stock advisory for today - buy infosys stock with target price of target price of rs 3910

8/12/2019 Stock Advisory for Today - Buy Infosys stock with target price of target price of Rs 3910

1/21

IEA-Equity

Strategy

Private Sector Banks Result Review 3QFY14 3th Mar 2014

Private Banks are trading at significantly lower or reasonable valuation when compare to their historical trend due to possible deterioration i

asset quality earnings pressure and political un-clarity. We prefer private banks over PSBs largely due to their capability to report health

earnings, higher capital adequacy ratio and lower or stable asset quality. Our top picks in sector are HDFC Bank, ICICI Bank, Indusind Bank an

DCB. ............................................................................ ( Page : 8-9)

3th Mar 2014

IFGL refractories is the flagship company of SK Bajoria group.Company manufacturing Continuous Casting Refractories and Special gradRefractories which find applications in steel industry. IFGL has grown as an Indian multinational with manufacturing facilities located in Braz

China, Czech Republic, Germany, India, UK and USA. Krosaki HarimaCorporation Japan ,a subsidiary of worlds second largest steel make

NipponSteel Corporation holding about 15 % stake in IFGL. We expect IFGL will report its best ever performance in this full year. Considerin

industrysimproving prospects, stabilization of production from its newly built plant at Kandla SEZ and out performance of company in it

financials, We dontexpect any scope for deep correction, hence recommending a BUY. ...................................................................................

Pa e : 6-7

3th Mar 2014

The stock is trading at 1.7x FY15E BVPS. We estimate to Power grid stock to trade at 1.8x BVPS. Valuation is very reasonable for a busines

model with RoE (16%), strong growth visibility and minimal operational risks. We valued stock for a 12 month period at a target price o

Rs.118.With equity dilution overhang on the stock is removed, so we expect the stock price will drive by purely on its fundamentals, on ou

estimates we maintain a positive fundamental outlook for Power grid. Also, govt. stake coming down to 58% is a positive, as risk of furthe

equity dilution is reduced . ............................................................ (Page : 5)

IFGL Refractories Ltd :"Strong Fundamentals..." "BUY"

Infosys : "Meritocracy to growth" "BUY" 4th Mar 2014

In the recent webcast, Mr. Narayan Murthy expressed its view regarding senior level exits from the company. In near term, non-performers i

Infosys could be asked to leave or may hand over layoff notices. Infosys will retain its revenue acceleration and margin expansion, also operatin

metrics will turn into greenery from hay. At a CMP of Rs 3793, it trades at 17.4x FY15E earnings. We retain our BUYview on the stock withtarget price of target price of Rs 3910 . ............................................................... ( Page : 2-4)

4th March, 20

Edition : 217

Public Sector Banks Result Review 3QFY14 26th Feb 2014

28th Feb 2014

For IT Industry, 3QFY14 has carried out a quarter of mix set of numbers largely impacted by seasonality and furloughs impact. However, most o

companies expressed its sanguine view for industry outlook and demand discretionary environment ahead. Post earnings, almost all companie

management have expressed for better earnings outlook in near term . .................................................. ( Page : 10-15)

IT Industry: 3QFY14 results review : "Clear acceleration in growth"

SHREE CEMENT. "BOOK PROFIT " 25th Feb 2014

The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking a

future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutiv

quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.s

we recommend its a better pic to book profit. ................................................................. ( Page : 18-20)

Powergrid : "BUY"

Most of PSBs profitability were declined due to higher operating cost, surge in provisions and contingencies and creation of DTL special reserv

But declining profitability and deteriorating asset quality is not a concern but structure damage of balance sheet. Going forward banks wit

higher CASA base and healthy growth in deposits would able to protect margin and hence profitability. Post result we like SBI, Union Bank and

UCO Bank due to their structural improvement in balance sheet, operating and financial metric

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

Narnolia Securities Ltd,

India Equity Analytics aily Fundamental Report on Indian Equities


2/21

Infosys

1M 1yr YTD

solute 4.5 30.4 53.1

l. to Nifty 0.8 21.6 49.4

Current 2QFY14 1QFY14

omoters 15.94 15.94 16.04

40.65 39.93 39.55

15.35 16.16 18.28

hers 28.06 27.97 26.13

Financials

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

Revenue 13026 12965 0.47 10424 25.0

EBITDA 3258.9 2836.9 14.88 2677 21.7

PAT 2874.9 2406.9 19.44 2369 21.4

EBITDA Margin 25.0% 21.9% 310bps 25.7% (70bps)

PAT Margin 22.1% 18.6% 350bps 22.7% (60bps)

evious Target Price 3620

side 3%

ange from Previous 8%

"Meritocracy to growth"

MP 3793

rget Price 3910

Focus on m eri tocracy for cl ient sat isfact ion as wel l as margin expansion;ompany update BUY

wk Range H/L 3847/2190

kt Capital (Rs Crores)

ock Performance

erage Daily Volume

year forward P/E

Rs, Cro

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

E Code 500209

E Symbol INFY

are Holding Pattern-%

1240448

fty 6221

217810

Cost Rationalization: Companysemployee costs have ballooned very rapidly in the la

2-3 years. For example, on-site compensation was 36% of the overall revenue in FY

and it went up to 46.3% in FY13, Overall employee cost on sales increased fro

52%(FY09) to 56% (FY13). Company has hired a number of employees at higher salar

outside India and employees are not adding efficient growth in productivity.

Improving utilization level:Comparing with other peers, its utilization level (excludi

trainees) declined from 80% in FY11 to 74% in FY13. Post NRN entry, company hhiked offshore wage at the rate of 8% and overseas at 3%. We expect that compan

management could decide for wage hike across onsite as well as offshore to enhance

utilization rate in near term.

View and Valuation:Infosys seems to be on its way to rediscovering its past mojo w

revenue momentum kicking, and the NRN invisible hand in play. Further announceme

of strategic acquisitions, better utilization of cash balances, better deal win, consiste

client traction and revenue momentum would help the company to bridge the gap w

rivals such as TCS.

On an ongoing basis, Infosys will retain its revenue acceleration and margin expansio

also operating metrics will turn into greenery from hay. Upgradation of earni

guidance by management hinted to join the party to enjoy with 12-14% earnin

growth for FY14E like other top bellwether. At a CMP of Rs 3793, it trades at 17.

FY15E earnings. We retain ourBUY view on the stock with a target price of targ

price of Rs 3910 .

arket Data

In the recent webcast, Mr. Narayan Murthy expressed its view regarding senior lev

exits from the company. In near term, non-performers in Infosys could be asked

leave or may hand over layoff notices. Despite high salaries, some identifi

employees are not contributing so much to improve productivity and efficiency

operations. Already, the restructuring initiatives has taken place at the top of t

pyramid and now shifted to mid level of pyramid. Hence, its pink slip strategy indicat

to regain its growth and margin in near term.

Considering the strategy to build clients relation, execution of growth oriented pol

and combination of reduced onsite costs and higher utilization would be an optimis

growth story despite recent hiccups of top management exit.

Key takeaways from recent webcast;

Restructuring at middle management: Mr. Murthy has taken initiatives to impro

cost efficiency and effective delivery system. The management has rewarded the t

performers and has given an opportunity to mediocre performers. Its PIP (performanImprovement Program) followed by exam, and appraisal would dictate the level

efficiency for mediocre, and the situation of involuntary attrition.

"BUY"4th March' 14



3/21

(Source: Company/Eastwind)

Infos s.

mployee cost on sales-%

Employee cost on sales at all time high


tal Employee and additions,

Looking to bring in about maximum 6,0

off-campus offers, Infosys will hire up

16,000 engineers next year.



The Company's Utilization is likely

keep inching up, which could lead

margin expansion for a couple

quarters and that is going to be a hu

positive for Infosys as a company.

eadcount Metrics: Its attrition increased to 18% fro

17.3%(2QFY14) on LTM basis, howev

on sequentially basis they have been ato control its attrition. we hope that t

further salary hikes across the board w

bring down the attrition levels go

forward.


ilization:



4/21


Infos s.

nancials

(Source: Company/Eastwi

y facts from Management Interview;

Management upgraded its earning guidance for FY14E from 9-10% to 11.5-12%. This

idnace means the company only has to achieve flat growth in the fourth quarter to

eet the projection.

With 85% of the companysrevenues coming from clients based in US and Europe, the

mpany should hope the current economic recovery in developed countries would help

revenues.

They are seeing confidence coming back from clientsmetrics. However, they expect

heir] budgets only remain stable from last year. Clients are still focused on cost.

The Company is looking to bring in about maximum 6,000 off-campus offers starting

te January early February, so there is a lot of activity going on that is bringing people in,

gaging and developing.


s in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

ales, INR 22742 27501 33734 40352 50330 59631

mployee Cost 12085 14856 18340 22565 28185 33691

Other expenses 2792 3677 4671 6254 8556 10734

otal Expenses 14877 18533 23011 28819 36741 44425

BITDA 7865 8968 10723 11533 13589 15206

Depreciation 905 854 928 1099 1371 1624

Other Income 982 1211 1904 2365 2567 3578

BIT 7942 9325 11699 12799 14785 17160

nterest Cost 0 0 0 0 0 0

BT 7942 9325 11699 12799 14785 17160

ax 1681 2490 3367 3370 3992 4633

AT 6261 6835 8332 9429 10793 12527

Growth-%

ales 4.8% 20.9% 22.7% 19.6% 24.7% 18.5%BITDA 9.3% 14.0% 19.6% 7.6% 17.8% 11.9%

AT 4.6% 9.2% 21.9% 13.2% 14.5% 16.1%

Margin -%

BITDA 34.6% 32.6% 31.8% 28.6% 27.0% 25.5%

BIT 34.9% 33.9% 34.7% 31.7% 29.4% 28.8%

AT 27.5% 24.9% 24.7% 23.4% 21.4% 21.0%

xpenses on Sales-%

mployee Cost 53.1% 54.0% 54.4% 55.9% 56.0% 56.5%

Other expenses 12.3% 13.4% 13.8% 15.5% 17.0% 18.0%

ax rate 21.2% 26.7% 28.8% 26.3% 27.0% 27.0%

Valuation

MP 2615 2765 2865 2400 3793 3793

No of Share 57.4 57.4 57.4 57.4 57.4 57.4NW 23049.0 25976.0 31332.0 37994.0 45629.8 54797.5

PS 109.1 119.0 145.1 164.2 188.0 218.2

VPS 401.7 452.4 545.6 661.7 794.7 954.3

oE-% 27.2% 26.3% 26.6% 24.8% 23.7% 22.9%

Dividen Payout ratio 25.1% 45.9% 24.0% 45.1% 23.0% 19.8%

/BV 6.5 6.1 5.3 3.6 4.8 4.0

/E 24.0 23.2 19.7 14.6 20.2 17.4


5/21

Powergr ..

95

118

NA

25%

NA

532898

49490

22270

6277

1M 1yr YTD

solute 8.2 9.5 8.1

l. to Nifty 9.5 3.8 4.0

3QFY14 2QFY14 1QFY14

omoters 57.9 57.9 69.4

25.4 19.4 14.7

8.6 8.8 7.6

hers 8.2 13.9 8.3

View & Recommendation

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY1

Revenue 3685 9.4 -7.9 3369 399

EBIDTA 3105 6.0 -8.4 2930 338

Net Profit 988 -8.5 -16.9 1080 118

EBIDTA% 84 -3.1 -0.6 87 8

NPM% 27 -16.3 -9.8 32 3(In Cr

The Central Electricity Regulatory Commission (CERC) issued the final tariff regulations fo

the period FY15-19these regulations form the basis of Power Gridsearnings (regulate

returns) from its core transmission business over the next five years.The Key take away

of these Regulations are Normative TAF (NATAF) for incentives lowered; no incentive fo

TAF >99.75% .Normative O&M charges raised (vs. draft), but still below FY14 levels.

E Code

POWERGRIDE Symbol

wk Range H/L


116/87


ock Performance-%


yr Forward P/B

Source - Comapany/EastWind Research

The stock is trading at 1.7x FY15E BVPS. We estimate to Power grid stock to trade at 1.8

BVPS. Valuation is very reasonable for a business model with RoE (16%), strong growt

visibility and minimal operational risks. We valued stock for a 12 month period at a targe

price of Rs.118.

Power Grid's Raichur-Solapur line has been connected to national grid. Management Say

there were four trippings in the first week. Two were to increase reliability and wer

done intentionally, and the other two were because of a few glitches. For the last montthere has been no tripping.

With equity dilution overhang on the stock is removed, so we expect the stock price wi

drive by purely on its fundamentals, on our estimates we maintain a positive fundamenta

outlook for Power grid. Also, govt. stake coming down to 58% is a positive, as risk o

further equity dilution is reduced

Capitalisation of assets remains on track. Till Jan end the company has capitalised R

118bn of assets which is 70% of our full year estimate. Since last two months of the yea

usually account for the bulk of yearly commissioning we are confident that the co. will mee

our estimate of Rs 170bn for FY14.

Strong Capitalization :Power Gridsadjusted PAT increased 4.3% YoY to Rs. 1,043 cror

in Q3FY14 While asset capitalisation was below estimate Rs. 3050 crore, PGC

commissioned another Rs. 3450 crore in January 2014 taking overall capitalisation to R

13000 crore YTDFY14.

Overall revenues increased 9.6% YoY to Rs.3685 crore due to lower than anticipate

capitalisation (Rs.3050 crore) in Q3FY14 . Income increased 6.5%, 10.0% and 121.9% Yo

in transmission, telecom and consultancy income, respectively. Other income decline

9.7% YoY to Rs.116 crore as cash was deployed across various upcoming project

Margins declined 336 bps YoY to 87.4% due to 55.7% YoY rise in transmission & othe

expenses to Rs.333 crore. Tax expenses increased 7.5% YoY to Rs. 399 crore. Q3FY1

included a one-time income of Rs.167 crore as wage revision benefit. Adjusting the same

PAT increased 4.3% YoY to Rs.1,043 crore.

side

ange from Previous

fty

pdate BUY

arket Data

erage Daily Volume (Nos.)

MP

rget Price

evious Target Price

"Buy"3rd march' 14



6/21

V- IFGL Refractories Ltd.

MP 62

rget Price 80

evious NA

side 29%

ange from 0%

E Code 532133

E Symbol

wk Range 24/68

kt Capital 214

erage Daily 6,366

fty 6,277

1M 1yr YTD

solute (0.5) 75.7 100.2

l. to Nifty (3.6) 68.5 89.7


omoters 71.3 71.3 71.3

0.0 0.0 0.0

2.2 2.2 2.2

hers 26.5 26.5 26.5

Financials Rs, Crore

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

Revenue 194.7 201.4 -3.3% 169.0 15.3%

EBITDA 27.2 29.9 -8.8% 18.3 48.5%

PAT 14.3 19.1 -25.2% 9.5 50.3%

EBITDA Margin 14.0% 14.8% (80) bps 10.9% 310 bp

PAT Margin 7.4% 9.7% (230) bps 5.1% 230 bp

Valuation :

Low leverage balance sheet and attractive valuations augurs well :

IFGL reported debt equity ratio of 0.35x in Sep FY13, even after the series of acquisitions, and

expect it to gradually reduce over time to 0.28x in FY15E.Company having an uninterrup

dividend paying record for the past four years. Promoters holding more than 70 % stake (

pledged) in the company and another 7 % is held by large investors. At a time the steel indus

is showing revival, We expect IFGL will report its best ever performance in this full ye

Considering industrysimproving prospects, stabilization of production from its newly built pl

at Kandla SEZ and out performance of company in its financials, We dontexpect any scope

(Standalo


(Source: Company/ Eastwind Research)

At CMP of INR 62, IFGL is trading at P/E of 3.7x and 3.2x its FY14E and FY15E earnings. Compa

can post the EPS of Rs 16.8/18.6 in FY14/15E and RoE% of 20.3%/19.2% in FY14/15E . We rat

BUY rating on the stock with an 12 months price target price of Rs 80.0 at 4.1x FY15E earnings.

IFGL refractories is the flagship company of SK Bajoria group.Company manufactur

Continuous Casting Refractories and Special grade Refractories which find applications in st

industry. IFGL has grown as an Indian multinational with manufacturing facilities located

Brazil, China, Czech Republic, Germany, India, UK and USA. Krosaki HarimaCorporation Japasubsidiary ofworlds second largest steel maker NipponSteel Corporation holding about 1

stake in IFGL. The company has a lot of subsidiaries with the ones in US and Germa

seemingly doing well. For the latest December quarter,on a consolidated basis comp

reported a Sales of Rs. 195.7 Cr v/s Rs. 168.9 Cr. Net profit improved sharply from Rs. 9.5 C

Rs. 14.3 Cr. For 9 Month period EPS is Rs. 13.9 which is more than the full year figure of Rs.

of last year. We expect IFGL will report its best ever performance in this full year. Consider

industrys improving prospects, stabilization of production from its newly built plant at Kan

SEZ and out performance of company in its financials, Wedont expect any scope for d

correction, hence recommending a BUY.

"Strong Fundamentals..."

esult update

yr Forward P/B


ock Performance-%

arket Data

IFGLREFRAC

Buy

Industry revival to spur growth :

Fate of refractory companies closely related with the growth of steel industry. Now steel indusworld around showing some earlier signs of revival.As a global player ,IFGL is expected to

immense benefit from this revival.Its technical collaboration and equity participation with one

the world leaders also helping the company to adopt latest technology in manufacturing proce

A major portion ofcompanysincome is from exports and the currency valuation of currenc

also positive for it. Steel industry in the US and in Europe is coming out of pro-longed recess

and demand in India is also expected to pick up on account of major projects getting start

Increase in capital expenditure for capacity expansion by major steel producers both within In

and internationally augurs well for the refractory industry

"Buy"

3rd Mar' 14



7/21


FGL Refractories Ltd.

y financials :

urce: Company/ Eastwind Research)


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

Performance

Revenue 398 415 471 604 671 772 888

Other Income 2 3 5 3 4 3 3

otal Income 401 419 476 607 676 776 891

BITDA 27 58 43 75 58 106 120

BIT 20 50 34 62 45 89 103

Depriciation 7 8 9 13 13 17 17

ntrest Cost 10 5 6 7 8 7 7

BT 13 49 33 58 41 85 99

AX 7 15 8 18 16 27 31

Derrivative Loss 0 0 0 0 0 0 0

Reported PAT 6 34 24 40 25 58 68

Dividend 2 2 0 1 2 2 2

PS 1.8 9.7 7.0 11.5 7.3 16.8 19.6

DPS 0.7 0.6 0.0 0.2 0.6 0.6 0.6

Yeild %

BITDA % 6.9% 13.9% 9.1% 12.3% 8.7% 13.7% 13.5%

NPM % 1.5% 8.0% 5.1% 6.6% 3.8% 7.5% 7.6%

arning Yeild % 9.7% 17.6% 22.9% 29.2% 23.7% 27.2% 31.6%

Dividend Yeild % 3.7% 1.1% 0.0% 0.5% 1.9% 1.0% 1.0%

ROE % 5.3% 24.6% 15.0% 19.2% 11.0% 20.3% 19.2%

ROCE% 2.8% 15.6% 8.3% 11.9% 7.1% 14.6% 15.0%

Position

Net Worth 114 137 161 207 231 287 353

otal Debt 100 79 129 127 129 110 100

Capital Employed 214 216 290 335 360 397 453

No of Share 3 3 3 3 3 3 3

CMP 18 55 31 39 31 62 62

Valuation

Book Value 32.8 39.6 46.6 59.9 66.7 83.0 101.9

/B 0.5 1.4 0.7 0.7 0.5 0.7 0.6

nt/Coverage 2.1 11.1 5.7 9.1 5.6 12.2 14.1

/E 10.3 5.7 4.4 3.4 4.2 3.7 3.2


8/21


In our coverage universe, banks NII grew by 15.7% YoY largely due to stable marg

and loan growth. Private sector banks are getting benefit from their high base CAS

franchise and low share of high cost wholesale bulk deposit. HDFC Bank, ICI

Bank, Indusind Bank and DCB were continued to report 20%+ NII growth where

Federal Bank, INGVYSYA Bank, J&K Bank saw some stress in their earnings.

Asset quality continues to persist and would take time despite of uptick in

economy

Private Sector Banks Result Review 3QFY14

Better than expected NII on the back of margin expansion and loan growth

Private sector banks delivered better when compare to PSBs in term of asset quali

at sequential basis. Sequentially banks reported stable asset quality with high

coverage ratio which provided cushion to their earnings. But in our sense, asset

quality pressure continues to persist because economy growth is likely to be tepid

and it will take some time for recovery in domestic industrial activity and corporate

balance sheets leverage to decline. According to S&P, with the uptick in economy,

bank will have take some time for revival as banks have to struggle for capital base

too for further growth but private banks have adequate capital base and healthy tie

1 capital. Outlook of asset quality in system is not positive and it would remain

challenge for banks in FY14.

fty Vs Bank Nifty during Year

Well structure balance sheet led healthy growth at operating profit level

Operating expenses in our coverage universe remained stable on sequential bas

and on very positive note; they delivered on an average basis growth of 19.8% Yo

at operating profit level. This was due to healthy NII growth, stable fee income a

controlled operating leverage. We have highlighted above that banks with healt

operating profit would do better going forward as strong performance at operati

profit level would be possible only in case of well structure balance sheet growEconomic growth and stress in asset quality issue would be resolve with the passa

of time. Although we have not seen any revival in economy nor improvement in ass

quality in near term but private sector banks are trading significant discount

against their historical valuation due to possible fear of deterioration in assets.

Profitability increased due to healthy NII growth, controlled CI ratio and stable

asset quality

Most of banking stocks are trading at lower side of valuation band due to earnin

pressure, higher operating leverage and asset quality. In our coverage univers

bank reported profit growth of 16.6% YoY higher than our expectation led by marg

expansion, controlled operating leverage and stable asset quality. Although we sa

some earnings pressure in many large and mid cap banks on which Axis ban

profitability was boost up by right back of investment depreciation and Yes Ban

provisions and contingencies was almost down by 100% which inflated profit grow

by 21.4% YoY.



9/21

ell structure balance sheet growth and high CASA base would help to keep

ofitability up

esult Snapshot

Private Sector Banks Result Review 3QFY14

e like those banks which did well at operating profit level, keeping in mind that with

ower pace of economy growth and rising interest rate scenario, asset quality pressure

ould persist. Provision and contingencies are already expected to remain high. Most ofanks profitability was down owing to higher provisions against loan loss. With the

covery in economy loan growth and asset quality would improve with the passage of

me but operating leverage and margin expansion are permanent structure of balance

eet. Banks with strong CASA base and adequate deposits growth that could support

an growth easily without depending upon external fund would do better in going

rward.utlook

ivate Banks are trading at significantly lower to their historical valuation or reasonable

luation due to their possible earnings pressure and asset quality issue. This is on

ccount of sluggish economic growth and political un-clarity. Some banks in our universe

e capable to generate high level of profit, have high capital adequacy ratio and lower

vel of stress. In our sense these banks would do better in current economy macro

uation. Out top picks are HDFC Bank, ICICI Bank, Indusind Bank and DCB.



NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Pr

ISBANK 2984 2615 1604 2937 2750 1362 2495 2311 1296 19.6 13.2 23.8 1.6 -4.9 1

B 198 135 89 190 141 84 163 131 85 21.2 2.8 4.8 4.0 -4.5

B 94 46 36 91 40 33 72 32 27 30.5 44.9 34.7 3.3 15.9 1

HANBANK 57 -8 -119 82 18 -1.85 74 14 4 -23.6 -154.4 -3084.3 -31.1 -142.3 635

DERALBNK 546 356 230 548 354 226 497 394 211 9.8 -9.7 9.1 -0.4 0.5

DFCBANK 4635 3888 2326 4477 3387 1982 3799 3024 1859 22.0 28.6 25.1 3.5 14.8 1

CIBANK 4256 4440 2533 4044 3888 2352 3499 3452 2250 21.6 28.6 12.6 5.2 14.2

DUSINDBK 730 647 347 700 588 330 578 472 267 26.3 37.2 29.9 4.3 10.1

GVYSYABANK 416 274 167 440 276 176 403 263 162 3.3 4.3 3.3 -5.4 -0.6 -

KBANK 647 441 321 682 496 303 594 435 289 8.9 1.3 11.2 -5.2 -11.1

RURVYSYA 305 153 107 298 157 83 308 212 113 -0.9 -27.8 -5.5 2.4 -2.6 2

UTHBANK 350 216 141 364 212 127 353 235 128 -0.7 -8.1 10.4 -3.7 1.8 1

SBANK 665 615 416 672 713 371 584 563 342 13.9 9.2 21.5 -1.0 -13.8 1

tal 15882 13818 8198 15525 13020 7427 13419 11538 7033 18.4 19.8 16.6 2.3 6.1 1

QoQ Growth

RIVATE BANK

3QFY14E 2QFY14 3QFY13 YoY Growth


10/21

IT Industry: 3QFY14 results review

Key takeaways from 3QFY14 earnings:

ice performance of our coverage:

(Source: Eastwind)

For IT Industry, 3QFY14 has carried out a quarter of mix set of numbers largely impact

by seasonality and furloughs impact. However, most of companies expressed

sanguine view for industry outlook and demand discretionary environment ahead. T

Top-4 companies responded a decent set of performance despite seasonally we

quarter with aggregate revenue of 2.8% in USD term (QoQ).

Comparing with street expectation, Infosys and HCL Tech beat the street, while TCS a

Wipro reported inline set of numbers. On margin front, they surprised positively w

back-to-back quarters of margin improvement led by operational efficiencies and co

rationalization.

USD revenue was marginally inline and Positive FY15E outlook:Reported USD revenu

were in line or very marginally below our estimate during the seasonally weak quart

across the top tier. A part of this, companies management have given better outlook w

margin expansion for FY15E, even NASSCOM aired the earning guidance of 13-15% f

FY15E, better than FY14E and FY13.

(Source: Eastwind)

dex Performance:

(Source: Eastwind)

"Clear acceleration in growth"

(Source: Eastwi


Post earnings, almost all companies management have expressed for better earnin

outlook in near term and they were confident to see stronger FY15E than FY14E

healthy growth prospect and a secular improvement in demand trend.

Margin ramped up across the Tier-1 and most of mid cap space:Despite flattish curren

benefit, companies have been efficient to maintain its margin because of reinvest

higher growth and efficient strategy to improve utilization. With macro improving a

positive growth outlook, the operating advantage from investment is likely beginning

play out.SMAC and Digital were subject to discussion: Emerging verticals SMAC (Social, Mobili

Analytics and Cloud) and Digital transformation are expected to bring next generation

growth in IT Industry. A number of IT companies, especially tier-1 IT companies ha

expressed its priority area and strategy to pan-out growth opportunities on the

emerging verticals. Current uptrend in discretionary spend is being driven by the same.

Deal Pipeline remains healthy:During the quarter, weak seasonality marginally impact

order inflow. For near term, deal pipeline remains healthy and somehow, Pricing will

marginally under pressure in the traditional IT segment, Application Development a

Management segment. While, we do not see any pressure on new emerging segments l

SMAC, Digital, Infra, etc.

Earning Performance v/s Estimates;

Mix performance and margin sustainability, future outlook appears positive;


TCS

WIPRO

CMC

INFY MINDTREE

HCLTECH HEXAWARE

TECHM NIITTECH

ZENSARTECH PERSISTENT

TATA ELXSI ECLERX KPIT

Outperform Inline Underperform

9.4%

43%


11/21



ompanies Specific Earnings Review

er-1 ; The top four IT companies delivered a decent performance in a seasonally soft quarter with an aggregate revenue growth

8% QoQ. INFY and HCL Tech beat the street on growth and margin front, while TCS and Wipro reported inline set of numbers.

id cap/Niche (Tier-2)-TECHM and Persistent outmatch peers;TECHMs broad based revenue growth and deal signing was robu

ersistent system surprised positively on margin front for the second consecutive quarter led by higher utilization. Apart of th

nsar Tech also reported good margin ramp up during the quarter. As a backbencher, KPIT, NIITTECH and Hexaware reported flat

low expected numbers.

rowth and Margin Performance-%

(Source: Company/Eastwin

*Infosys (net profit for 2QFY14 includes the one-time visa charge of Rs219 crore).

# HCL Technologies (June year ending). $ Hexaware (Follow Callendar year)



3QFY13 2QFY14 3QFY14E 3QFY14 3QFY13 2QFY14 3QFY14E 3QFY14 3QFY13 2QFY14 3QFY14E 3QFY14CS 16069.9 20977.2 21606.6 21294.0 4660.5 6633.0 6300.3 6686.8 3549.6 4633.3 5096.7 5333.4

FY* 10424.0 12965.0 13069.1 13026.0 2677.0 2837.0 3424.1 3258.9 2369.0 2407.0 2695.8 2874.9

IPRO 9587.5 10990.7 11342.4 11327.4 2050.2 2503.8 2552.0 2652.7 1598.1 1932.0 1984.2 2014.7

CLTECH# 6273.8 7961.0 8160.0 8184.0 1416.6 2093.0 2080.8 2125.0 974.3 1416.0 1472.6 1495.0

CHM 3523.7 4771.5 4819.2 4898.6 756.9 1110.9 1084.3 1136.3 455.9 718.2 754.1 1009.8

MC 493.0 560.8 566.4 561.0 83.2 88.4 87.8 90.8 61.1 67.3 65.6 70.6

INDTREE 590.1 769.5 792.2 790.6 120.4 159.8 153.9 154.1 87.7 113.0 98.6 114.0

EXAWARE$ 507.5 621.1 629.2 620.0 109.0 147.7 147.9 139.4 66.2 98.7 103.6 103.3

ITTECH 514.4 587.3 593.5 587.3 81.3 88.6 86.1 95.1 56.6 60.4 57.4 52.5

PIT 563.3 702.8 722.0 677.9 87.9 108.1 115.5 103.5 59.9 66.7 69.4 60.8

ERSISTENT 333.0 432.4 436.1 432.8 82.4 100.8 104.7 104.3 49.5 60.8 66.9 64.2

NSARTECH 525.5 599.7 590.6 594.1 70.1 102.5 87.5 87.3 48.7 70.6 50.4 50.8CLERX 170.8 214.6 218.5 219.5 66.8 92.8 90.5 88.8 49.8 67.2 61.4 62.3

ATA ELXSI 156.7 190.0 195.5 200.1 16.5 32.4 40.4 43.6 8.8 19.9 20.5 21.6

ompanySales,cr EBITDA,cr PAT,cr

Sales EBITDA PAT Sales EBITDA PAT EBITDA PAT EBITDA PAT

CS 1.5% 0.8% 15.1% 32.5% 43.5% 50.3% 31.4% 25.0% (20bps) 290bps

FY 0.5% 14.9% 19.4% 25.0% 21.7% 21.4% 25.0% 22.1% 310bps 350bps

IPRO 3.1% 5.9% 4.3% 18.1% 29.4% 26.1% 23.4% 17.8% 60bps 20bps

CLTECH 2.8% 1.5% 5.6% 30.4% 50.0% 53.4% 26.0% 18.3% (30bps) 50bpsECHM 2.7% 2.3% 40.6% 39.0% 50.1% 121.5% 23.2% 20.6% (10bps) 560bps

MC 0.0% 2.7% 4.8% 13.8% 9.1% 15.5% 16.2% 12.6% 40bps 60bps%

INDTREE 2.7% -3.6% 0.9% 34.0% 28.0% 30.0% 19.5% 14.4% (130bps) (30bps)

EXAWARE -0.2% -5.7% 4.7% 22.2% 27.9% 56.0% 22.5% 16.7% (130bps) 80bps

ITTECH 0.0% 7.3% -13.1% 14.2% 17.0% -7.2% 16.2% 8.9% 110bps (130bps

PIT -3.5% -4.3% -8.8% 20.3% 17.7% 1.5% 15.3% 9.0% (10bps) (50bps)

ERSISTENT 0.1% 3.5% 5.6% 30.0% 26.6% 29.7% 24.1% 14.8% 80bps 80bps

ENSARTECH -0.9% -14.9% -28.0% 13.1% 24.5% 4.3% 14.7% 8.6% (240bps) (320bps

CLERX 2.3% -4.3% -7.2% 28.5% 32.9% 25.2% 40.5% 28.4% (280bps) (290bps

ATA ELXSI 5.3% 34.6% 8.5% 27.7% 164.4% 146.9% 21.8% 10.8% 470bps 30bps

Margin Change,(QoQompany

Growth (QoQ)-% Margin-%Growth (YoY)-%


12/21


scretionary spends continue to gain

omentum in America and in specific

ockets in Europe.

Operating Metrics across Tier-1 IT space

Sales mix- Geogrpahy wise

Sales mix- Segment wise

uring the quarter, manufacturing

gment reported attractive growth.

hilea mong service offerings,

frastructure Management Services

MS) will be a key growth driver.




Utilization Rate-%



Attirition rate-%

mployee Addition;


TCS INFY WIPRO HCLTECH

tal Employee 290713 158404 146402 88332

oss Addition 14663 6,682 -814 7593


13/21


(6) CMC

-CMC continues to target growth ahead of the overall IT industry; the company expects

grow faster than that in the current financial year.

-Expects operating Profit margin at 16 percent for FY14E,

(5) TECHM

-The Company aspires revenues of USD 5 billion by 2015. This expects to be throu

organic and inorganic initiatives (looking for USD 0.5 billion to 0.8 billion as acquisiti

targets) going forward.

-Expecting utilisation rate to 77% from 75%(3QFY14) in near term.

-The tax rate expected to be 26% for the FY'14.

-Year 2014 would be better year than FY13, demand environment and Order pipeline

looking good.

-The company expects to see margin at a range of 21-22% in near term.

-The company is expecting to catch up more deal from US and Europe because of bett

demand environment ahead.

-The wage hike is spread over two quarters or rather more than two quarters. Q3 and Q

margin could be impact be 30bps.

-Hiring target for FY15E would be like FY14, will focus on onsite hiring.

-Wage hike by 1st June ,2014.

(4) HCLTECH:

-Chasing 20-25 large transformational deals,

-Seeing an uptick in discretionary spends,

(3) WIPRO

-Expect better FY15E than FY14.

-4QFY14: Revenues from IT Services business to be in the range of $ 1,712 million

$1,745 million* including the revenues from acquisition.

- Lateral hiring 50000-55000 in FY15E,

(2) INFOSYS

-Management upgraded its earning guidance for FY14E from 9-10% to 11.5-12%.

-They are seeing confidence coming back from clients metrics.

-The Company is looking to bring in about maximum 6,000 off-campus offers.


-Despite salary hike in 4Q, margin would be on place. Wage hike in 4Q could impa

200bps in margin front, but management is confident to mitigate.

-The company expects to maintatin its tax regime at 20-20.5% for coming quarter. F

next year tax rate could be stand at a range of 20-21%.

-Companys hiring Plan; a net addition of 400-500 this year.

Key Takeaways from Conference Call;

(1) TCS

- Confident of beating NASSCOM's FY15 growth guidance of 13-15%, -FY15E will be better than the current fiscal,

-Expect Europe to perform better than the US,



14/21


-Expect to see similar set of environment in FY 15E than FY14.

-Tax rate is expected to see at 23% mark in FY15E.

-It continues to look at inorganic opportunities.

- Expects to maintain 51% of payout ratio.

-Management expects the strong traction in top 10/20 clients to continue.

-Management expects to see better revenue growth in 4QFY14E than 3QFY14.

-The company is making significant changes in organization structure.

-The billing rates expected to be flat to slight uptick for the FY15E.

(12) KPIT

-Margins are expected to improve going forward as the one off during the quarter will

absent.

-Utilization will also go up as revenue growth is realized on the back two deals won th

quarter which have a duration of 12 months.

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

forward.

(11) MINDTREE

-Company expects to maintain operating margins at current levels in the near/mediu

term

-Management has expressed its margin at a range of 16-17%

(7) PERSISTENT SYS

- Persistent is confident of doing more than 15% revenue ($) growth forFY14E.

-They expect to maintain margin at 24-25% for FY14E.

-Expects 20-21% growth in the next year from IP led business, which in turn will helpimprove margins going forward.


-It expects the growth momentum will sustain with holding the margins going forward.

(9) ZENSARTECH

-Expects 4QFY14E revenue performance to be better than both 4QFY13 reven

performance (+2.8% QoQ) as well as 3QFY14 revenue growth (+2.5% QoQ).

-The company is optimistic to see more deals on SMACS and IP led business.

-Company expects FY14 to be better than FY13 with respect to both revenue growth an

EBIT margin.

(10) ECLERX

-Managent is very confident to maintain attrition at 12-13% and utilization at 77-80% in

near to medium term.

(8) NIITTECH

-The Companys focus on newer technologies like cloud, analytics, mobility and digital

transformation are gaining traction.

- It expects double-digit growth in the Enterprise Services business for the FY15 on the

back of healthy pipeline.

- It anticipates good growth from the IMS for the FY'15.



15/21


ew and valuation:

Industry Outlook:We have seen a significant increase in global technology spending this year, creati

opportunities for the Indian software services sector to post double-digit growth again

export as well as in the domestic markets. FY15E promises to be bigger and stronger ththe last 3 years, which were marked by bloodbath in global markets due to Euro-zo

crisis and falling consumer confidence in the US. Demand is set to pick up in sectors li

BFSI, healthcare, retail and transportation globally in the year ahead.

For FY15E, We expect that strong fundamentals should help to sustain earn

momentum in FY15E. Foray into niche verticals and executions of large deal would play

important factor for better earning visibility in near future. There is a window

opportunity for competent large caps and midcaps to displace incumbents and gain som

incremental business. In the past 4 quarters, large caps (four companies) have grown

3.4% CQGR, while midcaps (five companies) at 3.2%which is comparable to larger peers.


Hence, with strong medium term earnings visibility, better demand environment a

optimistic management comments, we maintain our positive stance on (In order

preference) TECHM, PERSISTENT, ZENSARTECH, ECLERX and KPIT under mid cap space.

r FY15E, NASSCOM expects IT exports

grow by 13-15% and domestic market

grow by 9-12% based on broad

edback loop from companies and

ptives.

S Immigration Bill to remain an

erhang in short-to-medium term,

CS and HCLT are growing the fastest

d with tremendous margin

rformance. Infy is accelerating growth

Our top picks:

Concerns:However, hardening of regulatory related to visa approval in USA, Canada and Austra

could spoil the party. Even, the approval of Immigration Bill attached with higher visa fe

wage requirements and enhanced audit by US agencies could turn the growth story

Indian IT players adversely. If passed in its current form, the Bill could hurt the margins

the Indian IT export sector, which derives almost 55-60% of its revenues from USA.

While all companies are accelerating its revenue growth and shaping up its marg

because of favorable demand and supply environment. Across the tier-1 IT space, T

INFY and HCL TECH remain our best picks in order of our preference. These compan

are very much optimistic to improve margin as well as operational efficiencies w

healthy deal pipeline across emerging verticals as well as traditional IT Space und

positive demand scenario.


CMP Upside

(26.02.14) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15

CS 2182.4 BUY 2510 15.0% 71.82 95.00 109.31 30.39 22.97 19.97 36.4% 37.5% 34.

FOSYS 3803.85 BUY 3910 2.8% 164.2 188.0 218.2 23.16 20.24 17.44 24.8% 23.7% 22

CLTECH 1572.9 HOLD 1560 -0.8% 58.10 79.36 98.11 27.07 19.82 16.03 30.7% 31.5% 29.4

IPRO 603.35 NEUTRAL - - 25.0 31.1 33.5 24.09 19.42 18.01 21.7% 22.7% 20.

CHM 1821.65 BUY 2130 16.9% 123.97 155.37 175.50 14.69 11.72 10.38 34.8% 30.7% 26.

MC 1450.4 NEUTRAL - - 75.3 86.0 92.4 19.27 16.86 15.70 24.1% 22.8% 20.

ITTECH 446.4 HOLD 443 -0.8% 36.28 43.33 54.18 12.30 10.30 8.24 20.0% 19.4% 19.6

PIT 174.9 BUY 177 1.2% 10.8 12.6 16.8 16.19 13.85 10.40 20.1% 19.3% 20.

EXAWARE 165.85 NEUTRAL - - 13.90 15.04 16.01 11.93 11.02 10.36 27.4% 24.9% 22.5

ERSISTENT 1119.25 HOLD 1065 -4.8% 46.1 61.4 79.1 24.27 18.22 14.15 18.1% 20.3% 21.

CLERX 1341.05 BUY 1358 1.3% 64.25 71.61 83.65 20.87 18.73 16.03 43.8% 37.9% 34.4

ATAELXSI 518.65 NEUTRAL - - 10.6 24.0 28.4 48.79 21.59 18.29 16.9% 29.7% 27.

NSARTECH 387.2 BUY 440 13.6% 40.03 52.70 68.97 9.67 7.35 5.61 23.2% 24.5% 25.2

INDTREE 1632.7 NEUTRAL - - 89.7 100.9 114.9 18.20 16.18 14.21 28.4% 25.6% 23.

RoE-%ompany View Target

EPS-Rs P/E-x


16/21

Profitability declined led by higher operating expenses, higher provisions and

creation of DTL special reserve

Earnings growth of Public Sector Banks (PSBs) are remained weak largely due

higher operating expenses led by employee provisions and surged in provisions a

contingencies and higher tax provision for DTL special reserve as per RB

suggestion. In our banking coverage universe, profitability declined by 27% YoY a

11.5% QoQ. UCO Bank reported 208% YoY growth while Andhra Bank de-grew

82% YoY.

fty Vs Bank Nifty during Year

oan (Rs tn) and YoY Gr(%)

Asset quality deterioration sequentially on account of tight liquidity condition

and rising interest rate

Most of PSBs reported 10 to 20% deterioration in asset quality sequentially wh

United BanksGNPA and net NPA were 11% and 7.5% of gross advance and n

advance respectively and fresh slippages were 16% (annualized). On slippage fro

some banks like PNB, Bank of Baroda, Union Bank and UCO bank showed som

strength. But in tight economy condition and rising interest rate scenario, ass

quality pressure would continue. Banks with higher coverage ratio would

protected. PNB and Bank of Baroda are in better place and their manageme

commentaries reflect some confidence on asset quality issue.

Public Sector Banks Result Review 3QFY14

Moderate NII growth in the system due to muted loan growth

Operating profit of our universe was declined by 1.5% YoY on the back of high

cost against employee provisions, operating cost and non supportive other incom

Most of PSBs were reported negative growth in their other income led by low

corporate fee income. In our universe ALBK, Bank of India and UCO bank report

healthy operating profit. But we have not seen improvement of operating metricsthese banks. Operating leverage of PSBs bank has been increasing led higher wa

provisions and branch expansion.

Lower operating profit on account of higher wage settlement provisions and

cost related to branch expenses


Net interest income of our universe grew by 10.4% YoY on the back of marg

expansion on YoY basis along with moderate to healthy loan growth. In our coverauniverse, Bank of India and UCO Bank were reported healthy NII growth where

Andhra Bank reported 10.6% YoY declined in NII. SBI reported NII growth of 13 Yo

largely due to loan growth of 17% while margin was declined by 12 bps and flat

QoQ basis.



17/21

Public Sector Banks Result Review 3QFY14


orry about the structure damage of balance sheet, declined profit is not matter

utlookost of PSBs are trading at lower range of valuation multiple owing to absence of core

arnings, operating leverage, deteriorating asset quality and higher amount of restructure

sets that are in pipeline. Most of banking stocks reported moderate revenue and profit

owth owing to multiple headwinds. In near term we are not seeing improvement in

conomic condition and asset quality pressure are expected to remain in the system due

tight liquidity situation and rising interest rate. Post result we like SBI, Union Bank and

CO Bank due to their structural improvement in balance sheet, operating and financial

etrics.

esult Snapshot

e are not worried about the declining trend of PSBs profitability but to worry about the

ructural damage of balance sheet. Most of PSBs were reported moderate to healthy

an growth but their deposits and CASA growth were absent. In rising interest rate

enario, banks with higher low cost deposits would be able to report healthy NII growth

n the back of margin expansion and would absorb operating cost. In our sense, PSBs

ould either have to improve their cost structure or improve deposits franchise to report

owth at operating profit level. On cost structure front, we are pessimist as PSBs have

gher numbers of unproductive employee than private banks and their salary at lower to

ddle level management are no means less than private sector banks. So banks with

gher deposits growth and strong CASA would be able to report healthy growth going

rward. We have buy rating on SBI on the back of its high CASA base and reasonable

luation despite of banks profitability was declined by 34% YoY.


U BANKS NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Profit NII PPP Net Pro

BK 1336 1008 325 1309 1154 276 1330 860 311 0.4 17.2 4.7 2.0 -12.6 1

DHRABANK 868 522 46 1045 643 71 971 712 257 -10.6 -26.8 -82.3 -16.9 -18.9 -3

NKBARODA 3057 2197 1048 2895 2125 1168 2841 2256 1012 7.6 -2.6 3.6 5.6 3.4 -1

NKINDIA 2719 2144 586 2527 2102 622 2308 1856 803 17.8 15.5 -27.0 7.6 2.0 -

NBK 2191 1425 626 2191 1425 626 1988 1516 714 10.2 -6.0 -12.3 0.0 0.0

NABANK 661 371 68 107 369 625 615 443 206 7.5 -16.3 -67.1 517.7 0.5 -8

B 1398 961 75 1452 791 133 1382 1017 116 1.2 -5.5 -35.3 -3.7 21.5 -4

IENTBANK 1230 858 224 1281 825 251 1204 926 326 2.2 -7.3 -31.2 -3.9 4.0 -1

B 4221 2702 755 4016 2535 505 3733 2682 1306 13.1 0.8 -42.2 5.1 6.6 4

N 12641 7618 2235 12251 6312 2375 11154 7791 3396 13.3 -2.2 -34.2 3.2 20.7 -

NDIBANK 1359 806 380 1411 811 470 1400 864 508 -3.0 -6.8 -25.2 -3.7 -0.7 -1

OBANK 1566 1137 315 1569 1166 400 1177 831 102 33.0 36.8 208.4 -0.2 -2.5 -2

IONBANK 1964 1262 349 1954 1225 208 1891 1358 302 3.8 -7.1 15.5 0.5 3.0 6

AYABANK 495 168 11 705 273 136 456 261 127 8.5 -35.7 -91.0 -29.8 -38.6 -9

al 34369 22170 6717 33404 20601 7590 31120 22513 9175 10.4 -1.5 -26.8 2.9 7.6 -1

3QFY14 2QFY14 3QFY13 YoY Growth QoQ Growth


18/21

SHREE CEMENT.

Profitability and Earning drag may surprise for the next cosecutive quarters.

4772

4791

47910%

NA

500387

16572

4143

6186

1M 1yr YTD

solute 8.2 9.5 8.1

l. to Nifty 9.5 3.8 4.0


omoters 64.8 64.8 64.8

8.2 8.2 8.1

5.9 5.7 5.9 MAT Credit support the buttom line :

hers 21.2 21.3 21.2

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY1

Revenue 1318 -7.7 5.6 1428 124

EBIDTA 271 -24.7 8.8 360 24Net Profit 115 -46.9 -32.9 217 17

EPS 33 -46.9 -32.9 62 4

EBIDTA% 21 -18.4 3.1 25 2

NPM% 9 -42.5 -36.5 15 1(In Cr

1

The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun13.LineX o

similar capacity along with 25MW of WHRS (at the same location) is expected b

Jun14.Twogrinding units of 2m tons each, at Ras and in Bihar,are being constructed an

expected by Jun14.Weexpect Shree to be a 21.5m-tpa company by Jun15.It plans t

foray into high demanding eastern.Total capex for these expansion is Rs.3,000 cror

which is spread over next 2 years.

The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current marke

scenario the price is fare enough to trade.But looking at future capex plans and sluggis

demand we belive the earnings and profitability of Shree cement may fall for the nextwo consecutive quarters.The profitability may fall due to incrising depriciation.Till now

the company's depriciation level is stable but it may surprise further.so we recommen

its a better pic to book profit.

E Code

SHREECEME Symbol

wk Range H/L


5210/3413

evious Target Price

fty

pdate Book Profit


ock Performance-%


yr Forward P/B


On the expansion front :

During the Quarter Company got MAT (minimum alternative tax) credit entitlement o

Rs9.25 crore and deferred tax of Rs1.79 crore. This reduced total tax payable amount t

Rs15.27 crore from Rs26.31 crore.

Volumes grew by18 % but prices came down by 5%. So the EBITDA margin has h

badly:Shree Cement Ltd has reported a 47% fall in its December quarter net profit o

lower sales as well as 5% degrowth in realization. PAT impacted due to lower othe

income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41%

YOY). Volumes grew by18 % to3.8mn ton from 3.3mn ton QOQ. Net profit decreased b

47% yoy from Rs.217.44 crore (Rs.62.42 per share) in 2Q13 to Rs.115.49 crore (Rs.33.1

per share) in 2Q14.Total net income from operations stood at Rs.1318.13 crore in 2Q14

a 6% fall yoy from Rs.1401.23 crore in 2Q13.Other income decreased from Rs.30.2 crorin 2Q13 to Rs.9.9 crore in 2Q14.In the mean time company declares a Rs.10 as interim

dividend/share.

Power Segment: Realization Down By 15% :For power generation the net realization ha

come down from Rs 383 to Rs 334 compared to last year same quarter and in the firs

quarter it was still better at Rs 397.So the power realization is down by 13 percent an

hence sales also have come down by 35 percent to Rs.290 Cr. At the same time 14%

increase in its profitability from power segment to Rs112.56 crore while its cemen

segment reported 79% fall in its profitability to Rs37.65 crore.

arket Data

erage Daily Volume (Nos.)

side

ange from Previous

MP

rget Price

"Book Profit"25th Feb' 14


Mar-02

Oct-02

May-03

Dec-03

Jul-04

Feb-05

Sep-05

Apr-06

Nov-06

Jun-07

Jan-08

Aug-08

Mar-09

Oct-09

May-10

Dec-10

Jul-11

Feb-12

Sep-12

Apr-13

Nov-13

PRICE 1.5x

2x 2.5x

3x 3.5x

4x 4.5x


19/21

utlook :

FY11 FY12 FY13 FY14E

3454 5898 5590 5409

203 163 188 197

3656 6061 5779 5550

905 1500 1513 1409

602 1006 915 1090

2569 4252 4029 4318

885 1646 1561 1091

676 873 436 562

98 235 193 138-99 69 115 54

365 619 1004 478

20.8 23.1 26.1 11.0

19

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

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

e believe although, near term challenges in terms of a slowdown in demand for

ment would remain, strong balance sheet and better efficiency in terms of cost

mains a key positive for this company to overcome challenges.Company Management

bull for the rest two quarters of FY2014 as according to them demand has already

ttom out.We are positive on the stock as it always beats its peers group with lower

perational cost.

he stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market

enario the price is fare enough to trade.But looking at future capex plans and

uggish demand we belive the earnings and profitability of Shree cement may fall for

e next two consecutive quarters.The profitability may fall due to incrising

epriciation.Till now the company's depriciation level is stable but it may surprise

rther.so we recommend its a better pic to book profit.

e recommend book profit at a 11% high,and stay out from the stock for medium

rm,till the triggers hit.

ompany Description :Shree Cement (SCL) is a cement producer operating in the two

gments cement and power. As of June 30, 2012, the company had a cement capacity

13.5 million tonnes per annum (MTPA) and power capacity of 560 MW. The

mpanysbrands include Shree Ultra,Bangur Cement and Rockstrong Cement. It has

anufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units

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



et tax expense / (benefit)

AT

OE%

wer and fuel

eight and forwarding

penditure

ITDA

epriciation

terest Cost

SHREE CEMENT.

L PERFORMANCE

et Revenue from Operation

her Income

tal Income

anagement Corner : From mid-January there is a big change in demand scenario

cause of the Indian calendar, the prices have improved, the demand has also

proved and they think that January to June some impact of elections will be there -

e-election demand and other things. So margins should be better than 21 percent.


-2

-1

0

10

20

30

40

50

60

1100

1150

1200

1250

1300

1350

1400

1450

1500

Revenue

Growth

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0NPM % OPM % EBITDA %

0

2

4

6

8

1

1

0

50

100

150

200

250

300

350

400

450

EBIDTA

INTEREST SERVICE COVERAGE

RATIO


20/21

FY10 FY11 FY12 FY13

35 35 35 35

1798 1951 2699 3809

1833 1986 2734 3844

1789 1472 818 443318 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

20

ngible assets

ventories to Turnover%

ort-term loans and advances

tal Assets

B

S

ebtor to Turnover%

editors to Turnover%

ort-term borrowings

ng-term provisions

ade payables

ort-term provisions

tal liabilities

SHREE CEMENT.

are capital

serve & Surplus

tal equity

ng-term borrowings

S PERFORMANCE

rading At :

ATIOS

pital work-in-progress


tangibles

ng-term loans and advances

ventories

ade receivables

sh and bank balances



21/21

Narnolia Securities Ltd

402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph

033-32011233 Toll Free no : 1-800-345-4000

email: [email protected],website : www.narnolia.com

Risk Disclosure & Disclaimer: This report/message is for the personal information of

the authorized recipient and does not construe to be any investment, legal or taxation

advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any

action based upon it. This report/message is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or

redistributed to any other person in any from. The report/message is based upon publicly

available information, findings of our research wing East wind& information that we

consider reliable, but we do not represent that it is accurate or complete and we do not

provide any express or implied warranty of any kind, and also these are subject to changewithout notice. The recipients of this report should rely on their own investigations,

should use their own judgment for taking any investment decisions keeping in mind that

past performance is not necessarily a guide to future performance & that the the value of

any investment or income are subject to market and other risks. Further it will be safe to

assume that NSL and /or its Group or associate Companies, their Directors, affiliates

and/or employees may have interests/ positions, financial or otherwise, individually or

otherwise in the recommended/mentioned securities/mutual funds/ model funds and

other investment products which may be added or disposed including & other mentioned

in this report/message.

stock advisory for today - buy infosys stock with target price of target price of rs 3910

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