india 2013 picks - stocks

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India Strategy & Top Ideas

Investment Argument, Financials & Valuation

discussion

Ajay Bodke

[email protected]

+91-22-66322210

Click to edit Master title styleLilladherPrabhudas August 2013

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that

the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.Please refer to important disclosures and disclaimers at the end of the report.


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Lilladher

Prabhudas Contents

August 12, 2013 2

Page No.

Services contracting, slowing manufacturing & plunge in core sector growth 4

Indias biggest risk: Sudden stoppage & reversal of foreign capital flows. Deterioration in most external vulnerability indicators 5

RBI in classic impossible trinity dilemma, stringent measures to tighten liquidity to shore up plunging Rupee 6

Governments foremost agenda: How to finance the large CAD 7

FDI regime liberalised. Monsoon Session: Insurance/Pension Bills unlikely to be cleared 8

Markets

Global Equity Markets Performance 9

Indian EquitiesSector Performance 10

India: Market cap-wise Performance 11

Global Currency Movement 12

India: FII/DII Equity Flows 13

Global Agricultural Commodities 14

Global Industrial Commodities 15

Q1FY14 Results: Actual versus Expectations 16

Nifty Valuations: Historic Trends 17

Indian Markets 18

Indian Markets: Headwinds-Deteriorating macro-economy & fears of US bond tapering, Tailwinds-Bountiful monsoons & narrowing CAD 19

Nifty Valuation 20


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Lilladher

Prabhudas Contents

August 12, 2013 3

Page No.

Mid-Caps

Britannia Industries 57

United Phosphorus 59

Crompton Greaves 61

Jammu & Kashmir Bank 63

KSB Pumps 65

MT Educare 67

Page No.

Top Pick Summary 21

Large-Caps

ITC 23

Infosys 26

HDFC Bank 28

NTPC 30

Wipro 33

ICICI Bank 35

Larsen & Toubro 37

Mahindra & Mahindra 40

Hindustan Zinc 43

Adani Port & SEZ 45

Titan Industries 49

Ranbaxy Laboratories 51

Shree Cement 53

(Prices as on August 8, 2013)


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Lilladher

Prabhudas Services contracting, slowing manufacturing &

plunge in core sector growth Services PMI for July 2013 plunged to 47.9 from 51.7 in June 2013 led by drop in new business and growing

pessimism about the future. It is the first time since October 2011 that it has fallen below the 50 mark that divides

growth from contraction and the lowest since April 2009. Services contribute 60% of GDP that grew at a decade-low

5% in FY13.

Manufacturing PMI for July 2013 moved down to 50.1 from 50.3 in June 2013, with order books shrinking the most

in over four years, led by slower growth in export orders. The PMI survey also indicated that inflation pressures have

strengthened in July, with both the input and output prices rising at a faster pace.

Growth in eight core infrastructure industries that constitute 38% of IIP plunged to 0.1% in June 2013 (vis-a-vis 8.9%

growth in June 2012) mainly due to contraction in Crude oil (-0.6%), Natural gas (-16.7%), Coal (-3%) & Electricity

(-1.2%) output. Petroleum refining, Steel & Cement production showed an increase of 2.3%, 3.4% and 2.3%,

respectively. During Q1FY14, growth in the core industries has slowed to 1.6% vis-a-vis 6.9% YoY.

August 12, 2013 4


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Lilladher

Prabhudas Indias biggest risk: Sudden stoppage & reversal of foreign capital

flows. Deterioration in most external vulnerability indicators

RBI in its latest monetary policy has kept the policy rates unchanged and the MSF rate was stayed at 10.25%, a mark

up of 3% above the repo rate. External sector concerns continued to dominate RBIs stance. Although it has

acknowledged the more-than-normal and wide-spread monsoons, the lower-than-expected industrial productionand subdued services activity due to adverse spill-over from tepid recovery around the world led it to lower GDP

projections for FY14 to 5.5% from earlier 5.7%.

Although the WPI and non-food manufactured products inflation within WPI has come down, CPI continues to

remain close to double digits mainly because of elevated food inflation. Sharp Rupee deprecation as well as upward

revisions in fuel prices have led to an increased upside risks to both WPI and CPI. RBIs study indicates that every

10% fall in Rupee results in a 1.2% increase in inflation. RBI is fearful that despite the low demand producers may

pass on high input prices as high output prices because of their inability to absorb the increase. Although non-oil

commodity prices remain subdued, oil prices have lately remained firm and although the IMF expects them to

remain soft, going forward, they remain hostage to any adverse developments in the Middle East.

Indias biggest risk remains its vulnerability to sudden stoppage and reversal of foreign capital flows as has been

witnessed over the last few months. Any announcements by the global Central banks and in particular the US Fed

about the beginning and likely trajectory of its tapering of US$85bn/month of bond-buying program has the

potential to create wobble in global financial markets. The consequent impact on global risk-aversion and capital

flow out of the emerging markets would particularly hit hard economies like India that has a frighteningly large CAD

estimated at between US$85-90 in FY14. The large CAD, which has remained above the sustainable level of 2.5% of

GDP for the last three years, has affected Indias external situation. As most external vulnerability indicators have

deteriorated, Indiasresilience to economic shocks has eroded considerably.

August 12, 2013 5


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Lilladher

Prabhudas RBI in classic impossible trinity dilemma, stringent

measures to tighten liquidity to shore up plunging Rupee

Although the government has shown its resolve in clearing long-pending industrial and infrastructure projects worth

Rs1.6lakh crores over the last six months, the investment environment continues to remain weak due to massive

time and cost overruns, high leverage, deteriorating cash flows, erosion of asset quality and muted credit

confidence. A number of supply constraints, especially in the food and infrastructure sectors, have affected growth

and inflation and need to be eased to improve growth and lower inflation.

RBI admitted that it is caught in a classic impossibletrinitydilemma i.e. in order to arrest the rapid depreciation of

currency it would have to forfeit some monetary policy discretion. It has announced a series of liquidity tightening

measures to check undue volatility in foreign exchange market which will be rolled back in a calibrated manner as

stability is restored to foreign exchange market enabling monetary policy to revert to supporting growth with

continued vigil on inflation. On July 15th, RBI had raised short-term borrowing rates and limited banks access to

liquidity by way of restricting borrowing from repo window to Rs75000cr. It has also sold government securities

through OMOs since July 18th. On July 23rd, it had directed banks to draw only 50% of their deposits in overnight

borrowings and maintain a 99% average CRR on a daily basis. On Aug 8th, it has announced sale of Rs22000cr worth

of cash management bills every Monday beginning from August 12th to make Rupee more scarce and prop-up the

battered currency.

August 12, 2013 6


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Lilladher

Prabhudas Governments foremost agenda: How to finance the large

CAD

Trade deficit has risen to Us$50.2bn in Q1FY14 from US$42.2bn YoY mainly led by a surge in gold imports in the

months of April and May 2013. In FY13, Indiastrade deficit stood at US$191bn (US$183.4bn in FY12) with exports at

US$300.6bn and imports at US$491.6bn, while its Current account deficit (CAD) rose to US$88bn or 4.8% of GDP in

FY13 vis-a-vis $78.2bn or 4.2% of GDP in FY12. Imports of gold and silver zoomed up to US$18.8bn in Q1FY14 from

US$8.8bn YoY. FY13 saw total gold imports of US$53.8bn versus US$56.5bn in FY12. A series of stringent measures

by the RBI to curb imports along with spike in import duty on gold to 8% and end-of-traditional-wedding-season with

the start of monsoons in June led to a sharp plunge in gold imports in June 2013 to US$2.45bn from US$8.4bn in

May 2013. Although the Finance Ministry expects to maintain CAD at 4.1-4.4% of GDP in FY14, it is banking on

reduced gold imports and a 10-20% increase in remittances by NRIs. Remittances with obligation of repayments

form part of the current account stood at US$62bn in FY13. NRI deposits with obligations of repayments on the

contrary are considered as a part of capital account. It remains to be seen whether a surge in remittances actually

materializes.

Indias fiscal deficit in Q1FY14 zoomed to Rs2.63lakh crores or almost 50% of FY14s budgeted target. The

government has projected a fiscal deficit of Rs5.42lakh crores for FY14 or 4.8% of GDP as against 4.9% achieved in

FY13. Total receipts in Q1FY14 were sluggish at Rs1.19lakh crores or just 10.6% of budget estimate (BE) for FY14,

while total expenditure at Rs3.82lakh crores was at a whopping 23% of BE. The Finance Minister has reiterated that

fiscal deficit for FY14 will not be allowed to breach its target of 4.8% of GDP.

August 12, 2013 7


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Lilladher

Prabhudas FDI regime liberalised. Monsoon Session:

Insurance/Pension Bills unlikely to be cleared

In order to attract foreign inflows, government announced measures to further open up more sectors to foreign

capital. It announced 100% ownership in telecom from the current level of 74%, relaxed or scrapped altogether

restrictions in a dozen sectors including insurance (subject to Parliamentary approval) and tea plantations and gave

Cabinet Committee on Security power to allow investment in defence sector above 26% current cap to up to 100%

on a case-to-case basis depending on infusion of state-of-the-arttechnology. It also eased sourcing and investment

norms for multi-brand retailing. The approved measures fell well short of the bold and sweeping recommendations

of the Mayaram Committee set up to take a comprehensive look at FDI regime.

The monsoon session which runs till August 30th, has just a dozen more sittings left for the legislative business. Itfurther reduces to just 9 days if the 3 Fridays on which private members bills are considered are excluded. High on

the governmentsagenda is to get the Food Security Bill cleared by Both the Houses lest the Ordinance lapses. Other

important bills on the agenda include the Land Acquisition Bill and Pension Bill as well as Insurance Bill that seeks to

allow foreign investments up to 49% in these two crucial sectors. The New Companies Bill which was passed by the

Lower House during last years winter session has been cleared by the Upper house last week. The Bill seeks to

update the countryscorporate laws and make executives & auditors more accountable and requires corporate to setaside money towards corporate social responsibility.

An increase in FDI cap to 49% from the current 26% in the Insurance Sector looks most unlikely in view of the

vociferous opposition from many Opposition parties like the BJP, Left Front, SP, BSP, TMC etc. BJP is more supportive

of the Pensions Bill provided the government accepts 2 amendments suggested by it namely embedding an FDI cap

of 26% in the Bill itself and provision of assured returns to subscribers.

August 12, 2013 8


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Lilladher

Prabhudas Global Equity Markets Performance MoM: India was among the worst-performing markets. A sharp

spike in interest rates as a result of RBIs liquidity tightening

measures to arrest the fall in Rupee has reversed markets

previously-held belief of cuts in interest rates due to cooling-offin WPI & non-food manufacturing inflation, expected cooling-off

of food & consumer inflation due to bountiful monsoons and

narrowing of trade and CAD in the June-Aug period. Subdued

corporate performance in 1QFY14 adds to the gloom.

CYTD and YoY: Indian markets have held up better than other

emerging market peers like China, Russia and Brazil as Indian

equities have seen very little FII selling as compared to peers. If

the grim macro-economic conditions continue to deteriorate, FIIscould pare down their weightage to India resulting in a sell-off.

Source: Bloomberg, PL Research


Month-on-Month

Year-on-Year


Calendar Year-to-date

August 12, 2013 9

5.3 5.3 5.24.4

4.0 3.73.1

1.30.8 0.5

(2.8)(3.6)(5.0)

(4.0)(3.0)(2.0)(1.0)

-1.02.03.04.0

5.06.0

Australia

Brazil

HongKong

China

Germany

S.Korea

S&P

FTSE

Indonesia

Russia

India

Japan

(%)

8.9

(22.2)

(4.4)(9.9)

8.9

(5.7)

18.6

10.77.5

(8.0)(3.3)

30.9

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

Australia

Brazil

HongKong

China

Germany

S.Korea

S&P

FTSE

Indonesia

Russia

India

Japan

(%)

17.4

(19.5)

7.9

(5.4)

19.0

(1.0)

20.6

11.713.2

(6.4)

6.8

53.2

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

60.0

Australia

Brazil

HongKong

China

Germany

S.Korea

S&P

FTSE

Indonesia

Russia

India

Japan

(%)


10/71

Lilladher

Prabhudas Indian EquitiesSector Performance

MoM: IT proves to be a safe haven in an

environment of turmoil in the currency market and

US economy (its largest market) gathering strength.

Sharp rise in interest rates singe interest rate

sensitive sectors like Capital goods, Reality, Banks

and Power.



Month-on-Month

Year-on-Year



August 12, 2013 10

19.6

0.6

(3.0) (4.1) (4.6) (5.3)(9.1)

(12.2) (13.1)(15.9) (17.6)

(20.0)(15.0)(10.0)

(5.0)-

5.010.015.020.025.0

(%)

36.5

(3.0)

20.4

8.2

(0.4)

27.6

(34.4)(27.3)

(7.2)

(24.3) (23.9)(40.0)(30.0)(20.0)(10.0)-

10.020.030.040.050.0

(%)

31.4

(19.7)

8.3

(10.6) (2.0)

10.4

(38.1)(28.8)

(21.9)

(40.8)(30.8)

(50.0)(40.0)(30.0)(20.0)(10.0)

-10.020.030.040.0

(%)


11/71

Lilladher

Prabhudas India: Market cap-wise Performance

MoM: Mid & Small cap stocks bear the brunt with

massive sell-off. Large cap index falls the least by

riding on the coattails of IT and Pharma stocks



Month-on-Month

Year-on-Year



August 12, 2013 11

(4.5)(5.3)

(7.7)

(9.7)

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

B SE100 Index B SE500 Index BS ES MCAP Index B SEMDCAP Index

(%)

4.0

0.8

(20.6)

(11.5)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

B SE100 Index B SE500 Index BS ES MCAP Index B SEMDCAP Index

(%)

(7.3)

(10.5)

(29.1)

(24.0)

(35.0)

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

B SE100 Index BS E500 Index BS ES MCAP Index B SEMDCAP Index

(%)


12/71

Lilladher

Prabhudas Global Currency Movement

MoM: Rupees movement over the month is

influenced by RBIs continuous fusillade of measures

to stamp out volatility and arrest its fall. Series of

measures are announced on July 15th & 18th and Aug

8th to make Rupees scarce and holding Rupee assets

more lucrative.



Month-on-Month

Year-on-Year



August 12, 2013 12

4.8 4.63.8 3.7

3.5

1.40.8 0.7 0.5 0.2 0.2

(0.7) (0.7)(1.1)

(2.2)

(3.4)(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

3.04.0

5.0

6.0

(%)

(9.9)

(0.6)

1.3

(4.6) (4.4) (4.7)

(7.3)

(3.0)

(2.1)

(6.0)

1.8

(9.9)

(12.7)

(5.8)

(11.3)

(5.0)

(14.0)

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

(%

)

(18.6)

5.58.0

(1.0)

1.4

(4.5) (4.3)

0.1 0.7

(4.3)

3.9

(9.2)

(14.2)

(4.4)

(12.3)

(8.1)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

(%

)


13/71

Lilladher

Prabhudas India: FII/DII Equity Flows

After massive outflows of Rs114.25bn in June, FII equity outflows come down to a trickle in July to Rs4.15bn.

DII equity buying reverses from Rs84.27bn in June to selling of Rs15.41bn in July.

FII outflows in the debt market in July reduced to Rs124.1bn from Rs315.8bn in June. August 1-7 continues to see

outflows of Rs48.1bn.

August 12, 2013 13

(200.00)

(100.00)

-

100.00

200.00

300.00

J

an-12

F

eb-12

M

ar-12

A

pr-12

M

ay-12

J

un-12

Jul-12

A

ug-12

S

ep-12

O

ct-12

N

ov-12

D

ec-12

J

an-13

F

eb-13

M

ar-13

A

pr-13

M

ay-13

J

un-13

Jul-13

DII Net Cash Market FII Net Cash Market

CY12 - Total FII buying

Rs1,050.6bn against DII net

selling at Rs-568.9bn

YTD CY13

FII Rs462.16bn

DII Rs-420.99bn


14/71

Lilladher

Prabhudas Global Agricultural Commodities

YoY: Corn, wheat, sugar and palm oil see sharp

erosion in prices


Source: Bloomberg, PL Research *Price in US$

Performance of Global Agricultural Commodities

Year-on-Year Performance


Month-on-Month Performance

August 12, 2013 14

60

70

80

90

100

110

120

Au

g-12

Se

p-12

Oct-12

No

v-12

De

c-12

Ja

n-13

Fe

b-13

Ma

r-13

Ap

r-13

Ma

y-13

Ju

n-13

Jul-13

Au

g-13

Rice Wheat Corn Soya Plam Oil Sugar

3.73.1

(2.6) (2.9)

(6.0)

(7.6)(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

Rice Sugar Wheat Palm Oil Soya Corn

(%)

(4.6)

(21.4)(23.4)

(19.9)

(7.4)

(28.5)(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

Rice Sugar Wheat Palm Oil Soya Corn

(%)


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Lilladher

Prabhudas Global Industrial Commodities

MoM: Zinc prices remain under pressure, with 0.2%

decline due to weak global steel demand.

YoY: With top metals consumer China facingeconomic slow down, copper prices fall by 7.9%.



Month-on-Month

Year-on-Year



August 12, 2013 15

5.1

3.7

3.0

1.5

(0.2) (0.3)

(1.4)(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

5.0

6.0

Nickel Lead Copper Aluminium Zinc Brent

crude

Thermal

Coal

(%)

(11.4)

10.2

(7.9)(6.6)

(2.5)(4.8)

(10.4)(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0


crude

Thermal

Coal

(%)

(18.2)

(9.7)

(11.7)

(14.2)

(11.5)

(4.6)

(15.4)

(20.0)

(18.0)

(16.0)

(14.0)

(12.0)

(10.0)(8.0)

(6.0)

(4.0)

(2.0)

-


crude

Thermal

Coal

(%)


16/71

Lilladher

Prabhudas Q1FY14 Results: Actual versus Expectations

Results announced so far indicate that revenues are broadly in line with expectations, while EBITDA and PAT have

beaten expectations. Revenues have grown at 5.2% versus an estimated 5.1%, whereas EBITDA has grown at 11.3%

versus estimated 6.8% reflecting the impact of fall in global commodity prices. PAT has grown at 3.3% versus

estimated 0.6%. Even excluding BFSI, the same trend is visible.

August 12, 2013 16

YoY gr. (%)Revenues EBITDA PAT

Q1FY14E Q1FY14 Q1FY14E Q1FY14 Q1FY14E Q1FY14

Agri & Agri Products (6.3) 4.6 (14.5) (20.3) (31.4) (35.3)

Auto (5.1) (5.1) 3.4 6.4 1.6 0.4

Auto Ancl. 0.6 9.4 2.0 30.2 (21.4) 18.8

Banks 18.0 17.6 17.1 25.0 10.5 17.1

Capital Goods 4.3 (4.1) 16.2 18.8 12.6 32.0

Cement (4.6) (4.0) (27.2) (25.1) (32.8) (23.4)

Construction 8.3 5.1 2.2 (5.3) (3.1) (18.0)

Consumer Staples 15.8 14.9 23.5 21.2 13.8 11.4

Financials 19.4 20.2 21.0 20.1 22.2 21.3

Information Technology 10.6 12.2 8.5 11.6 11.7 12.4

Metals (9.6) (6.9) (17.7) (12.4) (22.5) (15.3)

Pharma 16.7 11.1 11.5 (2.2) 59.7 23.3

Ports & Logistics 24.3 81.2 14.7 52.4 (39.0) 4.3

Power 6.9 5.8 10.7 20.9 (6.1) (16.9)

Real Estate 98.3 71.0 70.9 42.4 57.9 25.6

Others 6.6 5.6 39.8 6.4 (330.0) 501.8

PL Universe 5.1 5.2 6.8 11.3 0.6 3.3

PL Universe (excl.BFSI) 3.7 3.8 2.3 5.9 (3.4) (1.6)


17/71

Lilladher

Prabhudas Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (ExJapan)

August 12, 2013 17

13.3

5.0

10.0

15.0

20.0

25.0

30.0

Au

g-03

De

c-03

Ap

r-04

Aug-04

De

c-04

Ap

r-05

Aug-05

De

c-05

Ap

r-06

Aug-06

De

c-06

Ap

r-07

Aug-07

De

c-07

Ap

r-08

Aug-08

De

c-08

Ap

r-09

Aug-09

De

c-09

Ap

r-10

Aug-10

De

c-10

Ap

r-11

Aug-11

De

c-11

Ap

r-12

Aug-12

De

c-12

Ap

r-13

Aug-13

Average

14.5

11%

-30%

-20%

-10%

0%

10%20%

30%

40%

50%

60%

Aug-03

Dec-03

Apr-04

Aug-04

Dec-04

Apr-05

Aug-05

Dec-05

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

10 year Avg.

22%


18/71

Lilladher

Prabhudas Indian Markets

We estimate the free-float EPS for NIFTY companies in FY13, FY14, FY15 at Rs356.6, Rs395.2 and Rs461.6,

respectively, representing a YoY growth of 1.4%, 10.8% and 16.8%, respectively. Technology (21.1% YoY growth),

Telecom (88% YoY growth on the back of two years of de-growth) and FMCG (13.9% YoY growth) are expected tolead the charge in PAT growth in FY14. Metals (0.7% YoY growth), Engg & Power (2.4% YoY growth) and BFSI (4.4%

YoY growth) would be the laggards.

NIFTY is currently trading at 15.6x FY13, 14.1x FY14E and 12.1x FY15E estimated free-float earnings. As the chart

below indicates, the last ten-year average for NIFTYsone-year forward PE is at 14.5x. Thus, NIFTY is currently trading

at 13.3x one-year forward earnings (EPS for year-ending July 2014 is Rs 417.3) i.e. at 9% discount to its last 10-years

average of one-year forward multiple.

We compare MSCI Indiaspremium to MSCI Asia (excluding Japan) over the last ten years. The average of the last 10-

yearspremium is 22% and the current premium has fallen sharply over the last one month to 11% indicating a sharp

de-rating of the market due to worsening macro-economic conditions.

August 12, 2013 18


19/71

Lilladher

Prabhudas Indian Markets: Headwinds-Deteriorating macro-economy & fears of

US bond tapering, Tailwinds-Bountiful monsoons & narrowing CAD

RBIs success in stamping out wild volatility in the currency markets and arresting the slide in Rupee will play a

crucial role in determining the future of equity markets. Attempts to restore stability in the currency markets has

been achieved by RBI by stringent tightening of liquidity leading to a sharp spike in interest rates across the curvejeopardizing hopes of recovery in economy. RBIs priority clearly seems to stabilize external sector followed by

controlling inflation and then revive growth. A sharp fall in Rupee has lead to a sharp spike in fuel under-recoveries

and this would inevitably lead to ballooning of fuel subsidies in the absence of adequate pass-through. This has the

potential to upset the governmentsresolve to contain FY14sfiscal deficit to 4.8% of GDP. Passage of food security

bill may not pose an immediate threat of spike in food subsidies this year as the county-wide roll out may take 6-9

months but would certainly structurally burden the fiscal from FY15 onwards.

RBI has already scaled down GDP estimates for FY14 to 5.5% versus the budgetary estimate of 6.5%. This is bound to

adversely impact the projected revenues for FY14. The government had based its commitment to contain fiscal

deficit by cutting revenue expenditure (i.e. subsidies) and not by slashing plan expenditure like it did in FY13. Infact it

has budgeted a hefty increase of around Rs1lakh cr in plan expenditure in FY14 versus FY13 s revised estimates. If

the revenue projections fall short and subsidies balloon, the only way to contain fiscal deficit would be by cutting

plan expenditure. This would have grave implications on an already weak investment demand.

We expect the market to remain vulnerable to any stoppage and reversal of capital flows due to news flow on

tapering by the US Fed. Market would need to navigate both domestic and foreign headwinds. Rapid spread of

monsoons with substantial increase of area under cultivation is expected to help cool food and consumer inflation

post-harvest. Also trade and current account deficit which has narrowed in June is expected to remain benign till

August. Although NIFTY may spring a short-term bounce-back as it is trading at 9% discount to its 10-year average of

one-year forward multiple, we continue to remain cautious.

August 12, 2013 19


20/71

Lilladher

Prabhudas Nifty Valuation

August 12, 2013 20

Weight-

age (%)FY12 FY13 FY14E FY15E

Weight-

age (%)FY12 FY13 FY14E FY15E

Banking & Fin. 27.0% Cement 3.2%

PER (x) 13.3 11.6 11.1 9.2 PER (x) 19.2 15.0 14.7 12.8

PAT Growth (%) 26.8 15.1 4.4 19.9 PAT Growth (%) 10.1 28.2 2.1 15.1

FMCG 13.6% Telecom 2.3%

PER (x) 44.1 36.2 31.7 26.2 PER (x) 31.7 59.2 31.4 20.4

PAT Growth (%) 35.5 21.8 13.9 21.0 PAT Growth (%) (29.6) (46.6) 88.6 53.8

Oil & Gas 12.9% Real Estate 0.3%

PER (x) 10.3 9.9 9.2 8.2 PER (x) 20.1 32.3 29.0 22.3

PAT Growth (%) 13.6 3.9 7.5 12.0 PAT Growth (%) (20.5) (37.8) 11.3 29.9

Technology 14.7% Nifty as on Aug 8 5,566

PER (x) 28.6 23.0 19.0 17.0

PAT Growth (%) 20.3 24.6 21.1 11.6 EPS (Rs) - Free Float 351.9 356.6 395.2 461.6

Growth (%) 8.1 1.4 10.8 16.8

Eng. & Power 7.6% PER (x) 15.8 15.6 14.1 12.1

PER (x) 11.0 10.6 10.3 9.6

PAT Growth (%) 5.8 4.1 2.4 7.3 EPS (Rs) - Free Float

Nifty Cons. 351.9 356.6 407.7 475.2

Auto 8.4% Var. (PLe v/s Cons.) (%) - - (3.0) (2.9)

PER (x) 11.6 12.5 11.0 9.4PAT Growth (%) 23.1 (6.8) 13.0 17.6

Sensex as on Aug 8 18,789

Pharma 6.3%

PER (x) 75.4 26.7 27.0 17.7 EPS (Rs) - Free Float 1,149.8 1,128.8 1,262.3 1,479.7

PAT Growth (%) (51.3) 182.2 (0.8) 52.3 Growth (%) 8.5 (1.8) 11.8 17.2

PER (x) 16.3 16.6 14.9 12.7

Metals 3.6%

PER (x) 8.2 8.4 8.4 7.7 Sensex Cons. 1,149.8 1,128.8 1,340.1 1,555.6

PAT Growth (%) 1.2 (3.0) 0.7 8.6 Var. (PLe v/s Cons.) (%) - - (5.8) (4.9)


21/71

Lilladher

Prabhudas Top Pick Summary

August 12, 2013 21

2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E

Large Cap

ITC 325 366 12.4% 2,570.9 17.4 14.7 17.6 21.4 36.5 38.6 29.5 24.3 10.0 8.7

Infosys 2,965 3,350 13.0% 1,695.7 18.5 12.0 11.5 8.8 24.2 22.5 16.1 14.8 3.6 3.1

HDFC Bank 611 750 22.9% 1,452.6 21.0 18.8 24.7 21.9 20.3 20.8 18.0 14.8 3.4 2.8

NTPC 137 167 21.8% 1,130.5 12.7 10.6 16.1 6.3 12.5 12.2 10.6 10.0 1.3 1.2

Wipro 447 530 18.5% 1,101.3 12.8 10.7 16.1 13.6 23.2 22.4 15.4 13.5 3.3 2.8

ICICI Bank 875 1,200 37.1% 1,013.4 17.1 13.1 11.4 13.5 13.3 13.8 10.9 9.6 1.4 1.3

Larsen & Toubro 780 1,091 39.8% 721.4 13.3 15.2 4.5 16.5 15.6 16.3 15.2 13.0 2.3 2.0

Mahindra & Mahindra 864 1,044 20.9% 565.5 6.5 14.0 3.9 19.2 21.4 21.8 16.7 14.0 3.3 2.8

Hindustan Zinc 103 141 37.4% 434.8 4.8 3.9 (5.6) 5.4 18.6 17.3 6.7 6.4 1.2 1.0

Adani Port & SEZ 142 180 26.6% 284.9 28.2 21.9 15.1 23.6 25.4 24.6 15.2 12.3 3.3 2.8

Titan Industries 264 302 14.2% 234.5 30.8 21.1 19.5 34.4 38.2 39.2 27.1 20.1 9.1 7.0

Ranbaxy Laboratories 359 559 55.7% 151.9 9.0 12.9 150.4 33.7 44.1 38.9 6.6 4.9 2.4 1.6

Shree Cement 3,824 5,000 30.8% 133.2 14.8 16.3 (6.3) 20.3 22.5 21.5 14.0 11.6 2.8 2.3

Mid-Caps

Britannia Industries 694 812 17.0% 82.9 15.8 16.7 26.1 30.4 41.4 43.7 28.1 21.6 10.6 8.5

United Phosphorus 137 185 35.0% 60.6 12.5 11.6 11.6 13.7 18.8 18.2 6.4 5.6 1.1 1.0

Crompton Greaves 89 108 21.9% 56.8 8.9 11.5 40.8 63.2 9.8 14.5 15.0 9.2 1.4 1.3

Jammu & Kashmir Bank 1,014 1,500 48.0% 49.2 12.2 13.6 (0.6) 12.7 20.0 19.4 4.7 4.2 0.9 0.8

KSB Pumps 201 249 23.7% 7.0 3.3 7.3 14.5 15.4 14.7 15.3 10.5 9.1 1.5 1.3

MT Educare 97 130 33.9% 3.8 36.4 22.0 35.8 30.3 22.8 26.0 15.7 12.0 3.4 2.9

PER (x) P/BV (x)CMP (Rs.) TP (Rs)

Re venue Gr owt h (%) Ear nings Gr owth (%) RoE (%)Upside

Mcap

(Rs bn)


22/71

Lilladher

Prabhudas

LARGE CAP

August 12, 2013 22

ITC


23/71

Lilladher

Prabhudas ITCCMP: Rs325 TP: Rs366 Rating: BUY MCap: Rs2,593.6bn

ITC reported PAT of Rs18.9bn in Q1FY14 on the back of 18% EBIT growth in

Cigarettes even as Hotels and Paperboard businesses disappointed, resulting

in Non-cigarette business EBIT growth of only 4% YoY, mainly led by 51%

decline in losses in the FMCG business. Although Cigarette volume decline of

1.5% was disappointing, we expect a flattish volume growth in FY14. Paperbusiness is likely to show improved profits due to 4-5% price increase,

improving product mix and gradual increase in capacity utilization. Hotels

business remains under pressure due to decline in ARR and flat occupancy

levels, recovery is unlikely before H2FY14. New launches in FMCG have been

well received and we expect the business to end the year with EBIT of

Rs430m. We are increasing FY14 and FY15 estimates by 1.3-1.5% to factor in

18% EBIT CAGR in cigarettes and lower profitability in Hotels and FMCG. We

value the stock at Rs366 on SOTP. We maintain BUYon the stock.

Cigarettes EBIT up 18%, volumes decline 1.5%: Cigarette business reported18% EBIT growth with 590bps EBIT margin expansion even as volumes

declined 1.5%. We are increasing our EBIT growth estimates to 18% due to 2%

price increase undertaken recently and continued momentum in 64mm

cigarettes. Cigarette profit growth visibility looks strong for FY15 as elections

will delay announcement of budget and hence any change in excise duty. We

expect ~20% cigarette EBIT growth in FY15.

Non-cigarette businesses EBIT up 4%; recovery likely from H2FY14: Non-

cigarette business reported 4% increase in EBIT YoY. FMCG sales grew 18.4%,

with EBIT loss of Rs189m, decline of 51.3%. Hotels business reported 65.9%

decline in EBIT due to flat occupancy and decline in ARR. Paperboard businessreported 5% decline in EBIT due to higher pulp and coal costs; 4-5% price

increase, improved sales mix and stabilization of new unit will enable a

bounce back in margins in H2FY14. Agri business reported 16.3% EBIT growth;

gains from rupee depreciation and higher leaf tobacco prices are positive. We

expect non-cigarette business recovery to boost profits by 20% over FY13-15.

Non-cigarette businesses should increase EBIT by more than 20% in FY15 led

by 1) benefits of new pulp unit in papers 2) rising margins in processed foods

3) recovery in hotels post stabilization of new property and low base.

August 12, 2013 23

Key Financials (Rs m)

Y/e March FY11 FY12 FY13E FY14E FY15E

Revenue (Rs m) 214,590 251,475 299,013 351,125 402,568

Growth (%) 16.7 17.2 18.9 17.4 14.7

EBITDA (Rs m) 74,302 88,486 106,275 127,975 151,204

PAT (Rs m) 50,051 61,624 74,184 87,997 107,618

EPS (Rs) 6.5 7.9 9.4 11.0 13.4

Growth (%) (36.1) 21.9 19.1 17.6 21.4

Net DPS (Rs) 4.5 4.5 5.3 6.5 8.0

Source: Company Data, PL Research

Profitability & valuation


EBITDA margin (%) 34.6 35.2 35.5 36.4 37.6

RoE (%) 33.3 35.5 36.1 36.5 38.6

RoCE (%) 33.4 35.6 36.3 36.7 38.7

EV / sales (x) 11.4 9.8 8.3 7.0 6.1

EV / EBITDA (x) 33.1 27.9 23.4 19.3 16.2

PER (x) 50.3 41.3 34.7 29.5 24.3

P / BV (x) 15.8 13.5 11.5 10.0 8.7

Net dividend yield (%) 1.4 1.4 1.6 2.0 2.5


Stock Performance

(%) 1M 6M 12M

Absolute 14.0 22.8 47.6

Relative to Sensex 7.5 24.6 28.9

l f


24/71

Lilladher

Prabhudas Segmental PerformanceITC



Excise duty on cigarettes

FMCG and Hotel Business key profit drivers

August 12, 2013 24

FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales (Rs m)

Cigarettes 93,212 105,737 123,244 139,696 160,337 182,310

FMCG 36,339 44,716 55,256 69,828 86,602 106,542

Hotels 8,507 10,008 10,062 10,742 12,297 13,282Agri Business 38,621 47,480 56,953 72,007 82,346 95,170

Paperboards & Paper 31,078 35,072 39,234 42,368 48,984 50,580

EBIT (Rs m)

Cigarettes 49,381 57,668 69,077 83,259 98,447 116,678

FMCG (3,495) (2,976) (1,955) (813) 433 1,598

Hotels 2,166 2,666 2,794 1,377 1,477 2,127

Agri Business 4,478 5,663 6,432 7,313 8,646 9,993

Paperboards & Paper 6,843 8,192 9,368 9,640 10,839 11,838

EBIT Margin (%)

Cigarettes 53.0 54.5 56.0 59.6 61.4 64.0

FMCG (9.6) (6.7) (3.5) (1.2) 0.5 1.5

Hotels 25.5 26.6 27.8 12.8 12.0 16.0

Agri Business 11.6 11.9 11.3 10.2 10.5 10.5

Paperboards & Paper 22.0 23.4 23.9 22.8 22.1 23.4

EBIT Growth (%)

Cigarettes 18.0 16.8 19.8 20.5 18.2 18.5

FMCG NA NA NA NA NA NA

Hotels (31.5) 23.0 4.8 (50.7) 7.3 44.0

Agri Business 74.8 26.5 13.6 13.7 18.2 15.6

Paperboards & Paper 34.5 19.7 14.3 2.9 12.4 9.2

Non Cigarette Businesses

Net Sales 114,545 137,277 161,505 194,945 230,228 265,574

Growth % 9.8 19.8 17.6 20.7 18.1 15.4

EBIT 9,991 13,545 16,638 17,516 21,395 25,556

EBIT Growth (%) 67.2 35.6 22.8 5.3 22.1 19.4

EBIT Margin (%) 8.7 9.9 10.3 9.0 9.3 9.6


19.8

23.9

37.3

27.8

3.4

11.3

(17.0) (16.1) (3.5)1.5

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

Paper and Paperboard Hotels Agri Business FMCG

Rs/1,000 sticks Length (mm) FY11 FY12 FY13E FY14E FY15EPlains 65-70 1,473 1,473 1,768 2,086 2,242Small Filter


25/71

Lilladher

Prabhudas FinancialsITC

August 12, 2013 25

Income Statement (Rs m)


Net Revenue 214,590 251,475 299,013 351,125 402,568

Direct Expenses 97,750 114,297 140,822 163,953 185,559

% of Net Sales 45.6 45.5 47.1 46.7 46.1

Employee Cost 11,400 12,576 13,870 15,305 16,986

% of Net Sales 5.3 5.0 4.6 4.4 4.2

SG&A Expenses 31,137 36,116 38,045 43,891 48,820

% of Net Sales 14.5 14.4 12.7 12.5 12.1

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 74,302 88,486 106,275 127,975 151,204

Margin (%) 34.6 35.2 35.5 36.4 37.6

Depreciation 6,560 6,985 7,956 9,093 10,053

PBIT 67,743 81,501 98,320 118,882 141,150

Interest Expenses 684 779 865 865 865

PBT 72,857 88,975 106,842 129,407 154,846

Total tax 22,806 27,352 32,658 41,410 47,228

Effective Tax rate (%) 31.3 30.7 30.6 32.0 30.5

PAT 50,051 61,624 74,184 87,997 107,618

Extra ordi na ry Ga in/(Los s) - - - - -

Adjusted PAT 50,051 61,624 74,184 87,997 107,618


Balance Sheet (Rs m)


Share Capital 7,738 7,818 7,902 7,972 8,032

Reserves & Surplus 133,742 154,478 180,214 207,585 240,026

Shareholder's Fund 159,533 187,919 222,879 258,720 299,020

Preference Share Capital - - - - -

Total Debt 992 891 777 777 777

Other Liabil ities(net) - - - - -

Deferred Tax Liabil ity 8,019 8,727 12,037 13,749 15,058

Total Liabilities 168,543 197,537 235,692 273,246 314,855

Gross Block 127,659 141,444 169,444 189,444 209,444

Less: Depreciation 44,208 50,452 57,350 66,444 76,497

Net Block 83,451 90,992 112,093 123,000 132,947

Capital Work in Progress 13,334 22,768 14,878 12,000 12,000

Ca sh & Ca sh Equi va lent 77,979 91,355 106,753 146,361 187,343

Total Current Assets 141,920 156,590 193,194 247,346 301,975

Tota l Current Liabi l ities 85,795 92,345 104,482 129,109 152,076

Net Current Assets 56,125 64,245 88,713 118,237 149,899

Other Assets - - - - -

Total Assets 168,543 197,537 235,692 273,246 314,855


P bh d I f


26/71

Lilladher

Prabhudas InfosysCMP: Rs2,965 TP: Rs3,150 Rating: BUY MCap: Rs1,695.7bn

Smart beat to low running expectation: Infosys has beaten low-running

consensus expectations. Revenue grew 2.7 % (3.4%@cc) QoQ (Cons.: 0-

2%, PLe: 1.2%), and EBITDA margin was flattish at 26.5% (Cons.: 25.1-

27.5%, PLe: 26%).

Prudence with top clients: The volume and pricing discounts to its top

clients is showing early signs of success. Our channelchecks suggest

improved clientssatisfaction and rampingupvolume with top clients.

Flexibility in deal structuring To improve momentum: Infosys has been

flexible in pricing to structure the deal. Moreover, recent deals indicate

the company being forthcoming to acquire clientsasset and employees to

consummate the deal. Over the last one year, Infosys has signed few large

deals and ramp-up of which would help to accelerate the volume growth.

Margin tailwinds balance headwinds: The management has guided for300bps (PLe: 230bps) margin impact due to wage hike (Offshore: 8%,

Onsite: 3%). However, the currency (~110bps), Utilization (~60bps) and

non-accrual of visa expense (40bps) should limit the impact in Q2FY14.

Why we expect momentum to improve? Onsite volume and Deal wins:

Infosys has delivered second consecutive quarter of mid-single digit

volume growth (Q4FY13: 4.8%, Q1FY14: 5.8%). Moreover, they signed 7

large deals worth TCV of $600mn+ and added 66 new clients.

Strong client addition Not captured in performance: Infosys added

highest number of clients among the peers over the last four quarters.However, the quarterly performance didnt add-up to the same. We

expect ramp-up of projects from the client win to result in a positive

surprise. We expect the ramp-up to start driving the growth.

Why we expect momentum to improve? Onsite volume and Deal wins:

Infosys has delivered second consecutive quarter of mid-single digit

volume growth (Q4FY13: 4.8%, Q1FY14: 5.8%). Moreover, they signed 7

large deals worth TCV of $600mn+ and added 66 new clients. We expect

momentum to get better

August 12, 2013 26


Y/e March FY11 FY12 FY13 FY14E FY15E

Revenue (Rs m) 275,010 337,340 403,520 478,279 535,754

Growth (%) 20.9 22.7 19.6 18.5 12.0

EBITDA (Rs m) 89,640 107,160 115,580 129,493 141,873

PAT (Rs m) 68,230 83,160 94,210 105,040 114,332

EPS (Rs) 119.3 145.4 164.7 183.6 199.9

Growth (%) 8.9 21.9 13.3 11.5 8.8

Net DPS (Rs) 64.1 40.7 54.6 59.9 64.9


Profitability & valuationY/e March FY11 FY12 FY13 FY14E FY15E

EBITDA margin (%) 32.6 31.8 28.6 27.1 26.5

RoE (%) 27.1 27.4 25.7 24.2 22.5

RoCE (%) 26.9 27.2 25.6 24.2 22.5

EV / sales (x) 5.6 4.4 3.7 3.0 2.6

EV / EBITDA (x) 17.1 13.9 12.8 11.0 9.7

PER (x) 24.9 20.4 18.0 16.1 14.8

P / BV (x) 6.2 5.1 4.3 3.6 3.1Net dividend yield (%) 2.2 1.4 1.8 2.0 2.2


Stock Performance

(%) 1M 6M 12M

Absolute 20.1 6.3 29.8


P bh d Fi i l


27/71

Lilladher

Prabhudas FinancialsInfosys

August 12, 2013 27



Net Revenue 275,010 337,340 403,520 478,279 535,754

Direct Expenses 150,540 188,710 241,510 294,168 332,588

% of Net Sales 54.7 55.9 59.9 61.5 62.1

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 34,830 41,470 46,430 54,618 61,293

% of Net Sales 12.7 12.3 11.5 11.4 11.4


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 89,640 107,160 115,580 129,493 141,873

Margin (%) 32.6 31.8 28.6 27.1 26.5

Depreciation 8,620 9,370 11,290 12,826 14,834

PBIT 81,020 97,790 104,290 116,666 127,040

Interest Expenses - - - - -

PBT 93,130 116,830 127,880 141,945 154,503

Total tax 24,900 33,670 33,670 36,906 40,171


PAT 68,230 83,160 94,210 105,040 114,332Extra ordi na ry Ga in/(Los s) - - - - -

Adjusted PAT 68,230 83,160 94,210 105,040 114,332




Share Capital 2,860 2,860 2,860 2,860 2,860




Total Debt - - - - -

Other Liabil ities(net) 3,190 1,090 1,490 1,490 1,490

Deferred Tax Liabil ity - 120 1,190 1,190 1,190


Gross Block 80,980 90,300 106,760 126,369 148,335


Net Block 48,440 54,090 64,680 71,463 78,595

Capital Work in Progress - - - - -

Cash & Cash Equivalent 168,760 209,680 235,710 282,596 336,982


Tota l Current Liabi l ities 36 ,410 47,660 62,860 74,444 81,453


Other Assets 27,300 26,930 45,700 45,700 45,700

Total Assets 276,220 335,820 400,650 471,419 548,624Source: Company Data, PL Research

P bh d HDFC B k


28/71

Lilladher

Prabhudas HDFC BankCMP: Rs611 TP: Rs750 Rating: Accumulate MCap: Rs1,452.6bn

Challenging macros seems to be having some impact on HDFCBs

financials but we see limited risks to overall profitability as we draw

comfort from (1) Floating provisions (credit cost comfort) (2) Opex

efficiency (offset growth pressure) and (3) Superior liability franchise

(limited impact from RBI.s liquidity tightening). We continue to prefer

HDFCB over HDFC Ltd/Kotak despite expensive valuations.

Stable operating metrics: (1) Loan growth at 21% YoY was on expected

lines with some moderation in CV/CE/gold book. Overall auto loans would

moderate in FY14 but we see limited risk to our 19% growth estimate (2)

NIM performance at 4.6% was robust and with a large fixed rate book and

no low reliance on bulk deposits and limited ALM mismatch, margins are

expected to hold up (3) Opex growth at 16% YoY continues to remain less

than B/S growth and with just 250-300 branches planned for FY14,

management expects steady improvement to continue on cost ratios.

Some inch up in slippages but asset quality trends manageable: Gross

NPAs inched up by ~17% QoQ with net slippages of >1% in the last 8-10

quarters. The inch up in slippages was more related to the granular

slippages in the corporate book as retail slippage levels remained at Q4

levels in most retail segments with CV/CE continuing to face pressure and

some inch-up in the gold portfolio. Liquidity pressure and FX volatility

could impact HDFCsworking capital exposures as well but management

seemed relatively comfortable currently.

Macro difficult but comfort high on many fronts; Preferred defensive

name: Macro has turned difficult for financials but HDFCB provides

comfort on multiple fronts despite valuations (1) Rs19bn of floating

provisions provides significant credit cost comfort (2) Low bulk reliance

and no ALM mismatch will lead to lower impact on HDFCs margins (3)

Certain slowdown in fee income will be offset by significant cost levers

that HDFCB has built by expanding network by ~50% over FY11-13. HDFCB

remains preferred defensive over HDFC Ltd/ Kotak.

August 12, 2013 28



Net i nterest i ncome 105,431 128,846 158,111 191,277 227,185

Growth (%) 25.7 22.2 22.7 21.0 18.8

Operating profit 77,254 93,906 114,276 141,754 172,487

PAT 39,264 51,671 64,749 80,740 98,391

EPS (Rs) 16.9 22.0 27.2 33.9 41.4

Growth (%) 31.0 30.4 23.6 24.7 21.9

Net DPS (Rs) 3.3 4.3 3.3 4.1 5.0



NIM (%) 73.3 72.9 72.3 74.1 75.9

RoAE (%) 16.7 18.7 19.6 20.3 20.8

RoAA (%) 1.6 1.7 1.8 1.9 1.9

P / BV (x) 5.6 4.8 4.0 3.4 2.8

P / ABV (x) 5.6 4.8 4.0 3.4 2.9

PE (x) 36.2 27.7 22.4 18.0 14.8

Net dividend yield (%) 0.5 0.7 0.5 0.7 0.8Source: Company Data, PL Research

Stock Performance

(%) 1M 6M 12M

Absolute (7.6) (6.1) 1.9

Relative to Sensex (4.8) (2.5) (4.8)

P bh d Fi i l


29/71

Lilladher

Prabhudas FinancialsHDFC Bank

August 12, 2013 29



I nt. Ea rned from Adv. 150,850 211,244 268,224 318,123 375,707

I nt. Ea rned from I nvt. 46,754 65,046 78,203 89,033 103,383

Others - - - - -

Tota l Interes t Inc ome 1 99,2 82 278,742 350,649 411,660 483,931

Interest expense 93,851 149,896 192,538 220,383 256,746

NII 105,431 128,846 158,111 191,277 227,185

Growth (%) 25.7 22.2 22.7 21.0 18.8

Treasury Income (534) (1,944) 1,602 2,500 2,500

NTNII 43,886 59,780 66,924 77,602 94,271

Non Interest Income 43,352 57,836 68,526 80,102 96,771

Total Income 242,634 336,578 419,175 491,762 580,702

Growth (%) 21.4 38.7 24.5 17.3 18.1

Operating Expense 71,529 92,776 112,361 129,625 151,468

Operating Profit 77,254 93,906 114,276 141,754 172,487

Growth (%) 20.2 21.6 21.7 24.0 21.7

NPA Provisions 14,430 12,428 13,579 21,653 25,911

Investment Provisions - - 522 - -

Total Provisions 19,061 18,774 16,764 23,019 27,794

PBT 58,193 75,132 97,512 118,735 144,693

Tax Provisions 18,929 23,461 32,764 37,995 46,302

Effective Tax Rate (%) 32.5 31.2 33.6 32.0 32.0

PAT 39,264 51,671 64,749 80,740 98,391

Growth (%) 33.1 31.6 25.3 24.7 21.9




Par Value 2 2 2 2 2

No. of equity shares 2,326 2,347 2,379 2,379 2,379

Equity 4,652 4,693 4,759 4,759 4,759

Networth 253,793 299,244 362,141 431,425 515,856

Adj. Networth 250,829 295,720 357,452 424,310 505,847

Deposits 2,085,864 2,467,064 2,962,470 3,513,618 4,270,761

Growth (%) 24.6 18.3 20.1 18.6 21.5

Low Cost deposits 1,099,083 1,194,059 1,405,215 1,654,079 2,031,868

% of total deposits 52.7 48.4 47.4 47.1 47.6

Total Liabilities 2,773,517 3,379,093 4,003,320 4,704,964 5,644,741

Net Advances 1,599,827 1,954,200 2,397,206 2,852,676 3,480,264

Growth (%) 27.1 22.2 22.7 19.0 22.0

Investments 709,293 974,829 1,116,136 1,273,364 1,489,513

Total Assets 2,773,517 3,379,098 4,003,325 4,704,964 5,644,741


P bh d NTPC


30/71

Lilladher

Prabhudas NTPCCMP: Rs137 TP: Rs167 Rating: Accumulate MCap: Rs1,130.5bn

Capacity addition on track, Q1FY14 generation muted: NTPC has

commissioned close to 3820MWs which is one of the fastest and highest

additions as compared to its past. Further, we expect 3500MWs

commercialization in FY14E and 4000MWs in FY15E. NTPCsPLFs at 79.1%

(down by 730bps YoY and QoQ) suffered once again on account of non-

availability of imported coal and lower domestic coal availability for plants

commissioned post 2009, leading to a 5.3% YoY volume growth for

Q1FY14. PAF showed a decline at 87.4% by 400bps. However the

generation was also lower on account of major O&M activities.

Coal supply situation under control: NTPC has always enjoyed merit in

dispatches of coal and will continue to do so in the future. The shortages in

domestic coal supply will be met by imports of 3-5mt every year. The new

scheme of coal pooling, where CIL will be supplying imported coal, will also

augur well for the company as it will receive close to 5-8MTs from it. Pakri-Barwadih captive mine, is also expected to contribute from FY14E, with 2-

5MTs initially. Above this, reallocation of three captive blocks, which can

contribute close to 10MT (initially) from FY15E, should mitigate long-term

fuel supply risks. ACQ materialization of domestic coal was 100% in

Q1FY14.

Valuation undemanding, time to enter: The stock has been beaten down

on the fears of a pressure on operating parameters due to non-availability

of imported coal and shortage of domestic coal. The company will have a

challenging task further in the event of aggressive capacity addition planson account of shortage of coal supplies. We have toned down our target

price to factor in lower ROEs for newer plants till any clarity on coal

emerges. However, at an undemanding valuation of 1.1x FY15E, we

maintain Accumulateon the stock.

August 12, 2013 30



Revenue (Rs m) 549,387 611,963 662,980 747,123 826,058

Growth (%) 18.6 11.4 8.3 12.7 10.6

EBITDA (Rs m) 125,770 131,938 177,381 185,561 196,846

PAT (Rs m) 88,332 82,608 91,858 106,650 113,416

EPS (Rs) 10.7 10.0 11.1 12.9 13.8

Growth (%) 4.5 (6.5) 11.2 16.1 6.3

Net DPS (Rs) 3.8 3.9 4.2 4.2 5.0


Profitability & valuationY/e March FY11 FY12 FY13E FY14E FY15E

EBITDA margin (%) 22.9 21.6 26.8 24.8 23.8

RoE (%) 13.6 11.7 12.0 12.5 12.2

RoCE (%) 9.6 8.0 8.1 8.6 8.1

EV / sales (x) 2.5 2.4 2.3 2.2 2.1

EV / EBITDA (x) 11.1 11.0 8.5 9.0 8.7

PER (x) 12.8 13.7 12.3 10.6 10.0



Stock Performance

(%) 1M 6M 12M

Absolute (2.4) (7.4) (18.5)

Relative to Sensex 0.4 (3.8) (25.3)

P bh d O ti M t i


31/71

Lilladher

Prabhudas Operating MetricsNTPC



PLF and PAF Scenario

Returns have bottomed-out


BVPS on a rise


Trend in Installed Capacity

August 12, 2013 31

0

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

(MWs)

Total capacity (incl JV) Standalone capacity Standalone capacity only coal

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

96.0


(%)

PLF (coal) PAF (coal)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0

100,000

200,000

300,000

400,000

500,000


Regulated equity (Rs m) BV (Rs)

10.0

11.0

12.0

13.0

14.0

15.0

16.0


(%)

RoE RoE on regulated equity

Prabh das Fi i l


32/71

Lilladher

Prabhudas FinancialsNTPC

August 12, 2013 32



Net Revenue 549,387 611,963 662,980 747,123 826,058

Direct Expenses 423,617 480,025 485,599 561,561 629,212

% of Net Sales 77.1 78.4 73.2 75.2 76.2

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 125,770 131,938 177,381 185,561 196,846Margin (%) 22.9 21.6 26.8 24.8 23.8

Depreciation 24,857 27,917 33,968 44,000 46,923

PBIT 100,913 104,021 143,413 141,561 149,923

Interest Expenses 21,491 17,116 19,244 29,983 30,944

PBT 120,496 123,763 165,785 140,330 151,223

Total tax 29,470 31,024 39,592 33,679 37,806


PAT 91,026 92,738 126,193 106,650 113,416Extraordinary Gain/(Loss) 2,694 10,131 34,335 - -

Adjusted PAT 88,332 82,608 91,858 106,650 113,416




Share Capital 82,455 82,455 82,455 82,455 82,455

Reserves & Surplus 596,468 650,457 721,421 818,279 881,009Shareholder's Fund 678,923 732,912 803,876 900,734 963,464


Total Debt 431,882 482,403 552,197 685,603 751,341

Other Liabilities(net) 4,919 14,301 12,441 (2,372) (3,103)

Deferred Tax Liability 6,030 6,369 9,253 6,541 6,874


Gross Block 727,552 818,303 1,150,390 1,288,631 1,413,631


Net Block 392,360 452,584 745,490 839,731 917,808

Capital Work in Progress 333,263 418,279 254,965 298,220 298,677



Total Current Liabi l ities 130,729 178,423 233,401 178,047 192,306


Other Assets - 1 2 3 4

Total Assets 1,121,753 1,235,985 1,377,766 1,590,506 1,718,576


Prabhudas Wipro


33/71

Lilladher

Prabhudas WiproCMP: Rs447 TP: Rs530 Rating: BUY MCap: Rs1,101.3bn

Q1FY14 ahead of expectation: Wipro reported Q1FY14 results ahead of

expectation. IT Services (USD) revenue grew by 0.2% QoQ (1.2% @cc) to

$1,588m (PLe: $1587m, Cons: $1,590m). Overall revenue grew by 1.3%

QoQ to Rs97.29bn (PLe: Rs98.96bn, Cons.: Rs99.4bn). Operating margin

expanded by 38bps to 18.1% (PLe: 17.9%, Cons: 18.1%), despite wagehike, onsite shift, visa cost and S&M investment aided by currency

depreciation. EPS grew by 3% QoQ to Rs6.64 (PLe: Rs6.51, Cons: Rs 6.64).

Strong guidance Improved demand environment and sales cycle: The

management has given IT Services revenue guidance of 2% to 3.9% QoQ

(PLe: 2-4%, Cons.: 1-3%) growth in USD terms. The management was very

assertive about the improved demand environment, especially in the US.

Moreover, the company also highlighted some improvement in the deal

pipeline and significant improvement in the sales cycle.

Operating leverage yet to be unleashed: The management has increased

its S&M spend by 11% QoQ. Moreover, the company has very strong

bench strength with Gross Utilization at 64.7%, Net Utilization (excl.

Trainees) at 73.3%. The company has invested in tools which will drive

non-linearity. We see room for margin expansion along with improving

growth momentum.

Operating leverage yet to be unleashed: The management has increased

its S&M spend by 11% QoQ. Moreover, the company has very strong

bench strength with Gross Utilization at 64.7%, Net Utilization (excl.

Trainees) at 73.3%. The company has invested in tools which will drive

non-linearity. We see room for margin expansion along with improving

growth momentum.

August 12, 2013 33



Revenue (Rs m) 310,542 318,747 374,256 422,060 467,170

Growth (%) 14.2 2.6 17.4 12.8 10.7 EBITDA (Rs m) 65,463 66,713 78,181 89,476 103,002

PAT (Rs m) 53,004 52,568 61,684 71,643 81,408

EPS (Rs) 21.6 21.4 25.0 29.1 33.1

Growth (%) (29.4) (1.0) 17.1 16.1 13.6

Net DPS (Rs) 6.4 7.0 6.9 9.0 9.0



EBITDA margin (%) 21.1 20.9 20.9 21.2 22.0

RoE (%) 24.3 20.0 21.7 23.2 22.4

RoCE (%) 22.0 18.2 20.5 22.9 22.1

EV / sales (x) 3.4 3.3 2.7 2.3 2.0

EV / EBITDA (x) 16.1 15.7 13.0 11.0 9.1

PER (x) 20.7 20.9 17.9 15.4 13.5



Stock Performance

(%) 1M 6M 12M

Absolute 25.8 21.6 43.0



34/71

Prabhudas ICICI Bank


35/71

Lilladher

Prabhudas ICICI BankCMP: Rs875 TP: Rs1,200 Rating: BUY MCap: Rs1,013.4bn

NIM continues to surprise; To provide offset against RBIs recent

measures : ICICIs margins have improved from ~2.8% to ~3.0% and

management expects the asset mix change to drive further NIM

improvement. Though RBI measures will cause a near-term impact, we do

not expect significant NIM contraction because of the above offsets.

Asset quality stable; some lumpy risks remain: We factor in ~90bps credit

costs v/s management guidance of 75bps as we believe risks still remain

from lumpy corporate exposures as the reform process has still not

addressed power fuel/pricing issues. But low exposure to gas base power

plants is a positive.

Growth pick-up slower than expected; hence, leveraging up to take some

more time: ICICIs domestic book growth has improved but achieving

management guidance of 20% growth in the advances book lookschallenging. We expect ~13% YoY overall growth and this will also impact

the leveraging up process including improvement in consolidated ROEs.

Outlook & Valuations: We note that ~35% of the 300bps improvement in

ROEs over FY11-13 was not core operation driven and given the weak

marcos, we limit our expectation on consolidated ROE improvement to 15-

16% as against management guidance at ~17-18%. Current valuations at

1.4x Sep book does recognize the slower leveraging up and the macro

risks. Hence, we retain positive on ICICI with a PT of Rs1200/share.

August 12, 2013 35



Net interest income 90,169 107,342 138,664 162,393 183,742

Growth (%) 11.1 19.0 29.2 17.1 13.1Operating profit 90,476 103,865 131,992 152,977 173,703

PAT 51,514 64,653 83,255 92,736 105,214

EPS (Rs) 44.7 56.0 71.9 80.1 90.8

Growth (%) 23.9 25.1 28.4 11.4 13.5

Net DPS (Rs) 12.0 16.5 20.0 22.3 25.3



NIM (%) 100.3 96.8 95.2 94.2 94.5

RoAE (%) 9.7 11.2 13.1 13.3 13.8

RoAA (%) 1.3 1.5 1.6 1.6 1.6

P / BV (x) 1.8 1.7 1.5 1.4 1.3

P / ABV (x) 1.8 1.7 1.5 1.4 1.3

PE (x) 19.6 15.6 12.2 10.9 9.6

Net dividend yield (%) 1.4 1.9 2.3 2.5 2.9Source: Company Data, PL Research

Stock Performance

(%) 1M 6M 12M

Absolute (14.9) (22.6) (8.7)


Prabhudas Financials


36/71

Lilladher

Prabhudas FinancialsICICI Bank

August 12, 2013 36



I nt. Ea rned fr om Adv. 164,248 221,299 273,411 309,086 348,503

Int. Ea rned from Invt. 79,052 96,840 110,093 121,840 135,518Others - - - - -

Tota l Interes t Inc ome 2 59 ,7 40 335,427 400,756 450,331 505,873

Interest expense 169,571 228,085 262,092 287,938 322,131

NII 90,169 107,342 138,664 162,393 183,742

Growth (%) 11.1 19.0 29.2 17.1 13.1

Treasury Income (2,023) (757) 4,717 4,500 5,000

NTNII 68,501 75,784 78,740 88,235 101,067

Non Interest Income 66,479 75,028 83,457 92,735 106,067Total Income 326,219 410,454 484,213 543,066 611,940

Growth (%) (1.7) 25.8 18.0 12.2 12.7

Operating Expense 66,172 78,504 90,129 102,150 116,107

Operating Profit 90,476 103,865 131,992 152,977 173,703

Growth (%) (7.0) 14.8 27.1 15.9 13.5

NPA Provisions 19,769 9,932 13,948 25,109 28,765

Investment Provisi ons 2,038 4,132 1,262 1,000 1,000

Total Provisions 22,868 15,891 18,095 26,109 29,765PBT 67,607 87,973 113,897 126,868 143,938

Tax Provisions 16,093 23,321 30,642 34,132 38,724

Effective Tax Rate (%) 23.8 26.5 26.9 26.9 26.9

PAT 51,514 64,653 83,255 92,736 105,214

Growth (%) 28.0 25.5 28.8 11.4 13.5




Par Value 10 10 10 10 10

No. of equity shares 1,152 1,155 1,158 1,158 1,158

Equity 11,518 11,552 11,581 11,581 11,581

Networth 550,909 604,052 667,060 729,609 800,575

Adj. Networth 526,836 585,444 644,754 704,885 773,096

Deposits 2,256,021 2,555,000 2,926,136 3,376,707 3,867,635

Growth (%) 11.6 13.3 14.5 15.4 14.5

Low Cost deposits 1,016,465 1,110,194 1,225,763 1,417,884 1,633,694

% of total deposits 45.1 43.5 41.9 42.0 42.2


Net Advances 2,163,659 2,537,277 2,902,494 3,308,844 3,838,259

Growth (%) 19.4 17.3 14.4 14.0 16.0

Investments 1,346,859 1,595,600 1,713,936 1,908,194 2,103,577

Total Assets 4,062,336 4,736,471 5,367,947 6,055,398 6,904,394


Prabhudas Larsen & Toubro


37/71

Lilladher

Prabhudas Larsen & ToubroCMP: Rs780 TP: Rs1,091 Rating: Accumulate MCap: Rs721.4bn

At attractive valuations: L&T is certainly facing the turmoil of a slow

economic growth environment. However, the stock is in a comfort zone

on the backdrop of healthy set of announcements in the recently policies.

L&T is trading at P/E of 8.3X FY15E core earnings. However, with the

recent news flow in terms of order intake being positive, L&T looks on acomfortable wicket and poised to end the year with a 20% order inflow

and 15% revenue growth.

Order book at comfortable footing: LTsorder inflow stood at Rs250bn in

Q1FY14. L&T, in FY13, bagged orders worth Rs880bn, a growth of 25% YoY.

The company has maintained the order inflow guidance of 20% YoY which

amounts to Rs1.1trn. L&T has seen some revival in Hydrocarbon, Power

and International orders (especially Middle East). However, Infrastructure

projects remain the prime contributors. Within Infrastructure, Urban

Infrastructure and Buildings show a promising growth path ahead. Wehave taken 17% growth YoY, amounting to Rs1trn, keeping in view the

challenging domestic environment. Further, with the impetus given to

DMIC, DFC and other BOT projects in transportation (Budget 2013-14),

along with a strong financial backing, we expect L&T to be able to secure

sizeable orders. Though we have not factored in a major downfall in the

EBITDA margins (10.8%) over FY14E-15E, we have also not kept it higher.

However, any adverse mix in terms of order inflow may alter the margins.

We are expecting a 7.8% CAGR in standalone earnings for the period of

FY12-15E which is again not an out-of-reach assumption.

Valuation still in safe zone: Though the price points have corrected

sharply in the recent times, we see these levels as an entry

point/increasing exposure to a stock in volatile times. At CMP, the stock is

trading at a core P/E of 9.7x FY14E and 8.3x FY15E. With no near-term

major risks attached, the stock is not expected to underperform the

broader market, taking into account the recent sharp correction.

August 12, 2013 37



Revenue (Rs m) 434,959 531,705 608,738 689,490 794,394

Growth (%) 18.6 22.2 14.5 13.3 15.2EBITDA (Rs m) 52,136 62,826 64,200 73,520 88,497

PAT (Rs m) 36,720 44,196 45,499 47,551 55,384

EPS (Rs) 39.7 47.8 49.2 51.4 59.9

Growth (%) 16.0 20.4 2.9 4.5 16.5

Net DPS (Rs) 7.6 11.0 13.0 15.1 15.1



EBITDA margin (%) 12.0 11.8 10.5 10.7 11.1

RoE (%) 18.4 18.8 16.7 15.6 16.3

RoCE (%) 15.3 15.2 14.2 13.6 14.4

EV / sales (x) 1.8 1.5 1.3 1.2 1.0

EV / EBITDA (x) 14.9 12.8 12.5 10.9 9.1

PER (x)* 12.5 10.4 10.1 9.7 8.3


Source: Company Data, PL Research * Core PE

Stock Performance

(%) 1M 6M 12M

Absolute (16.6) (22.6) (16.7)


Prabhudas O i M i


38/71

Lilladher

Prabhudas Operating Metrics


Order Book Break-up


Order Inflow (Rs bn)

August 12, 2013 38

SOTP Valuation

Sectors Valuation Parameter Rs / Share

L&T Standalone 13.5x FY15 EPS of Rs60 809

L&T Infotech 12x FY15E PAT of Rs 8 bn @25% HOLDCO 78

L&T Finance Holdings 25% HOLDCO Discount to Mkt Cap of LT Finance -LT share 82% 92

L & T IDPL & developmet projects 1.25x Equi ty in Q1FY14E of Rs60bn @ HOLDCO of 25% 57

LT Power Equipement P/E 6x FY15E PAT @ HOLDCO of 25% 2

L & T Manufacturing 10x FY15E Rs1.6bn PAT of various facilities 18

L&T Urban Infra 1x BV of Real Estate Cost @ 20% HOLDCO 17

Others busineeses 3x FY15E Rs6bn PAT of various businesses 19

Total Value 1,091

Source: PL Research

Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13

Order inflow Composites

In-house 53 48 22 75 29 20 0 0 86 0 0 57

Third Party 103 157 111 226 133 141 171 211 110 196 198 222

Total 156 205 133 301 162 161 171 211 196 196 198 279

Order Inflow by sectors (Eng)

Infra 39 62 77 163 83 50 102 110 127 126 115 73

Hydrocarbon 11 18 0 0 15 40 65 25 4 26 36 10

Process 13 20 0 72 0 16 11 22 10 2 0 5

Power 81 88 44 61 35 42 22 36 41 22 24 123

Others 13 16 12 6 20 13 19 17 14 20 24 12

Infrastructure

49%

Power

26%

Hydro carbon

8%

Process

13%

Others

4%



39/71

Lilladher

Prabhudas FinancialsLarsen & Toubro

August 12, 2013 39



Net Revenue 434,959 531,705 608,738 689,490 794,394

Direct Expenses 100,640 242,424 431,648 543,062 631,259% of Net Sales 23.1 45.6 70.9 78.8 79.5

Employee Cost 28,845 9,754 44,363 50,456 49,658

% of Net Sales 6.6 1.8 7.3 7.3 6.3

SG&A Expenses - 19,867 20,651 22,452 24,981

% of Net Sales 0.0 3.7 3.4 3.3 3.1

Other Expenses 253,338 196,834 47,876 - -

% of Net Sales 58.2 37.0 7.9 0.0 0.0

EBITDA 52,136 62,826 64,200 73,520 88,497Margin (%) 12.0 11.8 10.5 10.7 11.1

Depreciation 5,992 6,995 8,184 9,000 10,045

PBIT 46,144 55,831 56,016 64,520 78,452

Interest Expenses 6,474 6,661 9,824 10,421 11,932

PBT 56,181 62,553 64,572 67,931 80,283

Total tax 19,459 18,357 17,940 20,379 24,899


PAT 39,580 44,565 49,107 47,551 55,384Extra ordi na ry Ga in/(Los s) - - 3,608 - -

Adjusted PAT 36,720 44,196 45,499 47,551 55,384




Share Capital 1,850 1,850 1,850 1,850 1,850



Total Debt 71,611 98,969 93,362 96,326 102,915

Other Liabil ities(net) - 1 - 3 4



Gross Block 89,567 105,364 119,760 132,813 145,670

Less: Depreciation 23,125 29,242 36,706 45,839 56,187Net Block 66,442 76,122 83,054 86,974 89,483

Ca pi ta l Work in Pr ogres s 8,139 7,587 5,968 4,734 2,950


Total Current Ass ets 349,511 505,245 471,256 519,145 581,438

Total Current Liabi l i ties 278,233 395,142 334,530 355,706 375,181


Other Assets - - (4) - -


Prabhudas Mahindra & Mahindra


40/71

Lilladher

Prabhudas Mahindra & MahindraCMP: Rs864 TP: Rs1,044 Rating: Accumulate MCap: Rs565.5bn

UVs to grow at 8-10% over the next three years: Over the last 2 years, we

have seen a marked shift towards UVs from the sedan segment which is

reflected in UV share increasing by 900bps to 22% of in passenger vehicles.

In our view, this trend (UV growth higher than cars) is likely to continue.

Given its brand pull, huge distribution network and strong R&Dcapabilities, we see M&M growing positively (but lower than industry)

despite all competitive challenges. Though we expect M&M to lose around

300-350bps Market share in FY14E, we expect the company to rebound in

FY15E (growth of 11%) with couple of new launches.

Tractors likely to grow at 10-12% over FY13-F15E period: M&M has

maintained its market share across all regions, validating success of most

critical factorsbrand, product and network. This, along with leveraging of

Mahindra Finance network, would safeguard M&Msdominance in tractor

industry going forward as well. M&M has reported a 25.2% YoY growth intractor volumes in Q1FY14E with full year volume growth pegged at 10-

12%. However, given the normal monsoons and regions such as AP,

Rajasthan and Maharashtra showing some signs of improvement, we

expect M&M to clock a volume growth of 14% in FY14E.

Our volume estimates: We estimate a 5.6% CAGR in automotive volumes

and a 11.0% CAGR in tractor volumes over FY13-FY15E period. We expect

a 60-70bps improvement in EBITDA margins mainly driven by favorable

product mix towards tractors and stable raw material cost scenario.

Valuation attractive: With earnings CAGR of ~10% for FY13-FY15E period

and attractive valuations for core business at ~9.8x FY15E EPS (M&M +

MVML), we prefer M&M as our pick in the auto space with a SOTP based

TP of Rs1, 011.

August 12, 2013 40



Revenue (Rs m) 233,895 318,472 404,412 430,807 491,208


PAT (Rs m) 24,892 27,706 32,622 33,889 40,380

EPS (Rs) 38.0 42.3 49.8 51.8 61.7

Growth (%) 8.2 11.3 17.7 3.9 19.2

Net DPS (Rs) 10.2 12.5 13.0 14.0 15.0



EBITDA margin (%) 14.5 11.8 11.6 11.4 12.0

RoE (%) 27.4 24.6 24.3 21.4 21.8

RoCE (%) 21.1 19.9 20.0 18.5 19.4

EV / sales (x) 2.5 1.8 1.4 1.3 1.1

EV / EBITDA (x) 17.2 15.5 12.3 11.7 9.6

PER (x) 22.7 20.4 17.3 16.7 14.0



Stock Performance

(%) 1M 6M 12M

Absolute (8.8) (2.3) 19.6

Relative to Sensex (6.0) 1.3 12.8

Prabhudas Operating Metrics


41/71

Lilladher

Prabhudas Operating MetricsMahindra & Mahindra

August 12, 2013 41

Y/e March FY09 FY10 FY11 FY12 FY13 FY14E FY15E

UV volumes (Nos) 121,232 161,293 186,343 232,204 296,382 290,600 325,579

3-wheelers & LCVs (nos) 83,449 120,825 167,730 220,131 240,743 257,181 281,460

Total Automotive Volumes (nos) 204,681 282,118 354,073 452,335 537,125 547,781 607,039

Tractor Volumes (nos) 119,708 175,196 214,325 235,375 223,883 255,227 280,750

Total Volumes (nos) 324,389 457,314 568,398 687,710 761,008 803,008 887,789

Average realization / Vehicle (Rs) 403,055 405,184 404,378 451,863 520,914 536,491 553,293

EBITDA / Vehicle (Rs) 39,724 65,518 58,763 53,413 60,661 61,124 66,134

Net Profit / Vehicle (Rs) 28,422 44,720 43,035 39,311 42,021 42,203 45,484


SOTP Valuation

Y/e March Parameter Value (Rs / share)

M&M + MVML 11.5x FY15E EPS of Rs69 799

Subsidiaries at 25% discount 245

SOTP Valuation 1,044




42/71

Lilladher

Prabhudas FinancialsMahindra & Mahindra

August 12, 2013 42



Net Revenue 233,895 318,472 404,412 430,807 491,208

Direct Expenses 162,639 234,997 304,149 324,295 368,217

% of Net Sales 69.5 73.8 75.2 75.3 75.0

Employee Cost 14,315 17,018 18,665 20,436 22,547

% of Net Sales 6.1 5.3 4.6 4.7 4.6

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 22,952 28,812 34,505 36,992 41,731

% of Net Sales 9.8 9.0 8.5 8.6 8.5

EBITDA 33,989 37,645 47,093 49,083 58,713

Margin (%) 14.5 11.8 11.6 11.4 12.0

Depreciation 4,139 5,762 7,108 8,195 9,114

PBIT 29,850 31,883 39,985 40,889 49,599

Interest Expenses 725 1,628 1,912 1,850 1,900

PBT 33,467 34,976 43,565 44,739 53,699

Total tax 8,575 7,270 10,943 10,850 13,319


PAT 26,621 28,789 33,522 33,889 40,380Extraordinary Gain/(Loss) 1,729 1,083 900 - -

Adjusted PAT 24,892 27,706 32,622 33,889 40,380




Share Capital 3,274 3,274 3,274 3,274 3,274




Total Debt 24,053 31,742 32,289 30,289 28,289

Other Liabil ities(net) 3,544 5,271 - - -

Deferred Tax Liabil ity - - - - -


Gross Block 62,110 80,632 95,132 110,132 123,132


Net Block 33,726 45,108 52,500 59,305 63,191

Ca pi ta l Work in Progres s 5,340 5,699 5,713 5,713 5,713



Tota l Current Liabi l ities 56 ,342 78,340 95,047 103,695 115,433


Other Assets 726 - - - -


Prabhudas Hindustan Zinc


43/71

Lilladher

Prabhudas Hindustan ZincCMP: Rs103 TP: Rs141 Rating: BUY MCap: Rs434.8bn

Government in no perseverance to sell the stake at current levels: Our

channel checks suggest that concerned Ministry of mines and finance are

well cognizant of the steep fall in stock price and resultant contraction in

targeted receipt from sale. Both ministries are now actively contemplating

to sell the stake to Vedanta through negotiation to garner higher pricerather than selling in open market. However, the process got delayed due

to ongoing impasse in parliament.

Strong outlook for Zn and Pb: Zn is expected to remain in deficit for

couple of years, primarily on account of growth in consumption outpacing

the rise in production. Pb is expected to be in marginal surplus in 2013;

however, the trend is expected to reverse on the back of lower growth in

production. We built in LME-Zn and LME-Pb at US$1950 and US$2120 in

FY14E.

Valuation and Outlook: We remain positive on the stock, given the play on

attractive valuations and quality assets, coupled with strong likelihood of

Govtsstake sale at a significant premium. We maintain our BUYrating

with PT of Rs150, EV/EBITDA of 4.5x FY15E.

August 12, 2013 43



Revenue (Rs m) 99,121 112,551 125,257 131,332 136,404


PAT (Rs m) 49,008 54,610 68,448 64,580 68,098

EPS (Rs) 11.6 12.9 16.2 15.3 16.1

Growth (%) 21.3 11.4 25.3 (5.6) 5.4

Net DPS (Rs) 1.0 2.4 3.1 3.5 4.0



EBITDA margin (%) 55.3 52.6 50.4 49.6 48.7

RoE (%) 24.1 22.1 23.1 18.6 17.3

RoCE (%) 24.1 22.1 23.2 18.7 17.3

EV / sales (x) 3.8 3.4 2.9 2.5 2.1

EV / EBITDA (x) 6.9 6.5 5.8 4.9 4.2

PER (x) 8.9 8.0 6.4 6.7 6.4



Stock Performance

(%) 1M 6M 12M

Absolute 1.7 (16.9) (13.9)

Relative to Sensex 4.5 (13.3) (20.6)



44/71

Lilladher

Prabhudas FinancialsHindustan Zinc

August 12, 2013 44



Net Revenue 99,121 112,551 125,257 131,332 136,404

Direct Expenses 35,572 43,807 50,502 52,844 55,519% of Net Sales 35.9 38.9 40.3 40.2 40.7

Employee Cost 5,108 5,346 6,499 7,149 7,864

% of Net Sales 5.2 4.8 5.2 5.4 5.8

SG&A Expenses 3,582 4,206 5,181 6,149 6,590

% of Net Sales 3.6 3.7 4.1 4.7 4.8


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 54,859 59,193 63,075 65,190 66,431Margin (%) 55.3 52.6 50.4 49.6 48.7

Depreciation 4,747 6,107 6,470 7,394 7,665

PBIT 50,112 53,086 56,604 57,795 58,766

Interest Expenses 194 140 291 305 317

PBT 59,637 68,884 77,675 75,978 80,115

Total tax 10,591 14,185 9,206 11,397 12,017


PAT 48,834 54,268 68,293 64,576 68,098Extraordinary Gain/(Loss) (174) (342) (155) (4) -

Adjusted PAT 49,008 54,610 68,448 64,580 68,098




Share Capital 8,451 8,451 8,451 8,451 8,451



Total Debt 4 4 4 4 4

Other Liabil ities(net) - - - - -



Gross Block 98,023 116,579 122,648 130,148 134,148

Less: Depreciation 25,481 31,451 37,811 45,205 52,869Net Block 72,542 85,128 84,837 84,943 81,279

Ca pi ta l Work in Pr ogres s 8,752 6,049 14,305 24,555 39,955



Tota l Current Liabi l ities 15,747 14,945 19,094 21,838 24,600


Other Assets - - - - -


Prabhudas Adani Port & SEZ


45/71

Lilladher

Prabhudas Adani Port & SEZCMP: Rs142 TP: Rs180 Rating: BUY MCap: Rs294.4bn

Coal volumes to continue its uptrend: Tata UMPP and Adani Powerscoal

contribution increased from 8.6mt in FY12 to 18.4mt in FY13. These

volumes are expected to continue their uptrend to 22mt in FY14 & 28.5mt

in FY15. Overall, Mundrasvolumes are expected to increase from 82.1mt

in FY13 to 99.6mt in FY14 and 115mt in FY15.

HMEL to contribute to growth in crude volumes: HMELscontribution to

crude volumes witnessed strong growth in FY13, resulting in overall crude

volumes increasing from 9.3mt in FY12 to 14mt in FY13. Further, crude

volumes in FY14 are expected to scale up to 19mt on account of HMELs

production increasing.

Developing new port assets: Operations at Dahej have scaled up quite

strongly. In FY13, volumes stood at ~7.56mt as against 2.14mt in FY12. The

financial performance at Dahej was also extremely robust contributing to

revenues of Rs2.4bn and PAT of Rs0.7bn. Hazira is likely to be the next big

contributor for the company. Besides, capex at Kandla, Vishakapatnam and

Mormugao are likely to continue. Total capex for the company is likely to

be ~Rs25-30bn in FY14. Further, the company is looking at investing into

port assets in the Eastern & Southern India.

Abbot divested at cost: In order to focus on growth in India and on

account of investor criticism, the company has divested its stake in Abbot

Point in favor of Adanispromoters. This would result in the consolidated

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