stock investment tips recommendation - buy stocks of shree cement with target price rs.4791

6th Jan 2013

The automobiles companies come up with December 2013 sales volumes with no big surprises. The industry followed the same declining trend

as in November 2013 with Scooter and Tractors sales showing some upward traction. Indian automobile OEMs continue to be negatively

impacted by the overall economic slowdown, firm interest rates, inflationary headwinds and high fuel prices .......................................... ( Page :

18)

Jyothy Lab: "Efforts for stability" "BUY" 6th Jan 2013

Recent management commentary reveals that the company is planning for inorganic growth with Rs 250 Cr of bank balance (post repayment of

its debt) and especially looking at regionally strong brands. We expect that company’s new management and new strategy of product reach

would energize its growth story in near future. Hence, the management has maintained its guidance of achieving around 22% - 25% revenue

growth and OPM of 14% - 15% for FY14E. We maintain "BUY" view on the stock with a target price of Rs 260, at a CMP of Rs195, stock trades at

3.6x FY15E P/BV ............................................ ( Page : 15-17)

AUTO SALES DASHBOARD : DECEMBER 2013:Another Month of Tepid Performance 6th Jan 2013

7th Jan, 2014

Edition : 178

IEA-Equity

Strategy

6th Jan 2013

SHREE CEMENT: "BUY" 7th Jan 2013

We are positive on the stock as it always beats its peers group with lower operational cost. Looking at the strategy of the company and

expansion plans for FY15 the stock may outperform among cement players with the rise in cement demand.Shree cement follows a multi brand

strategy and sells cement under the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together enjoy the largest market

share in high value markets of Rajasthan, Delhi and Haryana. After a good monsoon and election we are expecting a good performance from

shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/- ............................................ ( Page : 6-8)

For 3QFY14E, Indian IT players would report muted earnings growth because of seasonal weakness like furloughs and holidays impacts, already

it is understood fact by consensus. Post result, earning guidance for FY15E and forward looking statement by most of companies would be

considered as an important fact. Considering recent demand environment scenario and healthy growth outlook of US and Europe, we are

expecting to see positive outlook on the sector for the year 2014................................. ( Page :2-5)

IT Industry: 3QFY14E results preview : "As usual flattish 3rd quarter" 7th Jan 2013

ORIENTAL BANK "Neutral"

Emami Ltd : "The niche advantage" "BUY" 3rd Jan 2014

Considering Emami’s focus on increasing rural penetration, favorable monsoon, continuous strengthening of its brand equity and new product

funnel strongly in next 2- 3 years, we are positive on the stock. We recommend “Buy” on the stock with a target price of Rs 635. At a CMP of Rs

481 , the stock is trading at P/BV of 10.3x and 7.8x on FY14E and FY15E, respectively. .................... ( Page : 19-20)

Net interest margin of the bank is likely to expand on the back of RBI’s decision to leave policy rate (repo) unchanged and softening bond yield

to 8.75%. This would result of reducing cost of fund and fair amount of portfolio gain. Bank borrowed higher amount of repo than MSF during

the quarter. Moreover bank is getting deposits from FCNR which would give margin of one percent plus to the bank. We value bank at

Rs.163/share which would be 0.5 times of one year forward book and 5.4 times of one year forward earning .................................. ( Page : 12-

14)

We have now neutral rating on the stock led by trading closer to our target price of Rs.221. At this price stock would trade at 0.5 times of one

year forward book and 6.5 times of earning. In the absence of comfort earning and non visibility of ROE improvement, make us compel to value

bank in the range of 0.4-0.5 times forward book. Impairment of asset and high operating leverage would remain high according to the

management. On both front we would be getting more clarity after the quarterly result. ................... ( Page : 9-11)

UNION BANK : "BUY"

Narnolia Securities Ltd,

India Equity Analytics

IT Industry: 3QFY14E results preview

Key facts of 3QFY14E earnings:

Seasonal Impacts on (QoQ) earnings, while better on YoY:

Stable Margin and flat currency movement:

New discretionary spending:

Management commentary and forward looking statement:

↑6.9%

2

(Source: Eastwind)

Because of better economic scenario, demand environment expansion has taken place.

Now, domestic IT players have been able to retain its market share in US and successfully

improved its market share in Euro region, at a same point pricing pressure has turned out.

During the quarter, most of multimillion-dollar projects have been bagged from Euro

region. During the current fiscal, out of 27 large projects 11 orders deputed from Euro

(including UK) region and only 3 from US.

Post revealing 3QFY14E earnings, street will closely watch on the response of its clients

budgeting cycle to assess the strength of the demand environment and its sustainability.

Most of companies will comment on earning guidance, margin outlook and order pipeline

for FY15E. Taking recent attractive supply side scenario, we would like to see hiring

guidance and commentary on maintaining utilization rate and attrition rate.

CNX IT v/s USD/INR

(Source: Eastwind)

Post result, earning guidance for FY15E and forward looking statement by most of

companies would be considered as an important fact. Considering recent demand

environment scenario and healthy growth outlook of US and Europe, we are expecting

to see positive outlook on the sector for the year 2014.

For 3QFY14E, we expect to see lower rate of earning growth impacted by furloughs and

holidays, already YoY growth would be a favorable. The December quarter has

traditionally been a soft quarter for the IT sector. On USD term, revenue of top-4 IT

players could be reported at a range of 2-3.3% sequentially. We expect Tier-1 IT to report

constant-currency revenue growth of 1.4-3% (QoQ).

During the quarter, margin for IT Industry will largely be flattish or see marginal decline on

sequential basis. Across the tier-1 IT players, Infosys could improve its margin because of

cost rationalization and slow pace of currency benefit TCS will maintain its previous

quarters margin picture. While, margin of HCLTech and Mindtree could see some dip

because of wage hike during the quarter.

"As usual flattish 3rd quarter"

(Source: Company/Eastwind)

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

For 3QFY14E, Indian IT players would report muted earnings growth because of seasonal

weakness like furloughs and holidays impacts, already it is understood fact by

consensus. However, this quarter would report better earning and margin growth than

same quarters of last year. Because of stable currency movement, margin could be seen

flattish or marginally inched up.

Price performance of our coverage:

Index Performance:

Movement of INR-USD and Other Currencies v/s USD

(Source: Eastwind)


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

Average 44.65 45.73 50.84 50.29 54.09 55.19 54.14 54.17 55.93 62.08 61.97

Closing 44.59 48.86 53.08 51.4 56.8 52.85 54.97 54.28 59.54 62.59 61.84

Average 1.41 1.4 1.35 1.31 1.28 1.25 1.3 1.32 1.31 1.33 1.36

Closing 1.45 1.36 1.3 1.33 1.26 1.29 132 1.28 1.3 1.35 1.38

Average 1.62 1.61 1.57 1.57 1.57 1.58 1.61 1.55 1.54 1.55 1.61

Closing 1.61 1.57 1.55 160 1.56 1.62 1.62 1.52 1.51 1.6 1.66

Average 1.06 1.05 1.01 1.05 1.01 1.04 1.03 1.04 0.99 0.92 0.93

Closing 1.07 0.99 1.02 1.03 1.02 1.04 1.03 1.04 0.91 0.93 0.89

INR/USD

EUR - USD

GBP-USD

AUD-USD

↑59.5%

↑6.9%

↑13%

↑59.5%


Results preview

Forex loss as a hedging will reduce the net income growth.

We expect revenue growth of 2.2% in USD term for3rd qtr FY14E, sequentially.

3

Street would like to see some up

gradation in given revenue guidance

from 9-10% to 12% for FY14E.

The company had guided a strong 3QFY14 USD revenue growth guidance of 1.8-3.6% QoQ

for IT services .We expect IT services revenue growth to be closer to the higher end of this

range and to be 3% QoQ in USD terms.

The large deals won in the previous quarter are ramping up as expected and company

could reveal its orders pipeline.

Key things to watch – 4th quarter

revenue guidance, margin commentary,

visibility of growth/hiring in software

services.



We expect company is likely to report 3.5% (QoQ) revenue growth in USD term. On a

constant currency basis, the growth will be 3% QoQ.

Margins are likely to decline marginally because of Flattish currency movement

Key things to watch - Comments on

volume, demand environment, deal

closures from US, pricing, and

discretionary spends.

Margin is expected to remain stable and benefits from cost optimisation initiatives are

offset by the negative impact of the rupee appreciation by 1.2% during the quarter.

We expect Infosys to increase their FY2014 guidance to ‘at least 12%’ from 9-10% earlier.

The company needs a quarterly run rate of average 2% for the next two quarters to

achieve 12% for FY14E.


TCS

Rs, Cr 3QFY13 2QFY14 3QFY14E (QoQ)-% (YoY)-%

Sales 16069.93 20977.24 21606.56 3.0% 34.5%

EBITDA 4660.49 6632.95 6300.3 -5.0% 35.2%

PAT 3549.6 4633.33 5096.66 10.0% 43.6%

EBITDA Margin 29.0% 31.6% 31.0% (60bps) 200bps

PAT Margin 22.1% 22.1% 23.6% 150bps 150bps

WIPRO


Sales 9587.5 10990.7 11342.40 3.2% 18.3%

EBITDA 2050.2 2503.8 2552.04 1.9% 24.5%

PAT 1598.1 1932 1984.16 2.7% 24.2%


PAT Margin 16.7% 17.6% 17.5% (10bps) 80bps

INFY


Sales 10424 12965 13069.1 0.8% 25.4%

EBIT 2677 3346.9 3424.1 2.3% 27.9%

PAT 2369 2407 2695.8 12.0% 13.8%

EBITDA Margin 25.7% 25.8% 26.2% 40bps 50bps

PAT Margin 22.7% 18.6% 20.6% 200bps (190bps)


4

Key things to watch – Outlook for deal

pipeline, updates on SMAC(social,

mobility, analytics, cloud) and guidance

on forward looking statement.

Expect 3% US$ revenue growth. Hexaware discontinued quarterly guidance since the

previous quarter.

Expect 30-50bps decline in margin.

Key things to watch: Key stance on

dividend policy, deal wins and revenue

growth momentum and outlook for

order win.



Expect revenue growth of 3% in $-term QoQ and margins to be down by 50-100bps which

is largely attributable to the wage hikes effective from October 1, 2013 for some

employees..

Key things to watch - outlook for

pricing/volumes and deal ramp up and

deal re bid, margin commentary,

visibility of growth/hiring in software

services.

We expect revenue growth guidance of 2.5% in USD term and and full integration of

Complex IT.

Expect margins to be don by 50-100bps (QoQ) - wage hikes deferred to 4QFY14

Key things to watch – Outlook for deal

pipeline, outlook on BT/AT&T (the

biggest clients), updates on SMAC(social,

mobility, analytics, cloud) and

comments on synergies

We expect revenue growth guidance of 1.5% in USD term and expect margin ramp up by

40bps.


HCLTECH


Sales 6273.8 7961 8160.03 2.5% 30.1%

EBITDA 1416.6 2093 2080.81 -0.6% 46.9%

PAT 974.3 1416 1472.64 4.0% 51.1%



TECHM


Sales 3523.7 4771.5 4819.22 1.0% 36.8%

EBITDA 756.9 1110.85 1084.32 -2.4% 43.3%

PAT 455.9 718.2 754.11 5.0% 65.4%



CMC


Sales 492.97 560.75 566.36 1.0% 14.9%

EBITDA 83.2 88.41 87.79 -0.7% 5.5%

PAT 61.07 67.3 65.62 -2.5% 7.4%

EBITDA Margin 16.9% 15.8% 15.5% (30bps) (140bps)

PAT Margin 12.4% 12.0% 11.6% (40bps) (80bps)

HEXAWARE

Rs, Cr 4QCY12 3QCY13 4QCY13E (QoQ)-% (YoY)-%

Sales 507.52 621.1 629.17 1.3% 24.0%

EBITDA 109.02 147.74 147.86 0.1% 35.6%

PAT 66.20 98.7 103.64 5.0% 56.5%




We expect to see revenue growth by 4% (QoQ) in USD term.

View and valuation:

5

key macro indicators in US economy and recent interaction by Industry experts bring some optimistic view in the IT sector. The

meaning full recovery has been seen in US labor market. At the same time, business investment and consumer confidence appear to

be coming back. We believe, uptick in discretionary spend could be sustain over the next 12-18ms.

Commentary on demand outlook, deal pipeline and discretionary spending will be key topic to discuss post results. At a same,

management commentary would also be monitor able.

Hence, with strong medium term earnings visibility, better demand environment and optimistic management comments, we are

positive on (In order of preference) TCS, INFY, and HCL tech from large cap coverage and TECHM, eClerx and NIITTech from Mid cap

space.


Key things to watch: Outlook of deal

pipeline, Updates on SAP and Revolo,

and acquisition plan.

We expect overall revenue growth at 3% in USD term due to healthy growth in IP led

business and $1mn HP deal.

PAT is expected to grow by 10% (QoQ) despite a marginal growth in margin due to the

forex gain of Rs 5-6 cr v/s 9 cr of same previous quarter.

Key things to watch: Commentary on

deal pipeline and contribution from IP-

led revenue

We expect the company to report 1% QoQ growth in USD terms. Due to the

lower other income, we expect the net income to decline by 5%.

Key things to watch: Updates on new

deal win, revenue traction from all

geographies & inorganic initiatives.


KPIT


Sales 563.3 702.8 721.97 2.7% 28.2%

EBITDA 87.9 108.1 115.52 6.9% 31.4%

PAT 59.9 66.7 69.40 4.0% 15.9%

EBITDA Margin 15.6% 15.4% 16.1% 70bps 50bps

PAT Margin 10.6% 9.5% 9.7% (90bps) 120bps

PERSISTENT


Sales 333 432.4 436.06 1% 30.9%

EBITDA 82.4 100.8 104.65 4% 27.0%

PAT 49.5 60.8 66.88 10% 35.1%

EBITDA Margin 24.7% 23.3% 24.0% 70bps (70bps)


NIITTECH


Sales 514.4 587.3 593.50 1.1% 15.4%

EBITDA 81.3 88.6 86.06 -2.9% 5.9%

PAT 56.6 60.4 57.38 -5.0% 1.4%

EBITDA Margin 15.8% 15.1% 14.5% (60bps) (130bps)

PAT Margin 11.0% 10.3% 9.7% (60bps) (130bps)

CMP Upside

(06.01.14) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

TCS 2239.6 BUY 2360 5.4% 71.82 90.74 102.37 31.19 24.68 21.88 36.42% 36.22% 32.95%

INFOSYS 3514.2 BUY 3622 3.1% 164.2 181.1 208.2 21.40 19.40 16.88 24.8% 23.0% 22.2%

HCLTECH 1251.3 BUY 1415 13.1% 58.10 71.87 83.49 21.54 17.41 14.99 30.72% 29.10% 26.39%

WIPRO 558.05 NEUTRAL 450 25.0 25.15 27.4 22.28 22.19 20.37 21.7% 18.9% 17.8%

TECHM 1817.65 BUY 2330 28.2% 85.48 144.15 161.64 21.26 12.61 11.25 35.91% 38.31% 30.38%

CMC 1734.45 REDUCE 1693 75.27 101.56 110.07 23.04 17.08 15.76 24.10% 25.81% 22.92%

NIITTECH 379.85 BUY 408 7.5% 36.28 44.03 53.38 10.47 8.63 7.12 20.0% 19.6% 19.3%

KPIT 181.55 REDUCE 177 10.80 13.07 15.95 16.81 13.89 11.38 20.10% 19.80% 19.75%

HEXAWARE 138.65 BUY 141 1.4% 11.1 13.1 14.3 12.49 10.61 9.69 27.2% 27.0% 26%

PERSISTENT 990.05 REDUCE 960 46.12 63.40 76.92 21.47 15.62 12.87 18.1% 20.5% 20.4%

eCLERX 1064.6 BUY 1360 27.7% 64.25 71.61 83.65 16.57 14.87 12.73 43.8% 37.9% 34.4%

TATAELXSI 413.65 REDUCE 210 10.63 17.53 19.76 38.91 23.60 20.93 16.94% 23.55% 22.37%

ZENSARTECH 397.95 BUY 400 0.5% 40.03 57.16 74.62 9.94 6.96 5.33 23.22% 26.07% 26.34%

RoE-%Company View Target

EPS-Rs P/E-x

SHREE CEMENT.

4460

4791

NA

7%

NA

500387

15502

3875

6191

1M 1yr YTD

Absolute 0.1 -4.8 -5.1

Rel. to Nifty 0.0 -8.0 -9.2

2QFY14 1QFY14 4QFY13

Promoters 64.8 64.8 64.8

FII 8.2 8.1 7.8

DII 5.7 5.9 5.6

Others 21.3 21.2 21.8

Financials : Q1FY14 Y-o-Y % Q-o-Q % Q1FY13 Q4FY13

Net Revenue 1248 -5.7 -13.9 1324 1449

EBITDA 249 -36.8 -35.7 394 387

Depriciation 114 21.3 -14.3 94 133

Tax 5 -88.9 -68.8 45 16

PAT 172 -24.6 -39.4 228 284(In Crs)

6

Cement : Theme ReportIndustry’s profitability deteriorated to multi‐year low during 2QFY14 as all companies reported

sharp decline in their operating profits. Weak demand on account of a strong & timely monsoon

led to muted volume growth and weak cement prices. Regional & smaller players hit the hardest

.The industry’s profitability suffered on weak demand & rising costs; Fuel costs have largely

remained stable.Capex slowdown continues to impact demand off‐take. Sand mining bans also

hurting construction activities & cement demand.Infrastructure execution remains uncertain; rural

pick up on good monsoon can lead to demand growth. The storm seems over but headwind

persists Outlook is cautious.

Source - Comapany/EastWind Research


EBIDTA for the cement segment declined 39% at Rs.249 Cr (-37% YOY) on account of weak prices

coupled with higher operational costs. Lower effective tax rate (2.8% vs 16.5%) stemmed the

decline in net profits to INR1.7bn, a degrowth of 24.5%.

On the expansion front :

Share Holding Pattern-%The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of similar

capacity along with 25MW of WHRS (at the same location) is expected by Jun’14.Two grinding

units of 2m tons each, at Ras and in Bihar,are being constructed and expected by Jun’14.For the

greenfield clinker-cumgrinding unit (Chhattisgarh) and 2m ton grinding unit (Ras), equipment

order have been placed; commissioning is for Mar‐Jun’15.We expect Shree to be a 21.5m-tpa

company by Jun’15.It plans to foray into high demanding eastern. It has set its eye on 'Mission

2015', i.e. achieving a production capacity of 25mmt by 2015.Total capex for these expansion is

Rs.3,000 crore which is spread over next 2 years.1 yr Forward P/B

Volume Growth with degrowth in EBIDTA :Mkt Capital (Rs Crores)

With Q1FY14 performance Net sales declined 5.8% to Rs.1248 Cr as weak cement pricing in its key

northern market offset the benefits from higher cement and power volumes. While cement and

clinker dispatches rose 7.2% YoY to 3.26mmt, realizations weakened 12.7% YoY and 7.2% QoQ at

INR3,334/ mt.On the volumes front, while the 7.2% increase in cement dispatches positively

surprised, a 36% growth in power sales lagged our estimate of a 128% growth.

Average Daily Volume (Nos.)

Nifty

Stock Performance-%

Market DataBSE Code

NSE Symbol SHREECEM

52wk Range H/L 5210/3413

Company Update Buy As on Mid June, the company's gross debt stood at Rs.12.9bn, including Rs.3.1bn of long-term

debt maturing within a year and cash and cash equivalents of Rs. 25.7bn. We believe net cash

balance of INR12.8bn coupled with future cash flows should result in smooth execution of its

expansion plan. A very good strategy for capacity expansion has ensured that leverage remains

under control like in the past.We are positive on the stock as it always beats its peers group with

lower operational cost. Looking at the strategy of the company and expansion plans for FY15

the stock may outperform among cement players with the rise in cement demand.Shree cement

follows a multi brand strategy and sells cement under the highly recognized brands of Shree Ultra,

Bangur and Rockstrong which together enjoy the largest market share in high value markets of

Rajasthan, Delhi and Haryana. After a good monsoon and election we are expecting a good

performance from shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a target

Price Rs.4791/-

CMP

Target Price

Previous Target Price

Upside

Change from Previous

"BUY"7th Jan' 14


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OUT LOOK :

FY11 FY12 FY13 FY14E

3454 5898 5590

203 163 188

3656 6061 5779

2569 4252 4029

885 1646 1561

676 873 436

98 235 193

365 619 1004

20.8 23.1 26.1

7

ROE%

Expenditure

EBITDA

Depriciation

Interest Cost

Shree Cement (SCL) is a cement producer operating in the two segments cement and power. As

of June 30, 2012, the company had a cement capacity of 13.5 million tonnes per annum (MTPA)

and power capacity of 560 MW. This includes 300 MW (150 MW x2) thermal power plant

commissioned at Beawar. The company's waste heat recovery power plants have a total capacity

of 46 MW. The company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It

has manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units at

Khushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in Uttarakhand.

From the view company Operations in the high utilisation North and Central markets, capacity

expansions underway, low gearing and strong RoE are fundamental positives. We believe

although, near term challenges in terms of a slowdown in demand for cement would remain,

strong balance sheet and better efficiency in terms of cost remains a key positive for this

company to overcome challenges.Company Management is bull for the rest two quarters of

FY2014 as according to them demand has already buttom out.We are positive on the stock as it

always beats its peers group with lower operational cost. Looking at the strategy of the

company and expansion plans for FY15 the stock may outperform among cement players with

the rise in cement demand.Shree cement follows a multi brand strategy and sells cement

under the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together

enjoy the largest market share in high value markets of Rajasthan, Delhi and Haryana. After a

good monsoon and election we are expecting a good performance from shree cement for the

H2FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/-



Net tax expense / (benefit)

PAT

SHREE CEMENT.

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income

Company Description :


0

5

10

15

20

25

30

35

40

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q5F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

EBIDTA Margin

(10.00)

-

10.00

20.00

30.00

40.00

50.00

60.00

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1,550REVENUE

GROWTH

FY10 FY11 FY12 FY13

35 35 35 35

1798 1951 2699 3809

1833 1986 2734 3844

1789 1472 818 443

318 217 143 534

28 16 17 18

171 185 584 81

472 267 178 87

4906 4940 5973 6160

0 0 0 0

752 1167 1521 1782

967 729 97 133

299 308 205 378

358 404 503 530

82 108 181 315

416 499 459 369

415 429 363 326

4906 4940 5973 6160

FY10 FY11 FY12 FY13

4.4 3.6 3.8 4.2

212.3 118.6 177.5 288.2

2.3 3.1 3.1 5.6

4.7 5.3 9.9 1.4

1.0 1.2 0.9 0.9

FY10 FY11 FY12 FY13

0 0 0 1566

0 0 0 -64

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

8

Cash from Finance

Net Cash Flow during year

Trading At :


Cash from Operation

Changes In Working Capital

Net Cash From Operation

Cash From Investment

Creditors to Turnover%

Inventories to Turnover%

CASH FLOWS

RATIOS

P/B

EPS

Debtor to Turnover%

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances

Total Assets

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Short-term provisions

SHREE CEMENT.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity


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7000

NIFTY SHREECEM

216.5

221

-

2

-

1M 1yr YTD

Absolute 15.2 -36.8 -53.8

Rel.to Nifty 14.9 -42.2 -59.2

Current 1QFY14 4QFY1

3Promoters 58.0 58.0 58.0

FII 10.0 10.1 9.6

DII 24.0 24.6 25.2

Others 8.1 7.3 7.2

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 4178 4216 4701 5719 6710

Total Income 5138 5456 6356 7419 8410

PPP 3245 3141 3691 2968 3364

Net Profit 1503 1142 1328 1032 1165

EPS 51.5 39.1 45.5 35.4 39.9

9


We have now neutral rating on Orient Bank largely due to trading closer to our

target price Rs.221. At this price stock would trade at 0.5 times of one year

forward book and 6.5 times of forward earning. We haven’t revised the

multiple on account of non visibility of ROE improvement in near to medium

term. Asset quality and operating leverage is likely to remain at elevated level

in FY14. Provision coverage ratio at the end of 2Q was 30% implying very little

cushion to its future earnings. Balance sheet size is likely to grow at below of

industry average. Despite of comfortable Tier-1, capital infusion of Rs.150 cr

would be book value dilutive. Inability to increase CASA and expected higher

operating leverage in 2HFY14 restrict valuation multiple to move in the range

of 0.4 to 0.5 times of one year forward book in our view.

Asset quality pressure likely to persist but guided better recovery in

agriculture portfolio

Bank management is caution about impairment of asset and taken tight

measurement in lending norm especially in large corporate. Recently large ticket size

fresh slippage emerges from large corporate. Bank management has taken caution

outlook towards the corporate loan and tighten sanction and disbursement norm.

As the result corporate loan grew by 7% YoY in 2QFY14. We observe that corporate

loan constituted about 70% of total credit and rest came from retail loan. With lower

growth in corporate segment, overall credit growth is likely to be muted in full year

and would be below of industry average.

During the last quarter Orient Bank reported flesh slippage at 3.2% (annualized

basis) and asset impairment of 11.1% which would be likely to be flat in full year

according to management. However management expects better recovery in

agriculture portfolio in 2HFY14 led by better harvest. At the end of September bank

has total restructure portfolio of Rs.9421 cr in which most came from infrastructure

segment (about 49%). Power sector contributed 18% of total infrastructure standard

restructure. But as per management most of power sector exposures are from

government sector where chances of fresh slippage are very low. In line with

management guidance we model 3.3% of GNPA for FY14 and 3.4% in FY15E

keeping view of better recovery and controlled fresh slippage.

Balance sheet size likely to grow below of Industry average

Market Data

Upside

NEUTRAL

CMP

Target Price


ORIENTAL BANK

ORIENTBANK

Average Daily Volume

6329

Company Update

365/121

Mkt Capital (Rs Cr)


ORIENT BANK Vs Nifty

Share Holding Pattern-%

1.98 lac

Nifty 6211


Stock Performance

52wk Range H/L

BSE Code 500315

NSE Symbol

"NEUTRAL"6th Jan 2014


10

ORIENTAL BANK

Source:Eastwind/Company

We note that bank’s CASA ratio stick to 24.5% from FY10 to 2QFY14 which undoubtedly

escalate cost of deposits from 5.8% in FY10 to present of 7.8%. We donot expect

interest rate would be come down in surging inflation imperil. Inability to increase CASA

and rising interest rate would keep NIM under pressure. However management guided

NIM at 2.85 -2.87% in FY14. Lower visibility of comfort earnings and book value dilution

on account of capital infusion, we expect ROE would be 7-10% in near term which will

attract valuation multiple of 0.4 to 0.5 times book.


Capital infusion of Rs.150 cr despite of 8.9% of Tier-1 capital

Operating leverage would be remain at high led higher retirement expenses

Operating expenses to total asset of the bank is much higher than its peers group largely

due to higher expenses towards retirement. Cost-Income (CI) ratio of the bank remained

high at 60% as against industry average of 45%. Bank is likely to provide higher

employee provision in 2HFY14 as indicated by management. We factor CI ratio of 60%

in full year but we understand that ratio may go higher than anticipated. We will get more

clarity after the third quarter result and post conference call.

According to basel-111 norm, Tier-1 capital was 8.9% which was comfortable for required

business growth in our view but recent capital infusion of Rs.150 diluted our estimated

ROE by 10 bps. Bank may use the additional fund in credit growth without adequate

support of deposits.

Low cost deposits stick to 24.5% from last few quarters; exert pressure in

expanding NIM and ROE

Valuation Band


11

ORIENTAL BANK

Source: Company/Eastwind


Financials & Assuption


P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 8954 12075 13758 16609 19101

Income on investments 2774 3671 3854 4865 5457

Interest on balances with Reserve Bank of India 335 34 31 78 78

Others 25 35 61 14 14

Total Interest Income 12088 15815 17705 21568 24651

Others Income 960 1240 1655 1700 1700

Total Income 13048 17055 19359 23267 26351

Interest on deposits 7474 11213 12553 15254 17251

Interest on RBI/Inter bank borrowings 23 38 111 149 172

Others 413 348 340 446 517

Interest Expended 7910 11599 13004 15849 17941

NII 4178 4216 4701 5719 6710

NII Growth(%) 43.7 0.9 11.5 21.7 17.3

Other Income 960 1240 1655 1700 1700

Total Income 5138 5456 6356 7419 8410

Employee 1048 1357 1576 2626 2977

Other Expenses 844 959 1089 1825 2069

Operating Expenses 1892 2315 2665 4451 5046

PPP( Rs Cr) 3245 3141 3691 2968 3364

Provisions 1742 1999 2363 1678 1907

Net Profit 1503 1142 1328 1032 1165

Net Profit Growth(%) 32.4 -24.0 16.3 -22.3 12.9

Key Balance sheet dataDeposits 139024 155965 175898 196963 220598

Deposits Growth(%) 15.6 12.2 12.8 12.0 12.0

Borrowings 5639 5259 7679 8498 9854

Borrowings Growth(%) 15.4 -6.7 46.0 10.7 16.0

Loan 95908 111978 128955 148298 170543

Loan Growth(%) 14.9 16.8 15.2 15.0 15.0

Investments 42075 52101 58555 65747 73745

Investments Growth(%) 17.6 23.8 12.4 12.3 12.2

Eastwind CalculationYield on Advances 9.3 10.8 10.7 11.2 11.2

Yield on Investments 6.6 7.0 6.6 7.4 7.4

Yield on Funds 7.8 9.2 9.0 10.1 10.1

Cost of deposits 5.4 7.2 7.1 7.7 7.8

Cost of Borrowings 7.7 7.3 5.9 5.9 7.0

Cost of fund 5.5 7.2 7.1 7.7 7.8

ValuationBook Value 380 409 403 435 464

P/BV 1.0 0.6 0.6 0.4 0.4

P/E 7.5 6.4 5.5 5.1 4.5

128.9

163

26.5

-

-

1M 1yr YTD

Absolute 6.3 -53.8 -53.8

Rel.to Nifty 6.0 -59.2 -59.2


3Promoters 57.9 57.9 57.9

FII 10.2 11.7 10.6

DII 17.8 17.7 18.0

Others 14.2 12.8 13.5

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 6216 6793 7543 7654 8602

Total Income 8255 9241 10095 10389 11337

PPP 4305 5254 5583 5298 5782

Net Profit 2082 1787 2158 1851 1967

EPS 39.7 29.9 36.2 31.0 33.0

12


Stock Performance

52wk Range H/L


UNION Bank Vs Nifty


6.87LAC

Nifty 6211

Margin declined by 10 bps to 2.54% largely due to increase of cost of fund. Yield on

advance was stable at 10.6% QoQ despite to tight liquidity environment whereas

cost of fund increased by 10 bps QoQ. With the recent RBI decision not to hike repo

rate along with higher FCNR deposits, bank’s margin would be expanded in 2HFY14.

Union bank has borrowed fewer amounts for repo than MSF and during quarter bond

yield settle at 8.75% which would result on fair amount of portfolio gain and reduce

the cost of fund.

Mkt Capital (Rs Cr)


UNION BANK

Company Update BUY

CMP

Target Price

Union Bank is trading at 0.4 times of one year forward book and 4.2 times of

one year forward earning which we believe attractive for entry. We are looking

margin expansion on the back of RBI’s decision not hiking the policy rate

(repo rate) and bond yield settle at 8.75% which was much lower as compare

to April-June quarter. Bank borrowed more money on the repo and less on

MSF and bond yield softened to 8.75% which would result on fair amount of

portfolio gain. Moreover bank has taken more money through FCNR (Foreign

currency Non-Resident) which is less costlier than deposits and would help to

reduce the cost of fund and hence margin accretive. We value bank at

Rs.163/share which would be 0.5 times of one year forward book and 5 times

of one year forward earning.

Stable asset quality on sequentially but restructure pipeline still high

At the end of 2QFY14, bank has impairment assets (GNPA+ restructure) at 8.7% of

total advance which is lower as compare to its peers. Fresh addition to restructure

loans were at 2.8% of loans at Rs.1534 cr higher from 2.2% of loans at Rs.1068 cr in

1QFY14. Management guided another Rs.3000 cr of loans are in pipeline led mostly

from SEB. Fresh slippage reported by bank was stable at 3.1% as against 3% in first

quarter. Out of total fresh slippage, 50% came from 4 corporate accounts (Power,

manufacture, Iron & Steel and services). Bank made lower provisions as compare to

growth in GNPA as the result provision coverage ratio declined by 320 bps to 42.1%

from 45.3% on sequential basis.

Margin declined by 10 bps in 2QFY14 but expect to expand in 2HFY14


3231


Market Data

Upside

281.6/97.1

BSE Code 532477

NSE Symbol UNIONBANK

"BUY"6th Jan, 2014


13

Source:Eastwind/Company

UNION BANK


Comfortable earnings and ROE improvement would be possible

Stable yield on loan sequentially indicated that bank is able to deliver comfort earning on

the back of shifting low yield mix loans to borrowing other market instrument. Although

bank has stable CASA ratio but would be getting benefit from FCNR deposits and

unchanged repo rate along with MSF. So cost of fund would be lesser as compare to

previous quarter in our view. This would help bank to expand margin and ROE

improvement. Balance sheet is expected to grow at 16-17% in FY14 as per management.

View & Valuation

Union Bank is trading at 0.4 times of one year forward book and 4.2 times of one year

forward earning which we believe attractive entry point. We are looking at margin

expansion on the back of RBI’s decision not hiking the policy rate (repo rate) and bond

yield settle at 8.75% which was much lower as compare to April-June quarter. Bank

borrowed more money on the repo and less on MSF and bond yield softened on 8.75%

which would result on fair amount of portfolio gain. Moreover bank has taken more

money through FCNR (Foreign currency Non-Resident) which is less costlier than

deposits and would help to reduce the cost of fund and hence margin accretive. We

value bank at Rs.163/share which would be 0.5 times of one year forward book and 5

times of one year forward earning.

Valuation Band


14

UNION BANK

Source: Company/Eastwind



P/L 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 12031 16027 19140 21539 24769

Income on investments 4003 4570 5671 6797 7884

Interest on balances with Reserve Bank of India 161 331 199 205 205

Others 258 101 115 177 177

Total Interest Income 16453 21028 25125 28717 33035

Others Income 2039 2448 2552 2735 2735

Total Income 18491 23477 27677 31452 35770

Interest on deposits 9538 13406 16551 19872 23052

Interest on RBI/Inter bank borrowings 113 141 274 1191 1381

Others 585 689 756 0 0

Interest Expended 10236 14235 17582 21063 24433

NII 6216 6793 7543 7654 8602

NII Growth(%) 48.3 9.3 11.0 1.5 12.4

Other Income 2039 2448 2552 2735 2735

Total Income 8255 9241 10095 10389 11337

Employee 2600 2479 2755 3105 3389

Other Expenses 1350 1508 1757 1985 2166

Operating Expenses 3950 3988 4512 5090 5555

PPP( Rs Cr) 4305 5254 5583 5298 5782

Provisions 2223 3467 3425 3447 3815

Net Profit 2082 1787 2158 1851 1967

0.3 -14.2 20.7 -14.2 6.2

Key Balance sheet dataDeposits 202461 222869 263762 305963 354918

Deposits Growth(%) 19.1 10.1 18.3 16.0 16.0

Borrowings 13316 17909 23797 27694 32124

Borrowings Growth(%) 44.5 34.5 32.9 16.4 16.0

Loan 150986 177882 208102 239318 275215

Loan Growth(%) 26.5 17.8 17.0 15.0 15.0

Investments 58399 62364 80830 97094 112629

Investments Growth(%) 7.3 6.8 29.6 20.1 16.0

Eastwind CalculationYield on Advances 8.0 9.0 9.2 9.0 9.0

Yield on Investments 6.9 7.3 7.0 7.0 7.0

Yield on Funds 7.2 8.3 8.3 8.5 8.5

Cost of deposits 4.7 6.0 6.3 6.5 6.5

Cost of Borrowings 5.2 4.6 4.3 4.3 4.3

Cost of fund 4.7 5.9 6.1 6.3 6.3

ValuationBook Value 243 245 290 313 337

P/BV 1.4 1.0 0.7 0.4 0.4

P/E 8.7 7.8 5.8 4.2 3.9

Jyothy Lab

195

260

-

33%

-

1M 1yr YTD

Absolute 4.4 16.0 3.2

Rel. to Nift 4.5 12.6 3.1


Promoters 63.7 63.7 65.6

FII 16.0 17.0 16.5

DII 9.8 9.1 9.6

Others 10.5 10.2 8.4

Financials Rs, Cr

2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 306.1 319.2 -4.1% 230.14 33.0%

EBITDA 42.7 48.6 -12% 21.4 100%

PAT 20.9 28.7 -27% 1.4 1393%

EBITDA Margin 13.9% 15.2% (130bps) 9.3% 460bps

PAT Margin 6.83% 8.99% (230bps) 0.61% 620bps

15

Mkt Capital (Rs Cr)

Market Data

211/140

BSE Code 532926

NSE Symbol JYOTHYLAB

Going forward, the company will focus on brand building with extension of current

brands and continue to adapt to the continuous changes of consumers. Management

is confident that these efforts will further strengthen brands and establish better

consumer connect.

Segments/ Brandwise Performance: In its bread and butter business detergent & soap

segment, it has reported a 35% yoy growth led by a strong 77% growth in the Ujala

whitener revenues, a 24% growth in dishwash portfolio and 18% - 20% growth in

Henko. Home care revenues was up 37%, driven by strong growth in Maxo as well as

the other smaller brands in this segment. Maxo revenues grew 33% on YoY basis.

"Efforts for stability"

CMP

Upside

Company update BUY

Target Price

Recent management commentary reveals that the company is planning for inorganic

growth with Rs 250 Cr of bank balance (post repayment of its debt) and especially

looking at regionally strong brands. We expect that company’s new management and

new strategy of product reach would energize its growth story in near future. Hence,

the management has maintained its guidance of achieving around 22% - 25% revenue

growth and OPM of 14% - 15% for FY14.

Last month, Jyothy Lab raised around Rs 262.5 Cr by issuing shares to Promoters

group (Sahyadri Agencies) on preferential basis and Rs400cr of Negotiable Certificate

of Deposits (NCD) coupon payable after 3 years. Now inflow of Rs 662 would be

utilized to pay its outstanding debt of Rs 548cr as on 30th Sept 2013.

Healthy margin rampup: The EBITDA Margin expanded by 466 bps to 13.9%. In an

inflationary environment there was an impact of 2% of higher freight charges on the

OPM which would have been absent in a normal business environment.


3522



1 yr Forward P/B


51716

Nifty 6211



Stock Performance

52wk Range H/L

For 2QFY14, Jyothy Lab witnessed better numbers with 22% sales growth (standalone)

led by 25% volume growth and 8% price/mix led growth. Apart from detergents

business which grew slower versus other categories due to intense price/promotion

war between top-2 players, all other power brands continue to post strong growth

which has grown by 36%. PAT growth was over the head to Rs 21cr from Rs

1.4cr(2QFY13).

View and Valuation: The Company’s products are available through 2.9 mn outlets in

India and have direct reach of 1 mn outlets. Though the company expects the sub-

stockist will increase by 20% from the current 2000 to 2400 by the end of FY14E. We

believe the distribution restructuring would lead to generate sales and company’s

presence in highly demanding categories would help to manage high margins and

volume growth simultaneously. We maintain "BUY" view on the stock with a target

price of Rs 260, at a CMP of Rs195, stock trades at 3.6x FY15E P/BV.

"BUY"6th Jan' 13


16


Financials


Jyothy Lab

►The company's products are available through 2.9 mn outlets in India and have direct

reach of 1 mn outlets. Now, company does not expects to increase from the current level,

it expects the sub-stockist will increase by 20% from the current 2000 to 2400 by the end

of FY14.

Take away from management guidance:►The management is confident of achieving its target of 22% - 25% revenue growth and

OPM of 14% - 15% for FY14E.

►The mgmt said that its dishwash brand Pril has seen its market-share taken away by

Dettol's newly launch dishwash product. The company is going to double its ad-spend on

Pril in FY14.

► The management is confident of maintaining the strong growth rate in Ujala fabric

whitener.


Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 596.32 626.39 912.99 1105.96 1349.27 1646.11

Raw Materials Cost 317.19 320.27 502.99 584.35 688.13 855.98

Employee Cost 75.38 81.31 113.67 130.48 148.42 172.84

Advertisement and Publicity 26.62 33.99 41.79 95.54 134.93 148.15

Other expenses 85.31 111.52 170.46 165.92 175.41 230.46

Total expenses 504.5 547.09 828.91 976.29 1146.88 1407.42

EBITDA 91.82 79.3 84.08 129.67 202.39 238.69

Depreciation 12.36 13.03 24.65 22.43 26.10 31.84

Other Income 17.8 16.91 22.73 5.202 53.97 65.84

EBIT 79.46 66.27 59.43 107.24 176.29 206.84

Interest Cost 1.7 1.99 23.83 68.22 63.25 49.25

Profit (+)/Loss (-) Before Taxes 95.56 81.19 58.33 44.222 167.01 223.44

Provision for Taxes 21.48 15.43 19.94 -14.87 31.73 42.45

Net Profit (+)/Loss (-) 74.08 65.76 38.39 59.092 135.28 180.99

Growth-% (YoY)

Sales 65.3% 5.0% 45.8% 21.1% 22.0% 22.0%

EBITDA 88.3% -13.6% 6.0% 54.2% 56.1% 17.9%

PAT 93.0% -11.2% -41.6% 53.9% 128.9% 33.8%

Expenses on Sales-%

RM Cost 53.2% 51.1% 55.1% 52.8% 51.0% 52.0%

Employee Cost 12.6% 13.0% 12.5% 11.8% 11.0% 10.5%

Ad spend 4.5% 5.4% 4.6% 8.6% 10.0% 9.0%

Other expenses 14.3% 17.8% 18.7% 15.0% 13.0% 14.0%

Tax rate 22.5% 19.0% 34.2% -33.6% 19.0% 19.0%

Margin-%

EBITDA 15.4% 12.7% 9.2% 11.7% 15.0% 14.5%

EBIT 13.3% 10.6% 6.5% 9.7% 13.1% 12.6%

PAT 12.4% 10.5% 4.2% 5.3% 10.0% 11.0%

Valuation:

CMP 169.85 219.80 155.00 175.00 195.00 195.00

No of Share 7.30 8.10 16.10 16.00 16.00 16.00

NW 387.76 631.10 612.42 638.56 726.69 860.53

EPS 10.15 8.12 2.38 3.69 8.46 11.31

BVPS 53.12 77.91 38.04 39.91 45.42 53.78

RoE-% 19.1% 10.4% 6.3% 9.3% 18.6% 21.0%

P/BV 3.20 2.82 4.07 4.38 4.29 3.63

P/E 16.74 27.07 65.00 47.38 23.06 17.24

Hero Motocorp

17Please refer to the Disclaimers at the end of this Report.

AUTO SALES DASHBOARD : DECEMBER 2013Another Month of Tepid Performance

The automobiles companies come up with December 2013 sales volumes with no big

surprises. The industry followed the same declining trend as in November 2013 with

Scooter and Tractors sales showing some upward traction. Indian automobile OEMs

continue to be negatively impacted by the overall economic slowdown, firm interest rates,

inflationary headwinds and high fuel prices.

The first look on the 3QFY14 volumes for most of the companies is not encouraging in

any way even the export business which did fairly better in 2QFY14 lost its momentum in

the quarter under review. Our first analysis on the quarter volumes of the OEMs shows that

except for Heromotocorp remaining all the companies have declining performance on

volume front.

The current scenario does not provide with any quick turnaround and one can expect only slow and gradual progress in the industry. On

the whole, in the light streched valuation and business outlook we will continue to maintain our previous recommendation and will tracking

for any event in the sector and its consequent impact on our coverage universe.

The currency movement benefit which was realized in 2QFY14 for some of the auto

companies seems not to doing much of action in this quarter owing more stable INR-Dollar

movement.

Maruti Suzuki

Domestic sales (up 5.5% YoY) posted a strong show, led by the mini segment, which

posted robust 17% YoY growth. The mini segment a on YTD basis too is up nearly 8% YoY,

indicating a slow return of first-time buyers in the entry-level petrol segment.

Mahindra & Mahindra

Pickups and 3W growth stood at a moderate 5.0% YoY and 7.6% YoY, respectively. The

aforesaid trend is in line with overall LCV segment growth, which is on a moderating path.

Tractor share on a YTD basis inched up to 36% from 30% during the same period last year.

Tata Motors

Tata Motors posted yet another month of a muted set of numbers with total sales

contraction at 42.3% YoY to 37,852 units. However,with JLR accounting for most of the

company’s profitability, the struggling domestic business is unlikely to affect consoliadted

performance.


Amidst a tough market, Hero Motocorp has outperformed by posting marginally higher-than

expected volume of 524990 units in December 2013, down 3.1% YoY.

Bajaj Auto

Total sales for the month stood at 297776 units, down 13.4% YoY, driven by contraction of

32.5% YoY in domestic and 19.6% YoY in exports. With most of the Discover and Pulsar

series launches out of the way,company has little to offer in terms of new products to

protect its rapidly falling domestic business market share.


Company Dec-13 Nov-13 Dec-12 MoM (% Change) YoY(% Change)

HEROMOTOCO 524990 530530 541000 -1.0% -3.0%

BAJAJ-AUTO 297776 310591 343946 -4.1% -13.4%

MARUTI 90924 92140 95145 -1.3% -4.4%

M&M 39611 39255 45297 0.9% -12.6%

TATAMOTORS 37852 40863 65582 -7.4% -42.3%

ASHOKLEY 6275 5375 7299 16.7% -14.0%

TVSMOTORS 159495 161908 156221 -1.5% 2.1%

Sales Volume (Units)

AUTO SALES DASHBOARD : DECEMBER 2013 PERFORMANCE CHART

Emami Ltd

BUY

Key facts:

1M 1yr YTD

Absolute -3.3 20.3 50.6

Rel. to Nifty -4 15.8 33


Promoters 72.74 72.74 72.74

FII 16.68 15.46 14.46

DII 2.18 3.27 3.45

Others 8.4 8.53 9.35

Financials Rs, Cr

2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 406.7 383.7 6.0% 360.7 12.8%

EBITDA 87.4 59.2 47.6% 64.1 36.3%

PAT 80 60.7 31.8% 59.2 35.1%

EBITDA Margin 21.5% 15.4% 610bps 17.8% 370bps

PAT Margin 19.7% 15.8% 390bps 16.4% 330bps

18

"The niche advantage."

Company updateCMP 481

Target Price 635

Usually, Emami reports good earnings growth for third quarter every year. For

3QFY14E, we expect 20-22% sales growth led by strong rural demand and 22-25% PAT

growth on YoY Basis. In addition, we expect to improve margin by 150-200bps (YoY) to

26% because of softening raw material prices.Previous Target Price 500

The Company’s major raw material Menthol Prices declined by 34% (YoY), as the

company has already forward contracted menthol for the year, menthol prices

continue to trend lower and price hikes for the year have been taken. Therefore,

margin expansion visibility remains high.

We expect better revenue growth in 2HFY14 as the weather related headwinds for

cooling oils is behind us and pricing on balms stabilize. Visibility of margin expansion

remains high because of benign cost of Menthol.52wk Range H/L 539/368

Mkt Capital (Rs Crores) 10912

NSE Symbol EMAMI

Upside 32%

Change from Previous 27%

Market DataBSE Code 531162

Average Daily Volume 37072 Favorable rural discretionary demand: Recently, rural discretionary demand has

increased because of favorable monsoon and per capita rural growth. During the

2QFY14, its revenue from urban markets grew 8%, rural markets by 11%. Direct rural

business was up by 17%.Stock Performance

Stable Ad spend: The ad spends in Q2FY14 have declined by 125bps YoY to 16.6% as a

percentage of sales. The ad spends, as a percentage of sales, are expected to be in the

range of 16-17% in FY14 and FY15.

Nifty 6221

1 yr Forward P/B



View and Valuation: Considering Emami’s focus on increasing rural penetration,

favorable monsoon, continuous strengthening of its brand equity and new product

funnel strongly in next 2- 3 years, we are positive on the stock. We recommend “Buy”

on the stock with a target price of Rs 635. At a CMP of Rs 481 , the stock is trading at

P/BV of 10.3x and 7.8x on FY14E and FY15E, respectively.

Strong distribution reach: Although rural continues to grow ahead of urban markets, the

growth for Emami has tapered off in both urban and rural areas. While urban markets

grew 8%, rural markets by 11% growth. Direct rural business was up by 17%. The

company's direct outlet reach is 6 lakh. The company has added 20000 outlets in Q2 and

expects to add 75000 – 100000 in FY14.

Product expansion: The company has launched Boroplus face-wash last month and

there will be new launches in Q4 also. The mgmt said that for next 2 – 3 years it has

strong pipeline of products to be launch.

Capex plan: For FY14 & FY15, they plan to spend INR700-750mn per year. It is setting up

a new factory in Guwahati at an investment of INR500-600mn.


"BUY"3rd Jan' 14


19

▪ Emami has a good cash balance of Rs3bn which it expects to utilize for acquisition.



Financials

▪ The company has already taken price hikes and no further hikes are expected in FY14E.

Total annualized price hike for FY14 is 4% YoY.

Emami Ltd

Key facts from recent Conference Call

▪ The management has lowered its annual revenue growth guidance from 16% - 18% to

13% - 15% while PAT guidance continues to stand at 18% - 20% aided by strong gross

margin expansion on the back of lower Mentha Oil prices.

▪ Contribution from power brands is ~65%. The company plans to grow these brands by

15-16% in FY14.

▪ The mgmt has guided for a capex of Rs 70 – 75 crore each during FY14 and FY15. ASP for

FY14 will be 16% - 17%.


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 1037.98 1247.08 1453.51 1699.09 1936.23 2211.18

Raw Materials Cost 380.53 346.76 415.12 539.83 580.87 685.47

Purchases of stock-in-trade 0 204.9 189.13 182.14 203.30 221.12

WIP 0 -28.48 22.17 -6.52 -7.37 -8.42

Employee Cost 57.91 72.87 92.31 115.55 135.54 165.84

Advertisement and Publicity 194.42 219.41 228.99 279 319.48 353.79

Other expenses 158.66 178.17 209.02 241.82 281.65 321.64

Total expenses 791.52 993.63 1156.74 1351.82 1513.46 1739.44

EBITDA 246.46 253.45 296.77 347.27 422.76 471.74

Depreciation and Amortisation 117.52 116.09 120.89 124 131.63 150.32

Other Income 7 33.1 54.12 56 58.09 66.34

Exceptional Items 89.97 113.9 84.15 96 109.82 125.41

EBIT 128.94 137.36 175.88 223.2 291.14 321.42

Interest 20.98 15.23 15.21 6.6 6.86 5.14

PBT 204.93 269.13 298.94 368.69 452.18 508.03

Tax Exp 35.21 40.41 40.12 54 66.24 74.42

PAT 169.72 228.72 258.82 314.68 385.94 433.61

Growth-% (YoY)

Sales 35.5% 20.1% 16.6% 16.9% 14.0% 14.2%

EBITDA 91.0% 2.8% 17.1% 17.0% 21.7% 11.6%

PAT 85.0% 34.8% 13.2% 21.6% 22.6% 12.4%

Expenses on Sales-%

RM Cost 36.7% 27.8% 28.6% 31.8% 30.0% 31.0%

Ad Spend 18.7% 17.6% 15.8% 16.4% 16.5% 16.0%

Employee Cost 5.6% 5.8% 6.4% 6.8% 7.0% 7.5%

Other expenses 15.3% 14.3% 14.4% 14.2% 14.5% 14.5%

Margin-%

EBITDA 23.7% 20.3% 20.4% 20.4% 21.8% 21.3%

EBIT 12.4% 11.0% 12.1% 13.1% 15.0% 14.5%

PAT 16.4% 18.3% 17.8% 18.5% 19.9% 19.6%

Valuation:

CMP 197.7 249.4 260.8 397.4 481 481

No of Share 15.1 15.1 15.1 15.1 22.7 22.7

NW 625.4 689.9 706.6 777.5 1070.5 1397.9

EPS 11.2 15.1 17.1 20.8 17.0 19.1

BVPS 41.3 45.6 46.7 51.4 47.2 61.6

RoE-% 27.1% 33.2% 36.6% 40.5% 36.1% 31.0%

Dividend payout-% 23.4% 23.2% 23.8% 44.6% 24.1% 24.5%

P/BV 4.8 5.5 5.6 7.7 10.2 7.8

P/E 17.6 16.5 15.2 19.1 28.3 25.2

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stock investment tips recommendation - buy stocks of shree cement with target price rs.4791

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