key focus
During Q4FY13, Yes Bank’s credit (advances + credit substitutes) grew 30.9% YoY to
INR603.6bn. Within this, advances accounted for 68.1% (~89% a year ago), suggesting faster
traction in credit substitute segment—after muted Q3FY13. Advance growth was largely
contributed by the retail banking segment and the large corporate segment offsetting some
moderation in the commercial banking segment. Although granularity in loan book
continues to gain traction with retail banking comprising 18% of loans against a mere 5% in
FY10, the growth path is slower than expected. We are building in loan book growth of 24%
over FY13-15E.
Asset quality pristine: Moving towards zero net NPLs
In line with its guidance, the bank’s headline numbers continued to impress with GNPA
coming in at 0.20%, although a tad higher than 0.17% in Q3FY13. NNPL improved further to
stay at negligible level of 0.01% (0.04% in Q3FY13). Slippages during the quarter came in at
miniscule level of INR350mn riding on 3-4 accounts. With no major additions in the
restructured pool during the quarter, Yes Bank’s outstanding restructured assets stand at a
mere 0.31% of advances (down from peak of 0.53%). With weak assets of INR2.4bn
(reported gross NPAs + standard asset restructuring) (~60bps), we believe the bank is well
positioned to steer the asset quality out of pressures compared to peers.
Strong fee income supported by diversified streams
Fee income came in strong at INR31.9bn, up 21.1% QoQ, contributed by a robust
performance in financial markets (up 82% QoQ, predominantly debt capital and forex
segments)-riding on bond gains of INR450mn during the quarter. Financial advisory fees
once again came in healthy at 62% YoY .Revenue from the core fee segment–transaction
banking–is starting to show predictability, coming in at INR931mn (up 15.7% QoQ), riding on
enhanced cross selling of products to customers. Retail banking segment has seen a healthy
ramp up over the quarter, up 57% QoQ (forming > 10% of total fees), in line with its strategy
of building in granularity in fee income.
Margin stable led by tight leash on cost; positive guidance
NIMs remained stable at 3% (flat QoQ), given benefits of lower COF (down 10bps QoQ to
8.4%) due to the move to seek lower cost borrowing and healthy traction in SA. While
advance yields have improved 10bps and cost of funds are down 10bps, NIMs are still flat
QoQ as it has lost 9bps due to change in mix in favour of low yield investments and 5bps
due to leverage. We are building in average NIMs(calc.) of 2.8% by FY15E as the increasing
CASA and decline in wholesale rates will lower cost of funds. Management has guided for
margin pick up of 15-20bps .
Yes Bank
3 Edelweiss Securities Limited
Maintaining best-in-class cost-to-income
Despite being in expansion phase (adding another 18 branches during the quarter), Yes
Bank’s cost-to-income ratio for Q4FY13 was steady at 37.7% QoQ, at the lower end of the
private sector bank peer group, led by strong revenue traction. Even as Yes Bank expands its
footprint, with focus on scaling up branch banking business, CASA pool and revenue traction
to keep cost-income ratio around 40% mark.
Capital raising in CY13
Yes Bank has renewed approval to raise USD500mn capital. However, it believes, in the
interim, current capital along with internal accruals are sufficient to sail through. Given its
track record, we expect the bank to raise capital at an attractive valuation, limiting earnings
dilution and providing a significant boost to book value. Tier 1 currently stands at 9.5%.
Other highlights
• Version 2.0 strategy update: Balance sheet size on track or ahead; slightly behind on
loan growth considering challenging environment; CASA target was 30% (from 10% and
is already half-way at 20%).
• Retail strategy: In terms of rolling out is going pretty well. In the retail segment, now it
has all products on the shelf except housing and credit cards. Current growth driven by
CV, LAPs. Has started cross-selling retail products to branch banking customers.
Table 1: Customer assets (advances + Credit substitutes) grew at 30.9% YoY; advance grew 23.7% YoY
Table 2: Aimimg towards bringing granularity in business– Retail (branch banking) standing at 18% of customer assets
Note: Q413 mix is as a proportion of customer assets
Table 3: Financial markets–key growth driver of fee income
Source: Company
Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413
Advances (INR mn) 343,636 331,042 341,941 358,678 379,886 385,339 420,193 438,568 469,996
Advances growth Q-o-Q (%) 10.4 (3.7) 3.3 4.9 5.9 1.4 9.0 4.4 7.2
Advances growth Y-o-Y (%) 54.8 26.1 12.7 15.2 10.5 16.4 22.9 22.3 23.7
Deposits (INR mn) 459,389 435,759 440,759 469,291 491,517 502,081 522,900 564,005 669,556
Deposit growth Q-o-Q (%) 16.4 (5.1) 1.1 6.5 4.7 2.1 4.1 7.9 18.7
Deposit growth Y-o-Y (%) 71.4 44.1 10.2 18.9 7.0 15.2 18.6 20.2 36.2
CD ratio (%) 74.8 76.0 77.6 76.4 77.3 76.7 80.4 77.8 70.2
CASA (%) 10.3 10.9 11.0 12.6 15.0 16.3 17.3 18.3 18.9
(%) Q4FY11 Q1FY12 Q2FY12 Q312 Q412 Q113 Q213 Q313 Q413
Corporate and institutional 65 63 61 63 60 64 67 66 65
Commercial 23 24 24 21 22 20 18 21 17
Retail (Branch banking) 12 12 15 15 18 16 15 14 18
(%) Q4FY11 Q1FY12 Q2FY12 Q312 Q412 Q113 Q213 Q313 Q413
Financial markets 12.9 14.9 19.2 22.8 25.8 32.8 17.0 12.5 18.9
Financial advisory 41.3 50.2 45.7 38.1 38.3 35.6 43.2 51.9 43.7
Retail banking fees and others 10.8 9.5 6.7 8.8 9.6 7.5 11.1 9.9 12.9
Transaction banking 35.0 25.4 28.5 30.2 26.3 24.1 28.8 25.7 24.5
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Banking and Financial Services
4 Edelweiss Securities Limited
Table 4: Non-fund income contributed to 37% of Net revenues for the quarter
Table 5: NIMs stable as cost benefit is offset by decline in investment yields
Table 6: Tier I ratio at 9.5%
Chart 1: Given healthy traction on SA, it is targeting 30% CASA by FY15E
Chart 2: Ratio of corporate investments/customer assets have peaked
Source: Company
(%) Q4FY11 Q1FY12 Q2FY12 Q312 Q412 Q113 Q213 Q313 Q413
Fees income growth Q-o-Q 15.5 (11.5) 29.5 (1.2) 26.0 8.2 (3.9) 13.2 21.1
Non fund income/Net revenue 34.9 31.8 35.7 33.1 37.3 37.9 34.6 34.9 37.3
(%) Q4FY11 Q1FY12 Q2FY12 Q312 Q412 Q113 Q213 Q313 Q413
Spreads 2.9 3.1 3.6 3.5 3.5 3.4 3.7 3.8 4.0
NIM 2.8 2.8 2.9 2.8 2.8 2.8 2.9 3.0 3.0
COF 7.8 8.5 8.6 8.9 9.0 9.0 8.7 8.5 8.4
YoA 10.7 11.6 12.2 12.4 12.5 12.4 12.4 12.3 12.4
(%) Q4FY11 Q1FY12 Q2FY12 Q312 Q412 Q113 Q213 Q313 Q413
Tier-I 9.7 9.6 9.4 9.2 9.9 9.2 9.5 9.5 9.5
Tier-II 6.8 6.6 6.6 6.9 8.0 7.3 8.0 8.5 8.8
0.0
2.6
5.2
7.8
10.4
13.0
Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
(%)
Average SA Average CA
4.0
8.6
13.2
17.8
22.4
27.0
210
287
363
440
516
593
Q2
FY
11
Q3
FY
11
Q4
FY
11
Q1
FY
12
Q2
FY
12
Q3
FY
12
Q4
FY
12
Q1
FY
13
Q2
FY
13
Q3
FY
13
Q4
FY
13
(%)
(IN
R b
n)
Customer assets Advances Corp. Inv. as a % of customer assets (RHS)
Yes Bank
5 Edelweiss Securities Limited
Financial snapshot (INR mn)
Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E
Interest on advances 14,653 11,962 22.5 13,936 5.1 53,971 61,531 72,201
Interest on investments 8,144 5,782 40.8 7,257 12.2 28,595 37,420 45,250
Interest on other resources 27 63 (57.3) 43 (37.2) 375 404 476
Interest income 22,877 17,851 28.2 21,336 7.2 82,940 99,355 117,927
Interest exp 16,495 13,369 23.4 15,493 6.5 60,752 70,802 82,333
Net int. inc. (INR mn) 6,381 4,482 42.4 5,843 9.2 22,188 28,554 35,594
Fee income 3,794 2,664 42.4 3,132 21.1 12,274 15,422 19,404
Other income 3,794 2,664 42.4 3,132 21.1 12,574 15,722 19,704
Operating expenses 3,836 2,842 35.0 3,341 14.8 13,345 17,185 21,820
Staff expense 1,742 1,337 30.3 1,620 7.5 6,555 8,240 10,614
Other opex 2,095 1,505 39.2 1,721 21.7 6,790 8,944 11,206
Pre prov op profit (ppop) 6,339 4,304 47.3 5,635 12.5 21,117 26,791 33,178
Provisions 975 285 242.5 567 72.1 2,160 2,866 3,563
Profit before tax 5,364 4,019 33.5 5,068 5.8 19,257 24,225 29,915
Provision for taxes 1,742 1,301 33.9 1,645 5.9 6,251 7,752 9,573
PAT 3,622 2,718 33.2 3,423 5.8 13,007 16,473 20,342
Diluted EPS (INR) 9.9 7.5 31.0 9.4 5.3 36.3 45.9 56.7
Ratios
NII/GII (%) 27.9 25.1 27.4 26.8 28.7 30.2
Cost/income (%) 37.7 39.8 37.2 38.4 38.8 39.5
Provisions / PPOP 15.4 6.6 10.1 10.2 10.7 10.7
Tax rate (%) 32.5 32.4 32.5 32.5 32.0 32.0
Balance sheet data (INR bn)
Advances 470 380 23.7 439 7.2 470 564 705
Deposits 670 492 36.2 564 18.7 670 806 978
Investments 70 77 (9.2) 78 (9.7) 70 70 72
CASA ratio (%) 18.9 15.0 18.3 18.9 23.0 26.5
Capital adequacy (%) 18.3 17.9 18.0 17.9 15.2 15.0
NIMs(%) 3.0 2.8 3.0 2.7 2.8 2.8
CD ratio (%) 70.2 77.3 77.8 90.1 91.5 95.2
Asset quality
Gross NPA 943 839 12.5 762 23.7 943 2,355 4,050
Gross NPA (%) 0.2 0.2 0.2 0.2 0.4 0.6
Net NPA 70 175 (60.0) 156 (55.1) 70 146 236
Provision coverage (%) 92.6 79.2 79.6 92.6 93.8 94.2
Banking and Financial Services
6 Edelweiss Securities Limited
Yes Bank – Q4FY13 earnings concall key takeaways
• In terms of mix, retail banking (including MSME) seems to have witnessed a sharp jump
in Q4FY14 as they have regrouped credit substitutes as well while giving out proportion
of retail, commercial and corporate banking.
• PSL targets at broader level have been largely achieved (marginal miss); but in direct
agri there was a shortfall of INR 8-9 bn
• For full year FY13, Slippages INR 2.43 bn (INR 350 mn in Q4FY13), recoveries INR 1.08
bn (INR 100-150 mn in Q4FY13) and write-off INR 1.08 bn
• Provisioning has been higher: stepped up provisioning of INR 250 mn towards adversely
labeled assets (not NPLs); catch up of provisioning coverage (INR 250 mn); 120 mn of
general loan loss provisioning; INR 120 mn of non-credit provisioning.
• While advance yields have improved 10 bps and cost of funds are down 10 bps NIMs
are still flat QoQ as it has lost 9 bps due to investment yield and 5 bps due to leverage.
• Restructured book has come down from peak of 53 bps to 31 bps
• Retail strategy –in terms of rolling out is going pretty well. In retail segment, now it has
all products on the shelf except for housing & credit card. Current growth driven by CV,
LAPs. Have started cross-selling retail products to branch banking customers.
• Version 2.0 strategy update: balance sheet size on track or ahead; slightly behind on
loan growth considering challenging environment; CASA target was 30% (from 10% and
is already half-way at 20%)
• Sell downs will be 2-4% of the loan book – risk management, exposure management etc
• Exposure to gold loan companies will be 60-70 bps of loan book (short term loans).
Outlook
• Customer asset (including credit substitute) to grow at 25-30%
• Expects 15-20 bps NIM improvement by end of FY14
• Credit cost (as % of loans) to be within 50-60 bps for FY14.
o After taking into account increase in NPLs which the bank anticipates considering
the economy is not at its best (though its getting more worse)
o FY14 should be very good year for monetization on bond gains which will aid
stepping up countercyclical provisions.
o Also takes into account general provisioning on incremental loan book
• In Q1FY14, cost/income will be higher as payroll increase kicks in while on income front
Q1 is not seasonally not that strong. On a full year basis, can afford 30-40% growth in
opex given strong run-rate in NII & fee income.
• Restructuring pipeline is not even in double digit.
• Financial advisory: confident on pipeline visibility; Financial markets on account of
bonds will do better; retail will do better due to increasing penetration for the bank
• Will add 150-175 branches and 1400-1600 employees in FY14.
Yes Bank
7 Edelweiss Securities Limited
Datapoints
• RWA: INR 660 bn
• CASA and retail TD touched 35.5% vis-à-vis ~32% in FY12.
• Monetization from bond portfolio (duration adjustment) – INR 450 mn.
• Excess SLR of INR 30-40 bn of INR 230 bn
• Adversely labeled assets ~1% of assets and it carries countercyclical provisioning of
less than 20% on the same.
8 Edelweiss Securities Limited
Banking and Financial Services
Yes Bank – Q3FY13 earnings concall key takeaways
• Deccan Chronicle: 80% of the exposure at INR900mn has been provided on the same.
The bank is hopeful of recovering ~20% from this account and another 15-20% can be
recovered by taking legal recourse over the next 2 quarters. However, Deccan
Chronicle is still technically not an NPA till Dec 31, 2012
• For Financial Advisory Income robust due to 5-6 deal closures. Cost to income in this
business will ne 20-25%. For some small ticket deals the commission can be as high as
5%. Provision to be one stop shop for all the client requirements is the advantage
offered by the bank.
• Received highest number of urban and metro branch approvals from RBI at 146
branches (vis-à-vis 56 for the prior year)
• Buying RBS’s retail assets will definitely send out strong signals on retail assets build
up intention. However, even without this buyout the bank can build up the business
on its own
• Blended cost of SA will be a little short of 7%
• Yield on credit substitutes is 10-10.25%
• More than 80% of the investment book is rated AA and above
• 20-22% growth possible from internal accruals itself. May be 300-400mn USD in 2013
• The bank has hit an inflexion point similar to what HDFC Bank was in 2003-2004
• Internal rating of accounts by banks is taken into consideration for proactive
provisioning. While RBI mandates provisioning when a loan is rated 10 (as per the
banks’ scale) the bank starts providing the moment the account touches 8 (at 7.5-10%)
and by the time it touches 9 upto 15-20%
• Sale of corporate debt can be booked under both Financial Markets and Corporate
Finance. However, corporate finance will come into the picture in case of loan
syndication
• Blended cost of deposits will be ~8.9%
• Over the past one year 15bps of NIM improvement can be attributed to CASA
improvement
• No major project in the restructuring pipeline
• Employee/branch will increase in line with peers as the intensity of retail banking
increases
Outlook
• NIM will further benefit if repo rate cuts happen and liquidity remains benign
• CASA and retail TD likely to touch 55-60% over the next two years from the current
~38%
• Fee income from retail banking to become one of the biggest fee income contributor by
the next two-three years
9 Edelweiss Securities Limited
Yes Bank
• Minimum RoE of 20% will be maintained even post equity raising and that means the
bank can support 8-10% dilution
• 30% CASA by next 3 years, 30% in retail and SME assets in next three years and 3.5% on
NIMs
• Cost-income will unlikely cross the 40% mark
Datapoints
• SLR stands at INR194bn
• Breakup of provisions: Predominantly on account of credit costs of which INR200mn is
general and the rest is contingent (on account of Deccan Chronicle)
• RWA at INR600bn. Credit substitutes rated AA attract 30% RW but another hit on
account of market risk also needs to be taken
• Retail assets will be broadly INR10bn
10 Edelweiss Securities Limited
Banking and Financial Services
Company Description
YES BANK is a private Indian bank promoted by Rana Kapoor and Ashok Kapur with financial
support from Rabobank Nederland, and global institutional private equity investors –AIF
Capital, and ChrysCapital. It is operational since November 2004 and is the only greenfield
bank approved by RBI in last decade. It has market cap of INR 172 bn and balance sheet of
~INR 991 bn. It has branch network of 430 at the end of Q4FY13 and a CASA ratio of >17%.
Corporate lending forms 65% of customer assets, commercial 17% and retail 18%.
Investment Theme
YES BANK is one of the few private sector banks with product depth, sustainable
competitive edge, and strong growth. Given the underlying credit demand and small asset
book, the loan book is expected to grow at more than 24% for the next two years. The
bank’s high proportion of fee income enables high return on assets (of 1.5%+) and indicates
its potential of generating higher than presently reported RoE (25%+), once the capital
ratios normalise. Considering the bank’s strong fundamentals reflected in its product width,
adept management, and technological prowess, we find it to be the perfect acquisition
candidate for a foreign player, once the regulations ease.
Key Risks
Lower CASA can be a negative for the bank at this point of time when most banks are
banking on their franchise network.
In the event of demand for credit dying down as in the current scenario, lack of pricing
power can impact its margins adversely (due to nascent deposit franchise).
11 Edelweiss Securities Limited
Yes Bank
Financial Statements
Income statement (INR mn)
Year to March FY12 FY13E FY14E FY15E
Interest income 63,074 82,940 99,355 117,927
Interest expended 46,917 60,752 70,802 82,333
Net interest income 16,156 22,188 28,554 35,594
Non interest income 8,586 12,574 15,722 19,704
- Fee & forex income 7,945 11,883 14,930 18,785
- Misc. income 262 392 492 619
- Investment profits 379 300 300 300
Net revenue 24,742 34,762 44,276 55,298
Operating expense 9,325 13,345 17,185 21,820
- Employee exp 4,752 6,555 8,240 10,614
- Other opex 4,574 6,790 8,944 11,206
Preprovision profit 15,417 21,417 27,091 33,478
Provisions 902 2,160 2,866 3,563
Loan loss provisions 523 2,160 2,866 3,563
Investment depreciation 160 - - -
Other provisions 219 - - -
Profit before tax 14,515 19,257 24,225 29,915
Provision for tax 4,731 6,251 7,752 9,573
Profit After Tax 9,783 13,007 16,473 20,342
Reported PAT 9,783 13,007 16,473 20,342
Diluted EPS (INR) 27.7 36.3 45.9 56.7
Dividend per share (INR) 5.0 6.0 7.0 8.0
Dividend payout (%) 20.8 19.1 17.6 16.3
Growth ratios (%)
Year to March FY12 FY13E FY14E FY15E
NII growth 29.6 37.3 28.7 24.7
Fees growth 21.2 49.6 25.6 25.8
Opex growth 37.2 43.1 28.8 27.0
PPOP growth 21.6 40.4 26.9 23.8
PPP growth 29.5 38.9 26.5 23.6
Provisions growth (8.1) 313.1 32.7 24.3
Net profit 34.5 33.0 26.6 23.5
Operating ratios
Year to March FY12 FY13E FY14E FY15E
Yield on advances 12.2 12.7 11.9 11.4
Yield on investments 7.9 8.1 8.0 7.9
Yield on assets 10.0 10.2 9.7 9.4
Net interest margins 2.6 2.7 2.8 2.8
Cost of funds 7.6 7.5 7.0 6.6
Cost of deposits 8.1 7.9 7.0 6.6
Cost of borrowings 8.1 8.4 8.4 8.3
Spread 2.5 2.7 2.7 2.8
Cost-income 37.7 38.4 38.8 39.5
Tax rate 32.6 32.5 32.0 32.0
Key Assumptions
Year to March FY12 FY13E FY14E FY15E
Macro
GDP(Y-o-Y %) 6.5 5.0 6.5 7.0
Inflation (Avg) 8.8 7.8 6.0 6.0
Repo rate (exit rate) 8.5 7.5 6.8 6.0
USD/INR (Avg) 47.9 54.5 55.0 53.0
Sector
Credit growth 17.1 14.7 15.0 16.0
Deposit growth 13.4 13.5 15.0 16.0
CRR 4.8 4.3 4.0 4.0
SLR 24.0 23.0 23.0 23.0
G-sec yield 8.5 7.8 7.6 7.5
Company
Yield on advances 12.2 12.7 11.9 11.4
Yield on investments 7.9 8.1 8.0 7.9
Yield on asset 10.0 10.2 9.7 9.4
Net interest margins 2.6 2.7 2.8 2.8
Cost of funds 7.6 7.5 7.0 6.6
Cost of deposits 8.1 7.9 7.0 6.6
Cost of borrowings 8.1 8.4 8.4 8.3
Spread 2.5 2.7 2.7 2.8
Tax rate (%) 32.6 32.5 32.0 32.0
Credit growth 18.4 32.8 22.2 26.2
Deposit growth 7.0 36.2 20.4 21.3
SLR ratio 27.7 28.0 27.0 26.5
Low-cost deposits 15.0 18.9 23.0 26.5
Gross NPA ratio 0.2 0.2 0.4 0.6
Provision coverage 79.2 92.6 93.8 94.2
Incremental slippage 0.2 0.5 0.6 0.6
Net NPA / Equity 0.4 0.1 0.2 0.3
Capital adequacy 17.9 15.2 15.0 14.7
12 Edelweiss Securities Limited
Banking and Financial Services
Peer comparison valuation
Market cap Diluted PE (X) Price/ Adj. BV (X) ROAE (%)
Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E
Yes Bank 3,179 10.4 8.5 2.4 1.9 25.4 25.4
Allahabad Bank 1,255 3.3 2.6 0.6 0.5 17.5 19.4
Axis Bank 11,916 10.0 8.1 1.7 1.5 18.0 19.0
Bank of Baroda 5,262 4.6 3.9 0.9 0.7 18.3 18.5
Federal Bank 1,380 7.5 6.3 1.1 1.0 14.8 15.5
HDFC Bank 29,051 18.5 14.8 3.8 3.1 21.7 22.8
ICICI Bank 23,413 14.2 12.5 2.1 1.9 12.8 13.1
Indian Overseas Bank 1,100 4.2 3.6 0.6 0.5 10.5 11.4
IndusInd Bank 4,055 16.4 12.8 2.6 2.2 16.6 18.2
ING Vysya 1,596 11.0 8.7 1.7 1.4 16.1 17.5
Karnataka Bank 503 6.5 5.3 1.0 0.9 14.0 15.4
Oriental Bank Of Commerce 1,376 3.8 3.3 0.6 0.5 15.0 15.5
Punjab National Bank 4,886 4.3 3.8 0.9 0.7 17.7 17.5
South Indian Bank 580 0.5 0.4 0.1 0.1 25.2 25.2
State Bank of India 28,397 9.5 7.9 1.6 1.4 15.4 16.2
Union Bank Of India 2,553 6.1 5.3 0.9 0.8 16.3 16.6
Median - 7.0 5.8 1.0 0.9 16.4 17.5
AVERAGE - 8.2 6.7 1.4 1.2 17.2 17.9
Source: Edelweiss research
RoE decomposition (%)
Year to March FY12 FY13E FY14E FY15E
Net interest income/assets 2.6 2.7 2.8 2.8
Fees/Assets 1.3 1.5 1.5 1.5
Investment profits/Assets 0.1 - - -
Net revenues/assets 3.9 4.3 4.3 4.4
Operating expense/assets (1.5) (1.6) (1.7) (1.7)
Provisions/assets (0.1) (0.3) (0.3) (0.3)
Taxes/assets (0.8) (0.8) (0.8) (0.8)
Total costs/assets (2.4) (2.7) (2.7) (2.8)
ROA 1.6 1.6 1.6 1.6
Equity/assets 6.7 6.4 6.3 6.4
ROAE (%) 23.1 24.8 25.4 25.4
Valuation parameters
Year to March FY12 FY13E FY14E FY15E
Diluted EPS (INR) 27.7 36.3 45.9 56.7
Y-o-Y growth (%) 32.3 30.9 26.6 23.5
Book value per share (INR) 133 162 200 247
Adjusted book value per share 132 162 200 247
Diluted PE (x) 17.3 13.2 10.4 8.5
Price/ Adj. BV (x) 3.6 3.0 2.4 1.9
Dividend yield (%) 1.0 1.3 1.5 1.7
Price to income (x) 13.2 9.0 7.1 5.6
Balance sheet (INR mn)
As on 31st March FY12 FY13E FY14E FY15E
Equity capital 3,530 3,586 3,586 3,586
Reserves & surplus 43,237 54,491 68,065 85,095
Net worth 46,766 58,077 71,651 88,681
Sub bonds/pref cap 48,133 64,875 74,875 94,875
Deposits 491,517 669,556 805,875 977,634
Borrowings 93,432 144,347 164,347 239,347
Other liabilities 56,773 54,187 58,108 63,275
Total liabilities 736,621 991,041 1,174,857 1,463,812
Loans 379,886 469,996 563,995 704,994
Cash and equivalents 35,855 40,658 40,967 45,170
Gilts 161,784 236,931 261,960 322,500
Others 115,789 192,830 247,587 318,038
Fixed assets 1,771 2,296 2,296 2,325
Other Assets 41,535 48,332 58,052 70,786
Total assets 736,621 991,041 1,174,857 1,463,812
Credit growth 18.4 32.8 22.2 26.2
Deposit growth 7.0 36.2 20.4 21.3
EA growth 22.3 35.6 18.5 24.8
SLR ratio 27.7 28.0 27.0 26.5
C-D ratio 92.5 90.1 91.5 95.2
Low-cost deposits 15.0 18.9 23.0 26.5
Gross NPA ratio 0.2 0.2 0.4 0.6
Net NPA ratio - - - -
Provision coverage 79.2 92.6 93.8 94.2
Incremental slippage 0.2 0.5 0.6 0.6
Net NPA / Equity 0.4 0.1 0.2 0.3
Capital adequacy 17.9 15.2 15.0 14.7
- Tier 1 9.9 9.5 9.1 8.8
13 Edelweiss Securities Limited
Yes Bank
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
26 Apr 2012 Rabobank International Holding B.V Sell 12691564 357.03
26 Apr 2012 Citigroup Global Markets Mauritius Pvt Ltd Buy 2200000 357.00
26 Apr 2012 Bajaj Allianz Life Insurance Company Ltd Buy 2521000 357.00
28 Jun 2012 Hsbc Iris Investments Mauritius Ltd Sell 16792999 324.77
16 Oct 2012 Credit Suisse (Singapore) Ltd Sell 4985913 378.00
16 Oct 2012 Clsa (Mauritius) Ltd Sell 6358087 378.77
*as per last available data
Holding – Top10 Perc. Holding Perc. Holding
Life Insurance Corp. 5.07 American Funds Ins 4.59
Wasatch Advisors Inc 2.95 T Rowe Price 1.95
Merril Lynch Capital 1.63 Morgan Stanley 1.32
Goldman Sachs Invest. 1.29 JP Morgan 1.28
DB International 1.15 Bajaj Alliance Life 1.13
*as per last available data
Additional Data
Directors Data
Rana Kapoor Managing Director & CEO S L Kapur Director
Ajay Vohra Director Radha Singh Director
Arun K Mago Director
Auditors - BSR & Co
*as per last annual report
14 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Allahabad Bank BUY SP M Axis Bank BUY SO M
Bank of Baroda BUY SP M Federal Bank BUY SO L
HDFC HOLD SP L HDFC Bank HOLD SP L
ICICI Bank BUY SO L Indian Overseas Bank HOLD SU M
IndusInd Bank BUY SP L IDFC BUY SO L
ING Vysya BUY SO L Karnataka Bank BUY SO M
Kotak Mahindra Bank REDUCE SU M LIC Housing Finance BUY SO M
Mahindra & Mahindra Financial Services BUY SO M Manappuram General Finance UNDER REVIEW UNDER
REVIEW
None
Multi Commodity Exchange of India BUY SO M Muthoot Finance BUY SO M
Oriental Bank Of Commerce BUY SO L Power Finance Corp BUY SO M
Punjab National Bank HOLD SU M Reliance Capital BUY SO M
Rural Electrification Corporation BUY SO M Shriram City Union Finance BUY SO M
South Indian Bank HOLD SP M State Bank of India BUY SO L
Union Bank Of India BUY SO M Yes Bank BUY SO M
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
1 Edelweiss Securities Limited
Contrary to our expectation of increase in cement prices (on rise in railway
freight), prices dropped in April and that too across regions on back of low
demand. The current all India average price is down ~3.3% compared to
March with corrections of ~4% in each of Central, South and West regions.
Prices in North and East dipped ~1.5% each over the month. With bleak
chances of sharp hikes in cement price in Q1FY14 and a seasonally weak
monsoon quarter thereafter, we are cautious on the sector in the near term
even as the long term fundamentals (primarily reducing pace of capacity
additions) remain positive.
February industry production up just 3.9% YoY
As per IIP data (index of eight core industries), cement production in February
increased 3.9% YoY, taking YTD FY13 growth to 5.5% YoY. March production is also
expected to grow in lower single digits as per data released by a few companies and
feedback from channel checks.
Regional prices: Poor demand spoils the party
Owing to low demand, prices in April dipped across regions (~4% in Central, West and
South each and ~1.5% in North and East each). Prices have dropped below INR200/bag
for some brands in Andhra Pradesh (down ~INR20/bag over the month) while the
highest price is in Patna and Kolkata of INR370/bag for leading brands post correction
of ~INR5/bag.
Chart 1: Region-wise price trend—Prices decline on muted demand
Source: Edelweiss research
150
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North East Central West South
Navin Sahadeo
+91-22-6623 3473
Prasad Baji
+91 22 4040 7415
April 17, 2013
Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Edelweiss Securities Limited
CEMENT
Low demand stings prices
MONTHLY UPDATE
India Equity Research | Cement
Click to edit Master title style
Factor Analyser (FA)Analyst on Radar
1Factor AnalyserSource: Edelweiss research, Bloomberg
Click to edit Master title styleFactor Analyser (FA)
Consensus Estimate Revision
Earning Revision
Price Target Revision
Rating Revision
Valuation Screen
Sector Popularity Vs Dividend Yield
Factor Analyser: Factor Returns
Nifty Earnings (FY13E‐14E) ‐ Sectoral earning decomposition
India Valuation Dispersion Indicator
2Factor AnalyserSource: Edelweiss research, Bloomberg
Click to edit Master title styleWhat’s in…Market valuations dispersion indicator is trading at (0.2) SD levels Vs (0.1) SD levels last month. Nifty has closed in the redlosing ~3.5% in last 1 month. Broader markets were in‐line with mid‐cap and small‐cap indices losing ~4% and ~5% respectivelyin last one month.
MMFS saw 1m EPS upgrade (consensus estimates) of ~18% while price has declined by ~5% BPCL saw 1m EPS upgrade of ~7%MMFS saw 1m EPS upgrade (consensus estimates) of ~18% while price has declined by ~5%. BPCL saw 1m EPS upgrade of ~7%while price has remained flattish.
TTMT saw 1m EPS upgrade of ~5% with 1m prices correcting by ~11%. JLR global retail sales for the month of Feb‐13 stands at26.9k units (up 3.1% Y‐o‐Y, down 23% M‐o‐M). ONGC saw 1m EPS upgrade of ~6% while price has remained flattish.
Realty names such as UT & HDIL saw 1m EPS downgrade of ~24% & ~12% with price correction of ~17% & ~31% respectively.
TCS & HCLT saw 1m price target upgrade of ~4% & 3% respectively with prices declining by ~5% & ~4% respectively. RCOM saw1m price target upgrade of 3% along with price jump of 25%.1m price target upgrade of 3% along with price jump of 25%.
INFO saw 1m price target downgrade of ~11% with price depreciation of ~20%. Q4FY13 revenues grew a mere 1.4% Q‐o‐Q vs.estimate of 3.4% along with FY14 revenue growth guidance of 6%‐10% Y‐o‐Y.
SHRS saw 1m price target downgrade of 6% along with price reduction of 6% STER saw 1m price target downgrade of 6% andSHRS saw 1m price target downgrade of 6% along with price reduction of 6%. STER saw 1m price target downgrade of 6% andthe prices have corrected by 14%.
RCOM saw 1m price target upgrade of ~16% with price appreciation of ~25%. BHEL saw 1m upward stock rating revision of~11% with price correction of ~8%.
MGFL witnessed 1m downward stock rating revision of ~10% with price correction of ~54%. HDIL witnessed 1m downwardstock rating revision of ~8% with price depreciation of ~25%.
Factors that have worked well in March month were ROE, 12 months momentum / beta, and 12 months momentum.
3Factor AnalyserSource: Edelweiss research, Bloomberg
/
Click to edit Master title styleFactor Analyser: Estimates Revisions
• Analyst estimates across the broking industry play an important role in the performance of stocks.
• Upward and downward revisions by the analyst community on stock’s EPS, price target and rating provide a valuable insight.
• Tables below display the estimates revised by the sell side analyst community• Tables below display the estimates revised by the sell side analyst community.
• The universe contains companies with minimum 6‐8 analyst coverage and the recommendation that have been revisited over past
1‐3 months.
EPS Revisions
Top deciles Bottom deciles Note: 1 month price change as on 16‐Apr‐13
1m Change 3m ChangeUnitech ‐24 71 ‐17 2.5Reliance Capital ‐20 ‐35 ‐12 4.5Coromandel International ‐20 ‐20 ‐7 4.2Housing Development & Inf ‐12 ‐17 ‐31 2 9
Company name Bloom EPS Revision(%) 1m Price Change (%)
Analyst Rating (out of 5)1m Change 3m Change
Mahindra & Mahindra Finan 18 16 ‐5 4.1Bharat Petroleum Corp 7 15 ‐1 4.0JSW Energy 6 65 ‐4 2.7Oil & Natural Gas Corp 6 5 0 4 2
Analyst Rating (out of 5)
Bloom EPS Revision(%)Company name 1m Price Change (%)
Housing Development & Inf ‐12 ‐17 ‐31 2.9Tata Power Co ‐11 ‐2 ‐7 3.3Cadila Healthcare ‐11 ‐11 ‐3 3.6Ashok Leyland ‐11 ‐36 ‐3 3.6Manappuram Finance ‐10 ‐22 ‐49 3.8Aditya Birla Nuvo ‐9 ‐18 ‐10 4.7Bh F 8 21 6 3 2
Oil & Natural Gas Corp 6 5 0 4.2Financial Technologies India 5 ‐19 ‐11 4.5Tata Motors 5 ‐36 ‐11 4.1Neyveli Lignite Corp 5 ‐6 ‐6 4.0Tata Global Beverages 4 ‐9 ‐2 3.5Jindal Steel & Power 4 22 ‐8 3.8JSW S l 4 7 6 2 7 Bharat Forge ‐8 ‐21 ‐6 3.2
Indian Overseas Bank ‐7 ‐19 ‐10 2.5CESC ‐5 ‐7 ‐10 4.1DLF ‐5 ‐37 ‐15 4.0Infosys ‐5 ‐4 ‐19 3.4ABB/India ‐4 ‐21 ‐19 1.4
JSW Steel 4 7 ‐6 2.7Chambal Fertilizers & Chem 3 3 ‐7 4.1Sintex Industries 3 5 ‐21 4.2Kotak Mahindra Bank 3 10 ‐3 3.1GAIL India 3 6 ‐5 4.0Oracle Financial Services So 2 ‐14 ‐7 3.1
4Factor AnalyserSource: Edelweiss research, Bloomberg
Note: 5 suggests buy rating while 1 suggests sell rating
Click to edit Master title styleFactor Analyser: Estimates Revisions (cont…)i i iPrice Target Revisions Top deciles Bottom deciles Note: 1 month price change as on 16‐Apr‐13
1 Mth Change 3 Mth ChangeBajaj Finserv 8 4 ‐4 3.3Bhushan Steel 4 6 ‐1 2.8GMR Infrastructure 4 1 10 3 8
Bloom price target revision(%) Analyst Rating (out of 5)
Company Name1m Price
Change (%) 1 Mth Change 3 Mth ChangeManappuram Finance ‐23 ‐37 ‐54 3.8Housing Development & Inf ‐15 ‐23 ‐25 2.9Financial Technologies 13 13 6 4 5
1m Price Change (%)
Company NameBloom price target revision(%) Analyst Rating
(out of 5)
GMR Infrastructure 4 1 10 3.8Tata Consultancy Services 4 8 ‐5 3.5HCL Technologies 3 5 ‐4 4.4Sintex Industries 3 1 ‐17 4.2Indraprastha Gas 3 6 13 4.1Reliance Communications 3 14 25 2.4Strides Arcolab 2 15 ‐8 3.5
Financial Technologies ‐13 ‐13 ‐6 4.5Opto Circuits India ‐12 ‐46 5 4.3Infosys ‐11 ‐8 ‐20 3.4IVRCL ‐9 ‐29 ‐18 3.0Shree Renuka Sugars ‐6 ‐5 ‐6 3.0Sterlite Industries India ‐6 ‐4 ‐14 3.8Multi Commodity Exchange ‐6 ‐14 ‐2 4.2Strides Arcolab 2 15 8 3.5
Essar Oil 2 16 ‐4 3.4Tech Mahindra 2 8 ‐12 4.1Satyam Computer Services 2 12 ‐15 4.3IRB Infrastructure 2 5 ‐2 4.5Pidilite Industries 2 12 1 3.9United Spirits 2 14 4 4.3
Multi Commodity Exchange 6 14 2 4.2Jaiprakash Associates ‐6 ‐12 0 4.0Bharat Heavy Electricals ‐5 ‐4 ‐8 2.3Dena Bank ‐5 ‐2 ‐1 4.3Reliance Capital ‐5 12 ‐8 4.5Hindalco Industries ‐4 ‐7 ‐3 3.4Jaiprakash Power Ventures ‐4 ‐10 ‐8 4.2
Stock Ratings Revisions Top deciles Bottom deciles
1 Mth Change 3 Mth ChangeReliance Communications 16 24 25 2.4
Analyst Rating (out of 5)
1m Price Change (%)
Bloom stock reco revision(%)Company Name
1 Mth Change 3 Mth ChangeManappuram Finance ‐10 ‐17 ‐54 3.8
Analyst Rating (out of 5)
Company NameBloom stock reco revision(%) 1m Price
Change (%)Reliance Communications 16 24 25 2.4Indian Overseas Bank 13 5 ‐8 2.5Bharat Heavy Electricals 11 9 ‐8 2.3National Aluminium Co 9 30 ‐17 2.7JSW Energy 8 8 1 2.7Punj Lloyd 7 17 9 2.1Steel Authority of India 7 11 ‐15 2.9
Manappuram Finance 10 17 54 3.8Reliance Capital ‐9 ‐2 ‐8 4.5Infosys ‐8 ‐7 ‐20 3.4Housing Development & Inf ‐8 ‐7 ‐25 2.9Pidilite Industries ‐6 ‐4 1 3.9Asian Paints ‐6 ‐9 ‐6 3.4Shree Renuka Sugars ‐5 0 ‐6 3.0
Neyveli Lignite Corp 7 12 0 4.0United Spirits 6 6 4 4.3Cairn India 6 7 ‐2 4.6Kotak Mahindra Bank 6 15 ‐2 3.1Hero Motocorp 5 12 ‐12 2.9Sintex Industries 5 8 ‐17 4.2C t G 5 20 7 2 8
Oracle Financial Services ‐5 ‐10 ‐6 3.1Strides Arcolab ‐5 5 ‐8 3.5Nestle India ‐5 5 ‐2 2.6Godrej Consumer Products ‐4 ‐7 3 3.5GlaxoSmithKline Consumer ‐4 ‐27 ‐7 3.1Jubilant Foodworks ‐4 3 ‐17 2.9Bh t F 3 10 1 3 2
5Factor AnalyserSource: Edelweiss research, Bloomberg
Note: 5 suggests buy rating while 1 suggests sell rating
Crompton Greaves 5 20 ‐7 2.8Bajaj Auto 5 2 ‐5 3.6
Bharat Forge ‐3 ‐10 ‐1 3.2Opto Circuits India ‐3 ‐7 5 4.3
Click to edit Master title styleFactor Analyser: Sector Popularity Vs. Valuations
A different approach to look at sector popularity and valuation.
For e.g., on the below matrix, sectors in the top right quadrant are analyst favourite and having high dividend yield, whereas sectors in the
bottom left quadrant are giving low dividend yield and analyst hold negative view on the sector.
70
Overowned & High Div YieldOverowned & Low Div Yield
UtilitiesFinancials
Health Care Energy
I f ti T h l
60
65
atio
ns
(%)
Industrials
Materials
FinancialsConsumer Discretionary Information Technology
50
55
Rec
omm
enda
Telecommunication Services
Consumer Staples
40
45
Sell-
Sid
e B
uy
30
35
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0
S
Underowned & Low Div Yield Underowned & High Div Yield
6Factor AnalyserSource: Edelweiss research, Bloomberg
Div.Yield (%)
Underowned & Low Div Yield Underowned & High Div Yield
Click to edit Master title styleFactor Analyser: Factor Returns
In March 2013, ROE, 12 months momentum / beta, and 12 months momentum have worked well.
Factor returns matrix (%)*
(20) (15) (10) (5) 5 10 15 20 (20) (15) (10) (5) - 5 10 15 20
Please refer report Edelweiss Style Analysis‐What's hot – Apr‐2013 for detail analysis.
Last 6 Month Last 3 Month Last Month* Benchmark = NIFTY (for illustration only)
7Factor AnalyserSource: Edelweiss research, Bloomberg
Please refer report Edelweiss Style Analysis What s hot Apr 2013 for detail analysis.
Click to edit Master title styleFactor Analyser: Nifty Earnings (FY13E-14E)
The chart below shows the consensus earnings expectation for FY13 and FY14 decomposed into sector wise contribution
towards over all Nifty growth.
Strong contributors (FY14E) – Financials MaterialsStrong contributors (FY14E) Financials, Materials
Weak contributors (FY14E) – Industrials, Health Care
Decomposition of forward earnings by
4.2614
12.00
16.00
3
4
5
Ni%
)
2.161.65
0.63
1.20
0.540.98
0 19
0.89
1.63
7 8.001
2
3 ifty In
dex (%
)Contr
ibution (
0.19
4.00
-1
0
)C
0.00-2
Financi
als
Mate
rials
Energ
y
ons
Sta
ple
s IT
Health C
are
Cons
Dis
c
Indust
rials
Tele
com
Utilit
ies
8Factor AnalyserSource: Edelweiss research, Bloomberg
Co H
FY13E over FY12E FY14E over FY13E
Click to edit Master title styleFactor Analyser: India Valuation Dispersion Indicator
Market valuations dispersion indicator is trading at (0.2) SD levels Vs (0.1) SD levels last month. Nifty has closed in the red losing ~5.7% in last 1
month. Broader markets were in‐line with mid‐cap and small‐cap indices losing ~5% and ~5.4% respectively in last one month.
10000
2.0
3.0 Valuation Dispersion
(1.0)
0.0
1.0 Log sca
le
1000(3.0)
(2.0)
( )
02
02 03
03 04
04 05
05 06
06 07
07 08
08 09
09 10
10 11
11 12
12 13
Valuation dispersion calculation methodology: PE & PB factors across the universe ( BSE‐200 stocks) are ranked individually The difference
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
Oct
-0
Apr-
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-0
Apr-
Oct
-
Apr-
Oct
-
Apr-
Oct
-
Apr-
NIFTY (RHS) Valuation factor Dispersion ( Z-score)
Valuation dispersion calculation methodology: PE & PB factors across the universe ( BSE 200 stocks) are ranked individually. The difference
between the top and bottom deciles medians provides the factor dispersion for each factor. Then a composite valuation dispersion based on an
equal weighted average PE and PB dispersion is derived. Valuation dispersions are expressed in z‐scores terms (i.e., number of standard deviation
away from the 1 year rolling mean).
9Factor AnalyserSource: Edelweiss research, Bloomberg
Click to edit Master title styleDisclaimer
Thank You
Yogesh Radke +91 (22) 6620 3199
For further information please visit www.edelresearch.com
Yogesh Radke +91 (22) 6620 3199 Gaurav S Mehta +91 (22) 6623 3312
`General Disclaimer:This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated investment banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investmentb ki ti iti Thi d t d t tit t ff li it ti f th h l f fi i l i t t ffi i l fi ti f t ti Th i f ti t i d h i i f bli l il bl d t th b li d t b li bl b t d t t th t it i tbanking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurateor complete and it should not be relied on as such. 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This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would becontrary to law, regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should informthemselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. Edelweiss reserves the right to makemodifications and alterations to this statement as may be required from time to time. However, Edelweiss is under no obligation to update or keep the information current. Nevertheless, Edelweiss is committed to providing independent and transparent recommendation to its client and would be happy to provide anyinformation in response to specific client queries. Neither Edelweiss nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with theuse of the information Past performance is not necessarily a guide to future performance The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report Edelweiss Securities Limiteduse of the information. Past performance is not necessarily a guide to future performance. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. Edelweiss Securities Limitedgenerally prohibits its analysts, persons reporting to analysts and their dependents from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information provided in these reports remains, unless otherwise stated, the copyright of Edelweiss. All layout, design, originalartwork, concepts and other Intellectual Properties, remains the property and copyright Edelweiss and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.
Analyst Certification:The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views
expressed in this report.Analyst holding in the stock: No.
Additional Disclaimer for U.S. PersonsThis research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker‐dealer
and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearancesy ( ) / j p y , / q y g y g q q p y g g g, g g , j p y, p ppand trading securities held by a research analyst account.This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the
recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker‐dealer, Enclave Capital, LLC
("Enclave"). Transactions in securities discussed in this research report should be effected through Enclave or another U.S. registered broker dealer.
Additional Disclaimer for U.K. Persons
The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA").In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order
(including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
10Factor AnalyserSource: Edelweiss research, Bloomberg10
This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or relyon this research report nor any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person.Edelweiss shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services
or inability of the Edelweiss to present the data. In no event shall the Edelweiss be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by the Edelweiss through this presentation.
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Edelweiss Securities Limited
Gilts resume forward march
• Position building gained the upper hand once again as the market turns increasingly
confident about aggressive monetary easing by the RBI. Rate action is yet to be priced in
at current levels given the recent lean phase for bond yields and there are not many
negative triggers on the horizon.
• The positive sentiment is expected to reflect in sustained strong demand at tomorrow’s
auction and as a result the usual air of caution seems to be absent. The markets are likely
to build on the gains following the auction.
• The 10-Y benchmark opened with a negative bias on the back of profit booking. The G-Sec
was in the red for the first couple of hours before buying momentum kicked in and took
yields to 7.79% - it closed the day at 7.80% vs 7.82%. Average traded volume in G-Secs
has been above INR 450bn in April when the benchmark has rallied from the 8% level.
• The 1-Y OIS ended the day at 7.25-7.31% vs 7.29-7.35%, while the 5-Y OIS ended the day
at 6.98-7.04% vs 7.05-7.11%.
Non-SLR Market
IOCL placed 2M CP worth INR 3.5bn @ 8.06%. Tata Motors Limited placed Sept maturity CP
worth INR 2bn @ 8.60%. Bank of Maharashtra placed 3M CD worth INR 1bn @ 8.31%.
Indian Bank placed 3M CD worth INR 1bn @ 8.31%.
Money Market
The LAF deficit which has been dropping for 5 sessions in a row ticked up to INR 767bn – the
impact of the auction and reserve requirements might push this higher. The call rates were
largely unchanged with the call borrowing WAR at 7.56% vs 7.55%.
India Yield Curve – G-Sec & OIS
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
1-Y 2-Y 5-Y 10-Y 30-Y
(%)
G-Sec (T) G-Sec (T-10)OIS (T) OIS (T-10)Source: Edelweiss research, CCIL, Bloomberg
Liquidity Situation – LAF borrowing at INR 767bn
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
19-Mar 26-Mar 2-Apr 9-Apr 16-Apr
(Cu
mu
lati
ve
LA
F U
sa
ge
-IN
R b
n)
LAF Injection RBI Comfort LevelSource: Edelweiss research, Bloomberg, RBI
BOND VECTOR Fixed Income Daily
17-Apr 16-Apr Change*
Govt. Bonds
8.19% 2020 7.71% 7.77% -5
8.15% 2022 7.80% 7.82% -2
9.15% 2024 7.95% 7.98% -3
8.33% 2026 7.85% 7.88% -3
Corp. Bond
5 yrs 8.64% 8.68% -4
10 yrs 8.64% 8.68% -4
Corp. Bond (Non-PSU)
2 yrs 9.06% 9.06% 0
5 yrs 8.99% 9.01% -2
10 yrs 8.95% 8.98% -3
C D
3 mth 8.35% 8.35% 0
6 mth 8.45% 8.45% 0
1 yr 8.55% 8.52% 3
C P
3 mth 8.80% 8.80% 0
6 mth 9.00% 9.00% 0
1 yr 9.15% 9.15% 0
Swap
1 Yr 7.28% 7.33% -5
2 Yr 7.01% 7.08% -7
5 Yr 7.01% 7.08% -7
* Change in bas is points
Other Indicators* 17-Apr 16-Apr Change
Crude (USD/bbl) 98.9 99.9 -1.1%
Gold (USD/Oz) 1375 1368 0.5%
USDINR 54.21 54.15 -0.1%
1Y INR NDF Prem. 6.36% 6.50% -0.14%
Dollar Index 82.22 81.75 0.6%
Nifty 5689 5689 0.0%
MIBOR (o/n) 7.55% 7.55% 0.00%
LIBOR (1mth) 0.20% 0.20% 0.00%
* Figures as on 17:30 hrs IST
Source: Edelweiss research, Bloomberg, CCIL
Yield Curve
India Fixed Income Research
Jagdeep Kannarath
+91 22 6620 3083
April 17, 2013
Bond Vector
2 Edelweiss Securities Limited
CBLO 7.47% 7.46%
Repo 7.54% 7.53%
Cal l 7.56% 7.55%
17-AprWAR 16-Apr
Volume
(INR bn)
CBLO 807.0 839.4
Repo 330.3 274.4
Ca l l 209.9 206.1
17-Apr 16-Apr
G-Sec Activity
0
100
200
300
400
500
600
700
17-Apr16-Apr15-Apr12-Apr10-Apr9-Apr8-Apr5-Apr
( D
aily
Vo
lum
e -
INR
bn
)
GSec Total Vol 8.15 2022 8.33 2026Source: Edelweiss research, CCIL
Overnight Money Market Yields
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17
-Ap
r
15
-Ap
r
10
-Ap
r
8-A
pr
4-A
pr
2-A
pr
26
-Ma
r
22
-Ma
r
20
-Ma
r
18
-Ma
r
14
-Ma
r
12
-Ma
r
8-M
ar
6-M
ar
(%)
Call Repo CBLOSource: Edelweiss research, CCIL
Overnight Money Market Activity
0
100
200
300
400
500
600
700
800
900
1,000
17-Apr16-Apr15-Apr12-Apr10-Apr9-Apr8-Apr5-Apr
( D
aily
Vo
lum
e -
INR
bn
)
Call Repo CBLOSource: Edelweiss research, CCIL
Bond Vector
3 Edelweiss Securities Limited
Tenor AAA AA+ AA
1Y 74 120 142
5Y 75 113 139
10Y 65 123 151
*AA+ and AA spread as per Bloomberg As per previous session yields
17-Apr 16-Apr
3.50 5.00
7.00 6.00
6.50 16.75
17.00 27.75
Volume (INR bn)
CD Primary
CD Secondary
CP Tota l
Total
INR bn 15-Apr 12-Apr MTD
FII -12.49 -1.51 -47
MF 33.53 45.41 521
5Y Corporate Bond Spreads
0
20
40
60
80
100
120
140
160
16
-Ap
r
12
-Ap
r
9-A
pr
5-A
pr
3-A
pr
28
-Ma
r
25
-Ma
r
21
-Ma
r
19
-Ma
r
15
-Ma
r
13
-Ma
r
11
-Ma
r
7-M
ar
5-M
ar
(bp
s)
5Y AAA 5Y AA+ 5Y AASource: Edelweiss research, Bloomberg
Short-term Debt Activity – CDs & CPs
0
5
10
15
20
25
30
35
40
17-Apr16-Apr15-Apr12-Apr10-Apr9-Apr8-Apr5-Apr
( D
aily
Vo
lum
e -
INR
bn
)
CD Primary CD Secondary CP TotalSource: Edelweiss research
Net Debt Flows – FII + MF
(100)
0
100
200
300
400
500
600
700
800
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
(IN
R b
n)
FII MFSource: Edelweiss research, Bloomberg
Bond Vector
4 Edelweiss Securities Limited
Event Calendar – India & Global
Events & Updates Expected Actual Prior
15-Apr IN - WPI (YoY) MAR 6.27% 5.96% 6.84%
16-Apr US - CPI (YoY) MAR 1.60% 1.50% 2.00%
US - Industrial Production MAR 0.20% 0.40% 0.70%
EU - CPI (YoY) MAR 1.70% 1.70% 1.70%
18-Apr US - Initial Jobless Claims 350K - 346K
4 Edelweiss Securities Limited
First Call
INSIDER TRADES
Company Name Acquirer/Seller B/S Qty Traded
Andhra Petrochemicals Dr B B Ramaiah Buy 57060
HCL Infosystems HCL Corporation Buy 1048821
ISMT Mr. O P Kakkar Buy 88704
Kohinoor Foods Gurnam Arora Buy 55143
Master Trust Prime Industries Buy 300000 off market
Rolta India M/s Rolta Shares & Stocks Buy 25000
Shree Renuka Sugars Sidram Kaluti Buy 25000
Take Solutions Shriram Ventures Buy 136410
5 Edelweiss Securities Limited
First Call
BULK DEALS
Date Company Name Acquirer/Seller B/S Qty Traded Price
17-Apr-13 Aurionpro Solutions Paresh Chandulal Zaveri Buy 100000 75
17-Apr-13 Autoline Industries Olympia Builders Buy 262063 105
17-Apr-13 Brescon Corporate Advisors Alok Finance Sell 34258 161
17-Apr-13 Brescon Corporate Advisors Black Fox Financial Buy 19020 162
17-Apr-13 Confidence Trading Company Asha Jhaverilal Dedhia Sell 55900 320
17-Apr-13 Euro Finmart Garima Agarwal Sell 35887 76
17-Apr-13 Focus Ind Nanon Distributors Buy 71050 63
17-Apr-13 IVRCL Infrastructures & Projects Ambit Securities Broking Sell 203353 21
17-Apr-13 Jalgaon Re-Rolling Industries Shaan Leisure Sell 150000 18
17-Apr-13 Jaysynth Dyestuff (India) Jyoti Shivonkar Maheshwari Buy 100000 25
17-Apr-13 Jaysynth Dyestuff (India) Preeti Shrikant Kothari Sell 100000 25
17-Apr-13 KAVITA FAB Sanjoyog Trade-Link Buy 102000 40
17-Apr-13 KAVITA FAB Zawar Sales Sell 108000 40
17-Apr-13 Le Waterina Resorts & Hotels Anand Jyoti Kothari Buy 1450000 1
17-Apr-13 Le Waterina Resorts & Hotels Arisonassociates Sell 1450000 1
17-Apr-13 Lok Housing & Constructions Lgnc Sell 450000 15
17-Apr-13 Samrudhi Relty Hem Sec Buy 80000 15
17-Apr-13 Samrudhi Relty Surendra Prakash Shrimali Sell 70000 15
17-Apr-13 Sawaca Business Machines Kanan Ajitkumar Shah Buy 135000 27
17-Apr-13 Sawaca Business Machines Shaan Leisure Sell 135000 27
17-Apr-13 Taksheel Solutions Infoedge Capital Services Sell 250000 8
17-Apr-13 Taksheel Solutions Offerlink Infraprojects Sell 285132 8
17-Apr-13 Vision Technology India Srinivas Karrothi Buy 187386 10
6 Edelweiss Securities Limited
First Call
TECHNICAL UPDATES
After a large rally witnessed on Tuesday, the markets traded on a lackluster note
yesterday as the Nifty oscillated in a range of 63 points throughout the day and ended
dead flat. Nonetheless, it did climb up earlier to re-test the H&S neckline at 5721 where
selling pressure was expected. Volumes climbed up significantly yesterday despite the
restricted price action and the breadth ended neutral as well. Near-term momentum
oscillators have entered an over-bought state and the short-term indicators are in a
bullish state suggesting a bullish undertone. However price action remains critically
poised and could possibly result in a downward reversal from resistance levels. We
prefer to retrain our negative stance on the index and look for an eventual decline to
5447 / 5260 levels with a strict stop-and-reverse pivot of 5720 on a daily closing basis.
Among the notable sectoral performances for the day, gains were seen in shares from
Metals (+1.27%), FMCG (+1.25%) and Auto (+1.16%) indices; whereas losses were
logged in Oil & Gas (-2.12%), IT (-1.14%) and Power (-0.17%) indexes. Broader markets
marginally outperformed their frontline peer with gains of 0.18% for the Mid-cap index
and 0.30% for the Small-cap index,
Bullish Setups: BPCL, JPA, DITV, UNSP, STLT, ITC
Bearish Setups: BHARTI, TTMT, COAL, IIB, MCLR, PFC
Nifty Index Indicator Outlook Points*
Candlestick Positive 1
Stochastic Positive 1
Moving Avg Negative (1)
RSI Neutral 0
ADX Neutral 0
MACD Neutral 0
Aggregate Positive 1
10 17
September
24 1 8
October
15 22 29 5 12 19
November
26 3 10 17
December
24 31 7
2013
14 21 28 4 11
February
18 25 4 11
March
18 25 8
April
15 22 29 6
May
13
-50
0
50
100
50000100000150000200000250000300000
x1000
4800
4850
4900
4950
5000
5050
5100
5150
5200
5250
5300
5350
5400
5450
5500
5550
5600
5650
5700
5750
5800
5850
5900
5950
6000
6050
6100
6150
6200
5732
5477 / 5447
'bul l i sh gap'
5659 (200 DMA)
Bloomberg Code NIFTY Index
Spot Price 5,688
Res istance 1 5,732
Res istance 2 5,750
Support 1 5,650
Support 2 5,617
Ni fty 20 SDMA 5,631
Ni fty 50 SDMA 5,773
Ni fty 200 SDMA 5,659
Adv : Dec [NSE] 676 : 675
Turnover Rs Crs . 15,395
BSE+NSE cas h
7 Edelweiss Securities Limited
First Call
EYE CATCHERS
Futures Snapshot
Top OI Rises
Scrip % OI Chg OI % Price
Chg
% Future
Vol Chg
Shriram Transport Fin Co 132 1,454 1.2 1,099
Ambuja Cements 30 8,190 3.7 51
CESC Ltd 24 846 (2.8) 1
HCL Tech 19 3,301 (1.5) 592
Tata Motors 15 21,993 0.1 43
TCS 14 4,173 (1.8) 117
MCLEOD Russel India 14 3,461 (7.6) 449
Bank Nifty 10 1,905 0.9 18
Top OI Falls
Scrip% OI
ChgOI
% Price
Chg
% Future
Vol Chg
SAIL (12) 17,320 6.4 49
Union Bank (11) 3,222 (0.7) 10
Future Retail Ltd (10) 3,334 (9.1) (48)
Apollo Tyre (9) 4,132 0.2 (15)
Sterlite Ind. (7) 30,024 4.2 14
JSW Steel (7) 7,201 5.7 114
Federal Bank (6) 1,154 (0.5) 50
Adani Enterprise (6) 5,008 (1.9) 26
8 Edelweiss Securities Limited
First Call
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91-22) 4009 4400, Email: [email protected]
Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206
Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476
Nirav Sheth Head Sales [email protected] +91 22 4040 7499
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inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user
assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the
securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or
views expressed may not be suitable for all investors. We and our affiliates, group companies, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the
securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such
company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for
your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report
is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,
availability or use would be contrary to law, regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this
document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this
document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. Edelweiss
reserves the right to make modifications and alterations to this statement as may be required from time to time. However, Edelweiss is under no obligation to update or keep the information current. Nevertheless,
Edelweiss is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither Edelweiss nor any of its
affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise
from or in connection with the use of the information. Past performance is not necessarily a guide to future performance. The disclosures of interest statements incorporated in this document are provided solely to
enhance the transparency and should not be treated as endorsement of the views expressed in the report. Edelweiss Securities Limited generally prohibits its analysts, persons reporting to analysts and their
dependents from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information provided in these reports remains, unless otherwise stated, the copyright
of Edelweiss. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright Edelweiss and may not be used in any form or for any purpose whatsoever by any
party without the express written permission of the copyright holders.
Analyst Certification:
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or
her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
Analyst holding in the stock: No.
Additional Disclaimer for U.S. Persons
This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are
resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not
required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public
appearances and trading securities held by a research analyst account.
This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and
interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act
upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.
In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss
Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Enclave Capital, LLC ("Enclave").
Transactions in securities discussed in this research report should be effected through Enclave or another U.S. registered broker dealer.
Additional Disclaimer for U.K. Persons
The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA").
In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA
(Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to
whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and
will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report nor any of its contents. This research report must not be distributed, published,
reproduced or disclosed (in whole or in part) by recipients to any other person.
Edelweiss shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system
or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services or inability of the Edelweiss to present the data. In no event shall the Edelweiss be liable for any
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