stock investment tips recommendation - buy stock swaraj engines, kolte-patil developers, kalpatru...

Kolte-Patil Developers: "On track to meet FY14 guidence" "BUY" 4th Feb 2014

At the CMP of Rs.91, the stock P/E ratio is at 4.6x FY14E and 3.8x FY15E respectively. EPS of the company for the earnings for FY14E and FY15E is

seen at Rs. 19.6 and Rs.23.8 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 68% and 69% over FY13-15E

respectively. On the basis of Intrest coverage ratio, the stock trades at 7.5x for FY14E and 9.1x for FY15E. Price to Book Value of the stock is

expected to be at 0.7x and 0.8x respectively for FY14E and FY15E at current price . We expect that the company surplus scenario is likely to

continue for the next three years, will keep its growth story in the coming quarters also. We maintain ‘Buy’ in this particular scrip with a target

price of Rs 120 for medium to long term investment. .......................... ( Page : 4-5)

"BUY" 4th Feb 2014

At the CMP of INR610, the stock discounts its FY14E EPS of INR53.20 by 10.8x and FY15E EPS of INR61.2 by 9.8x. Given the strong revenue

growth at a CAGR of 21%; PAT growth at CAGR of 26% post acquisition and stable margins at ~15%, the company is poised to grow further and

capable of ustaining its healthy earnings. Also, Company assurance of 30-60% dividend payout ratio implies an attractive dividend yield of 4-9%.

So taking all this into consideration share looks reasonable at Rs. 610 as long term fundamental continue to remains intact and one can expect

growth of about maybe 10-13% in next eight-twelve months time. We upgrade our rating on stock from "Hold" to "accumulate", with a revised

price target to Rs 648 ................................. ( Page :2-3)

SWARAJ ENGINES: "Long term fundamental continue to remains intact "

Godrej Consumer Product :" Strategy Shining" "BUY" 4th Feb 2014

For 3QFY14, Godrej CP revealed inline set of numbers with 17% sales growth led by 18% domestic and 25% international sales growth, reported

growth across all geographies and segments, respectively. With launching new products in domestic as well as international market, Godrej CP

will explore organic & inorganic growth. Along with its 3x3 strategy, it has 10x10 strategy also, which refers to 10x growth in 10 yrs.

.............................................. ( Page : 10 -12)

Kalpatru Power Transmission : "Missed one……." "BUY" 4th Feb 2014

At CMP of Rs.75.6, KPTL tradesat 7.6x FY14 EPS and 5.5x FY15 EPS. To factor in robust revenue growth, we revise revenue estimates for

FY14/FY15 by 5.1%/1.0% respectively. On account of continued losses and low margin orders in the infrastructure segment we revise standalone

EBIDTA margins as well to 9.7% for FY14 and 10.0% for FY15. Hence, we maintain "Buy"rating with target price at Rs.95/share.

................................................ ( Page : 6-9)

Sesa Sterlite Ltd : "NEUTRAL" 4th Feb 2014

Marico : " Volume slows…" "NEUTRAL" 3th Feb 2014

Beats the street on profitability and Margin front with poor volume growth;Marico witnessed better numbers than expectation with 10% sales

growth (excluding Kaya Sales) led by 3% volume growth on YoY basis. We believe that slower volume growth could not easily turned out in next

1-2 quarters because of poor discretionary demand environment. Therefore, we downgrade our view from "BUY" to "NEUTRAL".

....................................................................... ( Page : 18-20)

HEROMOTOCO: Average Sales with Flat Profits Growth.. "BUY" 3th Feb 2014

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by healthy volume growth of 7% for the period under review.

The company during 3QFY14 sold 1680940 units including exports. The volume performance was led by a strong 7.8% YoY growth in the

domestic segment. ..................................................................... ( Page : 16-17)

Vedanta group firm Sesa Sterlite reported a consolidated net profit of Rs 1,868.29 crore for the Q3FY14.The company, previously known as Sesa

Goa, had reported a net profit of Rs 496.73 crore in the corresponding period of the previous fiscal.During the quarter, its net sales stood at Rs

19,414.34 crore .The company has resumed iron ore mining operations in Karnataka , 2013 where it has 2.29mn tonne per annum capacity .We

value the stock using forward P/B and here by we recomend Neutral rating on the stock at a target price of Rs.196 from current market price of

Rs.185 ................................................ ( Page : 13-15)

4th Feb, 2014

Edition : 198

IEA-Equity

Strategy

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

V- SWARAJ ENGINES Ltd.

CMP 598

Target Price 648

600

Upside 8%

7%

BSE Code 500407

NSE Symbol

742

601

Nifty 6,002

1M 1yr YTD

Absolute (6.6) 24.3 51.4

Rel. to Nifty (2.3) 24.7 45.3

3QFY14 2QFY14 1QFY14

Promoters 50.6 50.6 50.6

FII 1.9 1.9 1.5

DII 10.6 10.4 10.6

Others 36.9 37.1 37.3 Valuations :

Financials Rs, Crore

3QFY14A 2QFY14A (Var)-% 3QFY13A (YoY)-%

Revenue 150.2 151.6 -0.9% 124.6 21.7%

EBITDA 21.8 22.7 -3.8% 18.4 23.3%

PAT 15.6 17.2 -9.5% 13.8 24.9%

EBITDA Margin 14.5% 14.9% (40) bps 14.8% (30) bps

PAT Margin 10.8% 11.0% (20) bps 10.7% 10 bps

2

Market Data

382/535

" Long term fundamental continue to remains intact…. "

AccumulateResult update

Mkt Capital (Rs Crores)

52wk Range H/L

Previous Target Price

SWARAJENG

Change from Previous

Swaraj Engines posted a moderate revenue growth of 20.8% to Rs. 150.2 crore during Q3FY14

over corresponding period of previous year due to 21.2% growth yoy reported in diesel engines

sales volume. Company sold 18,530 diesel engines during the quarter as compared to 15,288

engines sold during corresponding period of previous year. EBITDA of the company marginally

outpaced by the revenue due to unexpected rise in non operating expenses and stands at Rs.

21.8 crore up by 18.6% yoy. Though company managed to control material cost, which

constitutes ~90% of the total expenses; however, employee cost and administration expenses

reported the growth of 22.1% and 23.9% respectively during the quarter. As a result, EBITDA

and PBT margin reported a marginal deterioration of 24bps and 5bps during Q3FY14 yoy

respectively. PAT reflected in-line numbers and reported the yoy growth of 21.4% to Rs. 16.7

crore before extra ordiniary item of Rs. 1.15 crore; while PAT margin improved by 5bps.

We have modeled a 25% of revenue growth for FY15 yoy respectively, due to SWE’s ability to

maintain growth in product volume and recent enhancement in annual production capacity from

75,000 units to 105,000 units. Company currently operates at TTM EBITDA and net margin of

14.8% and 11.3% respectively, which provides sufficient cushion against operating cost. With

liquidity being moderate and cash flow positive, company has enough cash to finance its

expansion plan of Rs. 38 crore through internal accruals.

Outlook :

Leading supplier to Mahindra & Mahindra Ltd – A key source to growth: SEL enjoys the access to

the India’s largest tractor manufacturer “M&M” (41% market share in Domestic tractor industry),

which has a holding of 33% in SEL. Swaraj Engines Ltd manufactures tractor engines solely for the

“Swaraj Division” of M&M. It caters to ~80% demand of Swaraj division of M&M and rest 20% of

demand is met through Kirloskar Oil Engines, which has a holding of 17% in SEL. The demand

from M&M is estimated to grow further and reach ~85‐90%.

Leading supplier to Mahindra & Mahindra Ltd :

Share Holding Pattern-%

Stock Performance-%

Average Daily Volume

(Standalone) (Source: Company/Eastwind Research)

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

1 yr Forward P/B

At the CMP of INR610, the stock discounts its FY14E EPS of INR53.20 by 10.8x and FY15E EPS of

INR61.2 by 9.8x. Given the strong revenue growth at a CAGR of 21%; PAT growth at CAGR of 26%

post acquisition and stable margins at ~15%, the company is poised to grow further and capable

of ustaining its healthy earnings. Furthermore, despite the capex of INR58crore, the company has

strong cash flows and the company is debt free. Also, Company assurance of 30-60% dividend

payout ratio implies an attractive dividend yield of 4-9%. So taking all this into consideration

share looks reasonable at Rs. 610 as long term fundamental continue to remains intact and one

can expect growth of about maybe 10-13% in next eight-twelve months time. We upgrade our

rating on stock from "Hold" to "accumulate", with a revised price target to Rs 648.

"Accumulate"4th Feb' 14


9

3


(Ammount in crore) (Source: Company/Eastwind)

SWARAJ ENGINES Ltd.

Key financials :

(Source: Company/Eastwind Research) (Figures In crore)


PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E

Performance

Revenue 208 282 361 449 479 602 750

Other Income 5 10 8 12 15 18 20

Total Income 213 292 369 461 494 620 770

EBITDA 32 50 61 69 71 87 109

EBIT 27 45 56 65 64 78 98

DEPRICIATION 5 5 4 4 7 9 11

INTREST COST 0 0 0 0 0 0 0

PBT 32 55 64 77 79 96 118

TAX 11 17 20 24 24 30 37

Reported PAT 21 37 44 53 55 66 81

Dividend 7 12 14 19 48 24 30

EPS 17.2 30.1 35.4 42.5 44.6 53.5 65.4

DPS 5.9 9.3 11.6 15.1 38.4 19.3 24.2

Yeild %

EBITDA % 15.3% 17.6% 16.8% 15.5% 14.9% 14.5% 14.5%

PBT % 15.1% 18.7% 17.4% 16.8% 16.1% 16.0% 15.7%

NPM % 10.0% 12.8% 11.9% 11.5% 11.2% 11.0% 10.8%

Earning Yeild % 8.0% 31.6% 12.2% 9.9% 11.3% 9.0% 10.9%

Dividend Yeild % 2.7% 9.8% 4.0% 3.5% 9.7% 3.2% 4.0%

ROE % 21.9% 30.4% 28.8% 28.4% 28.6% 28.1% 28.3%

ROCE% 21.9% 30.4% 28.8% 28.4% 28.6% 28.1% 28.3%

Position

Net Worth 97 123 152 186 194 236 287

No of Share 1 1 1 1 1 1 1

CMP 214 95 290 429 395 598 598

Valuation

Book Value 78.3 98.8 122.6 150.0 156.0 190.2 231.5

P/B 2.7 1.0 2.4 2.9 2.5 3.1 2.6

P/E 3.5 5.3 5.6 5.1 6.8 11.2 9.1

Net Sales/Equity 2.1 2.3 2.4 2.4 2.5 2.5 2.6

V- Kolte-Patil Developers Ltd.

CMP 74

Target Price 100

120

Upside 35%

0%

BSE Code 532924

NSE Symbol

558

239,587

Nifty 6,002

1M 1yr YTD

Absolute (18.8) (36.6) (16.3)

Rel. to Nifty (14.5) (36.3) (22.4)


Promoters 74.5 74.5 74.5

FII 1.4 1.4 1.5

DII 0.4 0.8 0.5

Others 23.8 23.5 23.5 Valuations


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

Revenue 188.1 188.6 -0.3% 225.4 -16.5%

EBITDA 57.3 60.3 -5.0% 62.9 -9.0%

PAT 20.4 32.2 -36.7% 30.6 -33.2%

EBITDA Margin 30.4% 32.0% (160) bps 27.9% 252 bps

PAT Margin 15.8% 18.3% (250) bps 16.6% (80) bps

4

Market Data

(Source: Company/ Eastwind Research)


Result update

"On track to meet FY14 guidence.........."

The company posted de-growth in its revenue and net profit during the third quarter

compared to same period last year. KPD's net revenue for Q3FY14 dipped to Rs 188 crore

against Rs 225 crore in Q3FY13. The company's net profit also decreased to Rs 20.40 crore in

Q3FY14 against Rs 30.52 crore in Q3FY13. However, the company's net revenues for first nine

months for FY14 grew by 15 per cent to Rs 593 crore against Rs 518 crore in 9MFY13.

Interestingly the company's EBITDA soared up by 45 per cent to Rs 181 crore in 9MFY14 on

yearly basis. This has improved its EBITDA margins by 630 basis points on yearly basis. The PAT

stood at Rs 79 crore in 9MFY14 against the PAT during same period in last financial year. Based

on revised volume guidence by management in range of 1.8-2.0mnsft, we cut our FY14/FY15

earnings by 5%/8% while maintaining BUY with a revised TP of Rs 100 (Rs 120 earlier)

Buy




KOLTEPATIL

1 yr Forward P/B

At the CMP of Rs.91, the stock P/E ratio is at 4.6x FY14E and 3.8x FY15E respectively. EPS of the

company for the earnings for FY14E and FY15E is seen at Rs. 19.6 and Rs.23.8 respectively. Net

Sales and PAT of the company are expected to grow at a CAGR of 68% and 69% over FY13-15E

respectively. On the basis of Intrest coverage ratio, the stock trades at 7.5x for FY14E and 9.1x for

FY15E. Price to Book Value of the stock is expected to be at 0.7x and 0.8x respectively for FY14E

and FY15E at current price . We expect that the company surplus scenario is likely to continue for

the next three years, will keep its growth story in the coming quarters also. We maintain ‘Buy’ in

this particular scrip with a target price of Rs 120 for medium to long term investment.

New sales booking recorded in Q3FY14 is 0.44 msf of which about 93% is residential and 7%

commercial projects. The sales value was worth Rs 253 crore. The Average price realization (APR)

for the quarter stood at Rs 5730/sft with average price for residential project stood at Rs

5421/sft and that for commercial project at Rs 9932/sft. The ongoing projects as end of Dec 2013

have a saleable area is 14.1 msf (KPDL's share is 9.3 msf) and of which the company already sold

about 7.8 msf with a sale value of Rs 3157.7 crore. Cumulative collection as end of Dec 2013 in

case of ongoing projects is about Rs 2442.7 crore and the collection in Q3FY14 stood at Rs 230

crore. In January 2014 launched 0.2 msf (of total saleable area of 0.9 msf) of Jazz Phase I at

Aundh. Jan 2, 2014 the company obtained final approval and started pre launch activity and

made 34 units as far as 0.6 msf Mirabilis, Horamavu, Bengaluru project. Gross debt excluding

compulsory convertible debentures (CCD) is Rs 205 crore and the net debt is Rs 127 crore. In

Q3FY14 recorded its first sale in Mumbai of 2,200 sft. at an APR of Rs 34375/sft.

Management Guidence

Management is hopeful of achiveing a topline target of Rs. 800-900 crore for FY14E and new area

sales booking of 1.8 - 2 msf for FY2014 with average price realization of Rs 5300/sft.


52wk Range H/L 49/115


Stock Performance-%

"Buy"4th Feb' 14


5


(Ammount in crore) (Source: Company/Eastwind)

Kolte-Patil Developers Ltd.

Key financials :

(Source: Eastwind Research) (Figures in crore)



Performance

Revenue 186 148 204 249 743 825 908

Other Income 50 5 5 10 7 7 18

Total Income 236 153 209 260 750 832 925

EBITDA 85 58 91 68 201 248 272

EBIT 84 57 89 66 196 240 265

DEPRICIATION 1 2 2 2 5 8 8

INTREST COST 8 8 7 24 42 46 46

PBT 126 54 87 50 160 201 237

TAX 40 16 30 14 55 69 81

Reported PAT 9 36 61 82 108 132 155

Dividend 8 8 12 12 30 30 30

EPS 11.5 5.0 7.5 4.7 16.4 17.4 20.5

DPS 1.0 1.0 1.6 1.6 4.0 4.0 4.0

Yeild %

EBITDA % 45.8% 39.5% 44.4% 27.2% 26.4% 30.0% 30.0%

NPM % 36.7% 24.7% 27.3% 13.8% 16.2% 15.9% 16.8%

Earning Yeild % 58.0% 9.3% 16.4% 12.1% 18.4% 23.7% 27.9%

Dividend Yeild % 5.1% 1.9% 3.5% 4.1% 4.5% 5.4% 5.4%

ROE % 13.2% 5.6% 8.2% 5.0% 17.3% 16.1% 16.4%

ROCE% 10.6% 4.6% 6.5% 3.8% 13.9% 12.3% 13.0%

Position

Net Worth 657 675 700 721 717 819 944

Total Debt 159 150 175 226 173 250 250

Capital Employed 816 824 874 947 891 1069 1194

No of Share 8 8 8 8 8 8 8

CMP 20 54 46 39 89 74 74

Valuation

Book Value 87.2 89.4 92.3 95.2 94.6 108.1 124.6

P/B 0.2 0.6 0.5 0.4 0.9 0.7 0.6

Int/Coverage 11.2 6.8 13.1 2.7 5.1 5.2 5.8

P/E 1.7 10.8 6.1 8.3 5.4 4.2 3.6

Kalpatru Power Transmission

Result CMP 73

Target Price 95

Previous

Target Price

120

Upside 30%

Change from

Previous

-21%

Market DataBSE Code 522287

NSE Symbol

52wk Range

H/L

64/105

Mkt Capital

(Rs Crores)

1201

Average Daily

Volume (Nos.)

48500 JMC Projects EBITDA margins improve to 5.1%, PAT up 75.6% yoy to Rs.31.4mn:

Nifty 6002

1M 1yr YTD

Absolute -18 -25 -11

Rel. to Nifty (13) (24) (17) Standalone Performance for nine months ended Dec 2013


Promoters 59 59 58

FII 9.7 9.9 10.9

DII 23.2 23.4 23.2

Others 7.6 7.3 7.8


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

Revenue 1051.3 962.2 9.3 889.7 18.2

EBITDA 94.0 91.1 3.2 88.6 6.2

PAT 33.7 31.0 8.7 35.1 -4.1

EBITDA Margin 8.9% 9.5% (60) bps 10.0% 110 bps

PAT Margin 3.2% 3.2% 0 bps 3.9% (70) bps

(Standalone)

6

Kalpataru Power Transmission reported a 18% growth in standalone net sales to Rs 1051.34

crore. The growth was driven by Transmission business, which constitute about 96% of total

sales and was up by 25% YoY to Rs 1007.22 crore. Infrastructure segment comprising of

Railways and Pipeline execution reported a 61% fall in net sales to Rs 28.05 crore largely due to

lower execution and excessive rainfall in Eastern region of the country. Other segment

comprising of Biogas reported a 6% growth in net sales to Rs 16.07 crore. OPM was down by

110 bps to 8.9%. While there was a better execution of Transmission sector business including

higher execution of export orders having better margins, continued losses in Infrastructure

segment resulted in fall in OPM. The PBIT of Transmission business stood at Rs 89.51 crore

with PBIT margin of about 9%, where as Infrastructure business reported loss of about Rs 15.23

crore as compared to profit of Rs 5 lakh for Dec'12 quarter. The Other segment PBIT was down

by 11% to Rs 1.80 crore. Thus overall OP was up by 6% to Rs 94.04 crore.

"Missed one……."

KALPATPOWR

Buy

Stock Performance-%

(Source: Company/Eastwind)


1 yr Forward P/B


Kalpataru Power Transmission reported a 26% growth in standalone net sales to Rs 2903.14 crore

for the nine months ended Dec'13 period. The growth was driven by Transmission business,

which constitute about 94% of total sales and was up by 33% YoY to Rs 2720.41 crore.

Infrastructure segment comprising of Railways and Pipeline execution reported a 36% fall in net

sales to Rs 138.48 crore largely due to lower execution and excessive rainfall in Eastern region of

the country. Other segment comprising of Biogas reported a 13% growth in net sales to Rs 44.25

crore.

OPM was down by 30 bps to 9.5%. While there was a better execution of Transmission sector

business including higher execution of export orders having better margins, continued losses in

Infrastructure segment resulted in fall in OPM The PBIT of Transmission business stood at Rs

259.25 crore with PBIT margin of about 9.5%, improvement of 60 bps YoY, where as

Infrastructure business reported loss of about Rs 36.48 crore as compared to profit of Rs 5.45

crore for nine months ended Dec'12 period. The Other segment PBIT was stood at Rs 3.49 crore

as compared to Rs 0.47 crore for nine months ended Dec'12 period. Thus overall OP was up by

23% to Rs 277.15 crore.

Other income was up by 10% to Rs 37.80 crore. Interest was up by about 24% to Rs 114.26 crore

and depreciation was up by 35% to Rs 51.33 crore, after which the PBT was up by 16% to Rs

149.36 crore. After providing total tax of Rs 50 crore, up by 25% YoY, standalone PAT for nine

Standalone PAT grew by 75.1% yoy to Rs.58.3mn upon 8.8% yoy growth in income from

operations to Rs.6651mn, better than our PAT and revenue estimates of Rs.32.1 and Rs.6426mn.

Robust execution of better margin factories and buildings orders and cost optimization

measures,led 40 bps yoy increase in EBITDA margins to5.1%,

"Buy"4th Feb' 14


7

Healthy order book:

• PGCIL has changed its model on bidding as PGCIL itself needs to be now competitive for winning

future bids. Competition continues to remain as it is, although everybody has become cautious.

Management expects good orders from PGCIL in Mar'14 quarter, which is the normal trend.

• Infrastructure segment comprising of railways and pipelines continue to report losses due to

lower execution, delays for some projects due to ROW issues and high and extended rainfall in

Eastern region of India, where the company has maximum orders.

• Infrastructure business has an order book of around Rs 420 crore of which 80% are legacy

orders. Management expects legacy orders to end by 2 more quarters after which better margins

and better results within the sector will come in. Railways are not making any money and it's been

very disappointing with not much to bid in and legacy orders hurting the margins.

• About 50% of order book is from Government contracts in JMC Projects and rests are private. Q4

will see some more margin improvement due to better execution. Margin improvement of about

50-75 bps will continue in FY'15 for JMC Projects.

• Overall, the management expects to end the year with a 20% net sales growth for FY'14 for KPTL

and about 15% for FY'15. Margins will hover around 10-10.5% for transmission business segment.

• Company has standalone debt of abut Rs 650 crore which it expects to bring down by about Rs

100 crore by end of FY'14. Average interest costs is about 10.5%. Consolidated debt is about Rs

2600 crore.

Consolidated order book as end of Dec 2013 was above Rs 12500 crore and of which KPTL's was Rs

7000 crore and that of JMC Project's was Rs 5500 crore. JMC received new order worth Rs 880

crore in Q3 FY'14. About 54% of order book of Transmission business was from international

markets. About 50% of order book is from Government contracts in JMC Projects and rests are

private.

At CMP of Rs.75.6, KPTL tradesat 7.6x FY14 EPS and 5.5x FY15 EPS. To factor in robust revenue

growth, we revise revenue estimates for FY14/FY15 by 5.1%/1.0% respectively. On account of

continued losses and low margin orders in the infrastructure segment we revise standalone

EBIDTA margins as well to 9.7% for FY14 and 10.0% for FY15. Hence, we maintain "Buy"rating

with target price at Rs.95/share.

Outlook:

Kalpatru Power Transmission.

Concall Highlights:



8


Story in graphs :T&D Revenue (INR) & T&D EBIT (%) (Q-o-Q) :

Standalone, INR in crores (Source: Company/Eastwind)

Revenue (Q-o-Q) :


Margin % (Q-o-Q) :

Standalone, INR in crores (Source: Company/Eastwind)

INR in crores (Source: Company/Eastwind)

Cost % of revenue :

Cost as a % of sales (Q-o-Q) :




9


(Source: Eastwind Research)

INR in crores (Source: Company/Eastwind)


Key financials :

(Figures in crore)

Ammount in crores (Source: Company/Eastwind)



Performance

Revenue 3246 4032 4363 5308 6085 7210 8166

Other Income 35 25 31 33 36 30 30

Total Income 3281 4057 4394 5341 6121 7240 8196

EBITDA 329 448 464 500 475 584 692

EBIT 272 373 376 402 352 445 525

DEPRICIATION 58 75 88 99 122 139 167

INTREST COST 137 126 117 158 194 263 263

PBT 170 272 291 277 194 212 293

TAX 42 69 79 73 60 65 90

Reported PAT 128 203 211 204 135 147 203

Dividend 23 23 27 27 27 27 27

EPS 9.7 15.3 13.8 13.3 8.8 9.6 13.2

DPS 1.7 1.7 1.7 1.7 1.7 1.7 1.7

Yeild %

EBITDA % 10.1% 11.1% 10.6% 9.4% 7.8% 8.1% 8.5%

NPM % 3.9% 5.0% 4.8% 3.8% 2.2% 2.0% 2.5%

Earning Yeild % 14.6% 7.3% 11.4% 12.3% 10.6% 13.1% 18.0%

Dividend Yeild % 2.6% 0.8% 1.4% 1.6% 2.1% 2.4% 2.4%

ROE % 14.7% 19.7% 12.9% 11.0% 6.9% 7.1% 9.0%

ROCE% 7.1% 10.5% 8.5% 6.5% 3.7% 3.2% 4.3%

Position

Net Worth 870 1027 1645 1851 1947 2068 2244

Total Debt 945 901 831 1281 1669 2500 2500

Capital Employed 1815 1929 2476 3133 3616 4568 4744

No of Share 13 13 15 15 15 15 15

CMP 66 210 121 108 83 73 73

Valuation

Book Value 65.6 77.5 107.2 120.7 126.9 134.8 146.2

P/B 1.0 2.7 1.1 0.9 0.7 0.5 0.5

Int/Coverage 2.0 3.0 3.2 2.5 1.8 1.7 2.0

P/E 6.8 13.7 8.8 8.1 9.4 7.6 5.5

Godrej Consumer Product

722

960

725

33%

32%

1M 1yr YTD

Absolute -13.8 1.5 5.4

Rel. to Nifty -10.3 1.4 0.6

Current 2QFY14 1QFY14

Promoters 63.3 63.3 63.3

FII 28.9 28.7 28.3

DII 1.4 1.2 1.2

Others 6.5 6.8 7.2

Financials Rs, Cr


Revenue 1982.3 1961.7 1.1% 1695.6 16.9%

EBITDA 311.1 299.8 3.8% 284.9 9.2%

PAT 196 195 0.5% 172.2 13.8%

EBITDA Margin 15.7% 15.3% 210bps 16.8% (30bps)

PAT Margin 9.9% 9.9% 220bps 10.2% (10bps)10


Stock Performance

52wk Range H/L



1 yr Forward P/B


120012

Nifty 6002

For 3QFY14, Godrej CP revealed inline set of numbers with 17% sales growth led by

18% domestic and 25% international sales growth, reported growth across all

geographies and segments, respectively. PAT grew by 14% on YoY basis.

" Strategy Shining"

CMP

Upside

Almost inline set of numbers;

Target Price

Result update BUY

24573


977/672

BSE Code 532424

NSE Symbol GODREJCP

Market Data

Mkt Capital (Rs Cr)

View and Valuations: Its strong 20%+ growth in the domestic household insecticides

business is the key growth driver. We expect strong momentum to continue in its

international business led by Megasari and consolidation of Darling business. Despite

some concerns related to higher leverage, lost domestic focus, macro uncertainties in

Africa and LatAM, and currency risk, we remain confident of achieving the 20%+ sales

growth with strong PAT growth for FY14E & beyond. At a CMP of Rs722, stock trades

at 5.1x FY15E P/BV. We retain BUY with a price target of Rs 960.

Its strong focus on driving growth in the domestic and international market by

expansion of products and distribution reach, we expect strong earning in near

future. With launching new products in domestic as well as international mkt, Godrej

CP will explore organic & inorganic growth. Along with its 3x3 strategy, it has 10x10

strategy also, which refers to 10x growth in 10 yrs.

Margin decline: The Company has been able to maintain its margin more than 15%

mark. EBITDA margin declined 110bps (YoY) to 15.7%, due to rise in A&P cost by 80 bps

to 11.5%. However, there was decline in RM cost by 500 bps to 38.8% of adjusted net

sales.

On Category wise: During the Quarter, Household insecticides grew by +8%, adversely

impacted by abnormal seasonal slowdown. Both the key brands Hit and Good knight

continue to gain share and strengthen market leadership positions across all formats.

Soap sales growth was +6%, volume growth at +4%, ahead of the category growth, but

down in value and volume term. Strong momentum in hair colours was maintained,

delivering sales growth at +37%. Liquid detergents grew 36%.

Geography wise performance: For 3QFY14, Business from India grew by 18% and

contributed 53% of total revenue, Indonesia grew by +18% and contributed 17% of total

revenue, Africa grew by 29% and contributed 15% of total revenue, Latin America grew

by 15% and contributed 8% of total revenue and Europe’s business continued strong

sales performance on both organic and Soft & Gentle (S&G) product portfolio. Business

reported growth of 124%.

Products strategy: The company continues to gain and enjoy market leader ship position

across all three formats. The company is driving increase in penetration with launch of

"Goodknight Advanced colour play".

Recent developments: The Company has entered into an agreement on Oct 7, 2013, to

acquire a 30% stake in Bhabani Blunt Hair Dressing Pvt Ltd, a premier hair salon

company with one of the strongest consumer franchises in this space.

"BUY"4th Feb' 14


11


Sales and its Growth(%)




Region-wise EBITDA Margin

Domestic and Export sales-(% of Sales)


It expects expansion in gross margin,

which will help it to fund new product

launches.

Margin-%


India branded business grows 17%,

ahead of the market growth across core

categories.


Regions 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY142

India 18.9% 20.4% 20.2% 15.1% 17.6% 18% 16.7% 15.8% 18.9% 18.5%

Indonesia 19.4% 20.6% 20.7% 18% 19% 20% 19% 15% 17% 16.0%

Africa 26.0% 31% 19.3% 19% 16% 20% 7% 13% 14% 18.0%

Latin America 7.4% 9% 16.3% 3% 4% 8% 9% 3% 7% 9.0%

Europe 11% 5% 10.5% 13% 9% 5% 13% 9% 10% 6.0%

12


(4)The company will continue investing judiciously for the longer term to improve

position, create competitive advantage and emerge stronger than before.

(5) They are not seeing any major impact on Argentina or Africa revenue, because of

economic uncertainties,

Key facts from Conference call (attended on 3rd Feb 2014);

(1) The management stated that the company is continue to be aggressive in launching

new innovations that have been well accepted by consumers. They are backing new

launches with strong investments.

(2) More focusing on Innovative pipeline and Brand equity to maintain its market share

across brands,They will launch a new product next week, but they did not tell the

segment name.

(3) Q4 will be better quarter for household segments.


Financials and Valuation



Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 2041.2 3693.6 4866.16 6390.79 7701.26 9053.82

Other Operating Income 2.5 28.11 45.93 16.58 15.40 18.11

Total income from operations 2043.7 3721.71 4912.09 6407.37 7716.66 9071.93

RM Cost 619.59 1458.28 2174.67 2640.31 3028.79 3719.49

Purchases of stock-in-trade 367.16 294.12 356.11 451.03 559.46 657.71

WIP -40.45 -45.22 -212.26 -118.06 -23.15 -90.72

Employee Cost 151.81 284.51 391.91 590.68 733.08 907.19

Ad Spend 132.8 352.85 449.86 660.35 887.42 997.91

Other expenses 402.98 695.96 850.47 1196.46 1311.8 1587.6

Total expenses 1633.89 3040.5 4010.76 5420.77 6497.4 7779.2

EBITDA 409.81 681.21 901.33 986.6 1219.2 1292.7

Depreciation and Amortisation 23.6 49.92 64.44 77 92.7 100.4

Other Income 44.81 24.13 6.07 67.78 57.9 90.7

Exceptional Item 0 41.14 200.17 96.12 38.6 45.4

EBIT 386.21 631.29 836.89 909.6 1126.5 1192.3

Interest 11.1 43.64 65.84 77.45 87.7 78.7

PBT 419.92 652.92 977.29 996.05 1135.3 1249.7

Tax Exp 80.33 138.21 226.05 179.18 204.35 249.94

PAT 339.59 514.71 751.24 816.87 930.9 999.8

Growth-% (YoY)

Sales 46.3% 81.0% 31.7% 31.3% 20.5% 17.6%

EBITDA 95.2% 66.2% 32.3% 9.5% 23.6% 6.0%

PAT 97.0% 51.6% 46.0% 8.7% 14.0% 7.4%

Expenses on Sales-%

RM Cost 30.3% 39.2% 44.3% 41.2% 39.3% 41.0%

Ad Spend 6.5% 9.5% 9.2% 10.3% 11.5% 11.0%

Employee Cost 7.4% 7.6% 8.0% 9.2% 9.5% 10.0%

Other expenses 19.7% 18.7% 17.3% 18.7% 17.0% 17.5%

Tax rate 19.1% 21.2% 23.1% 18.0% 18.0% 20.0%

Margin-%

EBITDA 20.1% 18.3% 18.3% 15.4% 15.8% 14.3%

EBIT 18.9% 17.0% 17.0% 14.2% 14.6% 13.1%

PAT 16.6% 13.8% 15.3% 12.7% 12.1% 11.0%

Valuation:

CMP 261 365 559 836 722.0 722.0

No of Share 30.8 32.4 34 34.03 34.03 34.03

NW 954.7 1725.2 2815.2 3313.0 4044.9 4845.6

EPS 11.0 15.9 22.1 24.0 27.4 29.4

BVPS 31.0 53.2 82.8 97.4 118.9 142.4

RoE-% 35.6% 29.8% 26.7% 24.7% 23.0% 20.6%

Div- Payout-% 30.6% 38.3% 22.6% 23.0% 21.4% 19.9%

P/BV 8.4 6.9 6.8 8.6 6.1 5.1

P/E 23.7 23.0 25.3 34.8 26.4 24.6

Sesa Sterlite Ltd.

Q3FY14 Result Update185

196

NA

6%

NA

500295

54979 Zinc Operations24740

6002

1M 1yr YTD

Absolute -6.6 4.3 -0.6 Aluminium OperationsRel. to Nifty -3.3 3.6 0.2


Promoters 55.0 55.0 55.0

FII 17.0 16.5 16.8

DII 8.4 8.1 7.4

Others 19.7 20.4 20.9 Power Operations

Iron Ore Operations

Q3FY14 Q-o-Q % Q3FY13 Q2FY13

19523 -23 237 25352

EBITDA 6572 2 -107 6460

2004 -30 35 2846

Interest Cost 1530 -19 126 1880

Tax -139 -85 -81 -924

PAT 1868 -22 498 2394(In Crs)

13

VAL alumina refinery utilization increased to 72% in Q3 vs 46% in Q2 and captive alumina

met 43% of total requirements of the aluminium smelter.BALCO volume performance

was stable but costs were lower resulting in increase in profits.Management expects to

tap first metal from 325 ktpa smelter of BALCO in H1FY15 and sees synchronization of 1st

unit of 1200 MW power plant in Q1FY15. Starting of metal tapping from 1.25 mtpa

smelter of VAL has still not been finalized.

52wk Range H/L


213/119

Vedanta group firm Sesa Sterlite reported a consolidated net profit of Rs 1,868.29 crore

for the Q3FY14.The company, previously known as Sesa Goa, had reported a net profit of

Rs 496.73 crore in the corresponding period of the previous fiscal.During the quarter, its

net sales stood at Rs 19,414.34 crore .Results of the company, however, are not

comparable due to merger of Sterlite Industries, Sterlite Energy, Ekaterina Ltd, Madras

Aluminium and Vedanta Aluminium into itself.The merger had become effective in

August last year.During the quarter EBIDTA% and NPM% increased to 33% and 9.4%

respectively from 24.6% and 7.6% in previous quarter . The company reported a forex

loss of 82cr during the quarter.

Production was lower by ~5% YoY to 220kt and FY14E production guidnace was reduced

further to 900kt (from 950kt in Q2 and 1000kt in Q1) due to slower than expected ramp-

up in underground mining.Integrated silver production guidance has been reduced to

290t (vs 335t earlier) due to lower output from Agucha than earlier expected.

Market Data

Neutral

NSE Symbol


Stock Performance-%


1 yr Forward P/B

Source - Comapany/EastWind Research

Upside


CMP

Target Price


Initial Coverage

Depriciation

Revenue from Operation

Average Daily Volume (Nos.)

BSE Code

SSLT

Operations at Karnataka have resumed and ramp up to a run rate of 0.5 MT/month is

underway.The first iron ore sale through e-auction is expected at the end of current

month.Operations remained in Goa but e-auction of inventory has been allowed.

However, further clarityon the start of auctions is still sought.

Q3FY14 Financials :

Blended realizations fell QoQ to Rs3.4/unit while CoP stood at Rs2.3/unit.Boiler light up

of 1st unit of 660MW of Talwandi Sabo power project was done in Q3 and trial runs are

expected to commence during Q4.

Nifty

"Neutral"4th Feb' 14


Oil & Gas Operations

Balance sheet and debt

Sesa Sterlite's mines in Goa remains a challenge

Zinc Lead Expansion projects for better growth

OUTLOOK

Company background

14

In Q2, average gross operated production and working interest production were 224493

boepd and 140830 boepd, respectively, 10% higher YoY. Production at Cambay was

higher by 51% YoY due to new infill wells.

Gross debt at Sesa Sterlite was Rs840.2bn as at Dec’13. This comprises long term loans

of Rs.650bn and short term working capital loans of Rs. 189.6bn.

During 2QFY2013, the Goa government had imposed a ban on iron ore mining in Goa

until further review. Later, the Ministry of Environment and Forest Clearances (MOEF)

also suspended environment clearances to all functional mining leases in Goa. Sesa Goa

operated several mines in the region with an annual production of 12mn tonne. While

we believe the ban could be temporary, there are chances of iron ore production cap by

the government/MOEF which could affect Sesa’s production going forward. This is likely

to be a key overhang on the stock in our view.

Sesa Sterlite’s subsidiary, Hindustan Zinc (HZL) has commenced production at its

underground Kayad mine, which has 11mn tonne of high-grade reserves. The company

expects to increase its capacity from 1.0mn tonne to 5mn tonne over the coming five

years.

Sesa Sterlite Ltd.

Sesa Sterlite is one of the world’s largest diversified natural resource companies. It

produces zinc, lead, silver, copper, aluminium, iron ore, oil & gas and power. Sesa

Sterlite came into existence mainly as a result of merging of two companies Sesa Goa

and Sterlite Industries which were owned by Vedanta Resources. The merger was

announced during January 2012 while it was completed during August 2013. Sesa

Sterlite generates ~80% of its revenues from India, China, East Asia, Africa and the

Middle East.

The company’s actual 3QFY2014 results are not comparable with 3QFY2013 results as

the two companies, Sesa Goa and Sterlite Industries were merged during August

2013.The company has delayed the commissioning of the 325ktpa BALCO-III Aluminium

smelter from 3QFY2014 to 1HFY2015.The company has resumed iron ore mining

operations in Karnataka from December 28, 2013 where it has 2.29mn tonne per

annum capacity and is gradually ramping up the production at the rate of 0.5mn tonne

per month.We expect Sesa Sterlite to benefit from the expansion of Zinc-Lead smelting

capacity during FY2014-15.In the mean time Norwegian government has asked its

sovereign wealth fund not to invest in Sesa Sterlite and two Israeli firms citing ethical

issues.We value the stock using forward P/B and here by we recomend Neutral rating

on the stock at a target price of Rs.196 from current market price of Rs.185.


FY12 FY13 FY14E FY15E

8310 2554 66976 75013

973 567 25416 28294

268 250 3011 3311

181 51 705 705

1739 756 12791 13590

4810 2089 47412 52009

3500 465 19564 23004

106 197 6939 8300

106 197 6939 8300

433 475 5107 6280

3195 -153 9422 11224

1021 -43 -1175 2416

2762 2301 6548 6478

14 -1 8 5

25.0 -1.3 21.9 21.9

FY10 FY11 FY12 FY13

83 87 87 87

7835 12724 15031 17388

7918 12810 15118 17475

44 31 1116 1179

1916 968 2618 3322

6 6 4 4

727 1169 887 547

405 425 233 42

11238 15604 20401 22889

0 15 10 89

704 927 1390 1880

79 729 837 723

401 462 199 492

503 744 875 961

338 683 549 142

2392 897 98 36

745 859 369 329

11238 15604 20401 22889

FY10 FY11 FY12 FY13

3.4 1.1 1.1 1.0

41.8 43.3 25.4 -4.2

56.9 59.0 41.0 17.8

28.8 37.7 14.2 10.4

2.8 9.0 11.6 10.5

0.2 0.1 0.2 0.3

15

Long-term provisions

Trade payables

Short-term provisions

Tax

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Trade receivables

Short-term loans and advances

Total Assets

P/B

Total liabilities

Cash and bank balances

Intangibles

Tangible assets


PAT WITHOUT Expactional Item

ROE%

EPS

RATIOS

NPM %

Capital work-in-progress

Long-term loans and advances

Inventories



Weighted Average Cost of Debt %

Debt/Equity (debt/debt+networth or

EBITDA %

ROCE%

Net Revenue from Operation

Cost Of Projects & Contractual

Employee benefit Expence

EBITDA

Depriciation

Depriciation

Interest Cost

PBT

Sesa Sterlite Ltd.

P/L PERFORMANCE

Loss on Foreign Currency Transaction

Other expences

Expenditure


1M 1yr YTD

Absolute -5.0 9.5 9.3

Rel. to Nifty -1.6 8.9 -4.4


4Promoters 39.9 39.9 39.9

FII 30.6 30.4 29.9

DII 8.5 8.8 9.3

Others 21.0 20.9 8.7



Revenue 6846 5696 20.2 6151 11.3

EBITDA 898 833 7.8 779 15.3

PAT 525 482 8.9 489 7.4

EBITDA Margin 13.1% 14.6% (150bps) 12.7% 50bps

PAT Margin 7.7% 8.5% (80bps) 7.9% (30bps)

16

The net profits for the stands at Rs 525 Cr for the quarter grew by only 7.5% yoy as the tax

rate increased to nearly 27% from 16% earlier due to expiry of tax benefits at the Haridwar

facility.

Post the 3QFY14 result management said that Industry motorcycle sales should be in the

range of 5 % and it will be in that level for the year and HMC will be at par with that.

Company has maintained its ad spend guidance at 2-2.5 % of sales and R&D spends at

nearly 0.75% of sales. The capital expenditure guidance for FY2014 stands at Rs1100 Cr to

Rs1200 Crr.For FY2015 the company has guided for Rs 1,500 Cr to Rs1,800 Cr.

The Management indicated that the current dividend policy of 35-45% payout will continue in

future. The total installed capacity of the company currently stands at 6.9mn units. Post the

commissioning of the Neemrana plant, scheduled by end of March 2014, the installed capacity is

expected to increase to 7.65mn units.

Average Sales with Flat Profits Growth..

Result Update BUY

CMP 1979

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by

healthy volume growth of 7% for the period under review. The company during 3QFY14

sold 1680940 units including exports. The volume performance was led by a strong 7.8%

YoY growth in the domestic segment, while export volumes posted a decline of 26.5% YoY,

mainly due to a weak demand environment in major exporting nations. Scooters sales

maintained strong momentum, led by the success of Maestro.

The average realization for the quarter moved up and came around at Rs 41000 verses Rs

39100 for the same time last fiscal. The net average realization for the quarter was driven by

price increases, which were undertaken in April and October 2013.

Upside

Target Price 2100

Previous Target Price -

The stock at its CMP of Rs 1979 which is 17.9x of one year forward FY14E EPS of Rs 110

and upcoming capacity expansion, Rising trend of volume growth of scooter business,

Improvement in operational efficiency are few factors which make us positive for the stock.

We recommend BUY for the stock with Target Price Rs 2100.

One Yr Price Vs NIFTY


1,434

Average Daily Volume 245841

Nifty 6089


Mkt Capital (Rs, Cr)

The operating EBITDA for the 3QFY14 came at Rs 898 Cr and OPM stands at 13.06

%.There is yearly rise in the OPM by nearly 40 bps however on sequential basis it had

shrunk by 150 bps due to led by increase in raw-material costs and significantly higher other

expenditure. Raw material cost as a percentage of sales increased 120bp QoQ due to the

currency impact on indirect imports, which comes with a quarter’s lag. The other expenses

in the quarter rose significantly very high because of higher advertisement expenses due to

festival season and also due to the launch of new products/ refreshes and higher royalty

payments on the back of rising share of new products. Additionally, the ongoing cost

reduction initiatives from the company led to a savings of Rs45 Cr during the quarter.

View & Valuation

HEROMOTOCO


52wk Range H/L 2215

6%

Market Data

BSE Code 500182

HEROMOTOCO

Stock Performance-%

NSE Symbol

Change from Previous -

"BUY" 3rd

Feb' 14.


17


Realization Trend


Profits for the grew by only 7.5% yoy as the

tax rate increased to nearly 27% from 16%

earlier due to expiry of tax benefits at the

Haridwar facility.


SALES & PAT TREND

Company registered its 3QFY14 net sales at

Rs 6846 Cr up by 11.3% YoY led by healthy

volume growth of 7%.

Rise in the OPM by nearly 40 bps however on

sequential basis it had shrunk by 150 bps due

to led by increase in raw-material costs and

significantly higher other expenditure.

HEROMOTOCO

OPM & NPM TREND



Marico

-

1M 1yr YTD

Absolute -3.6 2.4 0.5

Rel. to Nifty -10.8 -7.9 -9.1


Promoters 59.69 59.69 59.72

FII 27.58 27.6 27.96

DII 5.72 5.88 5.19

Others 7.01 6.83 7.13



Revenue 1089.29 1115.36 (2.3) 1155.89 -5.8

EBITDA 201.81 168.51 19.8 165.8 21.7

PAT 135.4 105.9 27.9 102.3 32.4

EBITDA Margin 18.5% 15.1% 340bps 14.3% -

PAT Margin 12.4% 9.5% 290bps 8.9% -

18

Margin ramp up: During the quarter, its EBITDA margin of the India FMCG business

during Q3FY14 was 18.7% and PAT margin was at 11.3%. The Company believes that an

operating margin in the band of 17% to 18% is sustainable in the medium term. On YoY

basis margin growth could not computed because of Kaya consolidation in same quarter

previous year.

Poor volume growth: Because of weak demand discretionary environment and socio

political instability in some regions, its volume growth of various segments have come

down during the quarter. The volume growth in India was marginally above 3% for the

quarter, reflecting continued soft consumption trends. Post earning, management

stated that the trend of volume decline has bottomed out based on hypothesis.

The Company maintained its market share across the portfolio, reflecting strong equity

of its brands, even though the rates of category growth have decelerated over the past

few quarters. We believe that slower volume growth could not easily turned out in next

1-2 quarters because of poor discretionary demand.

Mkt Capital (Rs Cr) 13829

Average Daily Volume 126142


BSE Code 531642

NSE Symbol

52wk Range H/L 248/188

Result update Neutral


" Volume slows…"

CMP 214

Target Price -

Previous Target Price -

Marico witnessed better numbers than expectation with 10% sales growth (excluding

Kaya Sales) led by 3% volume growth on YoY basis. PAT grew by 31% (YoY) because of

cost rationalization across various head of expenses like Ad Spend, employee cost etc.

However, the profits of Q3FY14 are not strictly comparable to Q3FY13 due to the

change in the method of depreciation from WDV to SLM carried out in Q4FY13 and

demerger of Kaya business.

Beats the street on profitability and Margin front with poor volume growth;


1 year forward P/BV-X


View and Valuation: The company expects demand scenario to remain challenging

especially in urban areas in India and some of its international market like Bangladesh,

Egypt and MENA. Based on hypothesis, management is expecting regarding the bottom

out of volume decline but they are not ignoring the threat of demand environment

challenges for near future. We believe that slower volume growth could not easily

turned out in next 1-2 quarters because of poor discretionary demand environment.

Therefore, we downgrade our view from BUY to NEUTRAL on the stock, at a price of Rs

214, stock trades at 4.9x FY15E P/BV.

Mix segmental growth: India FMCG business grew by 10%(YoY). Parachute’s rigid

portfolio (packs in blue bottles), recorded a volume growth of about 2% during Q3FY14

over Q3FY13. Parachute along with Nihar marginally improved its market share over the

same period last year to 56%. The Saffola refined edible oils franchise grew by about 9%

in volume terms during Q3FY14. During the quarter, Saffola average price hiked by 4-5%

to manage its RM cost and Packaging materials. Marico’s hair oil brands (Parachute

Advansed, Nihar Naturals and Hair & Care) grew by 8% (YoY) in volume terms during

Q3FY14.

Stock Performance

MARICO

Upside -

Nifty 6090

Market Data

"NEUTRAL"3rd Feb' 14


19


Marico

Sales (cr) and Growth (%) -


Margin-%

Expenses on Sales -%

For 2QFY14, Marico reported 4% (YoY)

decline in sales growth because of sluggish

volume growth impacted by weaker demand

in urban area.

The demerger of Kaya is on the way, and

new demerged entity would expected to get

listed by November or December.

Because of cost control in ad spend by

200bps and Raw material about 190bps, its

margin gone up by 210 bps to 15.1% on YoY

basis.

Geographical challenges: International market recorded a growth of 15%. Because of

political uncertainty, Bangladesh sales declined by 14%(YoY). While, the MENA business

on an average grew by 10% CC basis. The business in Egypt grew by 22% mainly led by

strong volume growth in Haircode and Fiancée. The business in GCC continued to report a

decline. Political environment in Egypt seems to have bettered for the time being with no

major report of violence, however the uncertainty continues. South Africa reported a top-

line growth of 5%. The business in South East Asia of which Vietnam comprises a

significant portion grew by 24% in constant currency terms.




(3) Operating Margin could sustain at a range of 17-18% in the medium term.

(4) The Youth brands portfolio is expected to grow by about 20% to 25%.

(5) In near term, Company does not expect to see any price hike decision.

20


(2) Immediate future could see volume growth rates of 7%- 8%. With the price increases

already in market place the overall sales growth could still be in the region of 12%-14%.

This is expected to improve from early/mid FY15.


Marico

Key facts from Management guidance;

Financials

(1) Management believes that the decline trend of volume growth has turned out, while

the economic environment is still challenging and there will be gradual recovery.


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 2500.09 3134.99 4008.28 4259.53 4740.86 5344.65

Other Operating Income 160.67 19.06 30.90 12.51 14.22 16.03

Total income from operations 2660.76 3154.05 4039.18 4596.86 4755.08 5360.68

RM Cost 1265.48 1712.66 2132.04 2212.27 2228.20 2672.32

Purchases of stock-in-trade 12.47 20.36 17.44 116.59 48.53 54.71

WIP -16.35 -115.43 -50.78 -127.47 -98.72 -111.29

Employee Cost 190.13 229.98 307.29 380.56 380.41 428.85

Ad Spend 351.12 345.95 448.99 597.94 618.16 643.28

Other expenses 482.76 523.36 668.90 791.07 808.36 911.32

Total expenses 2285.61 2716.88 3523.88 3970.96 3984.94 4599.19

EBITDA 375.15 437.17 515.30 625.90 770.14 761.49

Depreciation and Amortisation 60.06 70.80 72.52 86.62 145.44 133.80

Other Income 18.26 2.16 1.67 37.52 19.17 21.61

Exceptional Item -9.79 48.91 -1.75 33.20 33.29 37.52

EBIT 323.56 417.44 442.70 610.00 677.15 686.82

Interest 25.69 41.01 42.39 57.43 57.43 57.43

PBT 297.87 376.43 400.31 552.57 619.72 629.39

Tax Exp 64.33 84.98 78.25 146.18 163.95 166.50

PAT 233.54 291.45 322.06 406.39 455.78 462.89

Growth-% (YoY)

Sales 11.4% 18.5% 28.1% 13.8% 3.4% 12.7%

EBITDA 29.2% 16.5% 17.9% 21.5% 23.0% -1.1%

PAT 33.5% 24.8% 10.5% 26.2% 12.2% 1.6%

Expenses on Sales-%

RM Cost 47.6% 54.3% 52.8% 48.1% 46.9% 49.9%

Ad Spend 13.2% 11.0% 11.1% 13.0% 13.0% 12.0%

Employee Cost 7.1% 7.3% 7.6% 8.3% 8.0% 8.0%

Other expenses 18.1% 16.6% 16.6% 17.2% 17.0% 17.0%

Tax rate 21.6% 22.6% 19.5% 26.5% 26.5% 26.5%

Margin-%

EBITDA 14.1% 13.9% 12.8% 13.6% 16.2% 14.2%

EBIT 12.2% 13.2% 11.0% 13.3% 14.2% 12.8%

PAT 8.8% 9.2% 8.0% 8.8% 9.6% 8.6%

Valuation:

CMP 108.55 138.75 206.00 216.95 214.00 214.00

No of Share 60.90 61.40 61.40 64.48 64.48 64.48

NW 653.96 915.44 1143.01 1981.52 2399.58 2824.75

EPS 3.83 4.75 5.25 6.30 7.07 7.18

BVPS 10.74 14.91 18.62 30.73 37.21 43.81

RoE-% 35.7% 31.8% 28.2% 20.5% 19.0% 16.4%

P/BV 10.11 9.31 11.07 7.06 5.75 4.88

P/E 28.31 29.23 39.27 34.42 30.28 29.81

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