india equity analytics today: buy stock of hindalco industries ltd

On Mid Quarter Analyst Meet, TCS commented on weak revenue growth momentum for 4QFY14E due to weak seasonality. Growth in 4QFY14E

would be lower than the preceding quarter and margin would decline 40-50 basis points on cross currency movement and higher investments.

However, sigh of relief was seen on FY15E outlook and comments on overall demand environment. .................................................................. (

Page : 13-15 )

Hindalco Industries Ltd: "BUY" 25th Mar 2014

Sesa Sterlite's 22 days smelting shut will help rival producer Hindalco Industries raise sales.With greater comfort on sustainability and visibility of

ramp up in UAIL operations, we raise our FY15E volume and consolidated EBITDA by ~2%. Currently the stock is trading at 0.7x in 1yr Forward

P/B and we believe with the changing political climate and improving auto mobile demand the stock will accumulate to 0.8x P/B. Hence at CMP

Rs.121.5 we are bullish on the stock to a medium term target price of Rs.140 which is a 15% upside addition.

................................................................ ( Page : 2-4)

We cover Persistent System as one of the few companies in the tier-II with potential to grow revenue at a range of 18-20%, specially focused on

emerging business and relationship building with marquee clients. Despite better predictability of growth and attractive visibility of its expansion

in new emerging verticals, we advice to book profit on the stock because of its premium valuation. ...............................................................

(Page : 11-12)

"BOOK PROFIT"

TCS : " Strong Fundamentals" "BUY" 20th Mar 2014

IEA-Equity

Strategy

25th Mar, 2014

Edition : 231

KPIT Tech: "On billion dollar journey" "BUY" 19th Mar 2014

Impressive organic growth despite inorganic thrust (acquired 10 companies in the last 10 yrs), Potential option value from success of its hybrid

engine venture Revolo (on trial). KPIT has targeted to reach $1bn sales by 2017. Its differentiated positioning and competitive edge in its focus

areas, imperatives to the success of smaller-sized IT vendors impress to investors. ........................................................................ ( Page : 19-

20)

HDFC Bank : "HOLD" 20th Mar 2014

Profitability of bank is likely to report better in next few quarters on the back of mobilization of FCNR deposits which would reflect better NII

growth for being a low cost carry, RBI allowed banks to use counter cycle buffer for making specific provisions against bad loans, declining share

of priority sector lending but still met regulatory requirement and exempted foreign deposits with tenure more than 3 years from SLR, CRR and

PSL. Now the economy is witnessing some sign of revival and market sentiment boost up on account of exit poll result. We raised our price

target to Rs.760/share which is upper side of our valuation band. .................... ( Page : 16-18)

Persistent System : "Persistently innovating.." 21th Mar 2014

PNB : "BUY" 24th Mar 2014

We upgrade PNB from neutral to add rating on account of external factors like better than expected GDP growth and CAD numbers which

showing some improvement along with softening inflation numbers. Recently market sentiments are also booted on account of opinion poll

result which revealed that BJP led NDA would close to formation of Government in coming general election. We raised our price target to

Rs.700 from Rs.600 earlier. ............................................................. ( Page : 8- 10)

Jindal steel & Power : Challenging Fundamentals "NEUTRAL" 24th Mar 2014

The Company has embarked on expansion projects of US$9bn in steel and power, backed by resource availability and steady cash flows.

Improving free-cash-flows and volumes would be visible from end-FY15. Profitability is geared to iron ore and coal, which, against the present

backdrop of improving iron-ore prices and higher coal consumption, would drive a re-rating. The stock quotes at 1.1x FY14e P/B. We initiate our

coverage on this stock with a target of Rs.285/share on the basis of improving steel business, and Recommend Neutral.

.................................................................. ( Page : 5-7)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

Hindalco Industries Ltd.

122 1-

140

132

15%

NA

2-

500440

25497

17848

6284

1M 1yr YTD A. Captive bauxite is only 21km away from the refineryAbsolute 24.7 38.1 30.6 B. Low reactive silica content which reduces caustic soda consumptionRel. to Nifty 18.3 21.2 16.1 C.

D.

3QFY14 2QFY14 1QFY14

Promoters 37.0 37.0 37.0

FII 26.9 24.9 24.8

DII 13.3 14.4 14.3

Others 22.9 23.7 23.9

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14

Net Revenue 7273 5.8 15.4 6872 6305

EBITDA 629 8.1 16.5 582 540

PAT 344 -20.6 -3.7 434 357

EBIDTA % 9% 2.1 1.0 8% 9%

NPM % 5% -25.0 -16.5 6% 6%. (In Crs)

2

Expansions ready to deliver…

With the change in political climate, we believe there will be demand from domestic

aluminium and copper consumer. Currently copper is going through a three month

low,we expect it to be better after election.

Key reasons for this low cost UAIL plant include:

Novelis Business:

Copper producer Sesa Sterlite Ltd will shut its smelter for 22 days starting April 26, for

maintenance purpose. It produces 30,000 tons of refined copper per month and exports

half of that to China. It will help rival producer Hindalco Industries raise sales. And also

for Hindalco the copper realization is stable with the previous quarter, so it will be

additional sales if orders executes.

Ongoing Positive thrusts:

The Q3FY14 financial results still do not include Mahan, Utkal and Aditya projects. All

three projects have started production under trial run. UAIL’s commercial production

started in December 2013. Management guided for FY15E and FY16E volumes of over

1mt and 1.5mt (full capacity), respectively. Integration of Aluminium smelters (a) Newly

commissioned aluminium smelters (UP and Odisha) to ramp up volumes going forward

and (b) Cost benefit of cheap alumina for its existing smelters with high quality,

proximate and captive bauxite mine, whose production is currently running at ~4mtpa

run-rate. We are expecting a good amount profit addition from these plants in H1FY15.

Source - Comapany/EastWind Research

Political sentiment:

High trihydrate alumina content (40%) i.e., it is gibbsite form of bauxite with only 2%

bohemite (low quality bauxite)

Bauxite properties are such that process is carried out at relatively low temperature and

pressure leading to savings in energy cost.

Novelis’ business has started to improve with the benefit and strong demand from

automobiles. However, the pricing pressure is impacting margin. Novelis is one of the

world’s leading aluminium rolling and recycling companies supplying premium products

in the markets of North America, Europe, Asia and South America. The company is the

largest single producer of aluminium rolled products with an estimated share of 14% of

the world’s supply. Novelis’ sales volumes are expected to grow at a CAGR of 5.7% in

FY13-16E. On the back of increasing share of the automobile segment in the overall sales

mix, we expect the EBITDA/ton to improve.

Company UpdateCMP

Target Price

Previous Target Price

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

Stock Performance-%

Share Holding Pattern-%

1 yr Forward P/B

Nifty

Average Daily Volume (Nos.)

Upside

Change from Previous

Market DataBSE Code

HINDALCONSE Symbol

52wk Range H/L

Mkt Capital (Rs Crores)

137/83

"Buy"25th March' 14


3

Concerns:

View & Valuations:

Hindalco is a metal major with business interests in copper smelting & aluminium

manufacturing domestically. It is also a leading aluminum converter globally through

subsidiary Novelis. On the domestic aluminium business front, the company is

undergoing an ambitious capacity expansion wherein its aluminium (primary metal)

production capacity will increase from 560 KT currently to 1278 KT by FY15E. The

planned capacity expansion is backed by corresponding alumina refinery with captive

bauxite linkage. Bauxite conveyor expected to start in December 2014.

Trading At :


With greater comfort on sustainability and visibility of ramp up in UAIL operations, we

raise our FY16E volume and consolidated EBITDA by ~2%. We continue to see Hindalco

benefiting over next three years from volume growth in Novelis and Indian operations.

Although Hindalco has expanded its aluminium capacity recently, low aluminium prices,

sticky costs and delay in commencement of mining from captive blocks have resulted in

decline in profitability over the past few quarters. In the near-term, its profitability is

likely to be muted due to higher costs at Mahan smelter and low aluminium prices.

Currently the stock is trading at 0.7x in 1yr Forward P/B and we believe with the

changing political climate and improving aluminium demand the stock will accumulate

to 0.8x P/B. Hence at CMP Rs.121.5 we are bullish on the stock to a medium term target

price of Rs.140 which is a 15% upside addition.

The company has received stage-2 forest clearance for its Mahan coal block subject to

certain conditions. The next important step would be signing of liming lease with the

state government and subsequent mine development, which is likely to take ~18-24

months. High debt on the books continues to weigh on valuations.

About The Company:




FY11 FY12 FY13 FY14E

72078 80821 80193 81139

431 783 1012 1360

72509 81604 81205 82499

64102 72856 72395 72681

7976 7965 7798 8457

2725 2645 2822 3076

1839 1758 2079 2600

964 786 886 1201

366 211 -20 -

57 -50 16 -

2456 3397 3027 2940

8.5 10.6 8.4 7.8

FY10 FY11 FY12 FY13

191 191 191 191

21346 28824 31179 34597

21545 29023 31911 35330

10763 13736 37127 49857

13236 13956 3731 6442

3901 4138 5289 5691

9742 12980 11052 9613

1016 1077 1377 1610

69235 84376 101402 120590

7876 12272 15429 16435

21124 20133 19871 21490

5801 13131 22798 33831

1983 2035 3774 3170

11275 14096 13246 14332

6544 8000 8017 8952

2195 2556 3296 3770

1134 1164 2159 3257

69235 84376 101402 120590

FY10 FY11 FY12 FY13

1.6 1.4 0.8 0.5

20.5 12.8 17.7 15.8

10.8 11.1 9.9 11.2

16.0 18.0 13.7 12.0

FY10 FY11 FY12 FY13

5542 6929 8534 6852

4944 6226 7602 2978

-5448 -6710 -13220 -13765

428 825 6237 10278

-76 341 619 -510

4

Share in Profit/(Loss) of Associates

PAT

Expenditure

EBITDA

Depriciation

Interest Cost

Tax

Minority Interest

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances

P/L PERFORMANCE


ROE%

Net Revenue from Operation

Other Income

Total Income

Debtor to Turnover%

Creditors to Turnover%

CASH FLOWS




Net Cash From Operation

Cash From Investment

Long-term borrowings

Cash from Finance

Net Cash Flow during year


Cash from Operation

Short-term loans and advances

Total Assets

RATIOS

P/B

EPS

Long-term provisionsSource - Comapany/EastWind Research

Tangible assets

Capital work-in-progress

Trade payables

Short-term provisions

Total liabilities

Intangibles



Short-term borrowings

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity


Jindal steel & Power

265

285

NA

8%

NA

532286

24796

11158

6495

1M 1yr YTD

Absolute 6.9 -21.7 -27.9

Rel. to Nifty 0.5 -36.3 -37.6

3QFY14 2QFY14 1QFY13

Promoters 59.7 59.1 59.1

FII 21.9 21.3 20.8

DII 4.7 6.2 6.7

Others 13.7 13.3 13.4

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14

Revenue 5377 12.0 7.9 4802 4984

EBIDTA 1701 -5.0 16.7 1790 1457

Net Profit 562 -35.2 24.3 867 452

EBIDTA% 32 -15.1 8.2 37 29

NPM% 10 -42.1 15.2 18 9(In Crs)

5

Market Data

Challenging Fundamentals

NSE Symbol

52wk Range H/L


362/181

The Company has embarked on expansion projects of US$9bn in steel and power,

backed by resource availability and steady cash flows. Improving free-cash-flows and

volumes would be visible from end-FY15. Profitability is geared to iron ore and coal,

which, against the present backdrop of improving iron-ore prices and higher coal

consumption, would drive a re-rating. The stock quotes at 1.1x FY14e P/B. We initiate

our coverage on this stock with a target of Rs.285/share on the basis of improving steel

business, and Recommend Neutral.


Stock Performance-%


1 yr Forward P/B


Nifty

Balance sheet at inflection point: In the past three years, 3bn dollar has been spent on

expansion, and a further 6bn will be expended in the next three years. The expansion has

been supported by the strong business cash flows. However, the net-debt-to-EBITDA

level has hit 3.7x due to delayed cash flows, though the leverage ratio is likely to have

peaked.

Steel segment improving : Steel sales volumes of Jindal Steel and Power are likely to

have improved in 3QFY14, to 0.75m tons. On the changing business and client mix, prices

are likely to have been better. Export opportunities in the quarter due to favorable

currency could have offset the impact of iron ore realizations and would have improved

EBITDA, aided by stable costs. The Shadeed Oman HBI business, iron ore and coking coal

mine are likely to have been stable.Management expects the company’s total steel

capacity, both in India and overseas, to increase around 8 million ton as compared to

current 3 million ton by the end of the fiscal.

The consolidated turnover was up by 12% to Rs.5377 Cr against Rs. 4683 Cr in previous

year period. Net Profit is after tax for the quarter is Rs. 562Cr (Rs. 867 Cr in Q3FY13). The

steel business in volume and value terms grew by 11% and 7% respectively compared to

the previous quarter.

JSPL achieved a spectacular growth in its export volumes which in volume and value

terms grew by 32% and 104% for the same period last year. The Company has received

Rail order from DFCC for the prestigious Delhi – Kolkata corridor and export order from

Ferrotech Alloys, UK.

JSPL’s retail segment has been very successful and the sale during Q3 FY14. Jindal Power

Ltd., a subsidiary of JSPL sales grew by 17.7% while PBT and PAT increased by 16.9% and

15.7% respectively in Q3 this year compared to Q3FY13.Net Sales of the company is

expected to grow at a CAGR of 6% over 2012 to 2015E respectively.

Average Daily Volume (Nos.)

BSE Code

JINDALSTEL

Initial Coverage Neutral

Upside


CMP

Target Price


"Neutral"24th March' 14


Coverage :

Products

• Mining

Plants Locations

• Jindal Industrial Park (Chhattisgarh)

• Raipur Division (Chhattisgarh)

• Tamnar (Odisha)

• Angul (Odisha) • Zambia

• Barbil (Odisha) • Tanzania

• Tensa - (Jharkhand)

• Patratu (Jharkhand) • Australia

6


• Fabricated Sections

• Angels & Channels

• TMT Re-bars

• Wire Rods

• Oman (Middle East)

EBIDTA & Margin

Debt Structure

Stabilizing Power segment: With a steady performance and power sales to Rs.1130 Cr

in 3QFY14 (Rs.1068Cr in 3QFY13), the PLF in 3QFY14 would have held at ~100%, helping

maintain realizations. Capped realizations and the power-surplus situation would have

posed downside risks to earnings.

Jindal Steel and Power Limited (JSPL) is one of India’s major steel producers with a

significant presence in sectors like Steel, Mining, Power Generation and Infrastructure.

With an annual turnover of over US$ 3.6 billion, JSPL is a part of the over US$ 18 billion

diversified O. P. Jindal Group. In the recent past, JSPL has expanded its steel, power and

mining businesses to various parts of the world particularly in Asia, Africa and Australia.

The company has committed investments exceeding US$ 30 billion in the future and has

several business initiatives running simultaneously across continents. The company

produces economical and efficient steel and power through backward and forward

integration.

• Rails

• Parallel Flange Beams

• Plates & Coils

• Madagascar

Jindal Steel and Power Limited started as a steel manufacturing company, enhanced the

company position as a major steel producer and diversified into various other sectors

such as:

• Petroleum

• Cement and Infrastructure.• Power Generation & Trading

Global Presence

Earning Ratios

Earning Ratios

Revenue & Growth

EBIDTA & Margin

• Mozambique

• South America

Business Areas

• Semi-Finished Products

• Power

• Ferro Chrome

• Silico Manganese

• Sponge Iron


FY10 FY11 FY12 FY13

11092 13112 18209 19807

60 82 142 136

11152 13194 18351 19943

4197 5078 5311 6151

273 415 591 641

774 1303 5513 7020

5244 6795 11415 13812

5848 6317 6793 5994

997 1151 1386 1539

358 260 360 758

4553 4988 5189 3833

919 1184 1186 922

3573 3754 3965 2910

34 27 22 14

6.3 4.6 2.8 1.5

FY10 FY11 FY12 FY13

93 93 93 93

10324 14017 18018 21159

10417 14110 18111 21252

5330 5549 11180 15402

3274 8428 4569 8247

17 25 34 33

2266 2573 1251 1398

2036 3081 4111 4884

25122 36091 45008 57073

14 20 31 20

9883 14824 16463 19255

7947 10041 92 19230

1090 1527 2181 2421

1431 2773 3580 4524

753 1154 1307 1954

113 480 149 200

3464 4852 6927 8079

25122 36091 45008 57073

FY10 FY11 FY12 FY13

6.3 4.6 2.8 1.5

32.0 28.5 21.6 14.6

52.4 47.9 37.0 30.1

17.8 12.8 11.2 6.1

4.2 1.9 2.3 3.2

#N/A #N/A #N/A #N/A

7

Short-term provisions

Interest Cost

ROE%

P/B

Short-term borrowings

Long-term provisions

Trade payables

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Trade receivables

Short-term loans and advances

Total Assets

P/B

Total liabilities

Cash and bank balances

Intangibles

Tangible assets

PBT

Net tax expense / (benefit)

PAT

Weighted Average Cost of Debt %

Debt/Equity (debt/debt+networth or

EBITDA %

ROCE%

RATIOS

NPM %

Capital work-in-progress

Long-term loans and advances

Inventories


P/L PERFORMANCE

Cost Of Projects & Contractual

Employee benefit Expence

Net Revenue from Operation

Other Income

Total Income

Other Expenses

Expenditure

EBITDA

Depriciation


641

700

600

9

17

1M 1yr YTD

Absolute 18.9 -19.7 -19.7

Rel.to Nifty 14.0 -30.2 -30.2

Current 4QFY13 3QFY1

3Promoters 58.9 57.9 57.9

FII 17.5 17.9 18.0

DII 18.5 18.4 19.1

Others 5.1 5.9 5.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 11807 13414 14857 16536 17691

Total Income 15420 17617 19072 20775 21930

PPP 9056 10614 10907 11155 12500

Net Profit 4433 4884 4748 3408 5209

EPS 140.6 144.0 134.3 94.1 143.9

8

PNB

Market Data

Upside

890/400

BSE Code 532461

NSE Symbol PNB

Company update ADD Over the last one month, PNB has outperform Nifty by 14% and Bank Nifty by

5.7% largely on account of external factor like economy and fiscal deficit

showing some positive trend, softening of inflation from its peak level. Market

sentiment are also boosted by recent opinion poll result which revealed BJP

led NDA would come to power and economy would revived. Although we like

Bank of Baroda over PNB but former is trading close to our target price. We

value PNB at Rs.600 to Rs.775 per share implying 0.6 to 0.75 times of one year

forward book depending upon current economy scenario and banks own

fundamental. Looking at current fundamental and market sentiments we

believe bank would trade in the range of Rs.600 to Rs.700.

In the subsequent section we will discuss two positive fronts that bank has

witnessed in last quarter result (a) asset quality improvement especially in

fresh slippage side, (b) margin expansion. We will discuss the possibility

valuation contraction from current level.

CMP

Target Price


Average Daily Volume

19646


PNB Vs Nifty


7.4 cr

Nifty 6495

(Source: Company/Eastwind)

Stock Performance

52wk Range H/L

During the last quarter PNB experienced improvement of asset quality especially in

fresh slippage front. Fresh addition in GNPA was declined by 52% sequential to Rs.

1142 cr as against average run rate in last ten quarter was Rs.2124cr. In percentage

to gross advances, slippage ratio came down to 1.4% versus 3% in 2Q and 4.7% in

1Q. Cash recoveries were better which drag net NPA to 2.8% from 3.1% in previous

quarter. Further bank restructure Rs. 2115 cr in 3QFY14 mainly come from power

sector which was offset by similar amount of bond received from SEBs. Bank

management has not indicated restructure pipeline in near term which means stable

to improving asset quality trend could be seen.

Margin expansion on the back of shifting concentration of portfolio mix and

CASA growth

Mkt Capital (Rs Cr)


Creation of fresh slippage lower, impaired asset high but showing

improvement

During the last quarter bank’s margin expanded by 10 bps QoQ despite of moderate

loan growth. Bank witnessed 9.7% YoY loan growth led by SME growth of 21.6%

and retail segment growth of 17.5%. Retail and SME segment are high yield in

nature. Further bank’s low cost deposits CASA increased by 13% in absolute term in

which saving account supported with 14% growth current account 7% YoY. But

overall deposits declined by 20% led by 33% declined of term deposits which inflated

CASA ratio to 38.3% from 27%. Sequentially cost of fund declined by 25 bps while

yield on loan declined by 11 bps on account of creation of low deposits franchise and

shifting of portfolio.

"ADD"24th March2014


9

Management guided stable NIM, more focus on liability rather than asset yield

According to bank management, PNB is focusing more on liability side rather than yield.

Bank has reduced high cost bulk deposits from Rs.880 bn in Sept.2012 to Rs.220 bn in

Dec.2013 and certificate of deposits came down to Rs.110 bn from Rs.240 bn in

3QFY13. Share of low cost deposits improved to 40% which would help bank to maintain

NIM at 3.5% according to management.

Valuation & View

We upgrade PNB from neutral to add rating on account of improving sign of economy led

by CAD number and softening of inflation. Recently market sentiments are also boosted

up due to exit poll result which revealed that BJP led NDA government would be close to

government formation in coming general election. In our valuation matrix, we value in the

range of 0.6 times to 0.75 times of F14E book depending upon bank’s fundamental and

market sentiment. Looking at current market sentiment and fundamental, we value bank

in the range of Rs.600 to Rs.770 per share. We have added rating on the stock with

current price target of Rs.700.

Current Valuation Range

PNB



10

PNB

Financial & Assuption

Source : Eastwind/ Company



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

Interest Expense 15179 23062 27037 26977 31875

NII 11807 13414 14857 16536 17691

Change (%) 39.3 13.6 10.8 11.3 7.0

Non Interest Income 3613 4203 4216 4240 4240

Total Income 15420 17617 19072 20775 21930

Change (%) 27.6 14.2 8.3 8.9 5.6

Operating Expenses 6364 7003 8165 9621 9430

Pre Provision Profits 9056 10614 10907 11155 12500

Change (%) 23.6 17.2 2.8 2.3 12.1

Provisions 4622 3577 4386 6253 5059

PBT 4433 7037 6522 4902 7442

PAT 4433 4884 4748 3408 5209

Change (%) 13.5 10.2 -2.8 -28.2 52.8

Balance SheetDeposits( Rs Cr) 312899 379588 391560 450294 517838

Change (%) 25 21 3 15 15

of which CASA Dep 120325 134129 153344 139752 153766

Change (%) 18 11 14 -9 10

Borrowings( Rs Cr) 31590 37264 39621 47857 44728

Investments( Rs Cr) 95162 122703 129896 143572 149094

Loans( Rs Cr) 242107 293775 308725 339598 356578

Change (%) 30 21 5 10 5

RatioAvg. Yield on loans 8.7 9.7 10.3 9.6 10.5

Avg. Yield on Investments 6.0 6.4 7.4 7.2 7.8

Avg. Cost of Deposit 4.4 5.6 6.5 6.4 6.6

Avg. Cost of Borrowimgs 4.4 4.5 3.9 4.0 4.1

Valuation

Book Value 682 820 924 1000 1107

CMP 1220 926 759 543 543

P/BV 1.8 1.1 0.8 0.5 0.5

Persistent System.

Footing on Product Business, and working aggressively on new emerging services;

11%

Key facts from Management Interview to Media( on 20th

March,2014)

1M 1yr YTD

Absolute 1.1 76.8 85.7

Rel. to Nifty 3.4 75.8 82.3


Promoters 38.96 38.96 38.96

FII 18.26 15.28 14.84

DII 18.78 21.23 19.31

Others 24 24.53 26.89

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

432.75 432.37 0.1 332.98 30.0

104.3 100.8 3.5 82.4 26.6

64.2 60.8 5.6 49.5 29.7

24.1% 23.3% 80bps 24.7% (60bps)

14.8% 14.1% 70bps 14.9% (10bps)

11

BSE Code 533179

NSE Symbol

PAT

(1) Persistent System is setting up a unit related to product and Product services, named it

“ Accelerite” to manage efficiently. They are taking some of its IP led products into this

Accelerite. We expect that company is able to compete as a product company, which

“Accelerite” will in the market.

(2) Management expects that the overall trends are looking good on Industry per se and

new emerging segment will play a major role for growth. Now, clients are moving into new

changes and focusing into new services and solution.

(3) For 4QFY14E, muted set of growth could be seen and expecting Intellectual Property

(IP) growth this quarter.

(4) The business outlook though is very positive in the sense, and they are seeing good

opportunities, good pipeline growth and many good interesting deals being signed.

(5) Persistent system is expecting to see IP led growth at a range of 18-19% in FY14E and

20%+ in FY15E driven by HPCA without any addition of new IPs. At same point of time,

they are also looking to scale strong potential of rCloud after adding new capabilities.

Persistent management suggests that deal pipeline are looking strong and seeing good

activity and traction in the market across the board. Its focus on some of newer

technologies like cloud, analytics and mobility, M2M, digital transformation are gaining

a lot of traction because of pickup in demand environment. Because of actively

investment in these themes, management is very confident to see healthy growth.

View and Valuation: The company’s focus is shifting greater proportion to IP led services

and company has marquee clientele in cutting-edge technologies around cloud, mobility,

digital and analytics; witnessing faster growth. Considering the company’s premium

valuation, we advice “Book Profit” on the stock. At a CMP of Rs 1059, stock trades at

13.4x FY15E earnings. Our view could be change with management guidance, higher

currency flactuations and post earnings of coming quarter.

Financials

Revenue

EBITDA

We cover Persistent System as one of the few companies in the tier-II with potential to

grow revenue at a range of 18-20%, specially focused on emerging business and

relationship building with marquee clients. Despite better predictability of growth and

attractive visibility of its expansion in new emerging verticals, we advice to book profit

on the stock because of its premium valuation.


Nifty


6483

Stock Performance

PERSISTENT

52wk Range H/L 1220/477

Average Daily Volume 12139

Market Data

"Persistently innovating.."

CMP 1059

Target Price 1070

On recent management Interview, Persistent System announced its new footing of

dedicated product business unit “Accelerite” to align its business strategy combined with

Products and IP (Intellectual Property) based on SMAC (Social, Mobility, Analytics,

Cloud) platform.

Company update Book Profit

Previous Target Price 960

Upside 1%

1 year forward P/E-x

Rs, Crore




4236

EBITDA Margin

PAT Margin

"Book Profit"21st Mar' 14


12

Persistent System.


Operating Metrics

Financials



2QFY12 3QFY12 4QFY13 1QFY13 QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Top1 16.0% 15.9% 17.2% 17.8% 20.7% 21.1% 21.6% 21.2% 22.5% 19.8%

Top 5 38.6% 37.0% 36.6% 33.5% 36.3% 37.3% 36.7% 34.7% 36.4% 36.9%

Top 10 49.4% 48.3% 48.8% 45.3% 47.0% 49.4% 47.9% 46.0% 47.3% 46.9%

Onsite - Linear 12665 12387 12603 12789 12863 12772 14014 14567 14283 14510

Offshore - Linear 3803 3778 3895 3898 3978 4032 4143 4111 4109 4179

Yeild per Employee(excld- Trainee) 3208 3247 3350 3345 3746 3817 3769 3602 3919 3934

Total Employee 6900 6706 6628 6536 6370 6719 6970 7144 7457 7602

Attrition 17.7% 17.4% 18.3% 18.9% 16.9% 16.0% 14.4% 14.2% 14.0% 13.2%

Utilization rate %(xclude IP Led ) 73.8% 74.1% 71.7% 74.1% 75.2% 77.3% 72.5% 70.0% 71.7% 72.9%

Billing Rate-USD/ppm

Employee Metrics

Client Concentration

Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 601.16 775.84 1000.3 1294.5 1666.59 2061.72

Employee Cost 368.74 481.62 599.05 719 899.96 1123.64

Cost of technical professionals 0 30.67 41.68 54 91.66 113.39

Other expenses 86.05 105.24 135.2 218 291.65 366.99

Total expenses 454.79 617.53 775.93 990.78 1283.28 1604.02

EBITDA 146.37 158.31 224.37 303.72 383.32 457.70

Depreciation 33.52 42.39 61.1 78 100.55 93.54

Other Income 11.23 34.44 34.44 34.44 55.00 72.16

EBIT 112.85 115.92 163.27 225.44 282.76 364.16

Interest Cost 0 0 0.00 0.03 0.05 0.05

Profit (+)/Loss (-) Before Taxes 124.08 150.36 197.71 259.851 337.71 436.28

Provision for Taxes 9.05 10.62 55.09 75.37 92.03 119.98

Net Profit (+)/Loss (-) 115.03 139.74 142.62 184.481 245.69 316.30

Growth-% (YoY)

Sales 1.2% 29.1% 28.9% 29.4% 28.7% 23.7%

EBITDA 60.2% 8.2% 41.7% 35.4% 26.2% 19.4%

PAT 74.1% 21.5% 2.1% 29.4% 33.2% 28.7%

Expenses on Sales-%

Employee Cost 61.3% 62.1% 59.9% 55.5% 54.0% 54.5%

Other expenses 14.3% 13.6% 13.5% 16.9% 17.5% 17.8%

Tax rate 7.3% 7.1% 27.9% 29.0% 27.3% 27.5%

Margin-%

EBITDA 24.3% 20.4% 22.4% 23.5% 23.0% 22.2%

EBIT 18.8% 14.9% 16.3% 17.4% 17.0% 17.7%

PAT 19.1% 18.0% 14.3% 14.3% 14.7% 15.3%

Valuation:

CMP 310 366.7 409.2 541 1059 1059

No of Share 4 4 4 4 4 4

NW 639.0 747.1 840.5 1018.3 1212.5 1477.3

EPS 28.8 34.9 35.7 46.1 61.4 79.1

BVPS 159.7 186.8 210.1 254.6 303.1 369.3

RoE-% 18.0% 18.7% 17.0% 18.1% 20.3% 21.4%

P/BV 1.9 2.0 1.9 2.1 3.5 2.9

P/E 10.8 10.5 11.5 11.7 17.2 13.4

TCS

Key facts from Management Commentary:

1M 1yr YTD

Absolute -5.9 29.9 67.2

Rel. to Nifty -13.3 18.8 57.1


Promoters 73.9 73.96 73.96

FII 16.33 16.09 15.67

DII 5.26 5.58 5.90

Others 4.51 4.37 4.47


21294 20977.2 1.5 16069.93 32.5

6686.76 6633.0 0.8 4660.49 43.5

5333.43 4633.3 15.1 3549.61 50.3

31.4% 31.6% (20bps) 29.0% 240bps

25.0% 22.1% 290bps 22.1% 290bps

13


NSE Symbol TCS

52wk Range H/L 2384/1300

Mkt Capital (Rs Crores) 433985

Now, revenue in 4QFY14E could be a bit lighter than what we had expected post 3QFY14

earnings. We are not much surprise on comments on weak revenue as well as ramping

down on margin picture for current quarter. We believe that the 1QFY15E, the first

seasonally strong quarter of the year, is the stern litmus test of TCS’s confidence for

FY15E.

(1) For 4QFY14E, revenue would be lower than preceding quarter because of seasonal

impacts, and domestic revenue may clock negative growth largely impacted by upcoming

general election. However, no pressure would be seen on revenue for FY15E.

(2)Margin would decline by 40-50 basis points on cross currency movement and higher

investments. However, company is expecting no hiccups on margin for long- term

prospect.

(3) The company is very optimistic on Europe, US and UK growth could be inline. Latin

America will see good growth. Europe will continue to do well, and the US and the UK will

be close to industry average. Middle East and APAC could be seen on flattish node.

(4) Across vertical, Media and Entertainment has reported better, Telecom remains

challenged. While, there could be some ray of growth because of higher penetration in

Europe.

Market DataBSE Code 532540

Previous Target Price 2360

Upside 23%

Change from Previous 6%

Mid Quarter's Analyst Meet: Lower than expected growth for 4QFY14E, but still better

outlook for FY15E than FY14E,

" Strong Fundamentals"

CMP 2041

Target Price 2510

Company update Buy

On Mid Quarter Analyst Meet, TCS also commented on weak revenue growth

momentum for 4QFY14E followed by Infosys due to weak seasonality. Growth in

4QFY14E would be lower than the preceding quarter and margin would decline 40-50

basis points on cross currency movement and higher investments. However, sigh of

relief was seen on FY15E outlook and comments on overall demand environment.

1 year forward P/E

Rs, Crore



(5) Currency will play a small role with marginal impact of cross currency movement and

average currency movement. There may be some accounting changes related to

recognition of forex gains or losses, but it is not likely to be material.

View and Valuation: We continue to remain positive on its demand outlook and margin

profile, the management expects for robust deal pipeline going forward and also expects

to materialize its emerging space like Digital as well as Cloud, Mobility, Analytics and Big

data. We expect, TCS will be star performer in growth sense than other peers. Hence, we

are maintaining 17% (revised from 18%) revenue growth in dollar term for FY14E

because of improved demand environment, while NASSCOM expects 12-14% for the

Industry. At a price of Rs 2041, it is trading at 18x FY15E earnings, We maintain" BUY"

view on the stock with a target price of Rs 2510.

Financials

Revenue

EBITDA

EBITDA Margin

PAT Margin

PAT


Nifty 6524

Stock Performance

"BUY"20th Mar' 14


14

Unlike Infosys, TCS comments are based on potential impact from seasonally lower

demand in its biggest market (US and Europe) and weak domestic demand environment.

On previous comments, management had already quoted regarding demand volatility at

home because of upcoming poll.

Comparing with its nearest rival Infosys, TCS is not facing largely with any specific issue.

Despite a weak commentary on 4QFY14E, management is aggressively confident to report

better numbers in FY15E with healthy demand outlook. We are considering following

factors for its growth story in FY15E.

Healthy Demand Environment: TCS is much confident on healthy demand outlook and

expects that FY15E could be better year than FY14E propelled by better discretionary

spending in the US. Management suggests that except India, other emerging markets

(contributes 18-19% of revenue) continue to see healthy demand. Also, in its FY15

revenue growth models, India (contributes 7% of sales) is the only market which TCS

expects to be weak.

TCS.

Is there any setback?


No sign of any ramp down: Management suggests that Continental Europe will likely

grow ahead of overall company growth in FY15E. On vertical front, smaller verticals such

as Energy & Utilities, Transportation and Life sciences & Healthcare might grow ahead of

overall company average. While, its mature verticals like BFSI and Retails could grow

flattish, Telecom continues to face structural issue. Contracts wins from continental

Europe could change the shape of verticals. Still, we are not seeing any project ramp

down.

New emerging business on demand: A part of legacy business, the emerging

opportunities in helping large corporations tap areas such as social media and data

analytics are seen as increasingly contributing to the IT sector's next phase of growth. TCS

and its Indian competitors are winning a significant share of several 2nd and 3rd

generation renewal contracts as western companies look to both cut costs and modernise

their IT infrastructure.

Sales (USD) and Sales growth-%

Considering above growth factors, we are not expecting any major concern with

company's growth. The company is also focussed to drive operational improvements in

the business and aims to expand reach in non-traditional markets and servicelines.


We expect 1% (QoQ) revenue growth in

USD term for 4QFY14E,


15

TCS.


Financials



Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales-USD 6339.0 8187.0 10171.0 11569.0 13531.7 16012.2

Net Sales 30029.0 37325.1 48894.3 62989.5 81731.2 96073.3

Employee Cost 10879.6 13850.5 18571.9 24040.0 30060.7 35547.1

Overseas business expenses 4570.1 5497.7 6800.5 8701.9 11565.0 13930.6

Services rendered by business associates and others 1262.0 1743.7 2391.3 3763.7 4952.9 5764.4

Operation and other expenses 4622.8 5054.3 6694.8 8443.9 10044.8 12009.2

Total Expenses 21334.4 26146.2 34458.5 44949.6 56623.4 67251.3

EBITDA 8694.6 11178.9 14435.8 18040.0 25107.8 28822.0

Depreciation 601.8 686.2 860.9 1016.3 1279.2 1503.7

Amortisation 59.1 49.1 57.1 63.7 57.5 76.7

Other Income 272.0 604.0 428.2 1178.2 1348.6 1921.5

Extra Ordinery Items 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 8033.7 10443.6 13517.9 16960.1 23828.6 27318.3

Interest Cost 16.1 26.5 22.2 48.5 35.9 33.8

PBT 8289.6 11021.2 13923.8 18089.8 25141.3 29206.0

Tax 1197.0 1830.8 3399.9 4014.0 5933.3 7009.4

PAT 7092.7 9190.3 10524.0 14075.7 19208.0 22196.5

PAT (Reported PAT) 7000.6 9068.6 10414.0 13917.4 19208.0 22196.5

Sales-USD 29.2% 24.2% 13.7% 17.0% 18.3%

Sales 8.0% 24.3% 31.0% 28.8% 29.8% 17.5%

EBITDA 21.3% 28.6% 29.1% 25.0% 39.2% 14.8%

PAT 31.8% 29.6% 14.5% 33.7% 36.5% 15.6%

EBITDA 29.0% 30.0% 29.5% 28.6% 30.7% 30.0%

EBIT 26.8% 28.0% 27.6% 26.9% 29.2% 28.4%

PAT 23.6% 24.6% 21.5% 22.3% 23.5% 23.1%

Employee Cost 36.2% 37.1% 38.0% 38.2% 36.8% 37.0%

Overseas business expenses 15.2% 14.7% 13.9% 13.8% 14.2% 14.5%

Services rendered by business associates and others 4.2% 4.7% 4.9% 6.0% 6.1% 6.0%

Operation and other expenses 15.4% 13.5% 13.7% 13.4% 12.3% 12.5%

Tax rate 14.4% 16.6% 24.4% 22.2% 23.6% 24.0%

CMP 780.8 1182.5 1322.0 1563.0 2041.0 2041.0

No of Share 195.7 195.7 195.7 196.0 196.0 196.0

NW 18466.7 24504.8 29579.2 38645.7 49940.0 62991.6

EPS 36.2 47.0 53.8 71.8 98.0 113.2

BVPS 94.4 125.2 151.1 197.2 254.8 321.4

RoE-% 38.4% 37.5% 35.6% 36.4% 38.5% 35.2%

Dividen Payout ratio 28.1% 50.8% 37.5% 41.2% 41.2% 41.2%

P/BV 8.3 9.4 8.7 7.9 8.0 6.4

P/E 21.5 25.2 24.6 21.8 20.8 18.0

Margin -%

Expenses on Sales-%

Valuation

Growth-%

HDFC Bank

741

760

720

3

6

1M 1yr YTD

Absolute 11.8 15.1 15.1

Rel.to Nifty 4.7 4.8 4.8


3Promoters 22.7 22.7 22.7

FII 34.9 33.6 34.9

DII 9.3 9.8 6.6

Others 33.1 33.8 34.2

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 10543 12885 15811 18713 22944

Total Income 14878 18668 22664 26604 30835

PPP 7725 9391 11428 14516 15572

Net Profit 3926 5167 6726 8453 9119

EPS 84.4 22.0 28.7 36.0 38.9

16


HDFC Bank Vs Nifty


4.17 lakhs

Nifty 6524

Mkt Capital (Rs Cr)



Stock Performance

In last quarter, HDFC bank has raised FCNR deposits to the tune of $3.4 bn nearly

about Rs.21000 cr through RBI special window which carry interest rate of 3.5%

while normal deposits rate are in the range of 6.5% to 7%. HDFC Bank raised larger

chunk of monies in compare to other banks like SBI and ICICI bank. SBI and ICICI

bank raised monies through FCRN deposits to the tune of $2bn each. Further

incremental foreign deposits with tenure are more than 3 years are exempted from

SLR, CRR and PSL lending. This would help bank to lower cost of fund by 75 bps to

100 bps and hence margin expansion. Bank management guided margin would be in

the range of 4.1% to 4.5% going forward.

Mounting bad loans have major cause of worry; RBI allowed banks to use 33%

of counter cycle, floating provisions for specific provisions

Recently RBI allows banks to use 33% of counter cycle provisioning buffer, floating

provisions for making specific provisions against impaired accounts which would help

bank to make lower provisions and hence boost up earnings. HDFC bank reported

very strong asset quality with GNPA and net NPA stood at 1% and 0.3% at the end

of December quarter. Bank would use counter cycle buffer, floating provisions for

specific provisions and make lower fresh provisions. This would be the result of

boosting up profitability.

Average Daily Volume

Counter cycle provisions and floating provisions are represented as capital reserves

that bank need to build up in good times and can only use for contingencies under

extra circumstance. This is the first time when central bank allows to use since the

reserve were created starting 2010. At the end of quarter all banks reported Rs.1.71

trillion of GNPA, the rise of 39.4% YoY. In a very rough estimate, banking system

has nearly about Rs. 2 trillion in bad loans and another Rs.4 trillion loans are being

restructured pipeline out of total Rs.82 trillion.

Company update HOLD

176874

Raised foreign deposits higher amount in comparison to peers; likely to report

better NII for being low cost in nature

750/528

NSE Symbol HDFCBANK

52wk Range H/L

CMP

Target Price

We have raised our price target to Rs.760/share on account of bank’s likely to

get benefit from FCNR deposits mobilization that it had recently raised. We

value bank in the range of Rs.660 to Rs.760 per share on the back of current

fundamental and prevailing economic scenario. Now the economy is

witnessing some sign of revival and market sentiment boost up on account of

exit poll result. HDFC bank is likely to see earnings boost-up in near term on

account of mobilization of FCNR deposits which would reflect better NII for

being a low cost carrying in nature, recently RBI allow banks to use 33% of

buffer/floating provisions for bad loan and declining of low yielding PSL share

in overall lending.


Market Data

Upside

BSE Code 500180

"HOLD"20th March.,2014


17

Source:Eastwind/Company

HDFC BANK


Share of PSL down sharply; release fund would be deployed in high yield sector

Recently share of PSL in HDFC bank came sharply but bank already met PSL target of

40% which means addition fund would be deployed in high yield segment which would

reflect in NII growth. According to RBI, bank’s need to spend 40% in net advance in

priority sector lending and HDFC bank are among those which have highest share in PSL

in private bank category. Additionally fund raised fund through FCNR deposits with

tenure more than 3 years are exempted from SLR, CRR and PSL means bank would

have higher fund for deploying in sector those are high yield in nature.

Valuation & View

HDFC bank is expected to report better earnings on the back of (a) likely to get benefit

from FCRN deposits mobilization, (b) recent RBI allow bank to use 33% of counter cycle

buffer provisions for specific provisions, this would help bank to make lower provisions

and hence profitability and (c) share of additional PSL lending would be deployed in high

yielding sector. We have raised our price target to Rs.760/share which is upper side of

our valuation band.

Valuation Band


18

HDFC BANK

Financials

Source: Eastwind/ Company



P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 15085 21124 26822 32002 40213

Income on investments 4675 6505 7820 9311 10952

Interest on balances with Reserve Bank of India 148 137 282 373 373

Others 20 108 141 65 65

Total Interest Income 19928 27874 35065 41751 51603

Others Income 4335 5784 6853 7891 7891

Total Income 24263 33658 41917 49642 59494

Interest on deposits 8028 12690 16321 20281 24337

Interest on RBI/Inter bank borrowings 1336 2253 2889 4571 4278

Others 20 47 44 44 44

Interest Expended 9385 14990 19254 23038 28659

NII 10543 12885 15811 18713 22944

NII Growth(%) 25.7 22.2 22.7 18.4 22.6

Other Income 4335 5784 6853 7891 7891

Total Income 14878 18668 22664 26604 30835

Total Income Growth(%) 20.3 25.5 21.4 17.4 15.9

Employee 2836 3400 3965 4231 5342

Other Expenses 4317 5878 7271 7857 9921

Operating Expenses 7153 9278 11236 12087 15263

PPP( Rs Cr) 7725 9391 11428 14516 15572

Provisions( Incl tax provision) 3799 4224 4701 1751 6453

Net Profit 3926 5167 6726 8453 9119

Net Profit Growth(%) 33.2 31.6 30.2 25.7 7.9

Key Balance Sheet DataDeposits 208586 246706 296247 355496 426596

Deposits Growth(%) 24.6 18.3 20.1 20 20

Borrowings 14394 23847 33007 50785 47529

Borrowings Growth(%) 11.4 65.7 38.4 54 -6

Loan 159983 195420 239721 299651 365574

Loan Growth(%) 27.1 22.2 22.7 25 22

Investment 70929 97483 111614 114580 156461

Investment Growth(%) 21.0 37.4 14.5 3 37

Eastwind CalculationYield on Advances 9.4 10.8 11.2 10.7 11.0

Yield on Investments 6.6 6.7 7.0 8.1 7.0

Yield on Funds 7.7 8.9 9.3 10.1 9.9

Cost of deposits 4.3 5.6 6.0 6.5 6.2

Cost of Borrowings 9.4 9.6 8.9 9.0 9.0

Cost of fund 4.2 5.5 5.8 5.7 6.0

ValuationBook Value 545.5 127.5 154.3 189.4 222.3

P/BV 4.3 4.1 4.1 3.5 3.0

P/E 27.8 23.6 21.8 18.7 17.3

KPIT Tech.

Key Facts from recent Management Interview to media (on 12th

March, 2014)

1M 1yr YTD

Absolute -4.7 52.9 -

Rel. to Nifty -12 41.9 -


Promoters 22.53 22.87 24.25

FII 41.96 36.42 32.79

DII 6.99 11.12 10.93

Others 28.52 29.59 32.03


677.93 702.76 (3.5) 567.02 19.6

103.5 108.1 (4.3) 94.1 10.0

66.7 66.7 0.0 48 39.0

15.3% 15.4% (10bps) 16.6% (130bps)

9.8% 9.5% 30bps 8.5% 130bps

19

EBITDA Margin

PAT Margin

We expect that the company would report better earnings with margin ramp up and

signing of larger deals in next couple of quarters. Now, we upgrade our view on the

stock from “Neutral” to “Buy” with a price target of Rs 185. At a CMP of Rs 160, stock

trades at 9.5x FY15E EPS.

Financials

Revenue

EBITDA

PAT

SAP revival and Auto Engineering Services shape; a growth driver in near term,

Upside

BSE Code 532400

Price Performance

Rs, Crore


Incremental revenue by REVOLO and Systime: As per the management comment, its

dream project “REVOLO Technology” REVOLO would play a key role to report an

incremental growth in FY15E. KPIT’s acquisition Systime from Integrated Enterprise

Services (IES) segment would report healthy growth prospects at least over the next

couple of years.

View and Valuation: Impressive organic growth despite inorganic thrust (acquired 10

companies in the last 10 yrs), Potential option value from success of its hybrid engine

venture Revolo (on trial). KPIT has targeted to reach $1bn sales by 2017. Its differentiated

positioning and competitive edge in its focus areas, imperatives to the success of smaller-

sized IT vendors impress to investors.

NSE Symbol KPIT

Stock Performance

3103


"On billion dollar journey"

CMP 160

Target Price 185 SAP business back to growth trajectory: KPIT’s revenue has been facing growth related

issues on account of deficit in SAP business (contributes 24% of sales). Profitability on SAP

business was also a challenge for the company. On 3QFY14 revenues from SAP was down

by 10% (QoQ). However, on the back of deal signings and visible deal pipeline, SAP should

return into growth path in 4QFY14E and FY15E. Considering healthy demand environment

in FY15E, We expect that USD revenue growth in SAP could be in double digits.

Previous Target Price -

Company update Buy

16%

Change from Previous -

Market Data

Expectation of margin improvement: The decline in SAP revenue has impacted the overall

margins, and margin was seen almost flat at 15.4% in 2QFY14 and 3QFY14. We expect that

profitability from SAP business would support to shape up its margin in next couple of

quarters. Even, Utilization rate in SAP has declined to below 90% at onsite and below 70%

mark at offshore. This is expected to improve in FY15E. Management expects to see PAT

margin at double digit by next couple of quarters.

Auto Engineering Services; a growth driver: The global Automotive Industry has

witnessed a strong revival. US industry sales in 2013 finished at 15.6 million vehicles, up

7.6% from 2012, and China became the first country in which more than 20-million

vehicles were sold in any given year. Considering healthy demand outlook in Auto

Industry, KPIT is seeing exports growth above the industry rates, driven by demand for

services around safety systems, intelligent driving, hybrid electric cars, fuel efficiency etc.

Management expects revenues from Auto Engineering to exceed 30% of the company’s

revenues, in the next 3 years, as KPIT expected to achieve the mark of USD1b in

revenues.

6517



Nifty

52wk Range H/L 189/92

"BUY"19th Mar' 14


20

KPIT Tech

Operating Metrics


Financials



4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

No. of Customers Added 4 3 4 2 5 6 3 3

No. of Active Customers 169 172 176 178 183 189 192 195

Customers with run rate of >$1Mn 59 65 69 72 78 78 78 78

Top Client – Cummins 19.5% 20.6% 19.7% 19.1% 16.6% 16.8% 16.5% 17.9%

Top 5 Clients 33.0% 36.3% 35.2% 36.8% 35.2% 38.6% 38.0% 38.2%

Top 10 Clients 42.2% 44.0% 43.7% 45.2% 44.0% 47.3% 46.3% 47.6%

DSO 90 75 75 70 75 77 75 76

Total Employee 7719 7873 8111 8286 8321 8456 8816 9136

Onsite Utilization 94.5% 94.7% 94.5% 92.8% 94.3% 94.2% 92.4% 88.1%

Offshore Utilization 74.3% 74.1% 74.7% 72.9% 74.1% 73.4% 72.9% 71.3%

Client Metrics

Client Concentration

Employee Metrics

Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales-USD 153.76 224.07 306.71 410.46 445.78 535.96

Net Sales 731.64 987.05 1500.00 2238.63 2692.54 3215.75

Employee Cost 265.92 529.95 771.78 1140.79 1378.58 1640.03

Other expenses 304.70 308.82 511.97 762.32 902.00 1061.20

Total Expenses 570.62 838.77 1283.75 1903.11 2280.58 2701.23

EBITDA 161.02 148.28 216.25 335.52 411.96 514.52

Depreciation 30.80 41.12 44.49 47.16 54.42 67.93

Other Income 1.20 6.74 13.82 11.74 12.12 24.12

Extra Ordinery Items -26.45 0.00 10.05 -1.30 -21.05 16.08

EBIT 130.22 107.16 171.76 288.36 357.54 446.59

Interest Cost 2.74 3.78 7.32 13.99 24.31 24.56

PBT 128.68 110.12 178.26 286.11 345.35 446.15

Tax 16.91 15.49 43.67 76.55 96.70 122.69

PAT 111.77 94.63 134.59 209.56 248.65 323.46

Sales-USD -11.7% 45.7% 36.9% 33.8% 8.6% 20.2%

Sales-INR -7.8% 34.9% 52.0% 49.2% 20.3% 19.4%

EBITDA -12.2% -7.9% 45.8% 55.2% 22.8% 24.9%

PAT 169.6% -15.3% 42.2% 55.7% 18.7% 30.1%

EBITDA 22.0% 15.0% 14.4% 15.0% 15.3% 16.0%

EBIT 17.8% 10.9% 11.5% 12.9% 13.3% 13.9%

PAT 15.3% 9.6% 9.0% 9.4% 9.2% 10.1%

Employee Cost 36.3% 53.7% 51.5% 51.0% 51.2% 51.0%

Other Exp 41.6% 31.3% 34.1% 34.1% 33.5% 33.0%

Tax rate 13.1% 14.1% 24.5% 26.8% 28.0% 27.5%

CMP 115.00 168.05 122.90 99.0 160.0 160.0

No of Share 7.90 8.70 17.80 19.28 19.28 19.28

NW 387.11 603.19 712.55 1036.23 1269.09 1570.00

EPS 14.15 10.88 7.56 10.87 12.90 16.78

BVPS 49.00 69.33 40.03 53.75 65.82 81.43

RoE-% 28.9% 15.7% 18.9% 20.2% 19.6% 20.6%

Dividen Payout ratio 6.4% 6.8% 4.9% 7.9% 6.3% 7.0%

P/BV 2.35 2.42 3.07 1.84 2.43 1.96

P/E 8.13 15.45 16.25 9.11 12.41 9.54

Valuation

Expenses on Sales-%

Margin -%

Growth-%

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