share analysis today: buy stock of bank of baroda’s with target price rs.634/share

Bank of Baroda’s profitability was up by 3.6% YoY due to right back of depreciation provisions. Bank’s operating and financials metrics were

remained muted except healthy loan growth. Margin compressed sequentially but management guided domestic NIM of 3% from present of

2.95% which seems achievable if we look at balance sheet structure. We value bank at Rs.634/share which implies 0.75 times of FY14E’s book

value. ......................................................................... ( Page : 2- 7)

21th Feb, 2014

Edition : 211

BANKBARODA : "BUY" 21th Feb 2014

IEA-Equity

Strategy

CIPLA : "BUY" 14th Feb 2014

eClerx Services :"Consistent Performer" "BUY" 18th Feb 2014

SUNPHARMA :Robust Performance "NEUTRAL" 17th Feb 2014

Sun Pharmaceuticals Industries limited posted 3QFY14 results above street expectations with total revenues including other operating income

at Rs 4312 Cr up 50.5 % YoY led by robust growth in US formulations and Taro business. The stellar performance of company was supported

well from domestic operations. The US formulation business grew by more 56 % YoY to USD 434 Mn

.................................................................................................. ( Page : 24-25)

State Bank of India : "BUY"

eClerx Services witnessed inline set of growth with 2.3 %(QoQ) sales growth in INR term and 4.7%(QoQ) in USD term (4% in CC term) led by

some preponement of volume of work from Q4 into Q3 which has resulted into the slightly higher sequential growth. Company’s high RoE and

dividend payout ratio make attractive to invest on the stock. ........................................................ ( Page : 16-18)

17th Feb 2014

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with

well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the

quarter while domestic business grew by 9% YoY to 1044 Cr. ................................................ ( Page : 26-27)

SBIN’s profitability was declined by 34% YoY largely due to higher provisions and contingencies led by deterioration in asset quality and higher

tax in order to create DTL special reserve as per suggestion by RBI. Bank’s NII grew by 13.3% YoY led by higher loan growth and stable NIM.

Asset quality slightly deteriorated with GNPA stood at 5.9% versus 5.8% in previous quarter and net NPA further worsen to 3.2% against 2.9%

sequentially due to lower loan loss provisions made. We value bank at Rs.1779/share which is 1.1 times of FY14E book value.

.............................................................................................. ( Page : 19-23)

J&K BANK : "BUY" 20th Feb 2014

J&K Bank’s profitability increased by 11% YoY on account of reversal of provisions against NPA and investments, further on account of lower tax

rate profits inflated. Operating profit was flat at 1.4% YoY led by moderate NII growth which further led to margin compression. We lower our

price target to Rs.1525 from earlier of Rs.1578 which implies 1.3 times of FY14E book and 6 times of price earning.

.................................................................................... ( Page : 8- 12)

Britannia Inds :"Decent quarter" "BUY" 19th Feb 2014

Once again, Britannia Industries revealed better earning performance than street expectation. Its consolidated revenue grew by 10.7% (YoY) led

by 4-5% volume growth during the quarter.The company's margins are also likely to expand due to higher proportion of premium products and

easing input costs. We have "BUY" view on the stock with a target price of Rs 1065. At a CMP of Rs915, stock trades at 9.3x FY15E P/BV.

................................................. ( Page : 13-15)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

BANKBARODA

513

624

-

22

1M 1yr YTD

Absolute -18.8 -32.4 -32.4

Rel.to Nifty -15.3 -35.7 -35.7

Current 4QFY13 3QFY1

3Promoters 55.4 55.4 55.4

FII 15.5 15.5 15.3

DII 19.6 19.6 19.0

Others 9.5 9.5 10.3

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 8802 10317 11315 12218 14122

Total Income 11611 13739 14946 16400 18304

PPP 6982 8581 8999 9206 10067

Net Profit 4242 5007 4481 4444 4819

EPS 108.3 121.8 106.4 105.5 114.4

2

52wk Range H/L

Mkt Capital (Rs Cr)

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

(Source: Company/Eastwind)

Stock Performance

During quarter bank’s most of operating as well as financials was muted

except loan growth of 18% YoY. Asset quality was better among peers but in

tight liquidity situation it would remain challenging. Margin was compressed

slightly in sequential basis but management continued to guided domestic

NIM at 3% level from present of 2.95%. We value bank at Rs.634/share which is

0.75 times of FY14E’s book value.Change from Previous

BANKBARODA Vs Nifty

Share Holding Pattern-%

18.25 Cr

Nifty 6091

NSE Symbol BANKBARODA

Result update BUY

CMP

ANNUAL REPORT UPDATE

Target Price

Moderate NII growth despite of healthy loan growth and stable CD ratio

Bank’s NII growth moderate at 7.8% YoY to Rs. 3057 cr despite of healthy loan

growth and stable CD ratio. This was due to margin compression of 28 bps YoY led

by lower loan yield than cost of fund. However bank has taken several steps to

reduce the cost as share of bulk deposits declined to 73.8% from 79.3% in last year

and liability franchise increased by increased by 556 bps YoY. Other income (11%

YoY) was supportively help to growth revenue by 8.4% YoY to Rs.3989 cr.

Average Daily Volume

21627

Previous Target Price

Market Data

Upside

773/429

BSE Code 532134

Profitability increased by 3.6% YoY to Rs.1048 cr on account of higher tax provision

made by bank led by DTL special reserve as per suggestion by RBI. In 9MFY14,

total effective tax rate altogether came to 17%. Management guided tax rate for full

year would be 20-22%.

Higher operating expenses led de-growth in operating profit

Operating expenses increased by 25.7% in which employee cost increased higher by

32.3% YoY followed by 17.3% other operating expenses. This was result of

escalating cost to income ratio to 45% from 39% in last year. Higher cost income

ratio and moderate income growth led operating profit de-growth by 2.6% YoY to

Rs.2197 cr.

Provisions lower on account of right back of investment depreciation

Provisions and contingencies declined by 12% QoQ largely due to reversal of

provisions against investment depreciation to the tune of Rs.120 cr as against Rs.93

cr in previous quarter. Loan loss provision was by and large same as in previous

quarter and stood at Rs.819 cr versus Rs. 838 cr. With the reversal of provisions,

PBT increased by 17% YoY and 14% QoQ to Rs.1436 cr.

Profitability increased due to lower provisions

"BUY"21h Feb. 2014


3

NIM compressed by 5 bps QoQ to 2.37% due to stable loan yield while cost of fund

increased marginally by 10 bps to 5.4%. Bank has taken several steps to curtail cost by

reducing share of bulk deposits and increasing CASA ratio. Domestic NIM improved to

2.95% versus 2.85% in previous quarter whereas oversea NIM remained flat at 1.18% as

against 1.19%. Domestic NIM improvement was on account of higher investment yield to

7.98% from 7.9% on sequential basis.

Loan growth healthy led by SME and retail

Overall deposits de-grew by 4% YoY led by 10% declined of term deposits on year on

year basis. Current account and saving account deposits registered growth of 19% and

13% YoY respectively. This was the result of CASA ratio increased by 556 bps YoY to

26.2%. Loan grew by 18% YoY led by SME growth of 39.2% YoY followed by 21% YoY

growth retail. Corporate loan growth remained intact as bank’s has caution outlook

towards corporate exposure in tight economy scenario.

BANKBARODA


Asset quality by and large stable, PCR increased

On asset quality front, bank’s gross NPA increased by 10% YoY and net NPA

deteriorated by 5% in absolute term led by higher provision in balance sheet. In

percentage term, GNPA and net NPA stood at 3.4% and 1.9% versus 3.2% and 1.9% in

previous quarter. Provisions coverage ratio without technical write off was improved by

246 bps QoQ to 44.5%. Bank’s asset quality was better than among peers under our

coverage universe.

Margin compression on account of higher cost of fund than fund yield

Valuation & View

During quarter bank’s most of operating as well as financials was muted except loan

growth of 18% YoY. Asset quality was better among peers but in tight liquidity situation it

would remain challenging. Margin was compressed slightly in sequential basis but

management continued to guided domestic NIM at 3% level from present of 2.95%. We

value bank at Rs.634/share which is 0.75 times of FY14E’s book value.


4

BANKBARODA

Source: eastwind/Company


Bank’s NII growth moderate at 7.8% YoY to Rs.

3057 cr despite of healthy loan growth and

stable CD ratio. This was due to margin

compression of 28 bps YoY led by lower loan

yield than cost of fund

Higher operating expenses led de-growth in

operating profit

Profitability increased due to lower provisions


6

BANKBARODA

Source: Eastwind/Company



Quarterly Result (Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E

Interest/discount on advances / bills 7061 6832 6485 8.9 3.3 7173

Income on investments 2175 2220 1898 14.6 -2.0 2350

Interest on balances with Reserve Bank of India 245 281 403 -39.2 -12.8 397

Others 209 140 58 258.2 50.1 173

Total Interest Income 9691 9473 8845 9.6 2.3 10092

Others Income 932 974 841 10.9 -4.3 1102

Total Income 10623 10447 9686 9.7 1.7 11194

Interest Expended 6634 6579 6004 10.5 0.8 6792

NII 3057 2895 2841 7.6 5.6 3300

Other Income 932 974 841 10.9 -4.3 1102

Total Income 3989 3869 3681 8.4 3.1 4402

Employee 1056 1030 798 32.3 2.5 1189

Other Expenses 736 714 627 17.3 3.1 792

Operating Expenses 1792 1744 1426 25.7 2.7 1981

PPP( Rs Cr) 2197 2125 2256 -2.6 3.4 2421

Provisions 762 861 1029 -26.0 -11.5 897

Exceptional Items 16 16 12 25.0 0.0 0

PBT 1436 1264 1227 17.0 13.6 1524

Tax 372 80 203 83.7 364.7 457

Net Profit 1048 1168 1012 3.6 -10.3 1067

Balance Sheet Date( Rs Cr)

Equity Capital 423 423 412 2.5 0.0

Reserve & Surplus 35232 35127 30966 13.8 0.3

Net Worth 35654 35549 31379 13.6 0.3

Total Deposits 503772 484931 414733 21.5 3.9

Borrowings 29304 28558 27899 5.0 2.6

Other liabilities and provisions 18638 13995 14552 28.1 33.2

Total Liability 587368 563033 488563 20.2 4.3

Cash in hand 16742 15681 17147 -2.4 6.8

Cash and balances with RBI 87599 79980 58295 50.3 9.5

Total Investment 115210 111840 101848 13.1 3.0

Advances 352446 339855 299318 17.7 3.7

Fixed Assets 2562 2498 2399 6.8 2.6

Others Assets 12809 13179 9557 34.0 -2.8

Total Assets 587368 563033 488563 20.2 4.3

Asset Quality

GNPA( Rs Cr) 11926 10888 7321

NPA(Rs Cr) 6624 6316 3363

% GNPA 3.4 3.2 2.4

% NPA 1.9 1.9 1.1

% PCR (without technical writeoff) 44.5 42.0 54.1

7

BANKBARODA




Income Statement 2011 2012 2013 2014E 2015EInterest Income 21886 29674 35197 39065 45206

Interest Expense 13084 19357 23881 26847 31084

NII 8802 10317 11315 12218 14122

Change (%) 48.2 17.2 9.7 8.0 15.6

Non Interest Income 2809 3422 3631 4182 4182

Total Income 11611 13739 14946 16400 18304

Change (%) 32.8 18.3 8.8 9.7 11.6

Operating Expenses 4630 5159 5947 7194 8237

Pre Provision Profits 6982 8581 8999 9206 10067

Change (%) 41.5 22.9 4.9 2.3 9.4

Provisions 1331 2555 4168 3559 4043

PBT 5650 6026 4831 5647 6024

PAT 4242 5007 4481 4444 4819

Change (%) 38.7 18.0 -10.5 -0.8 8.4

Balance SheetDeposits( Rs Cr) 305439 384871 473883 521272 573399

Change (%) 27 26 23 10 10

of which CASA Dep 87589 103524 119981 135531 149084

Change (%) 23 18 16 13 10

Borrowings( Rs Cr) 22308 23573 26579 33273 36600

Investments( Rs Cr) 71261 83209 121394 122000 134200

Loans( Rs Cr) 228676 287377 328186 367568 404325

Change (%) 31 26 14 12 10

RatioAvg. Yield on loans 8.0 8.7 8.4 8.6 9.3

Avg. Yield on Investments 7.0 7.8 6.4 7.3 8

Avg. Cost of Deposit 4.3 5.1 5.2 5.2 5.4

Avg. Cost of Borrowings 5.5 6.7 5.4 5.5 5.5

Valuation

Book Value 536 668 759 846 929

CMP 963 794 652 513 513

P/BV 1.8 1.2 0.9 0.61 0.6

J&K BANK

1329

1525

1578

15

-3

1M 1yr YTD

Absolute -4.6 2.1 2.1

Rel.to Nifty -1.8 -1.8 -1.8


3Promoters 53.2 53.2 53.2

FII 28.2 27.1 24.8

DII 4.5 4.3 5.0

Others 14.1 15.4 17.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1544 1838 2316 2724 3356

Total Income 1908 2172 2800 3097 3728

PPP 1149 1370 1811 1952 2349

Net Profit 615 803 1055 1271 1535

EPS 105.7 126.9 165.7 217.6 262.2

8



Stock Performance

52wk Range H/L

J&k Bank Vs Nifty


22.54lakh

Nifty 6153

CMP

Target Price

We are disappointed with the growth parameters of bank and accordingly

reduce our target price from Rs.1578 to Rs.1525 due to lower growth in

balance sheet especially within state of Jammu & Kashmir. Bank’ profitability

was up by 11% due to reversal of provisions towards NPA and investment

depreciation while tax rate reduce to 28% versus 30% in last year. Bank’s

management continued to guide loan growth of 20% in FY14 but we lower our

loan growth assumption to 15% for FY14. We value bank at Rs.1525/share

which implies that 1.3 times of FY14E book value and 6 times of price

earnings.

Change from Previous

Company Update BUY


Market Data

Upside

Bank’s margin compressed by 36 bps QoQ to 3.97% due to 41 bps QoQ declined of

loan yield to 11.7% while deposits cost increased by 47 bps to 6.6%. Investment

yield improved by 55 bps to 7.7%. Overall cost of fund increased to 6.6% from 6.2%

in previous quarter whereas yield on fund improved slightly from 9.8% to 9.9% which

compressed margin by 36 bps sequentially.


6419

Moderate growth in deposits; CASA remained flat

Bank’s deposits grew by 11% YoY in which 12% growth within state of J&K while

deposits grew by 7% YoY in outside of state. CASA in absolute term reported growth

of 9% YoY while share to total deposits declined by 65 bps YoY 38.8%. Saving

deposits and current deposits registered growth of 5% and 10% YoY respectively

whereas term deposits reported growth of 12% YoY. Despite of lower growth in

CASA bank’s cost of deposits remain stable at 6.6% while cost of fund increased by

16 bps YoY.

Loan grew handsomely led by corporate loan growth

1496/995

Mkt Capital (Rs Cr)

532209

NSE Symbol J&KBANK

Loan grew by 21.5% YoY led by loan growth in J&K state by 25% YoY and 19% YoY

growth in outside state. Incremental loan came from corporate loan book which grew

by 23.4% YoY followed by agriculture (21.2% YoY) and SME (21% YoY). Corporate

loan constituted 83% in outside J&K sate, mostly infrastructure segment which has

high risk of restructure. Bank’s management guided loan growth of 20% in FY14

which means bank has to achieve 9% QoQ growth in loan as against quarterly run

rate of 5%.We lower our loan growth assumption from 20% to 15% in FY14E. Credit

deposits ratio improved by 611 bps YoY largely due to lower deposits growth as

against loan.

Margin compression on account of higher cost of fund than deposits

BSE Code

"BUY"20th Feb, 2014


9

We are disappointed with the growth parameters of bank and accordingly reduce our

target price from Rs.1578 to Rs.1525 due to lower growth in balance sheet especially

within state of Jammu & Kashmir. Bank’ profitability was up by 11% due to reversal of

provisions towards NPA and investment depreciation while tax rate reduce to 28% versus

30% in last year. Bank’s management continued to guide loan growth of 20% in FY14 but

we lower our loan growth assumption to 15% for FY14. We value bank at Rs.1525/share

which implies that 1.3 times of FY14E book value and 6 times of price earnings.

J&K BANK



Stable asset quality; PCR highest in industry

On asset quality front, bank’s GNPA increased by 2% QoQ in absolute basis while in

percentage to gross advance, it slightly improved from 1.72% to 1.67% sequentially.

During quarter, bank lowered its provisions by 1% which was the result of increased of

net NPA by 25% QoQ in absolute term. However in percentage to net advance, it stood

at 0.22% as against 0.19% in previous quarter. Fresh slippage ratio was at 1.4 %(

annualized) during quarter which was lower from previous quarter of 1.9%. Provisions

coverage ratio remained high at 86.6% (without technical write off) which was best in

industry in our coverage universe.

Moderate growth in NII despite of healthy loan growth

Bank’s NII grew by 8.8% to Rs.647 cr despite of healthy loan growth and improvement in

CD ratio led by margin compression. Other income was also lower to Rs.87 cr versus

Rs.91 cr in last quarter and Rs.99 cr in previous quarter. With the lower support from

other income, total revenue grew by 7.2% YoY to Rs.734 cr.

Higher operating expenses led flat growth in operating profit

Operating expenses increased by 17% YoY in which employee cost and other operating

cost increased by 15% and 22% YoY respectively. Consequently CI ratio increased by

340 bps to 40%. Moderate loan growth, lower other income and higher operating cost led

pre provisioning growth of 1.4% YoY.

Profitability increased on account of reversal of provisions and lower tax rate

Profitability increased by 11% YoY to Rs.321 cr despite of flat operating profit growth was

due to reversal of provisions towards NPA and depreciation. Bank’s provisions and

contingencies declined by 121% YoY due to Rs. 13 cr reverse from NPA provision and

Rs.5 cr reverse from investment depreciation provision. Tax rate was also lower to 28%

versus 31% in previous quarter and 30% in last quarter. We are disappointed with growth

parameters of profit and loss account. Bank’s balance sheet within J&K state especially

in deposits growth sense remained muted while credit growth grew handsomely. Overall

we found mixed growth trend which discourage us to reduce price target.

Valuation & View


10

J&K BANK



Moderate growth in NII despite of healthy

loan growth

Higher operating expenses led flat growth in

operating profit

Profitability increased on account of reversal

of provisions and lower tax rate


11

J&K BANK




Quaterly Result (Rs. Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%)

Interest/discount on advances / bills 1266 1244 1090 16.2 1.7 1322 -4.3

Income on investments 434 396 421 3.2 9.7 423 2.6

Interest on balances with Reserve Bank of India 16 10 23 -31.4 60.2 13 16.6

Others 0 0 0 0

Total Interest Income 1716 1650 1533 11.9 4.0 1759 -2.5

Others Income 87 99 91 -3.4 -12.1 96 -8.8

Total Income 1803 1749 1624 11.0 3.1 1855 -2.8

Interest Expended 1069 968 939 13.8 10.4 1022 4.6

NII 647 682 594 8.8 -5.2 738 -12.3

Other Income 87 99 91 -3.4 -12.1 96 -8.8

Total Income 734 781 685 7.2 -6.0 834 -11.9

Employee 188 177 164 14.7 6.3 180 4.3

Other Expenses 105 108 86 22.3 -2.5 120 -12.2

Operating Expenses 293 285 250 17.3 2.9 300 -2.3

PPP( Rs Cr) 441 496 435 1.4 -11.2 533 -17.4

Provisions -5 56 22 -120.6 -108.3 48 -109.5

PBT 445 441 412 8.0 1.1 485 -8.2

Tax 124 138 123 0.9 -10.1 145 -14.7

Net Profit 321 303 289 11.0 6.2 339 -5.4

Balance Sheet Data ( Rs Cr)

Net Worth 5797 5475 4898 18.3 5.9 5815 -0.3

Deposits 63157 61171 57075 10.7 3.2 65907 -4.2

Borrowings 1150 1346 801 43.6 -14.6 1579 -27.2

Advances 43318 41121 35658 21.5 5.3 44081 -1.7

Investment 22714 22316 22681 0.1 1.8 24200 -6.1

Asset Qaulity ( Rs Cr)

GNPA 725 709 582 24.7 2.3

NNPA 97 78 50 95.7 24.9

GNPA(%) 1.67 1.72 1.63

NNPA(%) 0.22 0.19 0.14

PCR(%) 87 89 91

12

J&K BANK




P/L 2010 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 2342 2630 3394 4318 5046 5703

Income on investments 705 1066 1403 1723 1713 1983

Interest on balances with Reserve Bank of India 11 17 39 97 56 56

Total Interest Income 3057 3713 4836 6137 6816 7742

Others Income 416 365 334 484 372 372

Total Income 3473 4078 5170 6621 7188 8114

Interest on deposits 1841 2069 2902 3741 3987 4386

Interest on RBI/Inter bank borrowings 83 46 41 26 101 139

Others 14 54 54 54 0 0

Interest Expended 1938 2169 2997 3821 4092 4386

NII 1119 1544 1838 2316 2724 3356

NII Growth(%) 37.9 19.1 26.0 17.6 23.2

Other Income 416 365 334 484 372 372

Total Income 1536 1908 2172 2800 3097 3728

Employee 366 524 521 652 675 814

Other Expenses 211 235 281 337 469 566

Operating Expenses 577 759 802 989 1144 1379

PPP( Rs Cr) 958 1149 1370 1811 1952 2349

Provisions 446 534 567 756 137 156

Net Profit 512 615 803 1055 1271 1535

Net Profit Grwoth(%) 20.1 30.6 31.4 20.5 20.8

Key Balance sheet dataDeposits 37237 44676 53347 64221 66789 73468

Deposits Growth(%) 20.0 19.4 20.4 4.0 10.0

Borrowings 1100 1105 1241 1075 1363 1884

Borrowings Growth(%) 0.4 12.3 -13.4 26.8 38.2

Loan 23057 26194 33077 39200 45080 51843

Loan Growth(%) 13.6 26.3 18.5 15.0 15.0

Investments 13956 19696 21624 25741 24535 21099

Investments Growth(%) 41.1 9.8 19.0 -4.7 -14.0

Eastwind CalculationYield on Advances 10.2 10.0 10.3 11.0 11.2 11.0

Yield on Investments 5.0 5.4 6.5 9.4 7.0 9.4

Yield on Funds 7.7 7.5 8.3 8.9 9.8 10.6

Cost of deposits 4.9 4.6 5.4 5.8 6.1 6.0

Cost of Borrowings 8.8 9.1 7.7 7.4 7.4 7.4

Cost of fund 5.1 4.7 5.5 5.9 6.0 5.8

ValuationBook Value 621 718 844 1003 1146 1412

P/BV 1.1 1.2 1.1 1.3 1.2 0.9

P/E 6.4 6.9 5.5 5.9 5.1 4.2

Britannia Inds

1M 1yr YTD

Absolute 1.7 86.9 34.57

Rel. to Nifty 3.8 82.8 18.27


Promoters 50.75 50.8 50.85

FII 20.11 19.11 19.48

DII 8.77 9.59 9.89

Others 20.38 20.5 19.78

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 1771.94 1755.27 0.9 1620.4 9.4

EBITDA 159.7 160.4 (0.4) 103.5 54.3

PAT 99.8 97.1 2.8 62 61.0

EBITDA Margin 9.0% 9.1% (10bps) 6.4% 260bps

PAT Margin 5.6% 5.5% 10bps 3.8% 180bps

13

Pricing and Promotion: During the quarter, company initiated its price hike of some of

its brand. The full benefit of these prices hikes will be seen in the March quarter. Its

strategy of focusing on premium brands has not only allowed the company to hike prices

but also improve its product mix as well.

BRITANNIA


Nifty 6127

Mkt Capital (Rs Crores)

Stock Performance

Margin Pickup: EBITDA Margin improved by 250 bps to 8.9%. The operating profit has

increased by 54% mainly due to decline in raw material cost by 420 bps to 54.7% and

purchase of stock in trade by 100 bps to 7.3% of adjusted net sales. The company also

expects to track margin expansion ahead by judicious mix of cost rationalization and

increasing supply chain efficiency.

Once again, Britannia Industries revealed better earning performance than street

expectation. Its consolidated revenue grew by 10.7% (YoY) led by 4-5% volume growth

during the quarter. Even, company has hiked the prices of some of its brands during

the quarter. PAT grew by 61% (YoY) because of its effective cost rationalization efforts.

The management expects the biscuit business to grow by 10-11% in FY14E, whereas

the non-biscuit business to grow at a faster rate by 20-25% in FY14E. Over the last few

quarter, company has more focused on its product portfolio expansion. We expect

that new products expansion is likely to increase going forward. By judicious mix of

cost rationalization and high value added biscuits, we expect its margin expansion

gradually over next couple of quarters.

No pressure on RM cost: High food price inflation remains a concern for the company.

Thankfully, Britannia doesn’t import much raw materials from abroad and is thus not

affected by rupee fluctuations. Its strategy of focusing on premium brands has not only

allowed the company to hike prices but also improve its product mix as well.

Market DataBSE Code 500825

NSE Symbol

52wk Range H/L 973/478

10967

Average Daily Volume 248428

"Decent quarter"

CMP 915

Target Price 1065

Consistency on witnessing better numbers with Margin expansion:Result update BUY

Previous Target Price -

Upside 16%

Change from Previous -

1 year forward P/BV

Rs, Crore



View and Valuation: Management also believes that volume growth will recover

gradually over the next few quarters, driven by higher brand spends and portfolio

expansion. The company's margins are also likely to expand due to higher proportion of

premium products and easing input costs. We have "BUY" on the stock with a target

price of Rs 1065. At a CMP of Rs915, stock trades at 9.3x FY15E P/BV.

Healthy distribution reach: The Company is also taking initiative to increase its rural

distribution reach for benefitting the opportunity of increasing consumption of food

products in rural markets. The company plans to increase its overall distribution

coverage by around 7-8% every year and rural coverage by around 10% every year.

"BUY"19th Feb' 14


14

Sales and Sales growth-%(YoY)

Entry into new categories like cereals will

also help drive growth. Consequently, the

company's earnings are expected to grow

20% over the next 2 years.


Sale of Land in Chennai and Banglore could result in Value unlocking: The company

plans to sell off its 8.60 acres industrial land in Chennai,which is located at Madras

Thiruvallur High (MTH) Road, Padi, Chennai. We expect the company to realize around

Rs120 crores to Rs150 crores from this land sale when it happens. Further the company

has another 5.0 acres prime real estate land in Bangalore at old airport road which can

fetch around Rs 350 crores.

volatility on key input (wheat, sugar, palm

oil) would prices directly impact its

margin picture,

The company's margins are also likely to

expand due to higher proportion of

premium products and easing input costs.


Expenses on Sales-%



Margin-%

Britannia Inds.


15


Britannia Inds.

Financials




Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales 3770.84 4589.73 5460.75 6135.91 6869.15 7693.45

Other Operating Income 63.53 19.65 24.62 49.5 68.69 76.93

Total income from operations (net) 3834.37 4609.38 5485.37 6185.41 6937.84 7770.38

Raw Materials Cost 2416.78 2714.38 3109.12 3350.51 3722.15 4196.01

Purchases of stock-in-trade 0 328.91 437.68 518.51 520.34 543.93

WIP 0 -15.68 -14.03 -7.57 -76.32 -77.70

Employee Cost 157.9 177.49 211.15 226.75 270.58 310.82

Advertisement and Publicity 300.96 332.84 419.6 534.28 610.53 660.48

Other expenses 728.57 834.76 1010.98 1142.39 1255.75 1398.67

Total expenses 3604.21 4372.7 5174.5 5764.87 6303.03 7032.20

EBITDA 230.16 236.68 310.87 420.54 634.81 738.19

Depreciation 58.23 64.91 61.83 73.15 84.12 100.50

Other Income 0 59.01 59.14 52.24 27.75 38.85

EBIT 171.93 230.78 308.18 399.63 578.44 676.54

Interest Cost 23.46 43.63 41.6 41.3 8.88 4.10

Profit (+)/Loss (-) Before Taxes 148.47 187.15 266.58 358.33 569.57 672.45

Provision for Taxes 5.58 52.94 66.85 98.55 176.57 208.46

Net Profit (+)/Loss (-) 142.89 134.21 199.73 259.78 393.00 463.99

Sales 10.2% 21.7% 19.0% 12.4% 12.0% 12.0%

EBITDA -16.8% 2.8% 31.3% 35.3% 51.0% 16.3%

PAT -0.3% -6.1% 48.8% 30.1% 51.3% 18.1%

RM Cost 63.0% 58.9% 56.7% 54.2% 53.7% 54.0%

Ad Spend 8.0% 7.3% 7.7% 8.7% 8.9% 8.6%

Employee Cost 4.1% 3.9% 3.8% 3.7% 3.9% 4.0%

Other expenses 19.3% 18.2% 18.5% 18.6% 18.3% 18.2%

Tax rate 3.8% 28.3% 25.1% 27.5% 31.0% 31.0%

EBITDA 6.0% 5.1% 5.7% 6.8% 9.2% 9.5%

EBIT 4.5% 5.0% 5.6% 6.5% 8.3% 8.7%

PAT 3.7% 2.9% 3.6% 4.2% 5.7% 6.0%

CMP 1599.5 382.6 459.9 504.7 915.0 915.0

No of Share 2.39 11.95 11.95 11.95258 11.97 11.97

NW 282.8 326.04 409.17 555.58 829.55 1174.50

EPS 59.79 11.23 16.71 21.73 32.83 38.76

BVPS 118.33 27.28 34.24 46.48 69.30 98.12

RoE-% 50.5% 41.2% 48.8% 46.8% 47.4% 39.5%

Dividend payout-% 126.4% 51.8% 45.1% 45.5% 30.3% 25.7%

P/BV 13.5 14.0 13.4 10.9 13.2 9.3

P/E 26.8 34.1 27.5 23.2 27.9 23.6

Growth-% (YoY)

Valuation:

Margin-%

Expenses on Sales-%

eClerx Services

1M 1yr YTD

Absolute 20.4 26.3 30.6

Rel. to Nifty 14.6 20.5 16.3


Promoters 52.95 52.88 53.13

FII 26.21 22.37 21.38

DII 11.27 14.72 14.80

Others 9.57 10.03 10.69

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 219.5 214.6 2.3 170.8 28.5

EBITDA 88.81 92.8 (4.3) 66.8 32.9

PAT 62.33 67.91 (8.2) 49 27.2

EBITDA Margin 40.5% 43.2% (270bps) 39.1% 140bps

PAT Margin 28.4% 31.6% (320bps) 28.7% (30bps)

16

"Consistent Performer"

CMP 1212

Target Price 1074

Result update Inline numbers , and expects to report better than NASSCOM guidance(FY14E);

eClerx Services witnessed inline set of growth with 2.3 %(QoQ) sales growth in INR

term and 4.7%(QoQ) in USD term (4% in CC term) led by some preponement of volume

of work from Q4 into Q3 which has resulted into the slightly higher sequential growth .

It expects some impact of this on Q4 growth. While, PAT decline by 7.2%, sequentially.Change from Previous 22%

Buy

Previous Target Price 881

Upside -11%

Mkt Capital (Rs Crores) 3701

52wk Range H/L 1255/599

Stock Performance

1 year forward P/E

Rs, Crore





View and Valuation: We expect that company’s organic revenue growth remains soft in

near term, and company is very focussed on inorganic growth and expect to see growth

from cable business . Furthermore, stable billing rate will support to maintain margin.

Company’s high RoE and dividend payout ratio make attractive to invest on the stock.

At a CMP of Rs 1212, stock trades at 12.5x FY15E earnings, we recommend ”BUY”

view on the stock with a target price of Rs 1410 (revised from Rs 1350) .

On demand environment, it indicated that there is no significant change and expects

to grow same pace of 10-15% in USD terms in the medium term. On margins, it

indicated that it will continue to operate in the mid 30% going forward. It continues to

look at inorganic opportunities.

Margin declined and expects to maintain stablity on demand: The OPM fell by 310 bps

QoQ to 37% on the back of rise in Selling and Distribution costs due to increase in onsite

headcount, bonus and commission and travel. Accordingly, PAT margin down by 270bps

to 28.6%, sequentially. Management is very confident to maintain its PAT margin at 30-

31% in near term.

Good growth from Financial Services: The Cable business grew faster on the low base,

Financial Services also grew fast during the quarter. In the Cable business, there is lot of

demand for its services. The digital and digital market has lot of demand and is another

key area.

Growth from Emerging revenue: It added 2 clients during the quarter. The Revenue

growth from Top 5 grew by 8% YoY and Emerging grew by 35% QoQ respectively during

the quarter. The Emerging revenue has continued to outpace growth in strategic clients

in line with firm strategy.

Approval on SEZ: The SEZ approval received for new floor in Airoli and planned go live

on April 2014 (600 Seats). It is discussing additional floors in Airoli to consolidate

Mumbai facilities, subject to regulatory approval. During the quarter, the Final payment

is done for Agilyst acquisition (for the total acquisition cost ~ $21 million) during the

quarter.

Nifty 6048

Market DataBSE Code 532755

NSE Symbol ECLERX

"BUY"18th Feb' 14


(1) The billing rates expected to be flat to slight uptick for the FY15E.

(2) Expect to see similar set of environment in FY 15E than FY14.

(4) Tax rate is expected to see at 23% mark in FY15E.

(5) It continues to look at inorganic opportunities.

(6) Expects to maintain 51% of payout ratio.

17


eClerx Services.

Sales (USD) and Sales growth-%(QoQ)

On $term, Sales growth was up by 4.7%

(QoQ) and 2.3% on INR term,


(3) On margins, it indicated that it will continue to operate in the mid 30% (30-31%) going

forward.

Key Facts from Cnference Call

Margin-%


Employee Metrics-%

Attrition decreased from 36% (2QFY14) to

31.8% .



18

eClerx Services.

Operating Metrics;



Financials;


Sales Mix-Geography 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

North America 70% 70% 71% 75% 75% 74% 74% 74% 74%

Europe 24% 23% 20% 19% 18% 21% 21% 21% 21%

RoW 6% 7% 9% 6% 7% 5% 5% 5% 5%

Client Concentration 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Top-5 86% 87% 80% 79% 78% 78% 76% 75% 74%

Client addition 8 10 8 4 7 6 5 5 2

Total Clients 53 55 54 54 60 73 61 65 65

DSO,days 52 29 30 41 31 33 35 41 33

Billing Mix 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

FTE 94% 95% 93% 93% 92% 91% 94% 95% 95%

SEZ Revenue 67% 72% 62% 58% 59% 60% 60% 60% 60%

Employee Metrics 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Employee Utilization 72% 72% 68% 68% 69% 69% 66% 65.0% 66%

Attrition - 30.9% 23.2% 30.2% 26.5% 27.3% 25.2% 36.4% 31.8%

Total Employee - 4405 5545 5760 5837 5954 6389 6543 6620

Employee Cost 39% 45.1% 42.4% 46.0% 45.0% 45.2% 44.1% 42.2% 43.6%

Rs, Cr FY11 FY12 FY13A FY14E FY15E

Sales 366.12 495.19 660.58 852.54 1020.87

Empolyee Cost 147.65 203.87 295.28 370.00 449.18

Other expenses 59.87 79.28 108.47 130.44 158.24

EBITDA 158.6 212.04 256.83 352.10 413.45

Dep 9.13 12.89 25.53 33.10 43.10

EBIT 149.47 199.15 231.3 319.00 370.35

INT 0 0 0 0.00 0.00

Other Income 0 0 0 28.99 10.21

PBT 149.47 199.15 231.3 347.98 380.56

Tax 16.76 39.47 39.34 83.52 91.33

PAT 132.71 159.68 191.96 264.47 289.22

Growth-%

Sales-% 39.5% 35.3% 33.4% 29.1% 19.7%

PAT-% 80.5% 20.3% 20.2% 37.8% 9.4%

Margin-%

EBITDA 43.3% 42.8% 38.9% 41.3% 40.5%

EBIT 40.8% 40.2% 35.0% 37.4% 36.3%

PAT 36.2% 32.2% 29.1% 31.0% 28.3%

Expense on Sales-%

Employee cost-% 40.3% 41.2% 44.7% 43.4% 44.0%

Other expenses-% 16.4% 16.0% 16.4% 15.3% 15.5%

Tax Rate% 11.2% 19.8% 17.0% 24.0% 24.0%

Valuations

CMP 783.95 625 650 1212 1212

OS.Cr 2.9 2.958 2.9875 2.99 2.99

EPS 45.76207 53.9824 64.2544 88.52 96.81

NW 238.32 342.92 438.32 615.20 816.84

BVPS 82.17931 115.93 146.718 205.93 273.42

P/E (x) 17.131 11.5778 10.116 13.69 12.52

P/BV (x) 9.54 5.39 4.43 5.89 4.43

RoE-% 55.7% 46.6% 43.8% 43.0% 35.4%

1473

1779

1776

21

-

1M 1yr YTD

Absolute -10.2 -35.8 -35.8

Rel.to Nifty -5.9 -37.9 -37.9


3Promoters 62.3 62.3 62.3

FII 8.8 8.9 9.8

DII 17.9 17.7 16.7

Others 10.9 11.1 11.2

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 32526 43291 44331 49365 58302

Total Income 48351 57643 60366 65288 74225

PPP 25336 31574 31081 29105 33401

Net Profit 8265 11707 14105 10241 11765

EPS 130.2 174.5 206.2 149.7 172.0

19

State Bank of India

During quarter SBI’s profitability declined by 34% largely due to higher

provisions and contingencies led by deteriorating asset quality and higher tax

in order to create DTL special reserve as per suggestion by RBI. However,

bank has seen growth in loan and deposits which translated into growth in

profit loss to some extent. Due to higher operating expenses, operating profit

growth was negative despite of 14% growth in revenue. We value bank at

Rs.1779/share which would be 1.1 times of FY14E’s book value.

Moderate NII growth led by lower growth in interest earnings assets than

interest bearing liabilities

Bank reported NII growth of 13.4% YoY to Rs.12641 cr lower than our expectation of

Rs. 12959 cr largely due to lower interest income from advances than higher

deposits and borrowing cost. Total income was grown by 13.7% YoY to Rs.16831 cr

supported by other income growth of 15% YoY to Rs.4190 cr. Other income growth

was led by exchange and commission income gain of Rs.2971 cr and forex income

Rs.643 cr.

500112

NSE Symbol SBIN

Mkt Capital (Rs Cr) 110126

SBI’s profitability was declined by 34% YoY largely due to higher provisions and

contingencies led by deterioration in asset quality and higher tax rate in order to

create DTL special reserve as per suggestion by RBI.


Result update BUY

CMP

Target Price


Operating profit reported negative growth due to higher operating expenses

led by employee benefit provisions

Market Data

Upside

2469/1452

BSE Code


SBIN Vs Nifty


9.44 lakh

Nifty 6048



Stock Performance

52wk Range H/L

Operating expenses increased by 31.4% YoY to Rs.9212 cr in which employee cost

and other operating cost increased by 35% and 25.7% respectively. Employee cost

was led by higher provision for pension and gratuity to the tune of Rs. 1355 cr as

against Rs.743 cr in 3QFY13 and Rs.1283 cr in 2QFY14. Adjusting the same,

employee cost increased by 8% YoY. Operating profit was declined by 2.2% YoY to

Rs.7618 cr. Cost income ratio increased by 735 bps YoY to 54.7% from 47.4% in

3QFY13.

Moderate NII growth, higher operating expenses and higher provision and tax

rate led profit de growth of 34% YoY

"BUY"17th Feb, 2014


20

State Bank of India


Continue to report week trend of asset quality

During quarter bank increased provisions and contingencies by 37% QoQ to Rs. 4150 cr

due to deteriorating asset quality. In absolute term GNPA and net NPA increased by 6%

and 16% sequentially. In absolute term, GNPA and net NPA stood at 5.9% and 3.2%

versus 5.8% and 2.9% in 2QFY14 respectively. During quarter bank’s loan loss provision

increased by 29.6% sequentially and stood at Rs.23429 cr. Standard asset provisions

and depreciation provisions were Rs.196 cr and Rs.621531 cr respectively. Net

provisions were declined by 4% sequentially which resulted 16% rise in net NPA in

absolute term. Consequently provision coverage ratio without technical writ off was

declined by 475 bps QoQ to 45.2% from 50% in previous quarter.

Strong traction in loan and deposits growth

During quarter SBI’s profitability declined by 34% largely due to higher provisions and

contingencies led by deteriorating asset quality and higher tax in order to create DTL

special reserve as per suggestion by RBI. However, bank has seen growth in loan and

deposits which translated into growth in profit loss to some extent. Due to higher

operating expenses, operating profit growth was negative despite of 14% growth in

revenue. We value bank at Rs.1779/share which would be 1.1 times of FY14E’s book

value.

Loan grew by 17.4% YoY led by across the sectors. Loan to large corporate grew by 17%

YoY, mid corporate grew by 19%, SME grew by 14% and retail loan grew by 19%. Strong

traction in auto loan (21.2% YoY) and house loan (19.4% YoY) led retail loan growth.

Deposits grew by 17% YoY largely supported by 20% YoY growth in term deposits

followed by saving deposits and demand deposits which grew by 8% and 13%

respectively. Overall CASA ratio was declined by 153 bps YoY to 41%.

NIM declined on account of higher deposits cost and lower yield

SBI’s net interest margin was flat at 3.19% versus 3.18% in previous year. Domestic NIM

declined by 2 bps to 3.49% while oversea NIM declined by 1 bps sequentially to 1.49%.

Cost of deposits increased to 6.25% from 6.22% sequentially while yield on advances

inch up to 10.4% from 10.3% in previous quarter. Credit deposits ratio marginally

declined from 85.3% to 85.1%.

Valuation & View


21

State Bank of India

Source: Esatwind/Company


Moderate NII growth led by lower growth in

interest earnings assets than interest bearing

liabilities

Operating profit reported negative growth due

to higher operating expenses led by employee

benefit provisions

Moderate NII growth, higher operating

expenses and higher provision and tax rate led

profit de growth of 34% YoY


22

State Bank of India




Quarterly Performance 3QFY14 2QFY14 3QFY13 % YoY % QoQ 3QFY14E Variation(%)

Interest/discount on advances / bills 26310 25379 22800 15.4 3.7 25937 1.4

Income on investments 8228 8137 7072 16.3 1.1 8303 -0.9

Interest on balances with Reserve Bank of India 92 106 110 -16.1 -13.0 109 -15.9

Others 241 300 362 -33.3 -19.7 349 -30.9

Total Interest Income 34870 33922 30344 14.9 2.8 34699 0.5

Others Income 4190 3278 3648 14.9 27.8 3876 8.1

Total Income 39061 37200 33992 14.9 5.0 38575 1.3

Interest Expended 22230 21671 19189 15.8 2.6 21739 2.3

NII 12641 12251 11154 13.3 3.2 12959 -2.5

Other Income 4190 3278 3648 14.9 27.8 3876 8.1

Total Income 16831 15529 14803 13.7 8.4 16835 0.0

Employee 5867 5819 4351 34.8 0.8 6364 -7.8

Other Expenses 3345 3399 2661 25.7 -1.6 3737 -10.5

Operating Expenses 9212 9218 7012 31.4 -0.1 10101 -8.8

PPP( Rs Cr) 7618 6312 7791 -2.2 20.7 6734 13.1

Provisions 4150 3029 2668 55.5 37.0 3112 33.3

PBT 3469 3283 5123 -32.3 5.7 3622 -4.2

Tax 1234 908 1727 -28.5 36.0 1087 13.6

Net Profit 2235 2375 3396 -34.2 -5.9 2535 -11.9

Balance Sheet (Rs Cr)

Deposits 1349940 1292456 1156691 16.7 4.4 1337803 0.9

Borrowings 189969 188937 148374 28.0 0.5 202402 -6.1

Investments 426728 398536 359959 18.5 7.1 415135 2.8

Loan 1148901 1103090 978115 17.5 4.2 1152774 -0.3

Asset Quality

GNPA 67799 64206 53458 26.8 5.6

NPA 37167 32151 25370 46.5 15.6

% GNPA 5.9 5.8 5.5

% NPA 3.2 2.9 2.6

PCR(%)(w/o technical write-off) 45.2 49.9 52.5

23

State Bank of India




Income Statement 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 59976 81078 90537 102590 120306

Income on investments 19826 23949 27200 32037 39720

Interest on balances with Reserve Bank of India 236 350 545 415 415

Others 1356 1144 1374 1253 1253

Total Interest Income 81394 106521 119657 136294 161693

Others Income 15825 14351 16035 15923 15923

Total Income 97219 120873 135691 152217 177616

Interest on deposits 43235 55644 67465 61066 70226

Interest on RBI/Inter bank borrowings 2562 3886 4124 10146 11668

Others 3071 3700 3737 0 0

Interest Expended 48868 63230 75326 86929 103391

NII 32526 43291 44331 49365 58302

Other Income 15825 14351 16035 15923 15923

Total Income 48351 57643 60366 65288 74225

Employee 15212 16974 18381 22795 25719

Other Expenses 7804 9095 10904 13388 15105

Operating Expenses 23015 26069 29284 36183 40824

PPP( Rs Cr) 25336 31574 31081 29105 33401

Provisions 17071 13090 11131 14253 16594

PBT 8265 18483 19950 14852 16808

Tax 0 6776 5846 4611 5042

Net Profit 8265 11707 14105 10241 11765

Deposits 933933 1043647 1202740 1383151 1590623

Change (%) 16.1 11.7 15.2 15.0 15.0

of which CASA Dep 461521 467607 539063 580923 668062

Change (%) 49 45 45 42 42

Borrowings 119569 127006 169183 215867 248248

Investments 295601 312198 350927 32037 39720

Loans 756719 867579 1045617 1202459 1382828

RatioYield on Advances 7.9 9.3 8.7 8.5 8.7

Yield on Investments 6.9 7.9 8.0 7.4 8.0

Yield on Funds 7.0 8.4 8.0 0.0 0.0

Cost of deposits 4.6 5.3 5.6 6.3 6.5

Cost of Borrowings 4.7 6.0 4.6 4.7 4.7

Cost of fund 4.6 5.4 5.5 5.4 5.6

Valuation

ROE(%) 12.7 13.9 14.3 9.3 9.8

Book Value 1023 1251 1446 1617 1617

P/BV 2.7 1.7 1.4 0.9 0.9

1M 1yr YTD

Absolute 1.1 57.1 82.9

Rel. to Nifty 4.7 55.2 70


4Promoters 63.7 63.7 63.7

FII 22.5 22.8 22.9

DII 5.7 3.2 3.1

Others 8.1 10.4 10.4

Financials Rs, Crore

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

Revenue 4312 4207 2.5 2865 50.5

EBITDA 2000 1843 8.5 1275 56.9

PAT 1531 1362 12.4 881 73.8

EBITDA Margin 46.4% 43.8% 260bps 44.5% 190bps

PAT Margin 35.5% 32.4% 310bps 30.8% 480bps

24


Stock Performance-%


CMP 609

52wk Range H/L 650/385

NSE Symbol SUNPHARMA

524715

View & Valuation

One Year Price vs Nifty


126,119


Nifty 6048

The operating EBITDA for the quarter came at Rs 1975 Cr grew by 57 % YoY and OPM

stands at 46 %.There is improvement in OPM by 200 bps during the quarter owing to

stronger operating metrics. The RM cost as percentage of sales was 14 % versus 15 % for

the same corresponding period last fiscal. The employ cost as percentage of sales was 12

% in current quarter verses 14% for 3QFY13.The company managed to control its other

expenses during the 3QFY14 and has dropped by 100 bps at 24 % of the sales.

The net profit for the quarter came at Rs 1531 Cr compared to Rs. 881Cr for Q3 last year,

up 74% YoY. The NPM for the 3QFY14 came at 36%.The other income for the 3QFY4 was

Rs 134 Cr and Tax rate was at 12 %.

The company on its R&D said that in the 3QFY14, ANDA for 5 products were filed. After

counting these, and adjusting for filings that were dropped, cumulatively ANDAs for 468

products have been filed with the USFDA (as on December 31, 2013). ANDAs for 4

products received approvals in the third quarter, taking the total number of approvals to 337

(as on December 31, 2013). ANDAs for 131 products now await USFDA approval, including

14 tentative approvals.

Mkt Capital (Rs, Cr)

The management of the company after 3QFY14 results has revised its FY14E revenue

guidance to 29 % from 25 % earlier. Guidance is at constant exchange rate. The company

further said that capex for the FY14 would be on higher side of earlier guidance. The tax

rate for the full year would be 15 % and R&D expected to be in the range of 6-8% of the

Sales for the FY'14.

The stock at its CMP of Rs 609 is trading at 22.1x of one year forward FY14E EPS of 27.60

and company has posted very strong 3QFY14 results however on account stretched

valuations we do not see much upside to stock and therefore we turn neutral with TP

650.

SUNPHARMARobust Performance

Target Price 650

7%Upside



Result Update NEUTRAL Sun Pharmaceuticals Industries limited posted 3QFY14 results above street expectations

with total revenues including other operating income at Rs 4312 Cr up 50.5 % YoY led by

robust growth in US formulations and Taro business. The stellar performance of company

was supported well from domestic operations as well. The US formulation business grew

by more 56 % YoY to USD 434 Mn while International formulation sales outside US grew

by 16 % YoY to USD 84 Mn. Overall international revenues accounted for more than 75%

of total revenues for the quarter. The Sales of branded prescription formulations in India

was Rs. 947 Cr up by 20% Yoy from Q3FY13 last year. The API business for the quarter

witness some decline with sales falls to Rs 174 Cr translating decline of 17 % YoY.Market Data

BSE Code

"NEUTRAL"17th Feb' 14


25

SUNPHARMA

Sales and PAT Trend (Rs)


Total revenues including other operating

income came at Rs 4312 Cr up 50.5 % YoY led

by robust growth in US formulations and

Taro business.

OPM %


NPM %



There is improvement in OPM by 200 bps

during the owing to stronger operating

metrics.

The NPM for the 3QFY14 came at 36%.The

other income for the 3QFY4 was Rs 134 Cr


BUY

1M 1yr YTD

Absolute -4.5 -3 -2

Rel. to Nifty -1.7 -4.3 -14


4Promoters 36.8 36.8 36.8

FII 23.8 23.8 23.1

DII 10.6 10.9 10.8

Others 28.8 28.5 29.3

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

Revenue 2282 2347 (2.8) 2070 10.2

EBITDA 403 533 (24.4) 492 -18.1

PAT 261 376 (30.6) 338 -22.8

EBITDA Margin 17.7% 22.7% (500bps) 23.8% (610bps)

PAT Margin 11.4% 16.0% (460bps) 16.3% (490bps)

26

Target Price 440

CIPLA

Result Update

CMP 381

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10

% YoY led by healthy growth in export business with well support from India operations to.

The revenues from export business including formulations and API grew by 36 % to 1509

Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. The growth in

export revenues was primarily due to growth in anti-retroviral, anti-cancer, anti-allergic and

anti-biotic segments.15%Upside



Market Data

BSE Code 500087

The net profits for the quarter came at Rs 261 Cr and NPM stands at 11.43 %. The Rs 40

Cr Forex gain is included in the other income during the quarter. The tax rate for the quarter

was nearly at same rate as in corresponding last quarter at 25 %.

The Company filed 10 ANDA's in the last nine months and got 6 approvals for the same

period. It has 35 ANDA's under approval as on 31st December 2013. The few of the

approval products are commercialized. Cipla Medpro formed as acquisition of

Medpro,South Africa last year added 500 Cr to top line and 50 Cr to the operating profits

during the quarter.

One Year Price vs Nifty


30,591


Nifty 6,001

The operating EBITDA for the quarter under review came Rs 403 Cr and OPM at 17.88

%.The OPM declines by more than 600 bps YoY due to the increase in the R&D and the

ramp up in the Staff cost during the quarter. The employ cost as percentage of sales stands

at 14 % while it was 12 % for the same time last fiscal. The other expenses as percentage

of sales were 27% for the 3QFY14 versus 25 % in 3QFY13.The other expenditure

increased largely due to rise in R&D expenses and rise in the cost owing to filings and

setting up of the front end during the quarter. The R&D expenses 4.5% of Sales during the

quarter.

450/354

NSE Symbol CIPLA

52wk Range H/L

The stock at its CMP of Rs 381 is trading at 19.58 x of one year forward FY14E EPS of Rs

19.40.The stock has reacted negatively after 3QFY14 results however we don’t see any

downside risks to our estimates. We further believe that Cipla-Medpro would be earning

accretive in medium to long term horizons and we view the recent correction a good entry

point for the stock. We maintain our view BUY for the stock with Target Price of Rs

440.


Stock Performance-%


Mkt Capital (Rs, Cr)

View & Valuation

The management of the company after the results said that the Global respiratory unit

expects some of launches in the next year. It has set up new global respiratory team during

the quarter. The Combination inhalers planned to launch in FY'15.Company expects to be

more than 5% of Sales on the back of ramp up filings for the FY'15.The Capex is 90 Cr

during the quarter and expects to be Rs 400 Cr FY'14. The Rollover Capex of previous year

is Rs 150 Cr during the year.

"BUY"14th Feb' 14


27

Revenue Trend %


OPM & NPM Trend %



Net revenues at Rs 2282 up 10 % YoY led by

healthy growth in export business with well

support from India operations to.

The OPM declines by more than 600 bps YoY

due to the increase in the R&D and the ramp

up in the Staff cost during the quarter.

CIPLA

Business Trend


The revenues from export business including

formulations and API grew by 36 % to 1509

Cr for the quarter while domestic business

grew by 9% YoY to 1044 Cr.


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share analysis today: buy stock of bank of baroda’s with target price rs.634/share

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