Trend in Sensex EPS Enjoying the rally…Now brace for Q4FY14… - …content.icicidirect.com/mailimages/IDirect_Consolidated... · 2016-12-05 · Balkrishna Ind 75.3 21.1 Auto Torrent

ICICI Securities Ltd. | Retail Equity Research

April 7, 2014

Q4FY14 Result Preview

Enjoying the rally…Now brace for Q4FY14…

Optically, the Sensex earnings growth (including oil & gas and financials) is expected to grow 17.5% YoY. The quarterly growth rate in Q4FY14E may be the second best in the whole of FY14E. The best quarter of FY14E was Q3FY14 wherein the PAT of Sensex companies grew 23% YoY. Our estimate of Sensex EPS for FY14E stands at | 1386

Earnings growth of Q4FY14E is mainly expected to be driven by revenue growth of 12.2% YoY. This performance will be the third best in the whole of FY14E as Q2FY14 and Q3FY14 recorded revenue growth of 15% YoY and 13.1% YoY, respectively

Non-leniency in revenue growth and PAT growth may be explained by a few adjustments like volatility of forex and recovery from loss in Q3FY14 to profit in Q4FY14E (for instance: Tata Steel reported a loss of | 6528 crore in Q4FY13 while in Q4FY14 it is expected to report a profit of | 841 crore). Hence, if we adjust the impact of Tata Steel in Q4FY14E PAT, then the Sensex EPS will grow 5% YoY, which then moves in sync with the logic of 12% revenue growth, muted margins and rise in interest / depreciation costs

On a sectoral basis, the top 5 performing companies (on the basis of PAT growth) come from information technology (three companies), FMCG (one company) and financials (one company). Hence, the top five companies that top the chart in term of growth in profitability include TCS (~46% YoY), Wipro (28% YoY), HDFC Bank (25% YoY), Infosys (21% YoY) and ITC (~18% YoY)

Conversely, the bottom five performing companies (on the basis of PAT growth) come from metals & mining (two companies), capital goods (one company), PSU banks (one company) and auto (one company). Hence, the bottom five includes Hindalco (-53% YoY), Coal India (-40% YoY), Bhel (35% YoY), SBI (-22% YoY) and Hero Honda (-15% YoY)

Though the broader markets have rallied 5.6% YTD on hopes of a favourable outcome of Lok Sabha elections in May 2014, we believe valuations are hanging on hopes of a reformist government in Delhi. However, valuations have reached almost the fair value zone or have got stretched mainly in case of cyclicals. Hence, caution is advised, as at the end of the day EPS is the sole driver of valuations

Exhibit 1: Trend in revenue growth for Sensex companies

200000

250000

300000

350000

400000

450000

500000

550000

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| c

rore

)

0

510

15

202530

3540

(%)

Revenues YoY Growth

Source: Company, ICICIdirect.com Research

Trend in Sensex EPS

1,0901,165 1,165

1,386

1,614

400

600

800

1,000

1,200

1,400

1,600

1,800

FY11 FY12 FY13 FY14E FY15E

(|)

-5

0

5

10

15

20

25

Sensex EPS % YoY Growth

Source: Bloomberg, ICICIdirect.com Research Analyst

Pankaj Pandey Head – Research [email protected]


Page 2

Exhibit 2: Trend in profitability for Sensex companies…

20000250003000035000400004500050000550006000065000

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| c

rore

)

-20-100102030405060

(%)

PAT YoY Growth

Top 5 Sensex companies in PAT growth for Q4FY14E Bottom 5 Sensex companies in PAT growth for Q4FY14E

17.925.0

45.6

28.420.8 21.3

05

101520253035404550

IT C H D F CBank

T C S Wipro Infosys S ensex

(% Y

oY)

-22.4

-40.4 -35.6

-15.8

-53.1

21.3

-60

-50

-40

-30

-20

-10

0

10

20

30

S B I C oa lIndia

BH E L H eroH onda

H inda lco S ensex

(% Y

oY)



Page 3

What we expect our coverage universe to report and emerging trends

The I-Direct coverage universe is expected to deliver revenue growth of 12.2% (excluding oil & gas). A strong double digit performance (12-14% YoY growth) is expected mainly driven by rupee deprecation witnessed over Q2FY14-Q4FY14E, thereby benefiting exporters

From a sectoral perspective, exporters like IT, pharma and textiles are expected to deliver revenue growth rates of 27.4%, 21.1% and 26.8% respectively. Given the slowdown, domestic sectors are likely to post single digit growth rates like FMCG (6.4% YoY), auto (10% YoY), oil & gas (1.8% YoY), telecom (9.1%) and capital goods (0.4% YoY)

We observe that comparing revenue growth rates of the I-Direct universe and BSE Sensex companies is the same. This implies that non-Sensex companies are still struggling with growth in revenues and may report a decline in Q4FY14E as well. However, comparing this trend with the previous quarters the intensity of decline is moderating. This can be a ballpark signal for bottoming of the financial performance of India Inc

Exhibit 3: Trend in revenue growth of I-Direct coverage universe

32.029.2 30.4

27.1

17.413.4

8.54.4 3.1

14.0 13.0 12.2

300,000

350,000

400,000

450,000

500,000

550,000

600,000

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| c

rore

)

0

5

10

15

20

25

30

35

Revenues (Ex-Oil& Gas, BFSI) Growth (%)


EBITDA margins are expected to improve YoY by 90 bps to 20.2% (excluding oil & gas) while on a QoQ basis it’s a dip of 30bps. The key reason behind the expansion is the exchange rate depreciation of 14% YoY.

The above increase is reiterated by the margin expansion of the IT and pharma sectors during Q4FY14E, where we expect YoY expansion of 198 bps and 94 bps for IT and pharma sectors, respectively.


Page 4

On the profitability front, the I-Direct coverage universe is expected to deliver PAT growth of 24% YoY. In terms of quarterly performance, Q4FY14E should be the second best quarter in terms of PAT growth over the last two fiscals (FY13-14E). However, if we adjust the impact of Tata Steel in our estimates (from a loss in Q4FY13 to profit in Q4FY14), our adjusted PAT growth is pegged at 6.4% YoY for Q4FY14E

Even the adjusted PAT growth of 6.4% YoY is better off than 3.5% decline in PAT growth that was reported in Q4FY13

IT, pharma and FMCG are expected to produce high double digit growth rates of 38%, 20% and 15% YoY, respectively. On the negative side, infrastructure, cement and oil & gas are expected to post a PAT decline of 86%, 31% and 36% YoY, respectively

Exhibit 5: Trend in profitability of I-Direct coverage universe

20000250003000035000400004500050000550006000065000

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| c

rore

)

-20

-100

1020

3040

5060

(%)

PAT YoY Growth


Exhibit 4: Trend in EBITDA margins of I-Direct coverage universe

21.8

19.019.3 19.3

19.9

19.0 18.819.3

19.7 19.8

20.520.2

17

18

19

20

21

22

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)

EBITDA Margin - Ex O&G (%)



Page 5

In terms of high flyers in the midcap space, most companies belong to the auto, pharma and FMCG space. Out of the top 10 midcap companies (revenue and PAT growth) 40% are from the auto space while 20% comes from the pharma and FMCG & consumer space

Some of the same that deserves a mention include Aurobindo Pharma (35% revenue and 279% PAT growth aided by strong currency and margin expansion), Balkrishna Industries (21% YoY revenue growth and 75% PAT growth aided volume growth and easing input costs) and Torrent Pharma (21% YoY revenue growth and 56% YoY PAT growth)

Exhibit 6: Top 10 midcap performers in I-Direct coverage universe in Q4FY14E Company % YoY PAT Growth % YoY Revenue Growth Sector

Aurobindo Pharma 279.0 35.3 Pharma

Sadbhav Eng. 187.8 29.7 Construction

Jyothy Laboratories 169.8 14.4 FMCG

Navneet Publications 84.7 27.5 Consumer

Balkrishna Ind 75.3 21.1 Auto

Torrent Pharma 56.0 21.1 Pharma

Amara Raja 54.1 13.1 Auto

Apollo Tyre` 51.1 11.3 Auto

Gujarat Pipavav 50.8 18.2 Logistics

Motherson` 49.1 10.9 Auto


In terms of worst midcap space performers, most companies belong to the real estate, metals, oil & gas and cement space. Out of top 10 midcap companies (revenue and PAT growth) 20% of these companies are from real estate while 10% each is contributed by cement and oil & gas

Exhibit 7: Bottom 10 midcap performers in I-Direct coverage universe in Q4FY14E Company % YoY PAT Growth % YoY Revenue Growth Sector

Mahindra Lifespace -57.9 -8.5 Real Estate

NIIT Ltd. -57.1 -0.9 IT

Usha Martin -54.8 3.8 Metals

Oberoi Realty -48.2 -39.6 Real Estate

GSPL -40.9 -29.6 Oil & Gas

Sintex Industries -30.0 2.9 Others

Mastek -28.0 -0.6 IT

JK Laxmi Cem -27.2 3.5 Cement

IRB Infra -23.9 -0.6 Construction

Exide -23.0 -7.8 Auto Source: Company, ICICIdirect.com Research


Page 6

Defensives: Moderation ahead but well above coverage universe

(Sector composition: Auto, consumer disc., IT, FMCG, cement, pharma) Key Highlights:

a. Defensives have been doing well on an absolute basis as also relative to cyclicals in terms of financial performance over the last 12-16 quarters

b. In the defensives space, IT and pharma are expected to post 27% and 21% YoY revenue growth, respectively. The key reason is the strong volume growth and strong dollar has helped the IT sector while strong product launches in international markets, reasonable domestic markets and a stronger dollar have come to the aid of the pharma sector

c. On the other hand, price hikes and muted volume growth are expected to help sectors like auto and FMCG post single digit growth of 10% and 10.6% YoY growth, respectively

d. If one takes into account revenue growth, margin expansion and PAT growth we would rank IT, pharma and auto as standout performers in the defensives space

e. On an overall basis, revenue growth for defensives is expected to grow 14.3% YoY vs. 8.5% YoY growth in Q4FY13

f. We expect a 110 bps margin expansion for the space mainly led by 14% exchange rate benefit (pharma and IT) and modest price hikes (FMCG and auto)

g. On the profitability front, defensives are expected to deliver 17% YoY growth vs. 1% decline in Q4FY13 and 35% QoQ growth. On an individual basis, IT and pharma may stand out as they are expected to deliver 38% and 20% YoY growth, respectively

Exhibit 8: How performance variables of cyclicals may pan out on Q4FY14E

5.7

11.938.0

15.0

20.0

-300

-200

-100

0

100

200

300

-5 0 5 10 15 20 25 30 35

(Revenue growth,% YoY)

(EBI

TDA

expa

nsio

n Yo

Y, in

bps

)

Auto Consumer Discretionary IT Cement FMCG Pharma



Page 7

Exhibit 9: Trend in revenue growth of defensives over last three years

28.3

24.222.4 23.9 25.0

22.9

30.2 30.3

26.5

20.9

13.4

8.55.7

14.7 15.4 14.3

5000

55000

105000

155000

205000

255000

305000Q1

FY11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

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Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| c

rore

)

0

5

10

15

20

25

30

35

Defensive universe revenues Y-o-Y(%)


Exhibit 10: Trend in EBITDA margins

20.0

18.318.118.0

20.1

17.2

18.9

17.718.5

18.117.718.018.3

19.219.419.1

15

16

17

18

19

20

21

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

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12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)


Exhibit 11: Trend in profitability

5000

10000

15000

20000

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30000

35000Q1

FY11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

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12

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Q1FY

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Q3FY

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13

Q1FY

14

Q2FY

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Q3FY

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Q4FY

14E

(| c

rore

)

-5051015202530354045

Net Profit Y-o-Y(%)



Page 8

Cyclicals: Still not out of woods

(Sector composition: Capital goods, power, infrastructure, real estate, oil & gas and telecom) Key Highlights:

• Regulatory concerns, execution issues, client side delays and forex volatility have deeply impacted the financials of cyclicals

• We expect the space to deliver revenue of 3.5%, which is the lowest growth rate recorded over Q1FY11-Q4FY14E. The growth rate was 5% YoY in Q4FY13

• On an individual basis, real estate, capital goods and oil & gas may be the key disappointing sectors as revenue growth may come in at -4.5%, 0.4% and 1.8%, respectively. Power segment owing to new capacity addition may achieve 17% YoY revenue growth rate

• Slow execution, project deferrals and negative operating leverage are expected to lead to 240 bps margin contraction for cyclicals to 15% in Q4FY14E from 17.4% in Q4FY13

• Real estate and capital goods may see the highest margin erosion YoY by 428 bps and 240 bps, respectively

• Interest costs are expected to be higher by 13.2% YoY in Q4FY14E. The highest interest costs jump may be seen in real estate (30% YoY), power (18% YoY) and infrastructure space (31% YoY). As a result, the interest to EBITDA ratio is expected to be 15.4% in Q4FY14E, higher by 340 bps YoY. The ratio is the highest ever in any of the fourth quarters of any fiscal

Exhibit 12: How performance variables of cyclicals may pan out in Q4FY14E

8.8

25.419.4

113.7

7.220.0

10.3

-600

-400

-200

0

200

400

-10 -5 0 5 10 15 20 25

(Revenue growth, % YoY)

(EBI

TDA

Mar

gin

expa

nsio

n, in

bps

)

Capital Goods Metals Power Telecom Infrastructure Oil&Gas Real Estate


Rectangle


Page 9

Exhibit 13: Trend in revenue growth of cyclicals over last three years

18.0

25.022.2

26.6

33.4

19.7

31.6

24.5

8.5

18.1

7.45.0

9.87.7

4.5 3.550000

150000

250000

350000

450000

550000Q1

FY11

Q2FY

11

Q3FY

11

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11

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(| c

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30

35

40

Total Y-o-Y(%)


Exhibit 14: Trend in EBITDA margins

10.4

18.916.715.9

10.011.0

15.917.2

1.5

17.1

13.2

17.4

10.4

13.311.1

15.0

02468

101214161820

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)


Exhibit 15: Interest costs have been a concern for cyclicals…

1000

3000

5000

7000

9000

11000

13000

Q1FY

12

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(| c

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Interest costs Y-o-Y(%)



Page 10

Apparels

Mixed bag quarter

We expect our apparel universe to witness topline growth of 26.8% YoY mainly due to strong growth expected for Page Industries and Vardhman Textiles. The other players in the coverage universe are likely to witness a relatively subdued quarter, with Kewal Kiran Clothing (KKCL) growing 16.2% and Lovable Lingerie and Rupa & Company growing in single digits. Page Industries and KKCL are likely to report healthy numbers on the back of the sale season. Vardhman Textiles, on the other hand, is expected to benefit from healthy export realisations.

Operating margin to rise marginally, with a few exceptions

Our coverage universe is likely to witness a mixed operational performance. KKCL is likely to witness a dip of 270 bps in the operating margin to 25.5% owing to higher promotional expenses. Lovable Lingerie, on the other hand, is expected to witness a margin expansion of 70 bps to 8.5% owing to reduced advertising spends. Vardhman Textiles is also likely to witness a 40 bps expansion in operating margin to 22.4% led by healthy export realisations. Page Industries and Rupa & Company are likely to witness flattish margins. Page Industries will be able to mitigate the impact of a rise in cotton prices owing to the price hikes taken in December.

Macro trends in sector

FY14 has been a good year for Indian textiles companies with exporters benefiting more. On the back of strong demand for yarn, both cotton and cotton yarn prices went up during the year. In Q4FY14, cotton and cotton yarn prices increased 30.3% and 11.0% YoY to | 117/kg and | 222/kg, respectively. Strong demand from China aided in keeping prices high.

The Chinese government’s decision to keep the minimum selling price (MSP) for cotton high had made it unviable for Chinese spinners to produce yarn. This led to increased demand for yarn from India and Pakistan. However, this policy is likely to be reversed. Hence, we could see some softening of prices, going forward.

Based on the data provided by Office of Textiles and Apparel (Otexa), India’s apparel and non-apparel exports to the US during January and February 2014 increased 6% and 11% YoY to $291.3 million and $274.7 million, respectively. Similarly, China’s yarn imports increased 16.2% YoY in January-February 2014 to 330 million kg.

Exhibit 16: Estimates for Q4FY14E: Apparels (| Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQKewal Kiran 88.8 16.2 2.9 22.8 4.8 32.6 17.9 8.3 68.1Lovable Lingerie 21.3 4.4 -45.7 1.8 13.1 -66.7 1.4 -55.3 -57.6Page Industries 280.5 34.2 -7.3 50.2 36.7 -8.8 29.0 22.9 -16.2Rupa & Co. 270.1 7.7 42.6 44.0 5.5 49.3 21.6 -3.9 37.3Vardhman Tex 1,472.8 30.8 4.0 329.9 32.9 -0.2 156.1 35.4 -10.9Total 2,133.5 26.8 4.9 448.8 28.2 2.5 225.9 24.9 -5.6

Company Change (%) Change (%) Change (%)


Topline & Profitability (Coverage universe)

1683

1822

1954

2033

2134

0

500

1000

1500

2000

2500

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

5.0

10.0

15.0

20.0

25.0

30.0

(%)

Revenue EBITDA Margin PAT Margin

Cotton prices (domestic & international)

80

100

120

140

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

0.8

0.9

1.1

1.2

|/kg (LHS) $/ lb

Indian Textile exports to US

3316

3041 32

12

27529

1

274

2618 28

54

248

3087

0

500

1000

1500

2000

2500

3000

3500

CY2011 CY2012 CY2013 Jan-Feb2013

Jan-Feb2014

US$

(Mn)

Apparel Non-Apparel

Analyst

Bharat Chhoda [email protected]

Dhvani Modi [email protected]


Page 11

Exhibit 17: Company specific view Company RemarksKewal Kiran Revenues are likely to grow 16.2% YoY to | 88.8 crore led by 3.3% & 12.0% YoY

growth in volumes & value to 9.4 lakh pieces & | 906/ piece, respectively. We expectoperating margins to dip 270 bps to 25.5% owing to higher promotional spends.Consequently, PAT is likely to grow 8.3% YoY to | 17.9 crore

Lovable Lingerie

In a seasonally weak quarter, we expect Lovable's topline to grow marginally (4.4%YoY) to | 21.3 crore. Operating margin is likely to improve 70 bps to 8.5% owing tolower promotional expenses. However, due to higher fixed costs and relatively lowother income, we expect PAT to halve to | 1.4 crore

Page Industries

We expect revenue growth of 34.2% YoY (| 280.5 crore) led by 19.9% increase involumes (23.0 million pieces) & 12.6% increase in realisation (| 122/ piece). Operatingmargin is likely to improve marginally to 17.9%. Due to higher fixed costs & lowerother income, PAT is likely to grow 22.9% YoY to | 29.0 crore

Rupa & Company

We expect revenues to increase 7.7% YoY to | 270.1 crore. Operating margin is likelyto dip marginally to 16.3% (16.6% - Q4FY13). As fixed costs remain constant, PAT islikely to marginally de-grow to | 21.6 crore (down 3.9% YoY)

Vardhman Textiles

Revenues are likely to grow 30.8% YoY to | 1,472.8 crore led by 25% and 35% growthin the yarn and fabric segment, respectively. Operating margin is likely to improve 40bps to 22.4% led by healthy export realisations. Accordingly, PAT is likely to grow35.4% YoY to | 156.1 crore



Page 12

Auto and auto ancillary

Sequential improvement but not out of the woods yet!

The quarter saw continued sluggishness in consumer sentiment despite the Auto Expo bringing in a slew of new products and the vote-on-account budget bringing excise duty cuts across the segment. However, new products have driven growth with the Ecosport, Amaze and Celerio performing well in the four-wheeler segment. With Gudi Padwa also being in March this year, both QoQ as well as YoY volume growth look optically higher, especially in the two-wheeler segment, which saw strong sales in March. Overall auto volumes were flattish QoQ but were ~7% YoY higher. Two-wheeler volumes de-grew ~1% QoQ but ~12% YoY led primarily by HMSI (contributed ~27% of 2-W volumes in Q4 and grew ~50% YoY) to drive segmental volumes. PV sales were down ~5% YoY while the CV segment continued to witness volume declines of ~25% YoY. However, the pick-up in volumes has been better QoQ (~9%), with the M&HCV segment growing ~50% QoQ. Tyre players have benefitted from lower raw material prices and are expected to post strong earnings growth. We expect the I-direct OEM/ancillary universe topline to grow at YoY ~10%, ~14% respectively, though Ex-Tata Motors OEM topline is likely to decline ~3% YoY. Bajaj Auto (BAL), Tata motors DVR are our top picks.

Margins to trend higher on volume pickup, steady raw material prices

Although volume growth is still low, due to better pricing and impact of appreciating currency, margins are likely to improve. However, adverse impact of excise duty hit on account of dealer inventory is likely to impact OEM margins by 10-15 bps. I-direct OEM, ancillary universe margins are is likely to improve ~40 bps, ~170 bps YoY and 30 bps, 90 bps QoQ to 14.7%, 13.3%, respectively.

Profitability continues to grow in sequentially strong quarter!

For our auto OEM, ancillary universe, we expect profits to grow at ~17%, ~9% on a sequential basis, respectively. However, ex-Tata Motors, I-direct coverage universe PAT growth is likely at ~9% QoQ.

Exhibit 18: Estimates for Q4FY14E: Auto and auto ancillary (| Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQAmara Raja 908.8 13.1 5.3 159.0 42.1 5.8 91.8 54.1 -3.3Apollo Tyre` 3,382.2 11.3 -5.0 467.2 31.3 -17.9 214.3 51.1 -36.7Ashok Leyland 3,160.1 -15.2 61.8 74.2 -62.6 LP 130.9 -12.7 LPBajaj Auto' 4,864.2 2.5 -5.2 1,051.8 25.7 -7.3 811.3 6.0 -10.3Balkrishna Ind 943.9 21.1 6.7 244.9 57.1 6.9 148.4 75.3 19.7Bosch India 2,490.5 8.0 7.7 410.9 13.2 8.2 292.1 16.1 9.3Eicher Motors` 1,911.7 10.9 13.8 226.9 33.3 36.3 134.0 37.2 39.2Exide 1,420.6 -7.8 9.0 173.7 -15.0 21.8 112.8 -23.0 45.5Hero Motocorp 6,523.6 6.1 -5.1 840.5 -1.1 -6.4 483.3 -15.8 -7.9JK Tyre 1,868.6 9.2 8.5 240.2 76.3 29.4 95.5 183.4 66.2M & M 10,126.3 -3.4 -4.1 1,395.7 9.9 1.0 952.3 7.1 2.0Maruti Suzuki 12,121.0 -8.9 11.3 1,357.7 -32.1 0.2 742.7 -40.1 9.0Motherson` 8,344.0 25.0 4.4 863.3 43.0 8.8 292.0 49.1 17.0Tata Motors` 67,084.2 19.8 5.0 10,520.5 26.3 -0.4 4,569.3 15.8 -4.9Wabco India 276.9 13.3 6.6 42.7 -7.8 18.6 25.2 -9.5 24.9Total 125,426.6 10.8 4.6 18,069.4 15.6 1.0 9,096.0 5.7 1.0


Source: Company, ICICIdirect.com research ,* Year end Sept `Consolidated numbers ‘ Maruti’s numbers are inclusive of SPIL

Topline & Profitability (Coverage universe) 11

3238

1000

47 1094

63 1198

61

1254

27

90000

95000

100000

105000

110000

115000

120000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

4.0

6.0

8.0

10.0

12.0

14.0

16.0

(%)


Key players & industry volume YoY quarterly growth (%)

HMSI, 49.8

TML, -33.0ALL, -24.8

Hyundai, -12.0M&M, -8.5

TVS, 8.8

Industry, 7.3 Maruti, -5.5

BAL, -4.6

HMCL, 4.1

0 12

+ve

-ve

+ve

-ve

Currency volatility chart

80

95

110

125

140

155

Oct-1

0De

c-10

Feb-

11Ap

r-11

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3De

c-13

Feb-

14

USDINR USDJPY USDEUR

Average US$/INR was flat QoQ in Q4. JPY also depreciated ~2.5% against the USD in the quarter.

Quotes have been indexed to 100 with base as September 2009

Top picks of the sector Tata Motors DVR Bajaj Auto

Analyst

Nishant Vass [email protected] Venil Shah [email protected]


Page 13

Exhibit 19: Company specific view -OEM Company RemarksAshok Leyland

Topline is expected to grow ~60% QoQ as overall volumes have increased by ~45% QoQ to~26000 units. M&HCV volumes have improved ~75% QoQ to ~18800 units while LCVsegment has been flattish QoQ to ~7,100 units. We expect EBIDTA margins to re-enter thepositive territory after the dismal show last quarter to ~4%, a swing of ~730 bps QoQ.Profit on sale of non-core assets is likely to boost PAT by ~| 270 crore. Topline, reportedPAT are estimated at ~| 3160 crore, ~| 131 crore, respectively

Bajaj Auto BAL has witnessed a rather lacklustre quarter in terms of volumes as domestic volumeshave not kept with industry growth and export volumes have been hurt by region specificissues. Two-wheeler volumes for Q4FY14 came in at 825,000 units ~7% QoQ and ~4% QoQdecline while 3-W segment volumes at ~110,500 units witnessed ~4% QoQ improvement.However, higher share of three-wheeler segment could support margins. EBITDA marginsare expected to remain strong at ~21% while topline, PAT to be at ~| 4864 crore, ~| 811crore, respectively

Eicher Motors

Eicher’s RE business continues to remain strong and has grown ~17% QoQ growth at ~64,300 units. However, the VECV business is managing commendably amidst an extremely weak CV cycle. VECV volumes rose ~20% QoQ at 9,855 units as year end buying, duty cuts aided fleet buying. EBIDTA margins, on a consolidated basis, are likely to trend higher ~200 bps QoQ to 11.9%. Even though we expect RE to witness life high ~21.7% EBITDA margins (up ~170 bps QoQ) the VECV business’ inferred margins could improve ~200 bps QoQ to ~7.9%. Consolidated margins are likely to improve 200 bps to 11.9%. Consolidated topline, PAT is expected at ~| 1,911 crore, | 134 crore, respectively

Hero Moto HMCL's volumes have been better especially in March as impact of festive season coupledwith reduction in excise duty helped improve volumes to 1.59 million units, ~4% YoY higherbut ~5% QoQ lower. The motorcycle segment rose ~3% YoY to 1.4 million units while thescooter segment has grown ~14% YoY and ~2% QoQ to ~185,500 units. EBITDA marginsare expected to decline ~20 bps QoQ to 12.9% owing to increase in other expenses onimpact of excise duty cut in dealer inventory. Topline/PAT are, expected at ~| 6523 croreand ~| 483 crore.

M&M In this quarter, M&M's automotive segment witnessed ~7% QoQ improvement in volumes to ~138,000 units, led by growth in the UV segment which saw ~15% improvement to ~62,500 units. However, the tractor segment saw a QoQ decline owing to seasonality but grew faster than industry at 7.5% YoY to 55,375 units. EBITDA margins are subsequently likely to improve ~50 bps QoQ to 13.8% as positive impact of higher utilization levels is partially offset by impact of excise duty cut on dealer inventory. Topline and PAT are expected at ~| 10,126 crore and ~| 952 crore, respectively

Maruti Suzuki

Maruti's performance has been better on a QoQ basis as excise duty cut and demand fornewly launched Celerio have aided growth. Volumes have grown ~5% QoQ to 288,000units. Favourable impact of yen is likely to boost margins by ~20 bps. However, this wouldbe offset by decline in margins due to excise duty hit taken on dealer inventory and increasein share of the small car segment in overall sales. Thus, we expect EBITDA margins todecline ~120 bps to 11.2%. Topline and PAT are likely to be | 12,121 crore and ~| 743crore, respectively

Tata Motors

JLR is likely to witness another strong quarter with wholesale volumes likely to rise ~3% QoQ to ~119,000 units (March numbers estimated). Jaguar is likely to post ~5% QoQ growth in volumes at ~21,350 units while LR is likely to post ~2% QoQ growth to ~98,500 units due to strong growth in new RR/ RR sport. Unfavourable impact of currency (GBP/US$) is largely negated by higher Jag volumes, better model/geography mix while currency movement (GBP/EUR) is likely to reduce imported RM costs.Overall, JLR's EBITDA margins are likely to decline ~40 bps QoQ to 17.5%. We expect JLR to witness topline, PAT of ~ £5.5 billion, ~£560 million, respectively. Domestic sales are likely to improve ~6% QoQ as overall volumes have improved ~1% QoQ to ~131,000 units. However, with the M&HCV segment growing ~35% QoQ, we expect standalone business margins to improve ~300 bps to QoQ (1%) but still post a loss of ~| 800 crore.


Maruti Suzuki’s sales performance

266

276

28834

4

325

14.0

-22.5

3.44.5

12.8

050

100150200250300350400

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

(000

's)

-25-20-15-10-505101520

(%)

Sales QoQ growth

JLR sales performance

111.

4

116.

3

90.6 96

.1

119.

9

0

20

40

60

80

100

Q4FY13 Q1FY14 Q2FY14E Q3FY14E Q4FY14E

(% s

hare

of t

otal

vol

umes

)

0

20

40

60

80

100

120

140

(000

's)

Jaguar % LR JLR total volumes(RHS)

Q3 volume number includes estimated numbers for Mar’14

M&M’s sales performance

199

198

178 20

8

192

-6.0

-0.7

-10.1

17.1

-7.7

100

140

180

220


(000

's)

-12.5

-7.5

-2.5

2.5

7.5

12.5

17.5

(%)

Sales QoQ growth

Ashok Leyland’s sales performance

35

22 23

18

26

50.4

6.3

-37.3

-20.0

41.1

10

15

20

25

30

35

40


(000

's)

-60

-40

-20

0

20

40

60

(%)

Sales QoQ growth


Page 14

Exhibit 20: Company specific view- Ancillaries Company RemarksAmara Raja Batteries

We expect decent volume growth (~8% YoY), primarily on the back of better 2-W demand.Replacement segment is also likely to maintain strong demand growth while inverter salesare expected to remain weak considering lower power demand/better availability. Overall, we expect an increase in sales of ~5% QoQ to ~| 909 crore. Average lead prices haveremained largely flattish QoQ in INR terms to ~| 131.5/kg. Also, with no major pricingaction taken in the quarter, EBITDA margins are likely to improve 10 bps QoQ to 17.5%. PATis estimated at ~| 92 crore

Apollo Tyres

The consolidated topline is expected to de-grow ~3% QoQ (due to seasonality effect ofEuropean operations) but is likely to grow ~10% YoY in the domestic industry. ConsolidatedEBITDA margins are estimated to decline ~220 bps QoQ to 13.8% due to one-offs in bothrevenues and expenses. However, adjusted margins are likely to improve on favourablerubber prices. Adjusted domestic margins are likely to improve ~230 bps QoQ on highervolumes and declining rubber prices. Performance of the European subsidiary Vredestein is,however, likely to be weaker QoQ, owing to lower sales of winter tyres. Topline and PAT areexpected at ~| 3382 crore and ~| 214 crore, respectively

Balkrishna The volume performance at ~37,500 MT is likely to be 10% higher QoQ due to better miningdemand. Sales though is expected to rise only ~7% QoQ as we expect ~2% drop inrealisations due to price cuts taken due to competitive pressures. We expect margins toremain at elevated levels of ~26%, flattish QoQ. Topline and reported PAT are estimated at~| 944 and ~|148 crore, respectively

Bosch Bosch's performance has been resilient to the slowdown in the auto industry due to adiversified product portfolio across sub-segments. We expect the topline to grow ~7% QoQto ~| 2490 crore with growth in the tractor and PV segment offsetting the weakness in theauto industry. EBIDTA margins are likely to improve 650 bps QoQ to 16.4% as year endremains a seasonally weak quarter driven mainly due to one-off accounting charges.Subsequently, PAT is expected at ~| 292 crore

Exide We expect sales revenues to grow ~9% QoQ to ~| 1420 crore as industrial batterybusiness continues to remain weak, contributing ~35%. With cost structure largelyinflexible, higher volumes are likely to improve margins. We expect EBITDA margin toimprove 200 bps QoQ at 13.3%. PAT is expected at ~| 113 crore

JK Tyre Since JK Tyres started reporting consolidated earnings (inclusive of Mexican subsidiary)from Q1FY14 onwards, YoY comparison would be misleading. On the topline front, weexpect the consolidated entity to grow ~5% QoQ with better growth. With the truck bussegment showing QoQ improvement (Q4 being a seasonally strong quarter), domesticvolumes are likely to improve ~5%. With rubber prices also remaining benign, margins arelikely to remain on the uptrend and are likely to improve 240 bps to 13.2%. Consolidatedtopline, PAT is estimated at ~| 1869 crore, ~| 96 crore, respectively

Motherson Sumi

We expect the consolidated topline to improve ~4% QoQ aided by strong performance in thestandalone business (~10% QoQ growth). We expect performance of SMP, SMR to remainrobust and expect SMR, SMP to post adjusted EBITDA margins of 9.5%, 6%, respectively.MSSL's margins are also likely to improve ~200 bps QoQ to 22.9%. Consequently,consolidated adjusted EBITDA margins are expected to decline 10 bps QoQ to 9.5%. Toplineis expected at~ | 8344 crore while reported PAT is expected to be ~| 292 crore

Wabco Wabco's performance is closely linked to the M&HCV industry. In Q4FY14 we havewitnessed OEM growth of ~70% QoQ.Exports and replacement segments have also beengrowing well. Wabco's revenues are likely to grow ~7% QoQ to ~| 277 crore. EBIDTAmargins are likely to improve 150 bps QoQ to 15.4% as utilisation levels improve.Subsequently, PAT is expected at ~| 25 crore


Eicher Motor’s sales performance 47

63

58

51

74

7.3 7.6

14.0

9.9

17.1

25

35

45

55

65

Q1CY13 Q2CY13 Q3CY13 Q4CY13 Q1CY14

(000

's)

024681012141618

(%)

Sales QoQ growth

Hero MotoCorp’s sales performance

1527

1681

1416

1589

1559

18.7

-5.4

2.1-2.9

-9.2

900

1100

1300

1500

1700


(000

's)

-20

-10

0

10

20

30

(%)

Sales QoQ growth

Bajaj Auto’s sales performance

981

979

961 994 93

6

-13.0

-0.2-1.8

3.4

-5.8

700

800

900

1000

1100

1200


(000

's)

-15

-10

-5

0

5

(%)

Sales QoQ growth

Auto raw material index

RM Auto Index

80

100

120

140

160

180

200

220

240

Feb-

09Ju

n-09

Oct-0

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n-11

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1Fe

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Jun-

12Oc

t-12

Feb-

13Ju

n-13

Oct-1

3Fe

b-14

Commodity prices have been indexed to 100 with base as Feb-09


Page 15

Aviation

Passenger traffic growth to moderate due to lean season

We expect domestic passenger traffic to grow marginally by 0.7% YoY vs. de-growth of 0.4% last year and growth of 4.1% QoQ last quarter while available seat kilometre (ASKM) is expected to increase 8-9% YoY. As a result, we expect domestic load factors to come down to 72% from 77% reported last year. On the other hand, yield per passenger is expected to increase 7-8% YoY, (down 3-4% QoQ). We expect the market share of Jet Airways to decline 180 bps YoY (flat QoQ) to 24.1% from 25.9% last year. SpiceJet’s domestic market share is also likely to decline 200 bps YoY to 18.2% YoY. For our I-direct coverage universe, this quarter is likely to end with average revenue growth of 11.1% YoY (down 4.2% QoQ). Further, we expect the I-direct aviation universe to report a net loss of | 658 crore vs. loss of | 930 crore reported last year and loss of | 457 crore reported last quarter.

Margins to take a hit led by higher operating cost, fall in occupancy

Average fuel prices have again increased sharply by 10.5% YoY (flat QoQ) during April-March 2014 led by weakness in the rupee against the dollar (flat QoQ, up 14.0% YoY) coupled with a rise in global crude oil prices. Average ATF prices for the quarter stood at | 79,900/kl (| 76,610/kl as of April 1, 2014). Other dollar linked operating cost like lease rentals, maintenance cost & salaries have also increased due to a sharp movement in the currency on a YoY basis. As a result, players increased average ticket prices by 15-16% in Q3FY14. Taking this into account, we expect the operating loss of the I-direct aviation universe to narrow down to -10.0% vs. -16.0% reported last year.

Exhibit 21: Company specific view

Jet Airways (Jet + JetLite)

Passenger traffic may decline ~2.2% YoY led by weak domestic traffic data (down5.2% YoY). Domestic market share may decline 180 bps YoY to 24.1%. Margins mayget impacted due to high operating costs while marginal strength in rupee vis-à-vislast quarter will provide some cushion vs. a fall in margins

SpiceJet Revenues are expected to grow 15.6% YoY (higher than Jet Air in our coverage) dueto 13% YoY growth in average realisations and increase in capacity. Higher ATFprices, lower load factors may affect margins. We expect net loss of | 269.6 crore(vs. loss of | 185.6 crore LY)


Exhibit 22: Estimates for Q4FY14E: (Aviation) (| Crore)

Revenue EBITDA PATQ4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

Jet Airways 4,915.3 9.6 -3.1 -124.7 NA NA -388.4 NA NASpiceJet 1,661.7 15.6 -7.5 -200.6 NA NA -269.6 NA NATotal 6,577.0 11.1 -4.2 -325.3 NA NA -658.0 NA NA




5921

6219

5928 68

69

6577

010002000300040005000600070008000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

(%)


Quarterly trends of domestic pax traffic

153

156

129 15

0

152

158

147 156

153

-

50

100

150

200

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

-15

-10

-5

0

5

10

15

Pax traffic (In lacs) - LHS Growth (%) - RHS

Movement in fuel prices (|./kl)

50,000

60,000

70,000

80,000

90,000

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Average AT F P rices (|./per kl)

Analyst

Rashesh Shah [email protected] Darpan Thakkar [email protected]


Page 16

Banking and Financial Institutions

Gap in NII growth of PSU and private banks to narrow We expect NII growth of PSU banks to trend north in Q4FY14E. If we compare to Q2FY14, NII grew at 21% and 9.5% YoY for private and PSU banks, respectively and then the gap narrowed in Q3FY14 to 16% and 11.8%. The same gap is expected to further narrow to 16.4% and 12.6%, respectively, in Q4FY14E. The major reasons for improved NII growth of PSU banks are i) shedding of bulk deposits and ii) moderation in NPA deterioration since Q3 resulting in lower interest income reversals. This has led to an improved expectation in PSU PAT from de-growth of 30% YoY in Q3 to 15.2% YoY in Q4. Credit & deposit growth in Q4 may remain stable with ~15% growth. Similarly, NIM for both private, PSU banks may be sequentially maintained.

Asset quality deterioration of PSU banks to moderate We expect GNPA to increase merely by 1.6% QoQ to | 114580 crore for PSU coverage banks while for private banks, it is estimated to increase 5.4% QoQ to | 11465 crore in Q4FY14E. Trend of slippages for each individual PSU bank is expected to stabilise at their current levels against a sharp deterioration seen in earlier quarters while Q4 generally witnesses better recoveries and upgradation leading to stable o/s NPA. Fresh restructuring will continue its trend of ~| 20000 crore at industry level.

PAT of private banks to register 16.6% growth, 15.2% de-growth for PSU Although we expect NPA in low ticket accounts of private banks, profits may stay reasonably healthy with 16.6% YoY growth. For PSU banks, PAT is estimated to decline by 15% vs. 30% decline in Q3 as NPA provision may be flat in Q4 in line with stable asset quality. With March end G-sec remaining stable, expect no MTM provision or reversal on the SLR book.

Exhibit 23: Estimates for Q4FY14E ( | Crore) NII PPP NP

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

Bank of India 2828.8 14.2 4.0 2244.5 8.2 4.7 616.3 -18.5 5.2Bank of Baroda 3201.0 13.8 4.7 2306.6 5.7 5.0 1071.1 4.1 2.2Dena Bank 712.7 26.8 7.8 455.6 13.7 22.9 143.6 14.3 111.8PNB 4406.2 16.6 4.4 2972.7 4.2 10.0 1060.2 -6.2 40.4Syndicate 1427.8 6.2 5.1 963.7 6.9 19.6 424.6 -28.3 11.8SBI* 12243.2 10.6 -3.1 7967.2 2.7 4.6 2557.5 -22.4 14.4Total 24819.7 12.6 0.7 16910.3 4.6 6.8 5873.4 -15.2 15.8

Axis Bank 3154.4 18.4 5.7 2892.1 3.3 10.6 1784.7 14.8 11.3City Union Bank 208.5 20.3 5.6 170.2 13.7 5.6 94.1 14.1 5.6DCB 98.7 21.0 5.0 52.5 22.0 13.3 41.2 20.8 13.3Federal Bank 543.4 13.3 -0.4 358.4 -3.0 0.7 205.6 -7.3 -10.6HDFC Bank 5081.4 18.3 9.6 3869.4 30.6 -0.5 2362.5 25.0 1.6Indusind Bank 802.7 21.4 10.0 708.4 30.4 9.4 379.4 23.4 9.4J&K Bank 730.2 15.3 12.9 519.5 -3.5 17.8 297.9 19.1 -7.3Kotak Bank* 934.6 3.5 2.4 652.0 -0.2 11.5 428.0 -1.9 25.9SIB 374.2 12.1 6.8 240.9 16.9 11.6 146.2 -4.9 3.5Yes Bank 717.1 12.4 7.8 698.8 10.2 13.7 434.5 20.0 4.5Total 12645.3 16.4 7.5 10162.2 14.2 6.5 6174.1 16.6 5.5

HDFC* 2004.8 5.5 19.5 2314.0 8.9 29.3 1660.2 6.8 29.3IDFC 640.9 -0.3 -3.5 795.0 -7.3 10.0 492.3 -6.8 -2.5LIC HF 540.2 17.2 18.0 506.1 21.6 10.9 364.4 15.3 11.6Rel Cap 2042.3 20.8 8.1 144.6 103.4 -31.5 193.5 -27.1 16.6Total 5228.1 11.4 11.5 3759.7 8.3 18.3 2710.5 1.7 18.8NII: Net Interest Income, PPP: Pre provisioning profits, NP: Net Profit, NC: Not Comparable

Public Sector Banks

Private Banks

NBFCs

Change (%) Change (%) Change (%)

Source: Company, ICICIdirect.com Research * represents standalone numbers

Net Interest Income (Coverage universe)

2465

7

2482

0

1086

5

1130

2

1158

5

1176

1

1264

5

2204

8

2278

8

2372

5

4694

4535

4466

4689

5228

5000

15000

25000

35000

45000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| C

rore

)

PSB Private NBFC

PPP (Coverage Universe)

1583

9

1691

0

8900

9596

9287 95

43

1016

2

1616

6

1669

2

1425

4

3470

3095

3075

3179 37

60

5000

10000

15000

20000

25000

30000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| C

rore

)

PSB Private NBFC

Net Profit (Coverage Universe)

5073

5873

5293

5053

5171

5850 61

74

525472

90

6929

2710

2282

224921

77

2665

3000

6000

9000

12000

15000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(| C

rore

)

PSB Private NBFC

Top pick of the sector

SBI DCB

Analyst Kajal Gandhi [email protected] Vasant Lohiya [email protected] Jaymin Trivedi [email protected]


Page 17

Exhibit 24: Company specific view (Banks)

Banks RemarksBank of Baroda We expect NII traction to improve during Q4FY14 and have factored in 14% YoY

increase to | 3201 crore led by stable margins of ~2.4% and healthy loan growth of~20% YoY. Easing trend as regards fresh slippages and restructured assets maysustain. PAT of | 1071 crore, up 4.1% YoY & 2% QoQ is estimated

Bank of India Asset quality risk remains high as the bank has grown its credit aggressively. Weexpect GNPA to increase from | 10023 crore to | 10755 crore and NNPA to increasefrom | 6147 crore to | 6821 crore. Slippages trend of | 1700 crore may continue.Credit to grow at 25% YoY to | 361709 crore (de-growth of 2% QoQ) and support14.2% YoY, 4% QoQ NII growth to | 2829 crore

Dena Bank We expect Dena bank's business growth to be below industry trend with loan growthof 12% YoY to | 73739 crore while deposit increase may be muted at 7% YoY. Assetquality concerns are expected to stay with slippages of | 400 crore and fresh RApipeline of | 550 crore expected in Q4. Margins may remain in range of 2.6-2.7%. PATof | 144 crore (up 14.3% YoY) is estimated

Punjab National Bank

Post the consolidation phase, credit growth improved from 4.1% in Q1FY14 to 9.7% inQ3FY14 and is estimated to further improve to 12.2% in Q4FY14E (up by | 37784 croreQoQ to | 346510 crore). No major negative or positive surprise is expected in assetquality as NNPA is expected to increase 6.8% from | 9084 crore to | 9699 crore QoQ

State Bank of India

Slower credit growth of 14.7% and deposit growth of 13.5% is estimated, leading to NIIgrowing just 10.6% YoY. Slippages are seen at | 2000-3000 crore but Q4 is strong onrecoveries and upgrades, leading to overall GNPA declining marginally. Accordingly,provisions may also be lower. PAT is expected to decline 22.4% YoY to | 25.6 billion

Syndicate Bank Growth of 16.5% in deposits and 13% in credit is expected. Profits may be driven byhigher other income at | 400 crore and lower tax provision of | 42.3 crore. NII growthis seen at 6.2% YoY. Asset quality can remain stable around 2.8% GNPA, an addition of| 200 crore QoQ

Axis Bank NII growth is expected to stay healthy at 18% YoY to | 3154 crore as margins areexpected to stay steady QoQ at ~| 3.7% while credit traction of 16% YoY to | 227496crore is factored in. Other income growth may remain muted. Fresh RA and slippagesare expected to remain within guided range of | 1500 crore per quarter. PAT growth of14.8% YoY to | 1785 crore is estimated

City Union Bank All-round steady performance is expected with PAT growth of 14.1% YoY to | 94.1crore. Credit growth may be modest at 14% YoY to | 17380 crore (up by | 1556 crore).Asset quality to remain stable as NNPA may increase from | 139.3 crore to | 149.3crore

DCB Overall, a steady performance is expected with PAT growth of 20.8% YoY to | 41.2crore. Credit growth of 21.1% YoY to | 7977.4 crore in Q4FY14E may support NIIgrowth of 21% YoY to | 98.7 crore. Asset quality to remain stable and shall keepprovisioning under check.

HDFC Bank PAT may grow at 25% YoY to | 2362.5 crore supported by all-round healthyperformance. Although flat QoQ, deposit and credit may register 20.4% YoY and 21.9%YoY growth respectively in Q4FY14E boosted by strong mobilisation of FCNR depositsin Q3FY14. Overall, steady result is expected.

Federal Bank Loan growth to stay muted at 6% YoY. NIMs may be maintained at current levels of3.3%. As regards asset quality, we expect slippages to remain steady QoQ at ~| 150crore, which is lower compared to ~ | 300 crore witnessed two quarters ago. Weexpect PAT of | 206 crore, down 7.3% YoY

Jammu & Kashmir Bank

Post the sharp decline of 36 bps in NIM to 4% in Q3FY14, we expect NIM to reboundto 4.2% in Q4FY14E. The bank has raised addition term deposit of | 1500 crore at 9-10%, which will be deployed for lending in Q4, thereby supporting NIM. Further creditto grow at 20% YoY, 8.6% QoQ to | 47040 crore and support NII growth of 15.3% YoY,12.9% QoQ to | 730 crore. Asset quality is expected to remain stable



Page 18

Exhibit 25: Company specific view contd. (Banks) Kotak Mahindra Bank

Credit to grow around 12% YoY after a sharp slowdown at 5.8% YoY growth in Q3FY14and expect a marginal dip in margins. Asset quality is expected to stay stable but wehave provisioned higher QoQ at |103 crore. Net profit is still growing 25% QoQ.Subsidiaries’ performance to remain stable with no surprises

South Indian Bank

Asset quality is expected to improve on the back of recoveries as guided bymanagement. We estimate GNPA will decline from | 554.6 crore to | 518.4 croresequentially while NNPA can decline from | 391.9 crore to | 373.2 crore. However,PAT growth can be largely flattish YoY at | 146.2 crore as Q4FY13 involved a taxreversal of | 13.6 crore

Yes Bank The pace of credit expected to pick up and grow at 16.5% YoY to | 54755 crore (up by| 4462 crore QoQ) in Q4FY14E against 14.7% YoY growth in Q3FY14. The managementhas guided for higher priority sector lending in Q4FY14E, which will support 8.9% QoQcredit growth. Considering the persistent high cost of funds and PSL lending, weestimate NIM will dip 10 bps QoQ to 2.8%. Asset quality to remain stable with PATgrowing at 20% YoY, 4.5% QoQ to | 434.5 crore

IndusInd Bank We expect net profit traction to slide but still remain better than peers at 23.4% YoY to| 379 crore. Healthy NII and other income growth of 21% YoY & 26% YoY, respectively,is expected. Margins to stay at ~3.6% levels. CASA ratio improvement to sustain.Advances growth is expected to moderate to 21.9% YoY with asset quality remainingunder control


Exhibit 26: Company specific view (NBFCs) NBFC RemarksIDFC NII is expected to remain flat both QoQ and YoY at | 640 crore with margins remaining

stable as we expect credit to remain flattish. No one time carry income or principalgains is expected to boost other income. Asset quality may further deteriorate withfresh | 150-200 crore GNPA addition factored by us. We expect profit to decline 6%YoY and 1.2% QoQ to | 494 crore

LIC Housing Finance

We expect advances to be healthy at 18.4% YoY to | 92115 crore. Strong increase inindividual home loan portfolio may continue at 18.9% YoY. Developer portfolio mayremain sluggish. Consequently, we expect margins to stay moderate in range of 2.2-2.3%. Asset quality is expected to remain largely steady. PAT growth of 15% YoY(11.6% QoQ) to | 364 crore is estimated

Reliance Capital Revenue growth is seen at 20% YoY to | 2040 crore, supported by strong performancein general insurance and life insurance on topline. Consumer finance can report asteady performance. With no one-offs expected, profits can grow 20% QoQ to | 193crore

HDFC Ltd Overall loan growth may remain steady at 18.4% YoY again led by strong traction inindividual home loan book. Corporate loan book growth is expected to remain subduedat ~8-10%. Reported NIM may improve to ~4.1%. Recovery from a corporate accountof ~| 500 crore that slipped in previous quarters may lead to improvement in assetquality & also have a positive impact on NII.


C-D Ratio (Industry)

78 77 76 7678 78

76 76 7677

26

5337 32

88100

60 56 5775

65

70

75

80

Apr-1

3

May

-13

Jun-

13

Jul-1

3

Aug-

13

Sep-

13

Oct-1

3

Nov

-13

Dec-

13

Jan-

14

Feb-

14

Mar

-14

(%)

020406080100120

(%)

CD Ratio Incremental CD Ratio

*as on March 7, 2013

Asset Quality (Coverage Universe)

153

156

129 15

0

152

158

147 156

153

-

50

100

150

200

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

-15

-10

-5

0

5

10

15

Pax traffic (In lacs) - LHS Growth (%) - RHS

NPA trend (Coverage Universe)

PSBBank of India 10755 7.3 6821 11.0Bank of Baroda 12747 6.9 7635 15.3Dena Bank 2227 7.8 1460 5.9PNB 17762 7.0 9699 6.8SBI 66444 -2.0 34746 -6.5Syndicate Bank 4646 5.6 2640 2.9Private. BanksAxis Bank 3198 6.3 1586 58.1City Union Bank 303 12.8 149 7.2DCB 225 8.2 72 26.0Federal Bank 1326 10.5 376 5.5HDFC Bank 3065 1.6 821 2.9Indusind Bank 706 12.9 172 4.3J&K Bank 779 7.5 114 17.9Kotak Bank 1112 3.3 525 -10.1South Indian Bank 518 -6.5 373 -4.8Yes Bank 231 18.1 86 103.4

QoQ Growth(%) Q4FY14E

GNPA (| crore)

QoQ Growth(%)

NNPA (| crore)


Page 19

Capital Goods Biggies score in terms of order inflows in Q4FY14E

The trend in order inflows was quite skewed in Q4FY14E as large cap companies under our coverage bagged a majority of the orders. Companies like Bhel and L&T reported order inflows to the tune of | 11200 crore and | 16500 crore, respectively. Bhel’s orders inflows in Q4FY14E accounted for almost 40% of total orders won in FY14E. Nonetheless, Bhel finally managed to achieve orders to the tune of | 28000-29000 crore in FY14E. On the other hand, L&T maintained consistency in order inflows. It is almost certain that L&T will meet its 15% YoY guidance for growth. For midcaps, Kalpataru and KEC managed to bag orders to the tune of | 700 crore and | 1200 crore, respectively. Other companies like Thermax & BGR Energy failed to report order wins in Q4FY14E. In terms of segments, Bhel’s inflows came from EPC projects of power plants while L&T’s wins were mainly across verticals (buildings & factories, power T&D, urban infra).

Interest cost rise seems moderating, up 12% YoY in Q4FY14E Even though interest rates have remained elevated, we believe an improvement in the receivables situation and a pick-up in recovery of the power sector (mainly SEBs) have led to a moderation in interest costs in Q4FY14E. From a company specific angle, we expect interest costs for L&T and KEC to go up 19% and 29% YoY, respectively. On the positive side, we expect Jyoti Structures and BGR Energy’s interest costs to decline 5% YoY and 11% YoY, respectively. This is despite both Jyoti and BGR’s execution being expected to grow 5% and 3%, respectively.

Power EPC companies to suffer decline across the board Slow execution & negative operating leverage are expected to play spoilsport for power EPC companies like Bhel, BGR & Thermax. Bhel will be the worst performer across parameters as revenues, EBITDA & PAT are expected to decline 17%, 32% & 36% YoY, respectively. On the other hand, lack of order inflows and tepid execution are expected to lead to revenue and PAT decline of 0.3% and 12.8% YoY, respectively for Thermax. On the positive side, we expect L&T to deliver on all fronts as order inflow and revenue are expected to grow 15% YoY and 16.5% YoY, respectively. EBIDTA margins are expected to expand 20 bps with PAT growth of 5% YoY. From the set of non-EPC companies, AIA Engineering also deserves a mention as its revenues are expected to grow 12% YoY backed by 8% YoY volume growth coupled with margin expansion of 190 bps to 22%.

Exhibit 27: Estimates for Q4FY14E ( | Crore)Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQAIA Engineering 511.0 11.7 -2.9 112.4 22.3 -6.5 74.2 16.5 12.1BGR 1,095.0 3.0 31.0 120.5 -13.2 18.3 43.7 -18.8 22.8BHEL 16,000.1 -16.7 85.3 3,149.9 -32.3 219.5 2,086.0 -35.6 200.2Greaves Cotton 508.3 2.5 20.0 63.5 0.4 34.1 37.9 -1.6 -3.1Jyoti Structure 987.9 5.3 49.1 96.8 -2.3 56.0 22.6 1.8 63.0Kalpataru Power 1,122.9 8.8 6.8 109.0 9.9 16.0 48.0 -0.2 42.5KEC Internnational 2,317.7 7.8 5.3 149.0 67.5 5.0 39.2 LP 104.6L&T 21,063.2 16.5 46.4 2,527.6 18.9 50.9 1,895.7 4.9 66.7Thermax Ltd 1,464.0 -0.3 44.4 146.4 -12.5 61.2 100.4 -12.8 50.7Total 45,070.1 0.4 51.6 6,475.1 -14.0 95.1 4,347.8 -19.1 106.4


Source: Company, ICICIdirect.com research Note: BHEL has already declared provisional FY14E performance wherein revenues and PAT has come in at | 40330 crore and | 3220 crore, which are way below our estimates for FY14E.


889

2494

2

2969

3

2973

8 4507

0

05000

100001500020000250003000035000400004500050000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| c

rore

.

0.02.04.06.08.010.012.014.016.018.0

(%)


L&T Order Inflow trends

162 161 171

212 196 210 195

280

144

220

110

165

0

100

200

300

Jun-

11

Sep-

11

Dec-

11

Mar

-12

Jun-

12

Sep-

12

Dec-

12

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

(| B

n)

Order Inflow

Mar 2014 orders = announced on the exchanges Trend in Interest costs as a % of EBITDA

100150200250300350400450500550600

Q1FY

12

Q2FY

12Q3

FY12

Q4FY

12Q1

FY13

Q2FY

13Q3

FY13

Q4FY

13Q1

FY14

Q2FY

14Q3

FY14

Q4FY

14E

(| c

rore

)

024681012141618

(%)

Interest Cost Interest Cost as % of EBITDA


L&T

Analyst

Chirag J Shah [email protected]


Page 20


Company RemarksBGR Energy We expect BGR's revenues to grow 3% YoY to | 1095 crore for Q4FY14E. Consistent

high share of EPC revenues may pull down margins by 200 bps to 11%. Interest costsmay be elevated but stable QoQ. PAT is expected to decline 18.8% to | 43.7 crore. Keymonitorable would be receivables and debt position

Thermax Q4FY14E will again be a flattish quarter for Thermax as we expect revenues to declinemarginally by 0.3% YoY. EBITDA margins are expected to decline 140 bps YoY to 10%owing to higher share of EPC revenues. PAT is expected to decline 13% YoY to | 100crore. Thermax has failed to garner any big ticket orders during Q4FY14E

Jyoti Structures Revenue and PAT growth may exhibit a flattish trend in Q4FY14E at 5.3% and 1.8%YoY, respectively. However, interest cost/EBITDA ratio may be elevated at 61% as weexpect margins to decline 80 bps YoY. This is mainly on the back of a rising share ofinternational revenues

KEC International KEC has won order worth | 1200 crore in Q4FY14E. We expect execution momentumto moderate as revenues are expected to grow 8% to | 2317 crore. Margins on a YoYbasis may improve 230 bps to 6.5% vs. 4.4% margins in Q4FY13. PAT is expected tobe at | 39 crore. Key monitorables would be carry of low margin orders in the overallbacklog

Kalpataru Power Transmission

Even with 8% revenue growth in Q4FY14E, KPTL is expected to meet its FY14Erevenue guidance of 15-20%. Margins are expected to remain flat 9.6% for Q4FY14E.However, a 20% YoY rise in interest costs is expected to lead to flattish PAT at | 48crore. KPTL has won | 700 crore worth of orders in Q4FY14E

Larsen & Toubro With current announced orders of | 16500 crore so far in Q4FY14E, L&T is all set toachieve its FY14E order inflow guidance of 15% YoY. In terms of execution, we expectsales to grow 16% YoY to | 21063 crore. EBITDA margins are expected to increase 20bps YoY to 12% while PAT is expected to grow ~5% YoY to | 1895 crore

Bhel Order inflows will be the key highlight for Bhel’s Q4FY14E as it has bagged orders tothe tune of | 11200 crore. However, the financial performance may continue to beweak as we expect revenue and PAT decline at ~17% YoY and 36% YoY, respectivelyin Q4FY14E. Key monitorables would be execution of private sector orders andreceivables

Greaves Cotton We expect revenues to be flattish at | 508 crore in Q4FY14E. For FY14E, we expect auto engine volumes to decline in the range of ~4%. The key drag will come from the infrastructure division wherein revenues may be lower and also lead to a YoY decline in margins of 30 bps to 12.5%. We expect PAT to be at | 38 crore, flat YoY

AIA Engineering We expect AIA's volume growth at 8% YoY at 44800 tonnes for Q4FY14E. Coupledwith this, a realisation of | 110000/tonne would lead to 12% YoY revenue growth inQ4FY14E. We have built in EBITDA margins of 22%, up 190 bps YoY. Hence, weexpect PAT of | 74 crore, up 16.5% YoY



Page 21

Cement

All India cement dispatch growth to remain subdued…

All-India cement sales volumes growth is expected to remain subdued due to a slowdown in construction activity and low government spending on infra sector. FY13 saw cement volume growth of mere 5.0-5.5% while in FY14E growth is expected to moderate further to 3.4-3.6%. For Q4FY14E, we expect all-India cement volume growth of 1.7% YoY vs. growth of 2.6% YoY last year and 2.0% last quarter.

…but north focused companies to benefit from sharp price increase

North based companies like Shree Cement and JK Lakshmi Cement are expected to come up with a relatively better sequentially topline growth in Q4FY14 after posting disappointing numbers for the last three quarters of FY14. The improvement in revenue would largely be due to price perking up in the first two months of Q4FY14. February 2014 saw cement price escalations in north and central regions due to constrained supply, on account of plant closures [Ambuja (HP) and Binani (Rajasthan)]. Meanwhile, prices in AP fell to ~| 200 owing to volume push from cement makers towards the financial year close. As such, prices in south, east and Maharashtra remained stagnant owing to tepid demand and high inventory pushing by regional players.

I-direct universe to report flat topline growth YoY, India Cement to remain major dragger due to price correction in Andhra Pradesh

Aggregate revenue growth of our cement coverage universe is expected to remain flat due to a mixed trend in volumes and realisations. Among our coverage universe, we expect India Cement to report 8.9% YoY drop in revenues due to power crisis and economic slowdown in AP. The average EBITDA margin of our coverage is expected to decline ~221 bps YoY (up ~402 bps QoQ) to 17.7% in Q4FY14E due to higher fixed overheads. The bottomline of our universe is also expected to decline ~29.6% YoY to | 1457.9 crore.

EBITDA/tonne expected to decline due to higher fixed overheads led by higher freight cost and low sales volumes

With high power tariffs, freight costs and rise in lead distances, we expect EBITDA/tonne of our coverage universe to decline 9.9% YoY to | 787/tonne. We expect power & fuel cost for cement companies to increase marginally YoY. Freight cost is also expected to increase YoY due to an increase in lead distances and higher rail freight tariffs (hiked by 15%). Other fixed costs are also expected to be higher due to lower volumes during the quarter.

Exhibit 1: Estimates for Q4FY14E (| Crore)Revenue EBITDA PATQ4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

ACC^ 2,940.0 1.0 9.2 411.1 -8.0 56.5 303.5 -30.7 10.1Ambuja^ 2,462.6 -3.2 12.4 471.9 -12.8 63.3 380.1 -22.1 20.1Heidelberg^ 415.9 12.6 18.7 52.3 44.1 177.2 -1.5 PL NAIndia Cement 1,084.8 -8.9 4.7 144.3 -14.0 0.0 -2.7 PL PLJK Cement 778.1 1.2 15.4 108.8 -17.8 48.8 35.6 -36.7 217.2JK Laxmi Cem 554.5 3.5 10.3 93.7 -1.7 47.7 36.2 -27.2 156.8Mangalam Cement 195.0 7.7 21.4 16.9 -3.0 LP 6.4 -26.8 1,270.8Shree Cement * 1,490.8 3.3 13.1 392.8 -6.5 45.2 218.2 -20.4 88.9UltraTech Cem 5,380.2 -0.2 12.4 1,019.8 -15.0 33.5 482.1 -33.6 30.4Total 15,302.0 -0.2 11.6 2,711.5 -11.3 44.3 1,457.9 -29.6 32.9


Source: Company, ICICIdirect.com research ^ Q4CY13 result * Q2FY14 result

Earnings matrix 15

334

1442

7

1286

1

1371

4 1530

2

11500120001250013000135001400014500150001550016000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

5.0

10.0

15.0

20.0

25.0

(%)


Cement dispatches and YoY growth

3.4 2.0 1.73.6

8.7

11.0

4.9

2.6

3.9

20

30

40

50

60

70

Q4FY

12

Q1FY

13

Q2FY

13P

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

milli

on to

nnes

0.0

2.04.0

6.0

8.010.0

12.0

%

Cement dispatches (LHS) YoY growth (RHS)

All India Demand Supply scenario

76.674.8

87.4

77.2

88.8

75.3

05

1015202530354045

FY09 FY10 FY11 FY12 FY13P FY14E

Mn

tonn

es

70.0

75.0

80.0

85.0

90.0

%

Effective capacity additions (LHS)Incremental demand (LHS)Capacity utilisation (%)

Top pick of the sector JK Cement Analyst

Rashesh Shah [email protected]

Darpan Thakkar [email protected]


Page 22

Exhibit 2: Company specific view Company RemarksACC We expect cement sales volumes to decline ~3.2% YoY (grow ~6.3% QoQ) to 6.22

MT in Q1CY14 due to a subdued demand environment. Net realisation may grow4.3% YoY to | 4729/tonne. Due to lower realisation and higher operating costs, theEBITDA/tonne is expected to decline ~5% YoY

Ambuja Cement Cement sales volume is expected at 5.92 MT (up 2% YoY, 7% QoQ) in Q1CY14. Weexpect cement realisations to decline ~5.1.% YoY (up ~5.0% QoQ) to |4,163/tonne. The EBITDA/tonne is expected to decline ~14.5% YoY to | 798/tonnedue to low realisations

UltraTech Cement Blended sales volume is expected to decline 3.5% to 10.89 MT in Q4FY14. Blendedrealisation is expected to increase ~3.5% YoY to | 4,942/tonne. BlendedEBITDA/tonne is expected to decline ~11.9% YoY to | 937/tonne

Shree Cement We expect cement sales volumes to increase ~12.5% YoY to 3.67 MT. Cementrealisations are expected to increase ~3.1% YoY (up~6.3% QoQ) to | 3,649/tonne.We expect merchant power sales volume of ~400 million units (down ~48% YoY,down ~2% QoQ) at realisation of | 3.80/unit. Cement EBITDA is expected at |972/tonne (up 10.6% YoY) due to higher realisation because of supply constraint inthe northern region

India Cement Sales volume is expected to decline 11.4% YoY to 2.46 MT in Q4FY14. Cementrealisation is expected to improve ~2.6% YoY (up 3.9% QoQ) to | 4329/tonne dueto lower sales from Andhra Pradesh where cement prices have declinedsubstantially. We expect EBITDA/tonne to increase ~3.1% YoY to | 587/tonnemainly due to lower power costs

JK Cement Blended sales volume (grey & white) is expected at 1.73 MT in Q4FY14 (up 0.6%YoY). The blended realisation is expected to increase by 0.6% to | 4511/tonne.Blended EBITDA/tonne is expected to decline by ~18% at | 631/tonne v/s |772/tonne reported last quarter

JK Lakshmi Cement

Cement sales volume is expected at 1.49 MT for Q4FY14 (up 3.6% YoY). Therealisation is expected stay flat at | 3734/tonne vs. | 3739/tonne in Q4FY13.EBITDA/tonne is expected to decline 8.1% YoY to | 611/tonne

Mangalam Cement

Sales volume is expected to increase 8.6% YoY (up 16.3% QoQ) to 0.55 MT inQ4FY14. We expect cement realisation to decline 0.8% YoY (up 4.4% QoQ) to |3538/tonne. The EBITDA/tonne is expected to decline 10.6% YoY to | 307/tonnedue to higher fixed overheads per tonne

Heidelberg Cement

We expect the sales volume to increase ~11.5% YoY, up 20.3% QoQ) to 1.06 MT inQ1CY14 due to commissioning of new capacities at Jhansi & Damoh. We expectrealisations to increase 1% YoY (3.4% QoQ) to | 3926/tonne. EBITDA/tonne isexpected at | 494/tonne as against | 382/tonne in Q1CY13


Sales Volume (Coverage Universe)

Million tonnes Q4FY14E Q4FY13 YoY (%) Q3FY14 QoQ (%)

ACC 6.22 6.42 -3.2 5.85 6.3

Ambuja 5.92 5.80 2.0 5.53 7.0

UltraTech* 10.89 11.29 -3.5 9.99 9.0

Shree Cem 3.67 3.26 12.5 3.44 6.8

India Cem 2.46 2.78 -11.4 2.29 7.2

JK Cement* 1.73 1.71 0.6 1.53 12.7

JK Lakshmi 1.49 1.43 3.6 1.42 4.7

Mangalam 0.55 0.51 8.6 0.47 16.3

Heidelberg 1.06 0.95 11.5 0.88 20.3

Total 33.97 34.15 -0.5 31.40 8.2

* blended sales volume (grey & white) * RE

Region-wise cement retail prices

|/50 kg bag Q4FY14 Q4FY13 YoY (%) Q3FY14 QoQ (%)

North 305 279 9.5 277 9.9

East 316 299 5.7 305 3.5

South 282 283 -0.4 328 -13.9

West 301 297 1.4 303 -0.6

Central 301 279 8.1 273 10.3

Average 301 287 4.8 297 1.3

Cement Realisations (Coverage Universe)

| per tonne Q4FY14E Q4FY13 YoY (%) Q3FY14 QoQ (%)

ACC 4729 4534 4.3 4604 2.7

Ambuja 4163 4388 -5.1 3963 5.0

UltraTech* 4942 4775 3.5 4792 3.1

Shree Cem 3649 3540 3.1 3434 6.3

India Cem 4329 4221 2.6 4429 -2.3

JK Cement* 4511 4485 0.6 4405 2.4JK Lakshmi 3734 3739 -0.1 3544 5.4

Mangalam 3538 3566 -0.8 3388 4.4

Heidelberg 3926 3887 1.0 3796 3.4

Average 4454 4400 1.2 4311 3.3

* Blended realisations (grey cement +white cement)

EBITDA per tonne (Coverage Universe)

| per tonne Q4FY14E Q4FY13 YoY (%) Q3FY14 QoQ (%)

ACC 661 696 -4.9 449 47.3

Ambuja 798 933 -14.5 523 52.6

UltraTech* 937 1063 -11.9 765 22.4

Shree Cem 972 1087 -10.6 719 35.2

India Cem 587 569 3.1 592 -0.9

JK Cement* 631 772 -18.3 478 32.1

JK Lakshmi 611 665 -8.1 447 36.6

Mangalam 307 343 -10.6 -146 LP

Heidelberg 494 382 29.2 204 141.5

Average 787 873 -9.9 588 33.8

*blended (grey + white)


Page 23

Construction & Infrastructure

Finally big ticket asset monetisation seen…

Big ticket size asset sale was finally seen in the infrastructure space in Q4FY14. In our coverage, JAL sold its two hydro plants aggregating 1390 MW at an equity valuation of US$616 million (| 3,820 crore) and EV of US$1.6 billion (~| 10,000 crore). Furthermore, it also hived off its 74% stake in the JV with SAIL in the 2.1 MT grinding unit in Bokaro for an equity valuation of | 690 crore. NCC also entered into a definitive agreement with SembCorp for sale of 45% stake for | 848 crore (at 1.1x P/BV) in NCC Power. These transactions would enable these players to repair its balance sheet in coming quarters.

Order inflow remains muted amid few NHAI ordering on EPC…

NHAI finally awarded a few projects in Q4FY14 after a gap of almost a year. These awards were made on an EPC basis wherein along with smaller players such as GR Infra, Dilip Buildcon and DR Infracon, listed players such as L&T, Gammon and Sadbhav (one project worth | 212 crore) also figured.

The order inflow announcement for our coverage universe continued to remain muted in Q4FY14. Supreme announced order inflows of ~| 618 crore in Q4FY14. Sadbhav announced order inflows of | 411 crore and two orders cancellation worth | 119 crore. We highlight that given the implementation of election code of conduct, order inflows have been impacted and a similar trend may be seen in H1FY15 also.

Construction universe – expect topline growth of 9.9% YoY

After a decline of four consecutive quarters till Q2FY14, revenue growth of the construction universe is expected at 9.9% YoY for second consecutive quarter, albeit on a lower base. Nonetheless, we believe stretched working capital and client side payment delays continue to persist in Q4FY14 as well. While NCC’s revenues are expected to grow at 12.3%, we expect SIL to post 8.2% YoY growth in topline. For Supreme, we expect 7.5% growth in topline in Q4FY14.

Infrastructure universe – revenues to grow at 5.5% YoY

We expect revenues to grow 5.5% YoY for our infrastructure universe, contributed mainly by strong growth of GVK (55.7% YoY due to the low base in Q4FY13 on account of power revenue reversal) and Sadbhav (29.7% YoY due to ramp up in new projects). JAL is expected to report a muted topline with 3.9% decline YoY given the subdued performance of the construction and cement segment. For IRB, we expect the topline to decline 0.6% YoY in Q4FY14 given the lower construction revenues.

Bottomline continues to be hurt by interest pain…

Given the higher interest cost and debt levels, we expect our construction coverage universe to report a modest 4.5% YoY bottomline growth (lower than topline growth of 9.9% YoY).

The infrastructure coverage universe is also expected to report a sharp decline of 86% YoY dragged mainly by JAL’s bottomline, which would turn into the red vs. profit on a YoY basis.

Topline & Profitability (Construction Coverage)

3818

3216

2925 34

87 4195

0

1500

3000

4500

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

2.0

4.0

6.0

8.0

10.0

12.0

(%)


Topline & Profitability (Infrastructure Coverage)

6014

5579

5156

5371

6343

5000

5500

6000

6500

7000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

(%)



Sadbhav Engineering Analyst

Deepak Purswani, CFA [email protected] Bhupendra Tiwary [email protected]


Page 24

Exhibit 3: Estimates for Q4FY14E: Construction (| Crore) Revenue EBITDA PATQ4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

NCC 1,883.9 12.3 26.6 141.1 50.2 54.1 29.3 8.0 LPSimplex Infra 1,608.1 8.2 15.5 159.1 9.6 9.2 16.8 -6.3 11.1Supreme Infra 702.6 7.5 15.9 87.6 5.9 1.7 30.8 8.1 -4.1Total 4,194.6 9.9 20.3 387.8 20.5 20.0 77.0 4.5 92.4


Source: Company, ICICIdirect.com research

Exhibit 4: Estimates for Q4FY14E: Infrastructure (| Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQGVK Power 778.7 55.7 5.9 284.9 LP 11.2 -64.1 NA NAIRB Infra 942.6 -0.6 7.4 451.6 6.8 3.8 115.0 -23.9 5.9JP Associates 3,712.2 -3.9 18.3 783.0 -8.0 8.9 -68.9 PL NASadbhav Eng. 910.0 29.7 46.6 92.8 78.0 43.7 33.3 187.8 28.2Total 6,343.4 5.5 18.1 1,612.3 23.8 9.3 15.2 -86.3 3,168.9



Exhibit 5: Company specific view (Construction coverage universe) Company RemarksNCC We expect topline growth of 12.3% YoY for NCC in Q4FY14. However, higher

interest cost would lead to modest bottomline growth of 8% YoY. Keymonitorable: receipt of money for power asset stake sale and debt reduction

Simplex Infra Simplex bagged orders worth | 800 crore in the first two months of Q4FY14.Simplex is expected to report modest topline growth of 8.2% YoY, owing tostretched balance sheet. The bottomline, however, is expected to decline6.3% YoY given the rise in interest cost. Key monitorable: managementcommentary on execution and working capital

Supreme Infra Supreme announced orders worth | 618 crore in Q4FY14. Given the stretchedworking capital impacting execution, we expect Supreme to report mutedtopline growth of 7.5% YoY. Consequently, the bottomline is also expected toremain muted at 8.1% YoY. Key monitorable: debt reduction and execution


Construction Coverage Universe

Order book to bill to go down as inflows are muted

2.9

3.0

3.0

3.2

3.1

2.0

2.4

2.8

3.2

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(x)

…with better execution, interest pressure to decline

6.65.9

6.5

5.5

7.5

6.7

4.0

5.0

6.0

7.0

8.0

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)

*Interest Expenses as %age of Sales

…so is interest as % of EBITDA to improve

65.969.9

64.159.5

72.7

76.6

40

50

60

70

80

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)


Page 25

Exhibit 6: Company specific view (Infrastructure coverage universe) GVK Power We expect GVK Power to report a topline growth of 55.7% YoY in Q4FY14

mainly on account of a lower base in Q4FY13, reversal of power revenuesworth | 237 crore. On the bottomline front, GVK is expected to post a loss of |64 crore in Q4FY14. Higher losses are due to additional interest anddepreciation for MIAL, which commenced T2 operation in Q4FY14. Keymonitorable: status of monetisation at MIAL’s real estate and stake sale plansin the airport division

IRB Infrastructure In Q4FY14, the Bombay High Court temporarily stayed tolling on KolhapurIRDP based on PIL by Kolhapur residents. IRB also commenced constructionon Goa Kundapur project in March. In terms of financial performance, weexpect a muted topline decline of 0.6% YoY while bottomline is expected todecline 23.9% given higher interest expenses and depreciation on account ofrecently commissioned BOT projects

JP Associates In the quarter, JAL sold its two hydro plants at an equity valuation of US$616million (| 3,820 crore). It also hived off its 74% stake in the JV with SAIL inthe 2.1 MT grinding unit in Bokaro for an equity valuation of | 690 crore. OurQ4FY14 estimates do not reflect any capital gain from these transactions. Interms of financial performance, we expect it report losses again impactedmainly by the higher depreciation & interest cost and a muted cement division(volumes to decline 4.5% YoY to 3.8 MTPA and realisation to grow ~6% YoYto | 4410/tonne)

Sadbhav Engineering Sadbhav has announced order inflows of | 411 crore and two orderscancellations worth | 119 crore. In terms of quarterly performance, thecompany is expected to report 29.7% YoY growth in topline given the ramp upin under construction projects. Given the sharp topline growth and highermargins, the bottomline is expected to grow 187.8% YoY. Key monitorable:execution status on ongoing projects


Infrastructure Coverage Universe

…interest cost* remains at elevated levels

15.017.4

20.6 19.7

21.9

10.0

14.0

18.0

22.0

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)

*Interest Expenses as %age of Sales

Major news during Q4FY14

Sadbhav

The company clarified on allegations ofsiphoning of | 200 crore in Bijapur Hungundand forensic audit by CLB saying thatallegations are baseless and the High Court hadstayed a forensic audit order of CLB

JP Associates

JAL has sold its two hydro plants aggregating1390 MW at an equity valuation of US$616million (| 3,820 crore) and EV of US$1.6 billion(~| 10,000 crore). It also hived off 74% stakein the JV with SAIL in the 2.1 MT grinding unitin Bokaro for an equity valuation of | 690 crore.News reports also indicated it is in talks to sellits 2.3 MT Bhilai cement plant

GVK PowerMedia reports indicated NTPC is looking toacquire the Goindwal Sahib Project

IRB Infra Bombay High Court temporarily stayed tollingon Kolhapur IRDP based on PIL by Kolhapurresidents. IRB also commenced constructionon Goa Kundapur project in March


Page 26

Consumer Discretionary

Revenue growth largely driven by price hike during Q4FY14

Consumer discretionary (CD) companies are expected to record 15% YoY growth during Q4FY14E led by selective counters such as Pidilite Industries and Bajaj Electricals wherein topline is expected to grow ~20% YoY. We believe overall revenue growth for the CD sector would be largely driven by price hikes in the range of 5-6% YoY as volume growth is expected to remain subdued considering the bleak macro environment. Within paint and chemical companies, Pidilite is expected to record revenue growth of 21% YoY led by ~24% YoY rise in consumer & bazaar segment’s revenues. Further, volume growth of Asian Paints and Kansai Nerolac is expected to be in the range of 6-7% YoY led by decorative paints (intact demand from tier II and tier III cities) while volume growth in the industrial segment is expected to remain subdued attributable to moderate GDP growth. Besides, electrical goods manufacturers Bajaj Electrical (BEL) is expected to record revenue growth of ~24% YoY led by 49% YoY rise in E&P revenue.

Absence of one-time event drives margin for selected companies

We believe in order to offset inflationary pressure coupled with adverse currency movement, the company took a price hike (~5-6%). Under our coverage, the EBITDA margin for selective companies like BEL, V-Guard and Essel Propack are expected to record a sharp margin expansion (between 195 and 480 bps YoY) attributable to better operational efficiencies. As majority of the raw material of paint & chemical companies is imported, the elevated dollar value against rupee (14% YoY) and stabilisation of titanium di-oxide price (TiO2) to its last year’s level would restrict any sharp increase in EBITDA margin. We expect the EBITDA margin of Asian Paints to increase 107 bps YoY largely driven by a decline in other expenses. However, EBITDA margin of Kansai is expected to decline 40 bps YoY due to lower operating leverage.

Coverage universe to record ~9% YoY bottomline growth

We expect a flattish EBITDA margin of Pidilite Industries and a decline in EBITDA margin of Kansai, Havells and Symphony, respectively. This would restrict the bottomline growth of our coverage universe at ~9% YoY. On the flip side, we expect BEL and V-Guard to record a sharp growth in bottomline led by a sharp margin expansion. Kansai Nerolac is expected to record a decline in PAT by 61% YoY attributed to a one-time impact and lower margin (as the company changed its depreciation policy in Q4FY14).

Exhibit 7: Estimates for Q4FY14E (Consumer Discretionary) (| Crore)

Company Revenue EBITDA PATQ4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

Asian Paints 3,108.4 14.5 -8.9 461.2 23.5 -7.4 308.8 23.0 -6.2Bajaj Electricals 1,376.8 23.6 33.2 82.4 523.5 42.9 46.5 NM 131.9Essel Propack 532.1 11.7 -0.9 95.3 25.2 5.9 28.1 6.0 -0.9Havells 1,306.6 11.7 10.3 160.7 8.0 -5.4 110.5 0.8 -9.0Kansai Nerolac 751.4 11.2 -8.5 80.5 6.3 -7.7 47.9 -60.9 -2.4Pidilite Industries 1,017.5 21.3 -4.8 150.3 26.6 -5.6 92.9 14.2 -4.5Symphony* 96.8 13.7 -16.0 25.6 13.0 -17.6 21.4 19.1 -13.2V-Guard Industries 379.1 2.1 8.3 29.6 133.7 13.1 16.4 84.0 -6.1Total 8,568.8 15.1 0.5 1,085.5 29.0 -3.0 672.5 8.7 -2.2

Change (%) Change (%) Change (%)

Source: Company, ICICIdirect.com Research, ,* year end is June


7445

7564 8029 8523

8569

-500

500

1500

2500

3500

4500

5500

6500

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

(%)


EBITDA margin (%) movement

EBITDA margin Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14Asian Paints 13.8 16.5 15.6 14.6 14.8Kansai Nerolac 11.1 12.8 11.6 10.6 10.7Pidilite Ind 14.2 20.4 17.2 14.9 14.8Essel Propack 16.0 17.4 17.5 16.8 17.9Havells 12.7 12.7 14.4 14.3 12.3Bajaj Ele 1.2 2.6 -0.2 5.6 6.0V-Guard 3.4 7.1 7.3 7.5 7.8Symphony 26.6 27.0 19.2 27.0 26.4

Titanium dioxide (|/kg) price trend

180

190

200

210

220

230

240

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

(|/k

g)

40

45

50

55

60

65

70

75

(|)

TiO2 Price | movement

Analyst

Sanjay Manyal [email protected] Hitesh Taunk [email protected]


Page 27

Exhibit 8: Company specific view for Q4FY14E

RemarksAsian Paints We expect the company's overall revenue to grow 14.5% YoY to | 3108

crore contributed by moderate ~8% volume growth and ~6% price hikesin Q4FY14E. Price hikes at regular interval to offset higher raw materialcost coupled with a marginal benefit from currency fluctuation areexpected to lead EBITDA margin expansion of 107 bps YoY to 14.8%. Asa result, PAT is likely to record growth of 23% YoY to ~| 309 crore

Bajaj Electricals We expect BEL to post ~24% YoY revenue growth at ~ | 1377 crore inQ4FY14E, led by ~49% YoY growth in the E&P segment to | 425 croreand ~15% YoY growth in consumer durable and lighting segments to |626 crore and | 326 crore, respectively. The EBITDA margin is expectedto increase 478 bps YoY at 6% due to execution of higher marginprojects. Company is expected to record PAT of ~| 47 crore

Essel Propack We expect the company to report ~12% YoY consolidated revenuegrowth at ~| 532 crore in Q4FY14E, led by ~15% YoY growth inAMESA region to | 275 crore and ~14% YoY growth in the Europeanregion to | 79 crore. We expect higher operating leverage in its Polandplant to help in driving EBITDA margin by 190 bps YoY to 17.9%. PAT islikely to increase ~6% YoY to ~| 28 crore

Havells India We expect Havells to post ~12% YoY standalone revenue growth at ~|1307 crore in Q4FY14E, led by ~19% YoY growth in switchgear segmentto | 371 crore and ~15% YoY growth in cable segments to | 529 crore.We believe the EBITDA margin will remain flat at 12.3%, down 40 bpsYoY mainly due to advertisement expenses. PAT is likely to increase 4%YoY to ~| 111 crore

Kansai Nerolac We expect sales growth of 11% YoY to | 751 crore during Q4FY14Elargely contributed by volume growth of ~6% coupled with 5% pricehike. The volume growth would largely be driven by decorative segmentwhich contributes ~55% in overall volume. We believe the EBITDAmargin will decline ~40 bps YoY driven by lower operating leverage dueto lower volume growth. PAT is likely to decline 61% YoY at ~ | 48 croredue to one-time impact

Pidilite Industries We expect Pidilite to post Q4FY14E consolidated revenue growth of~21% YoY at | 1017.5 crore led by ~24% YoY growth in consumer &bazaar segment and 12% YoY growth in the industrial product segment.The EBITDA margin is expected to increase 60 bps YoY at 14.8%,attributable to lower selling and promotional activities. PAT is likely toincrease ~14% YoY to ~| 93 crore

Symphony We expect Symphony to record ~14% YoY growth in revenue to | 97crore during Q3FY14E led by ~8% YoY volume growth. Domestic salesare expected to increase ~5.4% YoY while export volumes are expectedto increase 18.5% YoY. We expect an EBITDA margin of 26.4% down 20bps YoY due to higher advertisement expenses. PAT is likely to increase~19% YoY to ~| 21 crore supported by higher other income

V-Guard We expect flattish revenue growth of ~2% YoY to ~| 379 crore duringQ4FY14E led by 4% YoY growth in the electrical segment to | 250 crore.Revenue from the electronics segment may remain flat. The EBITDAmargin is expected to increase ~440 bps YoY at 7.8%, as last year thecompany incurred one-time expenses (higher ad expenses, higherinventory valuation). PAT is likely to double at ~| 16.4 crore


Volume growth movement of paint companies

02468

1012

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

(%)

Asian Paints Kansai Nerolac


Page 28

FMCG

Pricing to drive growth; reviving volume remains the aim

With the slowdown continuing to haunt consumer demand coupled with the persistent high food inflation at 8.6%, we believe volume growth in Q4FY14 would continue to remain modest across FMCG companies (I-direct coverage universe). In spite of good monsoons in FY14, consumer demand has failed to gain traction, as expected. Hence, revenue growth in Q4FY14 would be largely supported by creeping price increases taken to ward off input cost pressures and manage margins and growth in the wake of declining volumes. We expect the highest volume growth for Dabur India and Colgate Palmolive at 7-9% compared to 4-5% growth for HUL, Marico and Jyothy Laboratories. Further, we expect Nestlé to report lowest volume growth within our coverage at 1-2% considering the company’s presence largely in the sluggish premium segment.

Moderation in rural growth due to high inflation

Rural demand growth, the saviour for FMCG companies so far on the back of slowing urban demand growth is also witnessing moderation in growth. The premium of rural growth (1.3-1.5x urban growth) is fading led by persistently high inflation in the economy. However, we believe that with the election season round the corner, rural growth would gain traction in Q1FY15.

Increasing costs to limit margin expansion

With selective raw materials continuing to witness an uptrend (palm oil +8.3% YoY; milk up 22% YoY; crude oil up 4% YoY; raw coconut oil up 70%; copra up 78% YoY) and others remaining at elevated levels (if not softening), higher input costs for companies and limited pricing power in a slowing demand scenario would continue to keep margins suppressed. Hence, we expect Dabur, Jyothy, Nestlé and Marico to witness stress on margins due to higher raw material costs in Q4FY14E. We believe the price increases to ward off the higher cost impact would be limited to the cost inflation seen in previous quarters only. Hence, we expect further price increases by companies, going forward. We believe that other than raw material cost, change in sales mix (higher contribution of value-added products), higher employee costs and continued higher marketing spends would stress margins for other players. Companies with absolute pricing power in the segments they have dominance (HUL in soaps & detergents, ITC in cigarettes) would not face as much margin pressure in Q4FY14.

Exhibit 9: Estimates for Q4FY14 (FMCG) Revenue EBITDA PATQ4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQ

Colgate Palmolive 934.7 15.2 5.7 171.7 1.8 14.0 127.9 3.8 13.3Dabur India Ltd 1,771.8 15.7 -7.0 310.7 13.9 4.4 236.6 17.1 -2.9HUL 6,897.3 8.3 -2.0 1,103.8 13.6 -10.0 858.2 9.0 -19.2ITC 9,262.6 13.2 7.4 3,351.7 23.8 2.1 2,273.9 17.9 -4.7Jyothy Laboratories 311.4 14.4 4.9 43.5 28.7 2.5 31.9 169.8 16.5Marico Ltd 1,017.4 2.0 -15.1 146.9 22.2 -27.2 91.3 8.8 -32.6Nestle India 2,437.8 8.4 8.2 545.8 3.3 16.1 310.4 11.2 10.2Tata Global 1,946.4 7.5 -5.2 240.2 7.5 22.4 112.3 18.5 -6.1VST Industries 177.1 10.7 -16.0 49.9 13.2 -21.3 35.0 0.9 -9.4Total 24,756.5 10.6 1.2 5,964.1 17.7 0.5 4,077.6 15.0 -7.5


Source: Company, ICICIdirect.com Research *Marico’s revenue for Q4FY14 excludes Kaya business revenues as the business has been de-merged however, the base quarter revenues include Kaya revenues, hence the growth seems to be low at 2%. The like to like growth on a comparable base stands at 11.6% for Q4FY14.


2237

8

2240

5

2305

2

2446

1

2382

2

15000

20000

25000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

5.0

10.0

15.0

20.0

25.0

30.0

(%)


Palm Oil (MYR/Metric Tonne)

2100

2300

2500

2700

2900

3100

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

Milk (USD/100 pounds)

18

20

22

24

26

28

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

Copra (|/100 kg)

4,000

5,000

6,000

7,000

8,000

9,000

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Top pick of sector

ITC Marico Analyst

Sanjay Manyal [email protected] Parineeta Rajgarhia [email protected]


Page 29

Exhibit 10: Company specific view (FMCG) Company RemarksColgate We expect volume and price growth to remain at 7-8% each driving revenue growth at

~15%. Higher employee and marketing/promotion spends would restrict the marginexpansion at 18.2% (~210 bps lower YoY)

Dabur Domestic sales growth is expected to remain modest at 13.7% YoY led by ~8% volumegrowth and ~5% price led growth. We expect international revenue growth to remainhealthy at ~21% YoY. In the domestic business, we expect growth to be supported bystrong growth in health supplements, home care, foods and digestives at ~15%, ~14%~21% and ~15%, respectively. We expect margins to witness marginal contraction of~30 bps YoY to 17.4% following higher raw material and employee cost

HUL With the consumer demand scenario in the economy remaining subdued, we expectvolume growth for HUL to remain lower at ~4%. Growth across segments would alsoremain moderate with soaps & detergents, personal products, beverages and foods growth expected at ~8%, ~10%, ~11% and ~7%, respectively. We expect margin improvementof ~70 bps YoY to 15.7% to be led by price increases, a change in the sales mix andsavings in manufacturing costs

ITC Cigarette revenue growth of ~15% may be led by ~18% price hikes and volume de-growthof ~3%. FMCG revenue growth at 17% is expected to be aided largely by foods andstationery business with the personal care business growth remaining moderate. Weexpect agri-business, hotels and paperboards revenue growth at 22%, ~7% and ~12%,respectively. We believe the significant increase in cigarette prices would aid the marginimprovement by ~300 bps YoY to 35.8% in Q4FY14

Jyothy Lab Soaps & detergents (S&D) segment growth at ~27% is likely to boost the revenue growthwith growth in home care remaining flat. (S&D growth seems to be high as the basequarter experienced production run down in Ujala (company's key S&D brand). Also,growth in S&D would be largely price-led. Although raw material cost to sales ratio isexpected to moderate to ~52% (~57% in Q4FY13), higher employee cost (+100 bps YoYto 9.5%) and marketing spends (+125 bps YoY to ~10%) would limit the marginexpansion to ~150 bps YoY at 13.9%. Savings in interest cost by ~| 15 crore wouldboost profits in Q4FY14

Marico Domestic revenue growth (on a comparable base quarter ex-Kaya) is expected to remainmodest at ~8% led by ~5% price led growth and ~3% volume growth. We expect growthin the international business and subsidiaries' revenues to remain strong at ~24% YoY.Margin improvement during the quarter may be lower at ~80 bps YoY to 14.4% led by thecontinued higher cost inflation as well as low consumer demand making it difficult to passon the cost inflation entirely. Led by higher input costs, marketing spend to sales isexpected to remain lower at 12% compared to 13.3% in Q4FY13

Nestlé India Led by continued slowdown in urban demand and Nestlé’s portfolio being largely premiumin nature, we expect volume growth to remain muted across segments. Expect pricegrowth to the tune of 7-8% to ride the revenue growth in Q1CY14. We believe value growthwould remain strong at ~12% and ~13% for prepared dishes and chocolates, respectively. Growth in beverages and milk products is expected at ~7% and ~6%, respectively. Weexpect margins to dip ~110 bps YoY to 22.3% led by continued cost inflation and highmarketing spends

Tata GlobalBeverages

Revenue growth is expected to remain strong in India (up 15% YoY) along with a revival ininternational business revenues (up 4.2% YoY) aided by increased marketing initiatives ofthe company. Further, though favourable commodity prices would aid margins, the gainswould be mitigated due to higher employee and marketing spends. Hence, we expect onlya limited improvement in margins by ~10 bps YoY to 12.2%

VST Industries

We expect cigarette volume growth at ~1% led by increasing mix of 64 mm in sales. Weestimate ratio of 64 mm in sales to increase to ~60% from ~57% in Q3FY14. Increasingcontribution of 64 mm and lower un-manufactured tobacco sales would aid margins toimprove by ~60 bps YoY to 28%



Page 30

Healthcare

Consolidated revenues likely to grow at ~21% YoY

Companies under the I-direct Healthcare coverage are expected to post growth of 22.1% YoY to | 21854 crore driven mainly by the US. The select US pack is likely to grow 44% YoY on the back of legacy products traction and ~14% depreciation of the rupee vis-à-vis US$ (average basis). Indian generic players continued to sell gPrandin (anti-diabetic), gCymbalta (CNS), gTriplix (anti-cholesterol), gPrevacid (GI), gDepakote (CNS) and gZymaxid (ophthal). New generic additions during the quarter were gRapamune (immunosuppressant), gAvelox (anti-infective), gCaduet (CVS) and gMicardis (CVS). On the domestic front, things have started showing improvements and the select domestic formulations pack is likely to grow at ~13% YoY. The select European pack is likely to register growth of 16%.

Among players, Dr Reddy’s Laboratories, Lupin, Aurobindo, Glenmark, Torrent, Ipca, Natco and Indoco are expected to do well on the back of robust exports growth, especially in the US. On the other hand, companies such as Cadila and Unichem are likely to be laggards due to muted growth in domestic formulations. Jubilant is also likely to post subdued growth due to pricing pressure.

EBITDA to grow ~26% YoY

We expect EBITDA of the I-direct coverage to grow 26.3% YoY to | 4975 crore. EBITDA margins are also likely to improve ~100 bps to 22.8% on the back of niche/limited competition launches in the US. Margin pressure on account of muted growth in domestic formulations is likely to be compensated by these US launches just like Q3FY14.

Net profit to grow 20% YoY

I-direct coverage universe is expected to post 20% YoY net profit growth to | 3001 crore. Lower growth vis-à-vis EBITDA growth is on account of EO items in the Q4FY13 bases of Biocon and Cadila.

Exhibit 11: Estimates for Q4FY14E (| Crore)


Aurobindo Pharma 2,124.7 35.3 -0.7 594.9 147.8 -7.6 411.6 279.0 -1.4Biocon 741.0 16.3 4.8 169.9 51.6 -3.3 101.9 -59.0 -3.0Cadila Healthcare 1,828.7 13.4 -2.3 329.2 14.9 11.5 198.5 -24.4 6.7Divi's Lab 781.5 20.0 13.4 312.6 23.9 8.6 227.6 25.2 3.9Cipla* 2,626.0 33.5 1.8 485.8 18.6 4.0 260.6 -2.6 -8.3Dr. Reddys 4,064.4 21.7 15.0 975.5 9.3 -6.5 595.5 4.3 -3.7Glenmark 1,598.4 19.7 -0.2 357.9 NA -2.0 185.4 11.2 -14.2Indoco Remedies 191.8 20.6 2.1 29.8 17.4 -0.2 14.5 12.2 2.7IPCA Labs 789.0 17.5 -5.3 197.3 38.6 -9.2 123.1 63.2 -11.5Jubilant Life Sc. 1,527.3 9.7 5.9 267.3 12.9 7.1 117.0 LP -18.4Lupin 3,040.9 17.6 0.6 745.0 13.1 -3.7 458.1 12.3 -3.8Natco Pharma 197.9 17.8 -2.7 49.5 44.6 -8.2 29.8 148.3 -0.4Torrent Pharma 1,055.1 21.1 3.9 253.2 15.1 17.8 173.2 56.0 9.6Unichem 263.8 8.3 -0.4 48.8 16.7 1.5 31.7 2.4 -57.2Apollo Hospitals 1,023.2 20.6 3.0 158.4 19.3 0.4 73.0 -3.4 -12.5Total 21,853.6 21.1 3.6 4,975.1 26.3 -1.0 3,001.5 20.0 -5.2


Source: Company, ICICIdirect.com Research; *Cipla numbers are not comparable as Q4FY14 numbers were consolidated and Q4FY13 numbers are standalone


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USFDA approvals for Jan-Mar14 (Coverage Universe)

Company Final TentativeAurobindo 3 2Cadila 7 1Cipla 0 1Dr Reddy's 3 2Ipca 2 0Lupin 5 0Natco 0 1Torrent 2 0Unichem 1 0

Source: USFDA website;

Currency Movement

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Top picks of sector

Lupin Dr Reddy’s Laboratories

Analyst

Siddhant Khandekar [email protected] Krishna Kiran Konduri [email protected]


Page 31

Exhibit 12: Company specific view Company RemarksApollo Hospitals Revenues on a standalone basis are likely to grow at ~21% YoY driven by 32%

growth in the pharmacy business and 15% growth in the hospitals business. Weexpect the company to add 35-40 pharmacy stores during the quarter. EBITDAmargins are likely to decline 20 bps to 15.5% on the back of commissioning of twonew hospitals. We expect net profit to decline 3% YoY

Aurobindo Pharma

Revenues are expected to grow ~35% YoY on the back of 85% growth in the US (30%US$ growth) and 20% growth in Europe & RoW markets. Launches such asgCymbalta and gPrandin are likely to drive US growth. APIs growth, however, is likelyto be muted at 10%. EBITDA margins may shoot up ~1360 bps YoY to 28% on alower base and higher contribution from formulations. MTM forex gains are expectedaround | 54 crore

Biocon Revenues are likely to grow 16% on the back of 30% growth in research servicesbusiness and 11% growth in biopharma business. Biopharma growth is likely to besubdued on the back of pricing pressure in the Statins business and stoppage ofTrastuzumab (Oncology) sales. EBITDA margins are likely to improve 530 bps to~23% on a lower base. The net profit may witness decline due to | 202 crore EOincome in Q4FY13

Cadila Healthcare

Revenues are expected to grow ~13% driven by 40% growth in the US business.Indian formulation business and EU regions sales are expected to post marginalgrowth of 8% and 10%, respectively. It launched gPrevacid & gDepakote in Q3FY14and gRapamune in Q4FY14 in the US market. EBITDA margins are likely to besubdued at ~18% due to price erosion in some injectables and lower growth in thedomestic formulations

Cipla Consolidated revenues are expected to increase 2% QoQ. As the company has beengiving consolidated numbers since Q1FY14, YoY comparison is redundant. EBITDAmargins are likely to increase ~40 bps on account of a change in the product mix.Net profit is likely to decline ~8% QoQ on account of higher interest and depreciationcosts

Divi's Laboratories

Revenues are likely to grow 20% YoY driven by growth in both APIs and customsynthesis business. EBITDA margins are likely to improve 120 bps due to lowerpower cost and higher capacity utilisation at the DSN SEZ facility

Dr Reddy's Revenues are expected to increase ~22% driven by 50% growth in the USformulation business. The growth would be led by newly launched products suchgImitrex auto injector, gCymbalta, gCaduet and gAvelox. Growth in Russia CIS islikely to be muted at 8% so is the case with domestic formulation business. EBITDAmargins are expected to decline 270 bps to 24% on the back of a higher base

Glenmark Pharma

Glenmark is expected to post ~20% growth in revenues on the back of 22% growth inthe US market, 20% growth in domestic formulations and 16% growth in EU regions.EBITDA margins are likely to improve 330 bps to 22.4%. Despite healthy growth atEBITDA level, net profit growth is likely to be restricted to 11% due to higher tax outgo

Indoco Remedies

Indoco is expected to post growth of ~21% YoY on the back of 25% growth in exportformulations and 15% growth in domestic formulations business. We expect EBITDAmargins to decline 40 bps to 15.6% on the back of higher R&D cost

Ipca Laboratories

Ipca Laboratories is expected grow ~18% YoY on the back of 24% growth ininstitutional business, 25% in generic business and 15% growth in domesticformulations business. EBITDA margins are expected to improve 380 bps to 25% dueto decline in prices of raw materials for anti-malarial drugs. The margin improvementcoupled with relatively lower tax outgo would lead net profit to grow ~63% YoY


Expected growth (%) in domestic market in Q4FY14

(| crore) Q4FY14E Q4FY13 Var. (%) Q3FY14 Var. (%)

Biocon 99.8 84.0 18.8 99.2 0.6

Cadila 616.5 570.8 8.0 588.3 4.8

Glenmark 426.0 355.0 20.0 381.2 11.8

Indoco 106.4 92.5 15.0 114.9 -7.4

Ipca 205.2 178.4 15.0 246.3 -16.7

Lupin 650.8 565.9 15.0 650.4 0.1

Natco 42.4 36.0 18.0 44.0 -3.6

Dr Reddy's 375.9 348.1 8.0 391.3 -3.9

Torrent 250.8 220.0 14.0 300.0 -16.4

Unichem 153.5 142.2 8.0 166.4 -7.8

Total 2927.4 2592.9 12.9 2982.1 -1.8

Expected growth (%) in the US in Q4FY14

(| crore) Q4FY14E Q4FY13 Var. (%) Q3FY14 Var. (%)

Aurobindo 877.1 486.0 80.5 931.2 -5.8

Cadila 543.5 388.2 40.0 631.6 -14.0

Glenmark 523.5 429.1 22.0 521.4 0.4

Lupin 1449.9 1146.3 26.5 1356.7 6.9

Dr Reddy's 1712.0 1141.3 50.0 1622.3 5.5

Torrent 196.0 92.0 113.0 148.0 32.4

Total 5301.9 3682.9 44.0 5211.2 1.7

Expected growth (%) in Europe in Q4FY14

(| crore) Q4FY14 Q4FY13 Var. (%) Q3FY14 Var. (%)

Aurobindo 299.0 249.2 20.0 284.5 5.1

Cadila 105.7 96.1 10.0 118.6 -10.9

Glenmark 173.0 149.2 15.9 135.8 27.3

Dr Reddy's 192.2 183.0 5.0 186.2 3.2

Lupin 75.9 66.0 15.0 66.1 14.8

Torrent 263.8 211.0 25.0 248.0 6.4

Total 1109.5 954.5 16.2 1039.2 6.8


Page 32

Exhibit 13: Company specific view Jubilant Life Science

Revenues are expected to increase ~10% YoY on the back of 18% growth in lifescience ingredient segment and 1% growth in the pharmaceutical segment. The lowergrowth in the pharma segment is due to price erosion in its key generic products.EBITDA margins are expected to increase 50 bps YoY to 17.5%. We expect Jubilant tobook forex gains of ~| 54 crore

Lupin Revenues are expected to grow ~18% YoY on the back of 28% growth in the US, 25%growth in RoW markets and 15% growth in the domestic formulations. Overall USgrowth due to incremental launches including exclusivity drugs (gTrizvir & gZymaxid)and one limited competition drug (gCymbalta) is likely to be restricted by 1) higherbase and 2) price erosion in branded product Antara. Revenues in Japan may decline5% due to poor CRAMS off-take at I’rom. EBITDA margins are expected to decline by90 bps to 24.5%

Natco Pharma Revenues are likely to increase ~18% YoY on the back of 60% growth in exportformulations and 18% growth in domestic oncology business. On the flip side, APIbusiness is expected to post marginal growth of 2%. EBITDA margins are likely toimprove 460 bps to 25% on the back of higher growth in formulation business

Torrent Pharma Revenues are expected to grow ~21% YoY despite higher base (licensing income of |29 crore in Q4FY13) on the back of 113% growth in the US and 25% growth in EUmarkets. Domestic formulations are likely to grow 14%. Robust US growth will be onthe back of launch of gCymbalta and gMicardis Plus. EBITDA margins may decline130 bps YoY to 24% due to higher base

Unichem Labs Unichem is likely to post marginal growth of 8% due to just 8% growth in the domestic formulations and 5% growth in export formulations. We expect EBITDA margins toimprove 130 bps to 18.5% YoY



Page 33

Hotels

Higher room inventory to keep growth under check amid lower demand

The I-direct hotel coverage universe is expected to report revenue growth of 5.4% YoY to | 1237.5 crore in Q4FY14 (vs. 6.3% YoY growth in last quarter) led by higher growth in revenues of EIH and Indian Hotels due to addition of rooms. However, higher room inventory coupled with moderate room demand during the quarter are expected to suppress average room rate (ARR) growth to the tune of ~2-3% YoY. On YoY basis, average occupancy levels at business destinations are expected to remain flat at 73% while leisure destinations are expected to witness an improvement in average occupancy by ~100 bps to 78% mainly supported by higher foreign tourist arrivals (up ~6.2% YoY) during the quarter.

Operating margins to remain under pressure due to high fixed overheads

Margins of the I-direct hotel universe are expected to decline marginally YoY due to high fixed overheads. We expect operating margins of the I-direct hotel universe at 27.1% for Q4FY14E (down 30 bps YoY) while on a QoQ basis margins are expected to decline ~10 bps. Major hoteliers like Indian Hotels and EIH are expected to report EBITDA margins of 28.7% (down 130 bps YoY) and 27.2% (down 30 bps YoY), respectively, while Taj GVK is expected to improve its margins by ~160 bps YoY due to the low base effect.

I-direct universe expected to report net profit of | 27.7 crore

Companies under I-direct coverage are expected to report profit of ~| 27.7 crore in Q4FY14E vs. net loss of | 441.5 crore in Q4FY13, which included impairment loss of | 373 crore for Indian Hotels. Net profit in the previous quarter for companies under coverage was at | 9.2 crore. Under our coverage, we expect Indian Hotels (standalone) to report a net profit of ~| 77.4 crore (ex-impairment loss) while companies like Hotel Leela are expected to report losses on account of higher interest and depreciation costs. Profitability of EIH and Taj GVK is expected to improve compared to last year due to last year’s low base effect.

Select leisure destinations to drive growth

Average occupancy levels in business destinations such as Delhi and Bangalore improved marginally by ~100 bps each to 74% and 66% respectively while occupancy levels in Chennai and Mumbai declined by ~100 bps each to 68% and 73% respectively on account of higher room inventory. Among leisure destinations, Jaipur and Agra reported an increase in occupancies YoY by 300 bps to 70% and 100 bps to 80%, respectively due to the peak season during the quarter. Occupancy levels remained flat YoY in Goa and Kochi at 86% and 75%, respectively.

Exhibit 14: Estimates for Q4FY14E: (Hotels) ( | Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQEIH 376.5 6.7 6.1 102.5 5.7 3.4 51.2 31.2 24.8Hotel Leela 208.6 3.9 2.2 48.7 34.8 -3.8 -104.6 NA NAIndian Hotel 586.4 5.5 3.9 168.2 0.9 6.4 77.4 LP 18.2Taj GVK Hotels 66.0 2.7 1.1 16.5 9.5 2.8 3.7 532.4 12.4Total 1,237.5 5.4 4.1 335.9 6.6 3.7 27.7 LP 200.4


Source: ICICIdirect.com Research


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Growth in foreign tourist arrivals (Year ending March)

100200300400500600700800900

Apr

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Trends in average occupancy levels

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Business Destinations Leisure Destinations

Top pick of sector

EIH \

Analyst

Rashesh Shah [email protected] Darpan Thakkar [email protected]


Page 34

Exhibit 15: Company specific view Company RemarksIndian Hotels Standalone revenues may grow 5.5% YoY on the back of rising occupancy levels.

Operating margins may remain lower YoY due to high overheads. We expectstandalone net profit of | 77.4 crore except impairment loss, which is expected at| 400 crore while international business is expected to turn profitable

EIH With an improvement in occupancy levels, revenue is expected to increase 6.7%YoY and 6.1% QoQ during the quarter. On the other hand, higher fixed overheadsmay keep EBITDA margins under pressure

Hotel Leela Revenues are expected to increase 3.9% YoY supported by higher FTA arrivalsduring the quarter (~6% YoY increase). EBITDA margins are expected to remainunder pressure due to higher operating costs. Net loss may remain higher due tohigh interest and depreciation cost

Taj GVK Hotel Revenues are expected to increase only 2.7% YoY due to higher room inventory inHyderabad and political tension in AP. Occupancy level is expected to decline 200bps YoY to 56% in Hyderabad. EBITDA margin for the company may remain ataround 25%



Page 35

Information Technology Unusual softness in Q4 but optimism continues for FY15E

We expect the Q4FY14E earnings season to be mixed and polarised as the sector witnessed unusual softness led by company specific issues. Tier-I IT companies are likely to report average dollar revenue growth of 1.9% QoQ vs. average 2.9% in Q3 and 2.1% in Q4FY13. Within tier-I, HCLT and Wipro are expected to lead while TCS and Infosys may drag. Rupee revenue growth could be similar (1.9%) as inter-quarter the average rupee has been flat QoQ (61.75 vs. 61.98). Though Nasscom’s FY15E guidance is better than FY14E, we believe some caution is warranted as a majority of our coverage universe companies emphasised sluggish spend trends – despite timely budget cycle conclusion and optimistic commentary post Q3 earnings – led by a variety of reasons but primary being slower ramp-ups, harsh winters and elongated pipeline conversion. Interestingly, though Q4 was unlikely to be robust, what surprised was that these risks could overflow to Q1FY15E. That said, the structural demand recovery is encouraging and sharp sell-offs could be used as buying opportunity while significant rupee appreciation in FY15E relative to our 60.5 assumption remains a key risk to our estimates.

EBIT margin flux, also, to be company specific Business re-investments coupled with slower revenue growth could create margin headwinds. Among tier-I players, we expect a decline of 28 bps for Infosys, 72 bps for HCL, 54 bps and 44 bps for TCS and Wipro, respectively. Though hedge related losses could be lower, translation losses could be higher as, inter-quarter, the period ending rupee rate appreciated ~3% QoQ.

Persistent’s, KPIT’s growth likely to outshine peers Within midcaps, we expect Persistent Systems (4.1%), KPIT (4%) to outperform its peers; MindTree, Infotech (3.1%, 2.8%) stable, while NIIT Tech (2.2%) could be soft. Demand uptick for IP services could drive Persistent’s growth. Base effect and deal ramp-ups could drive KPIT’s growth while Infotech would benefit from continued momentum in engineering business. NIIT Tech growth could be impacted by lower hardware revenue contribution and spend delays. Broadly, EBITDA margin increase could range between -178 and +83 bps with Tech Mahindra, Persistent at the bottom, and KPIT at the top of the pyramid.

Exhibit 16: Estimates for Q4FY14E: Information Technology (| Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQEclerx 225.8 29.5 2.8 90.1 31.2 1.4 59.5 23.6 -4.5Firstsource Sol 800.2 12.1 0.1 102.6 23.5 10.1 58.6 45.8 21.4HCL Tech* 8,413.8 31.0 2.8 2,140.2 48.7 0.7 1,506.8 44.9 0.7KPIT Tech 703.9 23.5 3.8 114.0 12.2 9.4 72.0 40.7 18.4Infosys 12,962.9 24.0 -0.5 3,531.8 27.5 -2.4 2,868.9 19.8 -0.2Infotech 592.2 27.5 2.4 108.4 37.0 -4.6 65.1 20.0 -6.2Mastek 225.2 -0.6 -5.5 25.6 12.6 -21.5 14.6 -28.0 -20.4Mindtree 806.2 30.2 2.0 157.2 62.9 2.0 90.3 4.2 2.0NIIT Ltd. 219.5 -0.9 -6.0 16.1 126.8 12.6 1.2 -57.1 0.0NIIT Technologies 602.1 12.1 2.5 100.5 13.7 5.1 53.3 -5.7 0.4Persistent Systems 449.5 34.6 3.9 44.9 27.1 11.7 65.1 25.5 1.5Sasken 116.2 2.5 2.7 14.5 15.5 6.9 13.2 88.3 18.9TCS 21,729.3 32.3 2.0 6,716.6 44.1 0.4 5,238.3 45.6 -1.4Tech Mahindra 4,998.6 32.7 2.0 1,070.5 38.8 -5.8 1,009.9 58.4 0.0Wipro 11,740.3 21.7 3.6 2,721.3 31.5 2.6 2,084.3 41.0 3.5Total 64,585.6 27.4 1.9 16,954.3 37.8 -0.1 13,200.9 38.0 0.1


Source: Company, ICICIdirect.com research ,* Year end June


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IT Services Q4FY14E Q3FY14 Growth (%

TCS 3,504.7 3,437.6 2.0

Infosys 2,090.8 2,100.0 (0.4

Wipro ^ 1,729.0 1,678.4 3.0

HCL Tech * 1,362.6 1,321.3 3.1

Average 1.9

Tech Mahindra 809.5 791.0 2.3

Mindtree 131.1 127.1 3.1

KPIT Technologies 114.0 109.7 4.0

NIIT Technologies 96.9 94.8 2.2

Infotech Enterprises 95.9 93.3 2.8

Persistent Systems 72.8 69.9 4.1

eClerx 36.6 35.7 2.4

Average 1.2

Mastek 36.5 38.5 (5.3

Sasken 18.8 18.3 3.1

Average (5.3

BPO (in |)

Firstsource 800.2 799.4 0.1

* June year end, ^ IT services

Top picks of the sector

Wipro HCL Technologies

Analyst

Abhishek Shindadkar [email protected] Hardik Varma [email protected]


Page 36

Exhibit 17: Company specific view Company RemarkseClerx We expect $, | revenues to grow a modest 2.4%, 2.8% QoQ to $36.6 million, | 225.8

crore led by client specific issues in both sales & marketing (largest customer) andcable (consolidation in top cable customers) business. Though BFSI is stable, decisionmaking delays in other verticals could impact Q1FY15E. EBITDA margins may decline56 bps QoQ to 39.9% led by revenue weakness. Allaying concerns related to potentialrevenue weakness in FY15E due to top client corporate restructuring and ramp-updelays led by consolidation in top cable customers could be of investor interest

Firstsource Solutions

Firstsource is expected to report flat revenue growth QoQ to | 800.2 crore as customerrationalisation efforts offset strong collections business in Q4. EBITDA margins mayimprove 126 bps QoQ to 12.9% led by tail account rationalisation and higher revenueper collector in collections business. FY15E growth outlook (particularly healthcarevertical), margin trajectory and debt repayment updates could be of investor interest

HCL Tech We expect $, | revenues to grow 3.1% ($ 1362.6 million), 2.8% (| 8,414 crore) QoQ ledby continued momentum in IMS (4.6% QoQ) helped by demand recovery in coresoftware (2.3% QoQ). EBIT margins may decline 72 bps QoQ to 23% led by wage hikesand reinvestments. Investor interest: TCV deal signing, core software revenue growthmomentum and margin commentary

Infosys US$ revenues could decline 0.4% QoQ to $2,091 million led by client specific issuesleading to unanticipated ramp-downs and cancellations, project ramp-ups delay due toskills mismatch and weakness in hi-tech, retail and CPG verticals (~25% of revenues).Rupee revenues may decline 0.5% QoQ to | 12,963 crore. EBIT margins may decline 28bps QoQ to 24.7% led by slower volume growth but partially offset by costrationalisation efforts. Investor interest: FY15E revenue guidance, steps to addressrising attrition

Infotech Enterprises

We expect $, | revenues to grow 2.8%, 2.4% QoQ to $ 95.9 million, | 592.2 crore,respectively, led by >4% growth in engineering business (both aero & HTH). Contentbusiness could be soft led by base effect while utilities and telecom business may beflat led by ramp up delays in one customer. EBITDA margins could decline 134 bps QoQto 18.3%, led by net hiring (250-300), investments in strategic branding and S&Mrestructuring efforts partially offset by volume growth. FY15E wage hikes are expectedto be similar to FY14 (8% offshore, 3% onshore) while business unit wise growthoutlook could be of investor interest

KPIT Tech $, | revenues could grow 4%, 3.8% to $114 million, | 703.9 crore, respectively, led bydemand uptick in auto, IES business and base effect. EBIT margins may improve 83 bps QoQ to 16.2% led by healthy volume growth. FY15E growth guidance, SAP businessoutlook, deal wins pushed out to Q4 and wage inflation quantum would be of investorinterest

Mastek We expect $,| revenues to decline 5.3%, 5.5% QoQ to $36.5 million, | 225.2 crore,respectively, led by an anticipated $2.4 million ramp down in a US client. ReportedEBITDA margins could decline 231 bps QoQ to 11.4% led by revenue de-growth. Weestimate the order book will rise ~8% QoQ to $87-90 million led by two large deal winsin the UK insurance market. Investor interest: order backlog, US & UK business outlookand FY15E margin trajectory

MindTree Dollar revenues are expected to grow 3.1% QoQ to $131.1 million while those in rupeescould grow 2% QoQ to | 806.2 crore led by demand uptick in hi-tech business. At19.5%, EBITDA margins could come in flat QoQ as utilisation improvements may beoffset by currency headwinds. Investor interest: FY15E guidance, hi-tech verticaloutlook, large deal ramp-ups and margin trajectory


EBIT margin impact

EBIT margins Q4FY14E Q3FY14 Change (bps)

TCS 29.2 29.7 (54)

Infosys 24.7 25.0 (28)

Wipro ^ 22.6 23.0 (44)

HCL Tech* 23.0 23.7 (72)

EBITDA margins

Tech Mahindra 21.4 23.2 (178)

Mindtree 19.5 19.5 1

KPIT Technologies 16.2 15.4 83

NIIT Technologies 16.7 16.3 41

Infotech Enterprises 18.3 19.6 (134)

Persistent Systems 26.1 27.7 (157)

eClerx 39.9 40.5 (56)

EBITDA margins

Mastek 11.4 13.7 (231)

Sasken 12.5 12.0 50

EBITDA margins

BPO

Firstsource 12.9 11.6 126

* June year end ^ IT Services

$/|

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Page 37

Exhibit 18: Company specific view Company RemarksNIIT Ltd Net revenues could decline 6% YoY to | 219.5 crore led by continued weakness in ILS (-

8% YoY) and SLS (-32% YoY) business led by weaker enrolments and conclusion ofgovernment school contracts, respectively. Though CLS may grow 12%, 26% YoY in $,|terms, respectively, it could decline QoQ as seasonality in one customer led toincremental revenues of $1 million in Q3 and may not re-occur in Q4. EBITDA marginscould increase 413 bps YoY to 7.3% led by rising contribution of higher margin privateschools and CLS business. Breakeven in SBS business, demand environment for CLS,growth in ILS enrolments and private school sign-ups may be of investor interest

NIIT Tech Reported $, | revenues could grow 2.2%, 2.5% QoQ to $ 96.9 million, | 602.1 croreprovided milestone related payments are signed off by AAI during Q4. Services revenuemay grow 2.5-3% QoQ in dollar terms but reported revenue growth could be impactedby lower hardware revenues and ~| 7-7.5 crore of hedge related losses. EBITDAmargins may increase 41 bps QoQ to 16.7%, led by increased contribution of highermargin business (AAI). Order bookings may range at $100-120 million. FY15E wagehikes are expected to be similar to FY14. Margins trajectory for FY15E and client mininginitiatives could be of investor interest

Persistent We expect $, | revenues to grow 4.1%, 3.9% to $ 72.8 million, | 449.5 crore led bygrowth in IP business (10% QoQ led by higher HPCA contribution) while servicesbusiness could be soft (2.8%) relative to Q3 (3.9%) led by ramp-downs in one client.EBITDA margins may decline 157 bps QoQ to 26.1% primarily due to absence of one-offs (lower doubtful debt provision), which aided Q3 margins. Investor interest: wagehikes, which, we believe, could be in industry average range; FY15E growthcommentary particularly for IP and platforms business

Sasken Dollar, | revenues could grow 3.1%, 2.7%, to $ 18.8 million, | 116.2 crore. EBITDAmargins may improve 50 bps QoQ to 12.5%, led by revenue growth and costrationalisation efforts. Client mining initiatives post senior management restructuring,outlook on products and AUI business, could be of investor interest

TCS US$, | revenues could grow 2% each to $3,505 million, | 21,729 crore, respectively,while constant currency revenues could be lower than 2.1% reported in Q3. Weak Indiabusiness (~7% of 9MFY14 revenues) may drag overall revenue growth. EBIT marginscould decline 54 bps to 29.2% led by re-investments in Europe (~40 bps) and rupeeappreciation (~10 bps). Investor interest: FY15E revenue growth seasonality, wagehikes quantum, pricing trends and large deal pipeline

Tech Mahindra Revenues are expected to grow 2.3%, 2% QoQ to $ 809.5 million, | 4,999 crore,respectively, led by demand uptick in non-BT revenues and seasonally strong Q4 forComviva (could top $22-28 million revenue range). Cross currency may have favourable20 bps impact. EBITDA margins could decline 178 bps QoQ to 21.4% impacted by wagehikes (~-200 bps), lower BT deferred revenue amortisation (~-80 bps), and rupeeappreciation partially offset by operational efficiencies. Telecom vertical, non-BT and BTbusiness outlook, margin trajectory could be of investor interest

Wipro IT service revenues could grow 3%, 3.4% QoQ to $1,729 million, | 10,676 crore,respectively (2-4% guidance), led by large deal ramp-ups and OPUS acquisitioncontribution. EBIT margins could decline 44 bps to 22.6% led by re-investments andtransition costs associated with large deal ramp ups. Investor interest: Q1FY15Eguidance, changes to senior management portfolio, top 125 client mining initiatives anddeal pipeline outlook



Page 38

Logistics

Container volume growth continues to taper at major ports

Container volume growth at major ports remained discouraging in the January-February FY14 period, registering a decline of 2.2% YoY. Volumes at two of the largest major container ports, JNPT and Chennai, remained dampened. JNPT recorded a volume of 728000 TEUs during January-February FY14 period, growth of 3.3% over 705000 TEUs during the corresponding period of the previous fiscal. In contrast, Chennai with 225000 TEUs recorded de-growth of 11% YoY vis-à-vis 254000 TEUs in January-February FY13.

Subdued cargo volumes to keep revenue, EBITDA growth cowed

I-direct logistics universe revenue growth is expected to remain dampened in Q4FY14, posting a meagre growth of 4.2% and 5.2% on QoQ and YoY basis respectively to | 3156.5 crore. On EBITDA front, too we expect a subdued growth of ~ 3% QoQ and 8% YoY to |842.6 crore, as the sector continues to reel under slow volume pick up at major ports and price hikes are difficult to come by. Consequently, PAT is also expected to remain flattish QoQ to |491 crore. Further as container volumes posted a hawkish growth of 4.7% on YoY basis at major ports, we expect revenue for Concor to register a stunted growth of 3.7% YoY to |1277 crores whereas Gateway Distripark to post revenue growth of 3% QoQ (decline of 4.2% YoY). Further, Bluedart is anticipated to post a growth of 15.5% YoY (due to lower base) whereas TCI revenue growth is expected to remain flattish at 4% YoY. While Gujarat Pipavav port revenue growth is expected to remain flattish due to seasonality and lower reefer volume. Overall EBITDA is expected to grow 3% QoQ and 8% YoY and PAT to grow10% YoY basis (due to lower base).

Exhibit 19: Estimates for Q4FY14E: (Logistics) (| Crore)


Blue Dart 530.8 15.5 5.0 49.5 -22.2 9.1 34.1 -24.2 48.0Container Corporation 1,277.3 3.7 3.1 295.0 13.6 3.3 257.1 13.9 3.0Essar Ports 393.3 1.6 4.4 314.8 5.7 4.2 95.8 4.1 1.9Gateway Distriparks 255.8 -4.2 3.1 65.2 4.7 2.1 33.3 -0.9 4.5Gujarat Pipavav 147.1 18.2 1.3 76.6 34.4 -8.3 53.3 50.8 -30.8Transport Corp 552.3 3.8 7.2 41.4 3.4 10.1 16.9 21.9 17.5Total 3,156.5 5.2 4.2 842.6 8.0 3.0 490.7 10.1 0.1




3002

2893 33

22

3030 3157

180020002200240026002800300032003400

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

5.0

10.0

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30.0

(%)


Container Volumes

500

550

600

650

700

Dec'

11

Mar

'12

June

'12

Sep'

12

Dec'

12

Mar

'13

June

'13

Sep'

13

Dec'

13

Mar

'14

('000

TEU

s)

Analyst

Bharat Chhoda [email protected] Soumojeet Kr Banerjee [email protected]


Page 39


Company RemarksContainer Corporation

As JNPT volume growth is expected to stay subdued in the quarter (4.7% YoY), Concor’sthroughput too is expected to remain dovish at ~6% YoY. However, EBITDA margin isexpected to remain flattish as price hikes are difficult to come by. Consequently, PAT forQ4FY14 is expected to be ~| 257 crore in Q4FY14

Gateway Distriparks

With JNPT volume growth expected to remain muted (4.7% YoY) in the quarter. Revenuefor Q4FY14E is expected to grow 3% QoQ (-4.2% YoY) to | 256 crore aided by betterrealization in CFS and volume growth in cold chain segment. EBITDA growth is expectedto be muted due to flattish margin and PAT at | 35 crore

Transport Corporation

TCI is expected to post revenue growth of ~4% YoY. However, EBITDA margin isexpected to remain flattish at ~7.5% for Q4FY14E. With the freight segment continuing todrag, supply chain and express segment may provide respite on revenue growth andmargins. Subsequently, PAT is expected at ~| 17crore for Q4FY14E

BlueDart BlueDart’s revenue growth is expected to remain subdued (5% QoQ) in a muted economicscenario to | 530.8 crore in Q4FY14E. Further, EBITDA margin is expected to be flattish at~9.3%. In the absence of extraordinary expense we expect PAT to grow 48% sequentially but decline 24% YoY to | 34 crore

Gujarat Pipavav Port

We expect revenue to grow 18% YoY (on lower base) and 1% QoQ due to a decline incontainer volume by 5% sequentially on account of seasonality and absence of tariff hikeand stable currency. EBITDA margin is expected to contract 540 bps QoQ due to lowerreefer and container volumes.PAT is expected at|53 crore

Essar Ports We expect cargo volumes to increase 4% QoQ to 12.6 MT due to higher volume fromanchor clients while realisation is expected to remain flattish leading to QoQ revenuegrowth of 4.4%. EBITDA margin is expected to marginally decline 20 bps QoQ to 80%.PAT for the quarter is estimated at | 95.8 crore; up 1.9% QoQ



Page 40

Media

Advertisement revenue to grow at slower pace…

Ad revenue for broadcasters may grow at a relatively lower pace due to economic slowdown. Zee, TV18 may report ad revenue growth of 11.3%, 3.4%, respectively while Sun TV is expected to return to positive territory with marginal ad growth of 1.0%. Regional print, though, would benefit from high government spend in first two months of the quarter. High election led spending may be seen in the next quarter. However, overall scenario appears subdued for the next year as well, which could limit ad growth to low double digits. We expect our media universe to post revenue growth of 11.9% YoY but de-growth of 8.3% QoQ as Q3 was a seasonally strong quarter.

Print to benefit from Government related spends….

Print players are expected to benefit from the increased spends by the government (20% contribution to ad revenues). Ad revenues for DB Corp, HT Media and Jagran may grow 13%, 10% and 21% YoY, respectively, leading to combined ad growth of 14%. Election led spending has largely been limited to television in this quarter. However, print players will also benefit from it in coming quarter. Newsprint prices have subsided due to rupee appreciation. However, they would not be a major cost savings due to increased pagination.

Slower STB seeding, gross billing to be watched…

Phase III and IV digitisation is yet to pick up and the current quarter has also been quite subdued in terms of subscriber addition. We expect Hathway to seed about 50,000 STBs in Q4FY14 on standalone basis. Dish TV is expected to add 0.16 million net subscribers while it’s ARPU is expected to contract 1.5% QoQ to | 163.5, due to fewer billing days. MSOs are finding it difficult to shift towards gross/package wise billing in Phase I and II cities while digitisation is yet to pick up in Phase III and IV cities. We believe any uptick in digitisation activity would only be seen post general elections.

Subdued box office performance…

The box office performance was relatively subdued due to examination season, with only one big starrer movie (Jai Ho) that failed to meet expectations of a Salman Khan movie. Though several good small budget movies such as Queen, Highway, etc. were released, overall impact on box office collection was limited. Hence, we expect PVR to see a 5% QoQ decline in footfalls to 13.6 million.

Exhibit 21: Estimates for Q4FY14E (Media) (| Crore) Zzzzzzzz


DB Corp 444.3 11.6 -14.3 99.3 5.7 -36.0 54.6 -1.2 -42.2Dish TV 609.9 9.8 -0.5 156.0 30.0 15.1 -14.8 NA NAENIL 112.1 6.7 13.7 37.4 7.0 -2.0 25.2 -1.8 -2.6Eros International 276.1 30.0 -36.2 55.7 33.7 -58.9 34.7 9.3 -62.2Hathway Cables 254.5 10.1 8.4 41.4 -53.2 12.8 -38.6 PL NAHT Media 532.2 6.3 -8.5 64.1 -10.7 -32.4 27.8 -30.8 -58.6Jagran Prakashan 405.9 18.4 -10.8 79.8 47.8 -27.3 43.6 13.2 -35.6PVR 307.5 25.8 -8.8 28.4 72.1 -42.5 -12.9 PL PLSun TV 527.4 11.6 3.7 391.8 12.4 5.3 187.1 5.4 0.7TV18 Broadcast 530.6 11.8 1.0 41.4 20.1 -46.5 13.5 -21.9 -73.9Zee Ent. 1,035.1 7.3 -12.9 243.3 0.4 -16.3 182.2 1.5 -14.7Total 5,035.6 11.9 -8.3 1,238.6 8.0 -17.2 502.5 -10.6 -31.8




4501

4792

4903 54

93

5036

0

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6000

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13

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14

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Dish Subscriber Base and ARPU

15.2 15.6 15.9 16.4 16.8

157

165 165166

164

14.0

14.5

15.0

15.5

16.0

16.5

17.0

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14E

Milli

on

152154156158160162164166168

|

Subscriber base ARPU

PVR – Footfalls & ATP

165

177

166

171

161

13.6

16.614.3

11.5

15.2

150

155

160

165

170

175

180

Q4FY13 Q1FY14 Q2FY14 Q3FY14Q4FY14E

milli

on

0.02.04.06.08.010.012.014.016.018.0

%

ATP* Footfalls

*Cinemax is consolidated from Q4FY13 onwards

Top pick of sector PVR Limited DB Corp Analyst

Karan Mittal [email protected]

Sneha Agarwal [email protected]


Page 41

Exhibit 22: Company specific view RemarksDB Corp DB Corp is expected to post double digit ad growth of 13.2% on a high base.

Government related spends in the first two months of the quarter have contributedabout 20% to ad growth. Circulation revenue is also expected to post 14.7% YoYrevenue growth due to increased realisations. There could be 17% YoY increase innewsprint costs due to prior high cost inventory & Patna launch expenses, leading to130 bps YoY decline in the EBITDA margins to 22.3%

Dish TV Gross subscriber addition may be ~0.4 million, with net adds of 0.16 million and churnof 0.34 million (0.7% of net base). ARPU is expected to witness 1.5% QoQ decline to |163.5 due to fewer billing days. Margins are expected to improve 346 bps QoQ to25.6% due to content cost reduction from Dish's new initiatives "Request onlychannels'' and lower sports related content costs

ENIL We expect ad revenues to grow 7% YoY driven by higher election related spends andhigher yields. Utilisation is expected to improve to ~93.8% from 90.3% in Q4FY13.Possible election gains have been capped due to limited inventory. Last quarter, themanagement said the Phase III auctions were quite probable. However, any activity inthis regard may happen post elections

Eros International

We expect YoY revenue growth of 30% on the back of Jai Ho release and pre-releasemonetisation of Kochadaiyaan despite fewer movie releases. There was only one bigrelease viz. Jai Ho this quarter. EBITDA margins are expected to increase marginally by60 bps to 20.2%. The next quarter has a major release- Rajinikanth starrerKochadaiyaan, which would boost topline growth

HT Media HT Media is expected to post 10% YoY growth led by a strong growth in Hindi ads ofabout 18% buoyed by higher Government spends. English ad and radio would continueto post strong growth of 6% and 12% YoY, respectively. Circulation revenues areexpected to be flat sequentially as there has been no significant change in cover pricesor number of copies. The EBITDA margin is expected to decline about 160 bps YoY dueto 10% increase in the operating expenditure on account of higher pagination andhigher SG&A expenses

Jagran Prakashan

The quarter is expected to witness steady ad-revenue growth of 13% YoY clocking adrevenues of | 275 crore (including Mid-day and Nai Duniya). The growth can beattributed to spends by the government in the first two months. The impact ofelections and political spends would only be visible in the coming quarter. The 1%benefit from the rupee appreciation has been offset by the increase in pagination due togovernment and election related spends. EBITDA margins may witness 390 bps YoYimprovement to reach 19.7% due to an improved ad growth scenario

Hathway Cable Subscriber additions are expected to remain flat with only about 50,000 boxes to beseeded as the Phase III and IV digitisation is yet to gain momentum. However,subscription income is expected to witness 11% QoQ growth on account of the totalimpact of gross billing in Delhi, which was implemented in this quarter. Placementsrevenues are also expected to perk up 7% QoQ on account of better negotiations withbroadcasters. An increase in subscription income would be coupled with asimultaneous increase in operating costs leading to only a marginal increase in theEBITDA margin by 50 bps to reach 16.1%. The company would be striving to shift topackage wise net billing in Mumbai and Kolkata in the coming quarters

PVR PVR has opened three new properties this quarter with about 17 screens and has beenconsistent with its property roll-out. However, Q4 being a seasonally weak quarter forPVR we would see a 5% QoQ decline in its total footfalls to 13.6 million. Footfalls perscreen are also expected to decline 9.8% QoQ due to seasonality leading to a reductionin the occupancy rate to 26.6% from 29.1% in the previous quarter. ATPs and F&Bspends may show only a marginal increase of 3.3, 0.8% QoQ to | 173.6 and | 53.6,respectively. PVR may show an exceptional item due to the sale of Anupam Cinemasand due to write-off of the goodwill acquired through Cinemax acquisition in thequarters to come



Page 42

Exhibit 23: Company specific view Sun TV Sun TV is expected to return to positive ad growth though ad revenue may grow

marginally by 1.0%. Subscription revenue, on the other hand, may continue to grow at25% to | 173 crore on the back of digitisation efforts, covering four major cities ofsouthern India. Margins are expected to grow even on a sequential basis as thecompany has phased out some of the high cost non-fiction shows played during lasttwo quarters. Moreover, positive ad-growth would also aid the margins

TV18 Broadcast Limited

Ad revenues for TV18 may grow 3.4% YoY due to high base effect and relatively lowergrowth by Colors and continued de-growth in the news segment. Overall revenues areexpected to grow 12% and this includes the consolidation of 69 days of revenue fromETV News. ETV Entertainment has, however, not been included as it is kept as anasset for sale, which would subsequently be transferred to Viacom 18. EBITDAmargins may remain flat YoY at 7.8% as the cost escalation was in tandem with theincrease in revenues

Zee Entertainment

Advertisement revenue for Zee is expected to grow at a slower pace of 11.3% onaccount of inventory cut of ~15% across channels. Subscription revenue may remainflattish with 2.7% YoY growth as most of the Phase I and II cities have been monetisedto a large extent while digitisation is yet to pick up in Phase III and IV cities. Onaccount of lower revenue growth and higher operating expenditure due to launch of acouple of new channels margins are expected to decline 160 bps on a YoY basis



Page 43

Metals & Mining

Steel demand continues to be subdued, import parity prices prevail

On the ferrous metal front, steel demand remains subdued with a mere 0.7% consumption growth in April 2013-Februry 2014 at 67.2 million tonne (MT). Imports declined 31.1% to 5.0 MT while exports grew modestly by 8.1% to 5.0 MT in the aforesaid period. In Q4FY14, in our coverage universe, we expect steel manufacturers to report robust steel sales volume, thereby implying a gain in market share vis-à-vis subdued demand. The uptick witnessed in domestic steel prices last quarter (Q3FY14) continued in Q4FY14 as well. However, the quantum of price hikes was subdued as compared to price hikes undertaken in the last quarter (Q3FY14). Operating margins of all ferrous manufacturers domestically are expected to improve on account of improved sales volume, increase product realisations and marginal decrease in coking coal costs.

Non-ferrous metal prices - mixed bag; zinc outshines

Non-ferrous metal price movement during the quarter was a mixed bag wherein decline was witnessed in prices of copper & aluminium while lead remained almost flat with zinc being the only gainer. During the quarter, the average price of zinc was US$2026/ tonne, up 6.3% QoQ, copper was US$7032/tonne, down 1.8% QoQ & 11.3% YoY, lead was US$2102/tonne, down 0.5% QoQ & 8.3% YoY whereas that of aluminium was US$1710/tonne, down 3.4% QoQ & 14.6% YoY. The domestic currency, however, remained at elevated levels during Q4FY14 on a quarterly average basis (US$: INR ~61.8), thereby supporting domestic non-ferrous metal prices.

EBITDA margins to improve QoQ, sales volume to remain healthy

In Q4FY14, we expect companies within our coverage universe to report healthy metal sales volume with corresponding growth in topline at 7.5% QoQ. EBITDA margins are expected to remain stable at ~20% with absolute coverage EBITDA growing by 6.8% QoQ. The coverage PAT is expected to grow 6.4% QoQ. Within our coverage universe for Q4FY14 we expect EBITDA/tonne of SAIL at | 5292/tonne, JSW Steel (standalone) at | 7978/tonne, Tata Steel India at | 14787/tonne and Tata Steel Europe at US$25/tonne. We expect Novelis to clock EBITDA/tonne of US$325/tonne in Q4FY14 while mining majors NMDC and Coal India are expected to report EBITDA/tonne of | 2749/tonne and | 257/tonne, respectively.

Exhibit 24: Estimates for Q4FY14E: (Metals) (| Crore)


Coal India 18,791.2 -5.6 11.0 3,331.5 -45.6 -18.8 3,227.1 -40.4 -17.1Graphite India 427.3 -16.4 -1.6 64.3 4.1 -6.1 36.4 -12.5 -13.7HEG 496.2 11.9 17.1 98.3 43.4 15.5 54.5 55.2 22.9Hindalco 7,548.7 7.9 3.8 823.9 3.9 30.8 296.6 -53.1 -11.2Hindustan Zinc 3,545.8 -9.3 2.8 1,860.4 -12.1 2.0 1,850.5 -14.6 7.4JSW Steel 12,975.5 31.1 -4.8 2,497.5 44.1 3.7 746.4 152.3 60.0NMDC 3,853.6 20.3 36.5 2,666.4 52.4 40.1 2,074.1 40.3 32.3SAIL 13,432.0 8.9 17.2 1,811.2 96.0 60.0 971.4 117.6 82.4Sesa Sterlite 19,005.4 NA -2.7 6,810.1 NA 4.9 1,582.3 NA -15.3Tata Steel 41,063.8 18.5 11.8 4,250.9 -2.7 6.1 840.7 LP 67.1Usha Martin 983.3 3.8 1.9 190.7 5.2 -2.4 10.0 -54.8 NMTotal 122,122.7 NA 7.5 24,405.3 NA 6.8 11,690.0 NA 6.4


Source: Company, ICICIdirect.com Research Hindalco numbers are of Standalone entity

Top line & Profitability (Coverage universe) 10

6720

9232

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1159

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China Import iron ore fines 58% Fe spotChina Import iron ore fines 62% Fe spot

Top pick of sector NMDC; Hindustan Zinc Analyst

Dewang Sanghavi [email protected]

Shashank Kanodia [email protected]


Page 44


Company RemarksCoal India We expect the company to report coal production of 143 million tonne (MT) &

sales of 130 MT in Q4FY14. Blended realisations are expected at | 1449/tonnewhile corresponding EBITDA/tonne is expected at | 257/tonne with EBITDAmargins of 17.7%. E-auction sales volume for the quarter is expected at 13.8 MTwhile FSA sales volume is expected at 112.4 MT

Graphite India We expect capacity utilisation of the graphite electrodes segment at ~70% inQ4FY14. EBITDA margins are, however, expected to decline marginally by 70 bpsQoQ to 15.1% on account of relative appreciation of rupee QoQ

HEG We expect capacity utilisation of the graphite electrodes segment to be ~90% inQ4FY14. On the back of better utilisation levels, we expect topline to grow 17.1%QoQ. EBITDA margin in Q4FY14 is expected at 19.8%

Hindalco Industries

For Q4FY14, we expect Hindalco to commercially start reporting numbers from thenew facilities in India (Mahan aluminium & Utkal refinery). We expect externalalumina sales at 112 KT, total aluminium metal sales at 150 KT and copper metalsales at 92 KT. For the domestic aluminium business we expect blendedEBITDA/tonne of US$359/tonne. For Novelis, we expect rolled product sales at 783KT with EBITDA/tonne at US$325/tonne

HindustanZinc

We expect integrated zinc sales for Q4FY14 at ~190,000 tonne with integratedlead sales volumes at ~30,000 tonne and silver sales at ~66000 kg. We expectzinc metal realisation to improve QoQ (~6%) while lead metal realisations areexpected to remain flat QoQ. We expect EBITDA margins to drop marginally QoQ to52.5%

JSW Steel As a merged entity, we expect JSW Steel to report steel sales volume of 3.0 MTfor Q4FY14, which includes 0.8 MT of steel sales from JSW Ispat. Blendedrealisations are expected to improve ~1% QoQ to ~| 41000/tonne. EBITDAmargins are also expected to improve ~150 bps to 19.2% on account of betterrealisations

NMDC The company is expected to report iron ore sales of 9.7 MT in Q4FY14 (7.3 MT inQ3FY14). Export sales are expected at 0.6 MT in the quarter. On the back of pricehikes undertaken by the company in February 2014 (| 100/tonne for fines) weexpect blended realisations to improve QoQ by 3.8% to | 3942/tonne withcorresponding EBITDA/tonne expected at | 2749/tonne

SAIL We expect steel sales volumes for Q4FY14 at 3.4 MT. EBITDA margins areexpected to improve ~360 bps QoQ to 13.5% on the back of operationalefficiencies due to higher volume base and improved realisations. We expectblended realisations to improve marginally QoQ by ~| 200/tonne to ~|39000/tonne. The company is also expected to report a marginal forex gain of | 68crore for the quarter

Sesa-Sterlite We expect the company to report stable performance in Q4FY14. The company'scopper, aluminium and zinc business are expected to report healthy sales volumein Q4FY14. However, performance of the power business is expected to remainsubdued on account of lower PLFs (~30%) and electricity evacuation issues. Weexpect the company to report EBITDA margins of 35.8% in Q4FY14. Despiteresumption of iron ore mining operations in Karnataka and sell-off of inventory inGoa the company is not expected to book any revenue from iron ore sales due tonil dispatches of the same

Tata Steel For Q4FY14, we expect Tata Steel India to report steel sales of 2.3 MT. Blendedrealisations are expected to increase marginally (~1.1% QoQ) with acorresponding increase in EBITDA margins by 100 bps to ~30%. Tata Steel Europeis expected to report steel sales of 4.0 MT and EBITDA/tonne of US$25. On aconsolidated basis, we expect EBITDA margins at 10.4%

Usha Martin Sales volumes are expected to decline 5.9% QoQ to ~1,60,000 tonne whileblended realisation is expected to increase by ~8% QoQ to ~| 61450/tonne.Subsequently, the topline is expected to increase 1.9% QoQ. EBITDA margins arelikely to decline by 80 bps QoQ to 19.4%


Hindustan Zinc sales trend 18

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40000

60000

80000

100000

120000

kg

Zinc (LHS) Lead (LHS) Silver (RHS)

Tata Steel : EBITDTA/tonne & sales

FY13

Q4 Q1 Q2 Q3 Q4E

Tata Steel India MT 2.3 2.0 2.0 2.1 2.3

Tata Steel Europe MT 3.4 3.1 3.5 3.2 4.0

Tata Steel Group MT 6.6 6.1 6.5 6.4 7.3

EBITDA/tonne

Tata Steel India |/tonne 14491 14172 14402 14183 14787

Tata Steel Europe US$/ton 33 44 26 32 25

Sales Units

FY14

JSW Steel : EBITDA/tonne & sales

3823

4

3844

2

3832

0

4045

7

4090

9

6985

6859

7137

7478

7978

3.13.0

3.1

2.62.4

05000

1000015000200002500030000350004000045000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| / t

onne

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

milli

on to

nne

Realization EBITDA/tonne Sales Volume

JSW Steel’s performance post Q4FY13 includes the performance of JSW Ispat as well.

SAIL: EBITDA/tonne & sales

3800

8

3857

3

3778

1

3864

9

3886

0

2887

3692

2870

3850 5292

3.2

2.63.0 2.9

3.4

05000

1000015000200002500030000350004000045000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| pe

r ton

ne

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

milli

on to

nne

Realization EBITDA/tonne Sales Volume


Page 45

Oil and gas

Brent crude price falls; rupee appreciates QoQ

The Russia-Ukraine conflict pushed up Brent crude prices temporarily. However, weak Chinese manufacturing & easing of sanctions on Iran weighed on Brent crude prices. Average Brent crude oil prices declined 1.4% QoQ to $107.9/bbl in Q4FY14E. Also, since the rupee has appreciated on a QoQ basis, there would be an adverse impact on the gross realisations of upstream companies (Cairn, ONGC & Oil India).

Gross under-recoveries in Q4FY14E at ~| 37,404 crore

Gross crude oil under-recoveries are estimated to decline QoQ from | 39,725 crore in Q3FY14 to | 37,404 crore in Q4FY14E on account of a decline in diesel under-recovery. We estimate the government’s share of the subsidy burden at 85.4% in Q4FY14E. We expect upstream companies to bear a subsidy burden of | 15,451.3 crore ($56/barrel subsidy burden) while downstream will have an over-recovery of | 9,986.9 crore in Q4FY14E. Since downstream companies will have over-recovery in Q4FY14E, we expect oil marketing companies (BPCL, HPCL & IOCL) to report a profit in the quarter.

Gross refining margin increases QoQ

Singapore gross refining margins (GRM) have increased QoQ from $4.3/barrel in Q3FY14 to $6.2/barrel in Q4FY14 mainly on account of an increase in gasoline crack spreads from $10.6/barrel in Q3FY14 to $15.9/barrel in Q4FY14E. The gasoil, naphtha & fuel oil crack spreads have also increased during the quarter. This will be positive for refiners like Reliance Industries, Essar Oil, CPCL and MRPL. For complex refineries, the impact will also benefit from higher Arab crude heavy-light spreads that have increased by US$0.5/barrel on a QoQ basis.

No substantial increase in domestic gas volumes

Although the decline in gas production from Reliance KG-D6 basin has been arrested after many quarters (12.3 mmscmd in Q3FY14 to 13-14 mmscmd in Q4FY14E), the higher dependence on costlier LNG from global markets continues. Hence, large gas transportation companies are expected to report muted volumes QoQ.

Exhibit 26: Estimates for Q4FY14E: (Oil and Gas) (| Crore)Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQAban Offshore 1,003.4 4.6 0.9 552.5 9.8 -1.3 77.9 28.3 -3.0Bharat Petroleum 68,534.2 3.4 5.8 3,373.1 -48.7 LP 1,944.5 -59.5 LPCairn India Ltd 5,042.7 15.6 0.9 3,674.1 27.0 2.3 2,951.3 15.1 2.3Gail India 15,855.0 27.1 -1.1 2,232.4 86.2 -2.5 1,399.7 126.4 -16.7Gujarat Gas 837.5 9.1 7.3 149.2 106.6 11.4 95.0 59.6 4.3GSPL 253.4 -29.6 3.4 216.7 -33.9 4.7 95.5 -40.9 9.3HPCL 59,561.3 -0.2 7.4 4,652.7 -46.1 LP 3,536.2 -54.0 LPIOC 127,587.1 -0.9 8.4 10,269.8 -38.7 LP 6,708.7 -53.8 LPIndraprastha Gas 1,000.7 13.4 -3.9 232.5 25.4 19.1 110.6 32.4 23.3Mangalore Refinery 18,365.2 -1.6 -2.6 140.6 -36.7 LP -129.4 NA NAOil India Limited 2,284.1 -7.6 -16.3 898.5 -7.9 -30.4 682.6 -10.7 -24.4ONGC 21,100.3 -3.3 1.2 10,663.7 -0.7 -13.4 4,561.9 34.6 -36.0Petronet LNG 10,454.3 23.5 11.4 347.1 -20.1 -0.8 132.3 -46.0 -2.4Total 331,879.1 1.8 5.8 37,402.7 -24.5 100.2 22,166.8 -36.4 145.1




5912

2858

89

2993

18

3138

09

3318

79

260000270000280000290000300000310000320000330000340000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.02.04.06.08.010.012.014.016.0

(%)


Singapore gross refining margins (GRMs)

4.3

6.28.6

6.55.4

0

2

4

6

8

10


Refin

ing

mar

gins

(US$

per

bbl

)

Brent Crude Oil Prices

107.9109.4110.0

102.9

112.9

95

100

105

110

115

120


US$

per b

bl

Top picks of sector

MRPL

Analyst

Mayur Matani [email protected] Nishit Zota [email protected]


Page 46

Exhibit 27: Company specific view Company RemarksAban Offshore Revenue in Q4FY14E is expected to be up 4.6% YoY to | 1003.4 crore as majority of the

assets remain deployed in the quarter. The EBITDA margin is expected to increase 270bps YoY to 55.1%. PAT is expected at | 77.9 crore in Q4FY14

Bharat Petroleum

We expect revenues to grow 3.4% YoY due to growth in retail sales. We expect 3.3%YoY increase in retail sales. Refining margins are expected at $3.8/bbl vs. $6.0/bbl YoY.We expect BPCL’s net over-recovery at | 2366.6 crore, assuming the downstreamshare at -26.7% of total under-recoveries

Cairn India Revenues are expected to increase 15.6% YoY due to rupee weakness and higher grossproduction on a YoY basis. Net oil & gas production may increase 17.6% YoY to 148956boepd while oil realisation is expected to decline 6% YoY to $94.6/bbl. We expect grossproduction from Rajasthan fields to increase 17.6% YoY to 1,98,334 barrels/day

Gail We expect 27.1% YoY increase in revenues due to growth in natural gas trading,petrochemical & LPG and liquid hydrocarbon (LLH) business. We expect transmissionvolumes to decline 2% YoY to 97.5 mmscmd. Petchem volumes are expected at 120KTPA vs. 132 KTPA YoY while its realisations are expected to increase 19.2% YoY dueto price increase & rupee weakness on a YoY basis. We expect GAIL’s LPG & LLHbusiness to do well on a YoY basis on account of nil subsidy burden

Gujarat Gas We expect 9.1% YoY increase in revenues due to an expected increase in realisations.Total volumes at 2.57 mmscmd are expected to decline 12.3% YoY, as high LNG pricesand the slowdown in economy are impacting the demand from consumer industries.The gross spread is expected to increase from | 4.5/scm in Q1FY14 to | 8.6/scm inQ5FY14

GSPL Revenues are expected to decline 29.6% YoY mainly as Q4FY13 had exceptionallyhigher revenue due to one-time adjustment in tariff. We expect a decline in gasvolumes to result in volumes of 20.7 mmscmd in Q4FY14 against 22.2 mmscmd YoY onaccount of lower KG D6 production YoY. Transmission charges are expected to decline26.5% to | 1.3 per scm as the tariff of | 1.76 in Q4FY13 included one-time retrospectiveadjustment

Hindustan Petroleum

We expect revenues to remain flat (-0.2% YoY). We expect 3.0% YoY increase in retailsales. Refining margins are expected at $2.1/bbl vs. $3.7/bbl YoY. We expect HPCL’snet over-recovery at | 2243.8 crore, assuming the downstream share at -26.7% of totalunder-recoveries

Indian Oil We expect revenues to remain flat (-0.9% YoY). We estimate 1.8% YoY increase in retailsales. Refining margins are expected at $4.3/bbl vs. $2.4/bbl YoY. We expect IOCL’snet over-recovery at | 5376.5 crore, assuming the downstream share at -26.7% of totalunder-recoveries

Indraprastha Gas

Revenues are expected to increase 13.4% YoY on account of 6.2% YoY increase in salesvolume & 6.8% YoY increase in realisations. Sales volumes are expected to increase to3.98 mmscmd while net realisations are expected to increase to | 30.9 per scm. CNGprices are expected at | 41.7/kg in this quarter compared to | 39.3/kg in Q4FY13.Gross spreads are expected to remain high at | 9.8/scm

MRPL We expect revenues to decline 1.6% YoY, due to a decline in throughput. Thethroughput is expected at 3.7 MMTPA in Q4FY14 against 4.1 MMTPA in Q4FY13.GRMs are expected at US$1.9/barrel in Q4FY14 against -US$0.6/barrel in Q3FY14,mainly due to higher global refining margins as indicated by higher Singapore GRMs

Oil India Revenues are expected to decline 7.6% YoY due to a decline in production & realisation.We expect oil production of 0.78 MMT, down 11.1% YoY, due to protests in Assam.subsidy burden of $56/bbl (| 1931.8 crore vs. | 1849.7 crore YoY) and net realisation of$51.9/bbl in Q4FY14E against $55.4/bbl YoY


Gross under-recoveries of petroleum products

36175

25579

35328 39725 37404

0

7000

14000

21000

28000

35000

42000


| Cr

ore

Sharing of crude oil under-recoveries (| crore) Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

Upstream 14749 15304 16730 15938 15451Downstream -23573 2275 826 13787 -9987Government 45000 8000 17772 10000 31940Total 36176 25579 35328 39725 37404

Sharing of crude oil under-recoveries (%)

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14Upstream 40.8 59.8 47.4 40.1 41.3Downstream -65.2 8.9 2.3 34.7 -26.7Government 124.4 31.3 50.3 25.2 85.4Total 100.0 100.0 100.0 100.0 100.0

Sharing of net crude oil under-recoveries (| Crore) Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

ONGC 12312 12622 13796 13764 13519OIL India 1850 1982 2234 2173 1932GAIL 587 700 700 0 0IOC -12678 1212 414 7193 -5376BPCL -5667 545 215 3403 -2367HPCL -5228 518 197 3192 -2244Government 45000 8000 17772 10000 31940Total 36175 25579 35328 39725 37404

Gross under-recoveries of petroleum products

1033

461782

13851610

771

0

400

800

1200

1600

2000

FY08

FY09

FY10

FY11

FY12

FY13

| bn

Gross under-recoveries

Sharing of crude oil under-recoveries (| Crore)

0400

8001200

16002000

FY08

FY09

FY10

FY11

FY12

FY13

| bn

Upstream companies Government OMC's


Page 47

Exhibit 28: Company specific view Company RemarksONGC Revenues are expected to decline 3.3% YoY mainly due to lower net realisations YoY.

We expect oil production to increase 2.2% YoY to 6.6 MMT, subsidy burden of$63.5/bbl (| 13519.5 crore vs. | 12312.3 crore YoY) and net realisation of $43.4/bbl inQ4FY14E against $50.9/bbl YoY

Petronet LNG We expect 23.5% YoY revenue growth due to higher realisations. Volumes are expectedto remain flat (0.6% YoY) to 122 trillion British thermal units (2.4 MMT) in Q4FY14. Flatvolumes can be attributed to high spot LNG prices & limited offtake from Kochi terminaldue to operational issues. Higher interest and depreciation costs due to commissioningof Kochi terminal in Q2FY14 quarter will lead to lower profitability on a YoY basis



Page 48

Power With capacity addition surpassing target, deficits decline YoY

Power sector added 14.4 GW capacity vs. targeted 9.4 GW capacity in April-February FY14. Total installed capacity currently stands at 237.7 GW. YTDFY14, industry PLF declined 209 bps YoY to 47.7%. Average peak deficit declined to 3.7% in January-February 2014 vs. 9.1% YoY while base deficit declined to 3.6% vs. 9.1% YoY in the same period.

CERC releases final tariff order for 2014-19 (FY15 – FY19)

CERC issued final tariff order for 2014-19, which are more stringent than the draft proposal. While CERC retained most operating norms as per draft order, it further tightened normative O&M expenses, secondary fuel and auxiliary consumption orders in the final order. The new order will curb incentives earning ability of NTPC, impacting ~650 bps at its core RoE. However, some respite was provided to power transmission by relaxing the availability norms to 98.5% vs. 99% mentioned in draft.

CERC allows compensatory tariff hike for Tata Power, Adani Power CERC issued an order to provide for compensatory tariff hike for Tata Power’s Mundra UMPP (up | 0.524/Kwh) and Adani Power (up | 0.35/Kwh-0.85/Kwh) as per recommendation of the Deepak Parekh committee. Furthermore, the regulator also ordered to provide for loss faced by Tata Power (| 330 crore) and Adani Power (| 830 crore) in FY13. The tariff hike is likely to cost additional ~ | 2,400 crore per annum to utilities of Maharashtra, Gujarat, Haryana, Rajasthan and Punjab. The tariff will be audited at the end of every fiscal, which will be reviewed after three years. We believe the order has come as a relief to power plants having fixed PPA and dependency on imported coal, which were impacted by the hike in Indonesian coal price.

Upcoming general elections to drive merchant rates Although both average and peak deficit declined YoY during Q4FY14, average merchant rate has seen a slight uptrend (4-5% MoM) primarily due to increased demand/supply during the pre-election period. Accordingly, we do not expect merchant rates to decline in the near term and remain high at | 4-4.5/Kwh till Q1FY15.

Barring Power Grid, NTPC, all companies likely to see PAT decline In our coverage space, Power Grid is likely to see a healthy performance driven by strong capitalisation coupled with 20.8% YoY and 22.2% YoY growth in topline and bottomline, respectively. NTPC’s revenue is likely to increase 21.7% YoY, PAT is expected to grow only 7.7% YoY due to increased employee (+13.0% YoY) and depreciation (+8.6% YoY) expenses from commissioning of new capacities. PTC is expected to report volume growth of ~12% YoY to 7.5 BUs driven by rise in pre-election power demand. However, while topline is likely to grow 36.6% YoY, PAT is expected to decline 6.3% YoY due to closure of higher margin tolling business. CESC is likely to report 2.1% YoY and 6.6% YoY growth across revenue and PAT level, respectively, driven by 7.1% YoY rise in generation in Q4FY14 and declining losses at Spencer Retail. We expect NHPC’s sales volume to decline 1% YoY while revenue is likely to increase 20% YoY due to increased tariff. PAT, however, is likely to decline 34.7% YoY due to increased fixed cost from commissioning of new plants. JP Hydro’s overall generation is likely to increase 81% YoY, driven by full commissioning of 500 MW Bina plant. However, we expect a loss of | 49.4 crore due to increased fixed expenses and backdown at Bina power plant. Tata Power is likely to report modest revenue growth but PAT is likely to decline slightly due to increased interest expenses from higher debt levels. Overall, our coverage universe is expected to post topline and bottomline growth of 17.3% and 7.0% YoY, respectively.


798

3479

2

3628

9

3609

9

3846

7

30000

32500

35000

37500

40000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

(%)


Trend in all India sectoral PLF YTDFY14

41

62

25

39

81

66

33

78

20

30

40

50

60

70

80

90

Coal Gas Nuclear Hydro

(%)

11MFY14 11MFY13

*Upto May 2013 Capacity addition target and achievement YTDFY14

0

159

72

153

0

-2,0004,0006,0008,000

10,00012,00014,00016,000

Ther

mal

Hydr

o

Nuc

lear

Rene

wab

le

Tota

l

(MW

)

-20

20

60

100

140

(%)

Target Achievement % Achieved (RHS)

Top pick of sector

Tata Power, Power Grid

Analyst

Chirag Shah [email protected] Anuj Upadhyay [email protected]


Page 49

Exhibit 29: Estimates for Q4FY14E: (Power) (| Crore)


CESC 1,522.8 2.1 28.4 474.0 8.7 74.3 262.4 6.7 145.2JP Hydro 599.6 60.1 21.8 354.6 116.6 28.3 -49.4 NA NANHPC 1,303.8 18.6 13.9 783.8 30.2 21.5 380.6 -34.7 46.8NTPC 18,522.9 21.7 2.1 4,002.9 50.2 -18.1 2,428.7 7.7 -20.1Power Grid Corp 4,085.4 20.8 10.9 3,710.7 20.3 15.2 1,355.3 22.2 29.9PTC India Ltd 3,004.3 36.6 9.2 40.0 -21.9 -65.4 34.7 -6.3 -8.1Tata Power 9,427.8 4.4 8.4 2,088.6 12.6 16.9 176.8 -2.5 108.6Total 38,466.5 17.3 6.6 11,454.6 29.3 2.3 4,589.2 7.0 3.8



Exhibit 30: Company specific view Company RemarksNTPC We expect NTPC's generation to increase ~3% YoY to 62.2 BUs in Q4FY14E while

tariff is expected to increase 18% YoY to | 3.2/Kwh. Consequently, we expect revenueto increase 21.8% YoY while adjusted PAT is expected to increase only 7.7% to | 2429crore as fixed cost may increase due to new capacities

NHPC We expect NHPC's generation and sales unit to remain flat at 2.5 BUs and 2.2 Bus,respectively, in Q4FY14E. However, tariff realisation is expected to increased 21% YoYto ~| 5.7/Kwh. Consequently, we expect topline growth of 20% YoY to | 1,304 crore.However, PAT is expected to decline 34.7% YoY to | 380.6 crore due to exceptionalincome of | 360 crore in Q4FY13

JP Hydro We have built in sales of ~ 1.1 BUs in Q4FY14E driven by commissioning of Bina plantpartially offset by closedown of 400 MW Vishnuprayag unit. Consequently, we expecttopline to grow 60% YoY. However, we expect the company to report a loss of ~| 49crore due to increased fixed expenses, close down of Vishnuprayag and lower PLF atBina (>50%)

PTC India We expect PTC to report trading volumes of 7.5 BUs for Q4FY14E (+12% YoY) due topre-election demand, which drove short-term trading volumes. We expect tradingmargins of ~4 paisa/Kwhr. As dues from UPSEB were cleared in Q3FY14, keymonitorables would be recovery of dues from TNEB & execution of long term PPAs

Tata Power We expect sales to increase 4% YoY driven by 7% YoY increase in generation, partiallyoffset by lower realisation (| 6.1 vs. |6.4 YoY). Coal realisation is expected at$61/tonne with volume of 20 MT vs. 19 MT YoY. We expect a consolidated PAT of |176 crore vs. | 181 crore YoY

Power Grid We expect capitalisation of ~| 7,500 crore in Q4FY14E, as the same was only |13,000 crore till YTD January 2014. Given strong capitalisation for FY13, we expectPGCIL to report sales and PAT growth of 20.8% YoY and 22.2% YoY, respectively. ForFY14, we expect capitalisation of ~| 17,000 crore

CESC We expect CESC to sell ~1.8 BUs in Q4FY14E (up 3% YoY) as demand was moderatein the period. Topline is likely to increase 2.2% YoY on the back of increased generation7.1% YoY to 1.9 BUs in Q4FY14. Consequently, PAT is expected to increase 6.6% YoYto | 262 crore driven by decline in losses at Spencer



Page 50

Real Estate

Recent land acquisitions to improve sales volumes visibility …

Q4FY14 saw a big ticket land deal in the form of the 25-acre Borivali land purchase by Oberoi for | 1155 crore. Similarly, another player in our coverage, Mahindra Lifespace, has added land inventory of ~3.5 mn sq ft in the last 12-18 months across various cities such as Hyderabad, Pune, Mumbai and Chennai. We highlight that while volumes remain soft across key markets such as Mumbai, NCR and Bengaluru (lower absorption of big ticket size project), these land buys would enable them to have a strong launch pipeline, going ahead, providing visibility in coming years.

Sales volume to decline 25% YoY; expect coverage topline decline of -4.5% YoY…

Our coverage universe is expected to show a 25% YoY decline in sales volumes on lower offtake in major markets such as NCR, Mumbai and Bengaluru (high ticket size). While Sobha’s sales volume declined 14% YoY to 0.92 mn sq ft, given the lower offtake in big ticket size projects in NCR & Bengaluru, Oberoi is expected to report 42% YoY decline in sales volume to ~ 32,000 sq ft owing to a lack of new project launches.

Revenues of our real estate coverage universe are expected to decline 4.5% YoY impacted mainly by 39.6% YoY decline in topline of Oberoi while Sobha is expected to report 14.5% YoY growth in topline. The bottomline for our real estate coverage universe is, however, expected to decline 30.9% YoY dragged mainly by 48.2% YoY and 57.9% YoY decline in PAT for Oberoi and Mahindra Lifespace, respectively.

Company specific view (Real estate coverage universe) Company RemarksOberoi Realty In Q4FY14, Oberoi acquired 25 acres in Borivali for | 1155 crore. While this

deal would turn it a net debt company (~| 800-900 crore) though still sittingpretty vis-à-vis its peers, we believe it provides visibility over the sales volume beyond three years. On the operating & financial fronts, Oberoi continues toreport a dismal performance due to subdued volumes and lack of newlaunches in Q4FY14. We also believe that Oberoi Esquire revenue recognitionwould get pushed to H1FY15

Sobha Developers Sobha launched three projects aggregating ~1.3 mn sq ft (two in Bengaluruand one in Calicut) in Q4FY14. Hence, volume remained better sequentially at0.92 mn sq ft but saw 14% YoY decline due to the slower absorption of highticket size projects in Bengaluru. In terms of financials, the topline andbottomline are expected to grow 14.5% YoY and 14.1% YoY, respectively,given the hitting of revenue recognition in a few new projects

Mahindra Lifespace MLDL is expected to report 8.5% decline in topline given the slower executionacross projects. Higher interest expenses may further impact the bottomline(YoY decline of 57.9%). Key monitorable : launch guidance, execution status ofprojects and monetisation of Byculla land


Exhibit 31: Estimates for Q4FY14E ( | Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQOberoi Realty 183.7 -39.6 7.7 99.8 -43.9 11.1 75.2 -48.2 10.5Mahindra Lifespace 93.5 -8.5 62.5 12.6 -26.3 459.7 9.8 -57.9 -41.3Sobha Dev. 670.1 14.5 23.4 187.5 16.3 27.1 79.4 14.1 36.7Total 947.2 -4.5 22.9 299.9 -15.8 25.2 164.4 -30.9 15.1




736

755

776 99

1

792

0

200

400

600

800

1000

1200

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14E

| Cr

ore

0.05.010.015.020.025.030.035.040.045.0

(%)



Oberoi Realty

Analyst

Deepak Purswani, CFA [email protected] Bhupendra Tiwary [email protected]


Page 51

Retail

Nothing to cheer about in post-sale season

Domestic retailers commenced the sale season early this year and some players even extended the sale period to boost sales. However, after the sale season, retailers witnessed a significant decline in sales. In our coverage universe, we expect Future Retail to continue to witness a decline in sales owing to the de-merger of the fashion business. Shoppers Stop is likely to witness a 12.2% YoY increase in sales on the back of space addition. Despite the promotions extended during the quarter, companies are likely to witness mid-single digit like-to-like sales growth. Titan is likely to witness 11.2% YoY increase in sales owing to some revival expected in the jewellery segment and also growth in the eyewear and accessories segments. Bearing in mind flattish gold prices (YoY), promotions extended in the studded jewellery segment and the onset of the wedding season, we expect the jewellery segment to report 9% YoY revenue growth.

Operating margins to remain flat

Considering it was a quarter where promotions were extended we do not expect any margin expansion. Titan is likely to maintain the margins in the jewellery segment as the share of studded jewellery was high in Q4FY13 as well. On the profitability front, we expect losses for Future Retail owing to high interest costs. Shoppers Stop is likely to report marginal profit owing to HyperCity’s losses.

Shoppers Stop to continue space addition; Future Retail goes slow

We expect Shoppers Stop to add 0.09 mn sq ft of space, taking their total operational space to 5.5 mn sq ft while Future Retail is likely to remain at 10.4 mn sq ft. We expect revenue per sq ft for Shoppers Stop to dip 15.1% YoY to | 1,790 while we expect that for Future Retail to improve to | 2,176 as space reduces.

Exhibit 32: Estimates for Q4FY14E (| Crore) Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQFuture Retail 2,263.0 -22.2 -0.6 197.6 -20.6 -12.9 -30.7 PL PLShopper Stop 990.0 12.2 -9.1 34.5 20.9 -17.2 1.2 -2.5 -76.5Titan Company 2,884.5 11.2 8.8 295.3 10.8 20.4 199.9 8.1 20.7Total 6,137.4 -3.8 2.0 527.3 -3.1 2.6 170.4 -9.4 -11.4




Company RemarksFuture Retail

Revenues are likely to dip 22.2% YoY to | 2,263.0 crore (fashion business de-merger). Weexpect total space to remain flat at 10.4 mn sq ft. Owing to the sale season, we expectoperating margin to remain flat at 8.7%. However, high fixed costs continue to impactprofitability. We expect a loss of | 30.7 crore

Shoppers Stop

We expect 12.2% YoY increase in revenues to | 990.0 crore led by 0.09 mn sq ft spaceaddition & 5-7% like-to-like sales growth. We expect the operating margin to remain flat at3.5% owing to the strong space addition throughout the year. As fixed costs remain high,we expect a flattish PAT of | 1.2 crore

Titan Company

Revenues are likely to grow 11.2% YoY to | 2,884.5 crore led by 5% & 9% growth in watch& jewellery segment, respectively. We expect a revival in jewellery sales on the back ofpromotions and onset of the wedding season. With operating margins remaining flat(10.2%), PAT is likely to grow 8.1% YoY (| 199.9 crore)



6382

6168

5654 60

16 6137

5000

5300

5600

5900

6200

6500

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.01.02.03.04.05.06.07.08.09.010.0

(%)


Space addition

0.050.09

0.03

0.33

--

-

0.06

0.300.31

0.06 0.10

-

0.3

0.5

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

mn

sq. f

t.

Future Retail Shoppers Stop

Revenue per sq. ft.

1,708

2,003

1,790

2,176

1,9372,056

2,3452,243

2,5732,080 2,109

2,262

1,500

1,700

1,900

2,100

2,300

2,500

2,700

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

|

Future Retail Shoppers Stop

Analyst Bharat Chhoda [email protected]

Dhvani Modi [email protected]


Page 52

Shipping/Offshore/Shipbuilding

Dry bulk charter rates decline after spurt as supply side catches up

Average Baltic Dry Index (BDI) in Q4FY14 declined 26% QoQ as supply catches up to meet the spurt in iron ore demand from China. Iron ore inventory in China stood at an average of 97 million tonnes (MT) in Q4FY14 as steel output also showed improved 1.1% QoQ against a decline of 3% in the previous quarter. Going ahead, restocking is expected to taper down. Consequently, rates are expected to correct to align with excess supply of dry bulk ships in the industry. On the supply front, buoyed by demand, dry bulk segment added ~73 million dwt in 2013 and ~24 million dwt till March 2014. It has a strong order book of approximately 135 million dwt till CY16. On a segmental basis, Baltic Capesize Index (BCI) average also declined ~30% QoQ as restocking is expected to peak out. The smaller vessel segment also followed suit with Baltic Panamax, Supramax and Handymax indices declining ~27%, 17% and 3%, respectively, on an average for the quarter vis-à-vis Q3FY14.

Tanker rates firm up on extended winter and route specific demand

Quarterly average of Baltic Clean tanker Index (BCTI) firmed up ~13% in Q4FY14 while the Baltic Dirty Tanker Index (BDTI) gained ~31%. Tanker rates rose during the first half of the quarter due to extended winter in the US and stocking due to Chinese New Year. However, with a marked decline in activity in the Middle East Gulf region charter rates softened towards the end of the quarter for VLCC (largely) and other carriers.

Revenue expected to remain flattish; profits continue to slide

Q4FY14E revenues for the I-direct shipping universe are expected to remain flattish sequentially whereas it is expected to decline~10% YoY as charter rates remained volatile and softened towards the end of quarter. On the EBITDA front, the shipping universe gain is expected to remain muted at ~6% QoQ on account of lower in-chartering expenses. Further, I-direct shipping universe PAT is expected to report a loss of ~| 11 crore. On the company specific front, GE Shipping’s performance is expected to remain subdued with revenue and EBITDA gaining 5% and 7%, respectively, QoQ, whereas PAT is expected to grow~ 4.2% QoQ in the absence of any extraordinary income. SCI is expected to extend its losses for the sixth consecutive quarter with a net loss of | 127.8 crore in Q4FY14. Global Offshore’s revenue and EBITDA are expected to remain flattish QoQ but PAT is expected to be higher by 48% QoQ on account of the absence of extraordinary forex loss (Q3FY14: | 5.1 crore).

Exhibit 34: Estimates for Q4FY14E: (Shipping) (| Crore)

Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQGE Shipping 821.8 6.0 5.0 374.8 32.1 7.0 105.7 26.3 4.2Global Offshore 105.7 85.6 2.2 54.6 167.8 1.5 21.2 LP 48.0Pipavav Defence 333.1 -54.2 4.7 123.9 -5.2 -0.9 -10.0 PL NASCI 996.0 4.2 -4.0 116.0 2,243.4 12.6 -127.8 NA NATotal 2,256.6 -10.3 0.6 669.4 52.2 5.9 -10.9 NA PL




2515

2463

2713

2242

2257

2000

2400

2800

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

-10.0-5.00.05.010.015.020.025.030.035.0

(%)


Dry Bulk Indices

0

2000

4000

6000

8000

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Inde

x

BDI BCI BPI

Source : Bloomberg, ICICIdirect.com Research Tanker Indices

200

400

600

800

1000

1200

1400

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Inde

x

Baltic clean tanker index Baltic dirty tanker index

Source : Bloomberg, ICICIdirect.com Research Analyst

Bharat Chhoda [email protected] Soumojeet Kr Banerjee [email protected]


Page 53

Exhibit 35: Company specific view Company RemarksGE Shipping We expect revenues to grow 5% sequentially on the back of firmer charter rates in

tankers as well as dry bulk. However, the EBITDA margin is expected to remainflattish at ~45.6% in Q4FY14E due to survey cost and mobilisation expenses.Consequently, PAT is expected at | 105.7 crore for Q4FY14

Global Offshore Revenue growth is expected to be flattish in Q4FY14E at | 105.7 crore with allassets under utilisation in the quarter. EBITDA margin is also expected to remainflattish at 51.7% as mobilisation and dry docking expenses were absent.Consequently, in absence of any exceptional item PAT is expected at | 21 crore

SCI Reduction in fleet due to sale of three vessels in Q3FY14 and one in Q4FY14 wouldlead to revenues declining ~5% to | 996 crore. EBITDA margin is expected toimprove 171 bps QoQ to 11.7% due to lower average bunker cost. InsufficientEBITDA generation to cover fixed costs would lead to a net loss of | 128 crore

Pipavav Defence & Offshore Engineering Company

We expect the poor performance to continue with revenues posting muted growthof~5% QoQ. On the EBITDA margin front, we expect it to contract ~210 bps QoQ.Interest cost continues to drag. In the absence of any extraordinary gain, weanticipate a loss of | 10 crore for Q4FY14


BPR Asia Pacific Shipbuilding Index

0

100

200

300

400

500

600

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Inde

x

Source: Bloomberg, ICICIdirect.com Research China’s monthly iron ore inventory

30

50

71

91

111

Dec-

08

Jun-

09

Dec-

09

Jun-

10

Dec-

10

Jun-

11

Dec-

11

Jun-

12

Dec-

12

Jun-

13

Dec-

13

mln

tonn

es

Source: Bloomberg, ICICIdirect.com Research China’s iron ore imports trend

0

5

10

15

20

25

30

35

40

45

50

Oct-1

1

Feb-

12

Jun-

12

Oct-1

2

Feb-

13

Jun-

13

Oct-1

3

Feb-

14

mln

tonn

es

Australia Brazil India S. Africa

Source: Bloomberg, ICICIdirect.com Research


Page 54

Telecom

Subscriber growth rate improves QoQ…

We expect subscriber addition to grow ~3% QoQ for telecom operators under our coverage. We expect Idea to lead the subscriber addition with about 6.4 million subscriber addition compared to 5 million by Bharti Airtel and a flattish performance by RCom in Q4FY14. ARPMs for all three are expected to increase by about 1.1-1.4% leading to ~0.6% sequential decline in the average MoU to 364 minutes. Revenue growth for all three telcos will majorly stem from growth in data revenues to the tune of 15%, 17% and 5% for Bharti, Idea and RCom, respectively. We expect our telecom universe to post revenue growth of 9.1% YoY and 2.4% QoQ.

Data to lead growth in the telecom sector

Overall data usage is expected to continue to grow at a rapid pace, increasing 15.5% QoQ to 117 million GB for all three telcos. However, realisation per MB of data would continue to decline as telcos introduce disruptive pricing to push data consumption. We expect per MB realisation to decline about 0.5-0.1% across telcos to reach ~29, 27 and 19 paisa for Airtel, Idea and RCom, respectively. Contribution of data to revenue has been consistently increasing over the past few quarters. We expect total data revenue to increase as a percentage of total revenue from 12% in Q3FY14 to 13% in Q4FY14 witnessing 12% QoQ growth to | 2958 crore. Airtel, Idea and RCom have 11%, 11% and 19% contribution, respectively, from data in their total revenues.

ARPMs to expand, overall traffic to rise marginally 1.6% QoQ

Telcos have been gradually reducing discounts and hiking tariffs, hence, leading to an ARPM expansion. Voice ARPMs for all three telcos under our coverage are expected to expand marginally by 0.1-0.2%. Overall ARPM may expand 1-1.4% on account of higher data consumption, aiding margin expansion. We expect ARPMs to range between 44 and 46 paisa. The hike in tariffs and simultaneous curtailing of discounted minutes may lead to a QoQ decline of 0.6% in MoUs from 366 minutes to 364 minutes. The total traffic would, hence, only show marginal growth of 1.6% QoQ to 509 billion minutes in Q4FY14 from 501 billion minutes a quarter ago on the back of new subscriber addition. Declining MoU trend would limit ARPU expansion, which is expected to exhibit marginal growth of 0.5%, 0.4% & 1.1% for Airtel, Idea & RCom to | 196, 170, 126, respectively, in this quarter.

EBITDA margins improve

Margins across players are expected to improve sequentially as well as on a YoY basis buoyed by an increase in tariffs and, hence, higher operating leverage. Airtel may post about 90 bps expansion in blended EBITDA margin to 32.6%. Idea’s margin may remain flattish at 31.1% as savings on account of lower discounts would be offset by higher advertisement and promotional expenses. RCom is expected to post an EBITDA margin growth of ~70 bps to reach 31.9%.

Reliance Jio fears misplaced…

Telecom stocks had seen a massive correction post the February 2014 auctions on fears of Reliance Jio disrupting the pricing discipline in the sector. However, we feel Reliance Jio would take time to roll out its services and would not resort to disruptive pricing as that would not help it gain quality subscribers, a target for its data offering.

Topline & Profitability (Coverage Universe) 31

652

3215

3

3302

7

3373

1

3454

3

05000

10000150002000025000300003500040000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.05.010.015.020.025.030.035.0

(%)


ARPU Trend

129120 125 126

167 174164 169 170

196195192200193

128

80

100

120

140

160

180

200

220


|

Airtel RCom Idea

ARPM Trend

0.40

0.41

0.42

0.43

0.44

0.45

0.46

0.47


|

Airtel RCom Idea

Top Pick of the Sector Bharti Airtel Analyst

Karan Mittal [email protected]

Sneha Agarwal sneha. [email protected]


Page 55

Exhibit 36: Estimates for Q4FY14E (Telecom) (| Crore)


Bharti Airtel 22,421.4 9.6 2.1 7,306.1 12.6 3.0 950.7 86.9 55.8Idea Cellular 6,764.4 11.6 2.3 2,106.6 25.9 2.5 519.4 68.5 11.0RCom 5,357.0 4.4 3.9 1,698.2 22.0 6.2 137.3 -54.6 26.6Total 34,542.7 9.1 2.4 11,110.9 16.3 3.4 1,607.4 43.6 35.5



Exhibit 37: Company specific view Company RemarksBharti Airtel Bharti Airtel's India mobile subscriber growth has remained consistent with an

addition of about 2.5 million subscribers in the first month of the quarter. We expectgrowth to remain modest at 2.5% reaching about 203.4 million subscribers. ARPMis expected to expand to 45.3 paisa from 44.9 paisa on the back of reduceddiscounts and hike in tariffs. However, with increase in realisations, MoU maydecline marginally by 0.6% to 431 minutes, even though total traffic increases by2%. Revenues are also expected to be buoyed by an expected 7.5% QoQ growth indata usage per subscriber to 267 MB and an overall growth of 16% in the datatraffic to 260 billion MB for the domestic business. ARPU of the African business isexpected to decline by about 2% QoQ due to the appreciation of the currency

Idea Cellular Idea Cellular has added about 4.9 million subscribers within the first two months ofthe quarter. We expect it to exhibit 5% QoQ growth to reach about 135 millionsubscribers by year end. Realisation is expected to increase 1% to about 46 paisaleading to a marginal QoQ decline in the MoUs to 372 minutes from 376 minutes.Total voice traffic may, however, grow 2.2% QoQ to 147.5 billion minutes. ARPMswill also be aided by higher data usage per subscriber, which is likely to grow 7%QoQ to 305 MB from 285 MB a quarter ago. In addition, Idea is also expected to seerobust growth in its data revenues in the coming quarters as it has augmented its3G spectrum in the February 2014 spectrum auctions

Reliance Communication

The overall voice traffic in RCom is expected to remain flat QoQ at 102 billionminutes, which is comparatively lower than its peers on account of relatively lowersubscriber additions. Its subscriber addition has remained flat to negative in thepast two months. Hence, we expect its subscriber base to remain constant at 118.4million. The voice revenue is expected to remain flat QoQ while marginally expectedgrowth of 4% in total revenues would only stem from the growth in its datarevenues. We expect the data usage per subscriber to grow 3% QoQ to 407 MB anddata subscribers to increase to 37.8 million from 36.2 million in the last quarter



Page 56

Others Exhibit 38: Estimates Q4FY14E (| Crore)

Revenue EBITDA PAT

Q4FY14E YoY QoQ Q4FY14E YoY QoQ Q4FY14E YoY QoQCox & Kings 243.4 5.4 -40.3 56.1 16.9 -46.7 -6.9 NA PLInfoEdge 134.0 15.5 8.7 43.5 12.6 3.0 32.9 419.3 2.3Jindal SAW 1,535.4 56.7 -10.2 193.5 87.9 16.8 67.0 76.8 34.0Kajaria Ceramics 488.6 8.9 11.1 74.8 10.3 12.5 35.8 16.3 21.8Mah. Seamless 297.4 -9.5 11.5 25.4 2,016.7 78.9 18.3 13.2 -12.7Mcleod Russel 303.3 -6.1 -34.2 -101.1 NA PL -157.2 NA PLNavneet Publications 210.6 27.5 58.8 45.7 64.3 75.2 24.6 84.7 98.4Sintex Industries 1,436.8 2.9 4.4 226.5 19.8 -7.6 105.7 -30.0 24.7TTK Prestige 310.5 9.6 -16.0 43.5 1.0 -5.8 29.1 3.9 -1.2Talwalkars 70.0 25.4 89.9 35.1 26.2 131.8 16.4 34.9 363.8United Spirits * 2,453.2 17.1 6.3 239.7 1.5 7.9 75.9 35.5 16.9Total 7,483.2 10.8 -1.9 882.9 32.2 -19.2 241.5 80.7 -50.4


Source: Company, ICICIdirect.com Research, * Standalone numbers

Exhibit 39: Company specific view Company RemarksCox & Kings Standalone India revenue is expected to grow ~15% YoY. Leisure international

business may decline 6% YoY to due to seaonality. Lean season of HBR (education &camping division) may drag down revenue growth QoQ. Marginal strength in rupeemay result in some nominal currency loss during this quarter

InfoEdge We expect revenues to grow 8.7% QoQ to | 134 crore led by license sales in aseasonally strong quarter and growth in investee companies. EBITDA margins maydecline 180 bps QoQ to 32.5% led by advertising spends. Investor interest: FY15Eoutlook, demand trends in Naukri and investee company margins

Maharashtra Seamless

We expect pipes segment sales volume for Q4FY14 to be 50,375 tonnes (lower by12% YoY), wherein seamless pipes sales volume are expected at ~34375 tonnes(lower by 5% YoY) while that of ERW is likely to be ~16000 tonnes (lower by 24%YoY). On the back of a muted demand scenario, we expect topline to decline ~10%YoY. However, on the back of a lower base, we expect the EBITDA margin toincrease ~320 bps QoQ to 8.5%

Jindal SAW For the quarter, we expect the pipes segment sales volume at ~2,26,000 tonnes,lower by 8% QoQ. Subsequently, we expect topline to decline 10% QoQ. On the backof a lower base, we expect EBITDA margins to improve 290 bps QoQ to ~12.6%

Navneet Education

With part receipt of government orders, we expect robust revenue growth of 27.5%to | 210.6 crore, led by 56% growth in publication revenues. With a higher share ofpublication revenues, the operating margin is likely to improve ~500 bps to 21.7%.Consequently, we expect PAT to almost double to | 26.6 crore

Sintex Industries Monolithic business sales are expected to decline 17% YoY due to closing down ofsites while prefab sales are expected to grow 15% YoY due to a pick-up in demand.In custom moulding, we expect sales to increase 4% YoY domestically and 5% YoYin the overseas business due to moderation in auto demand

Talwalkars Better Value Fitness

Revenue is expected to grow ~25.4% YoY mainly due to 11% growth in gymadditions and rise in average realisations. Operating margins are expected to improve 30 bps YoY to 50.2%. We expect net profit of | 16.4 crore (vs. | 12.1 crore last year,| 3.5 crore last quarter))



Page 57


Company RemarksMcLeod Russel We expect tea sales volumes to remain lower ~5% YoY at 19.4 million kg. We also

expect realisations for domestic and exports to remain lower at | 140/kg and |180/kg, respectively. With the quarter remaining weak for tea companies, we expectmargins at -37.3% (+160 bps YoY). Further, with complete year's tax paid in thequarter, earnings may remain subdued for the quarter

TTK Prestige Revenues are likely to grow 9.6% YoY to | 310.5 crore. We expect the cookerssegment to aid revenue growth while the appliances segment is likely to remainsubdued. We expect operating margins to dip 120 bps YoY to 14%. Therefore, PAT is likely to grow by a mere 3.9% YoY to | 29.1 crore

Kajaria Ceramics Production volumes are expected to bounce back post a month’s strike in Morbiregion in Q3FY14. We expect Kajaria to report 8.9% YoY (11% sequentially) toplinegrowth. We expect margins at 15.3% in Q4FY14. Consequently, bottomline isexpected to grow 16.3% YoY led by robust topline growth

United Spirits We expect net sales to grow ~6.3% QoQ on the back of volume growth of ~6.7% to | 2453 crore in Q4FY14E. Volume growth is mainly expected in the regular segment.As a result, EBITDA margin is anticipated to remain flattish at 9.8%. Consequently,PAT for the quarter is expected at | 76 crore in Q4FY14E



Page 59

ICICIdirect.com Coverage Universe Exhibit 41: Valuation Matrix

CMP M Cap(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

Auto & Auto ancillaryAmara Raja Batteries (AMARAJ) 393 380 Hold 6,717 16.8 22.3 24.6 23.4 17.7 16.0 14.2 11.2 9.8 33.6 36.2 32.4 27.1 27.8 24.7Apollo Tyre (APOTYR) 167 175 Hold 8,422 12.2 16.8 19.4 13.8 10.0 8.6 7.1 5.6 4.9 18.7 21.6 21.2 18.0 20.1 19.1Ashok Leyland (ASHLEY) 23 15 Sell 6,239 1.6 -1.5 0.2 14.4 NA 115.8 12.1 244.3 15.2 5.6 -4.0 3.2 9.7 -10.3 1.4Bajaj Auto (BAAUTO) 2,029 2,450 Buy 58,710 105.2 115.9 139.5 19.3 17.5 14.5 15.3 12.4 10.3 43.5 43.0 41.6 38.5 35.1 34.9Balkrishna Industries Ltd (BALIND) 497 471 Hold 4,805 37.6 49.9 50.9 13.2 10.0 9.8 9.8 7.7 6.7 16.2 16.3 15.3 25.5 25.5 20.8Bosch Limted (MICO) 10,227 10,700 Hold 32,111 281.8 340.9 443.4 36.3 30.0 23.1 22.9 19.6 15.2 14.1 14.5 16.7 14.1 15.1 16.9Eicher Motors (EICMOT) 6,050 5,400 Hold 16,358 145.5 240.9 312.2 41.6 25.1 19.4 21.0 13.8 9.1 18.0 23.0 26.5 19.1 25.1 25.6Exide Industries (EXIIND) 123 90 Sell 10,447 6.1 5.2 5.5 20.0 23.5 22.5 13.0 13.5 12.9 19.6 16.7 15.7 15.3 12.0 11.6Hero Honda (HERHON) 2,251 2,100 Hold 44,948 106.1 104.7 136.1 21.2 21.5 16.5 12.6 11.3 10.1 42.8 39.7 42.9 42.3 33.9 35.2JK Tyre & Industries (JKIND) 182 197 Hold 828 49.5 66.0 94.8 3.7 2.8 1.9 5.1 3.5 3.0 14.5 19.1 20.1 22.4 22.5 26.6Mahindra & Mahindra (MAHMAH) 999 1,033 Hold 61,528 51.2 59.8 67.4 19.5 16.7 14.8 13.1 11.7 9.9 22.4 20.9 20.8 22.9 22.0 20.8Maruti Suzuki India (MARUTI) 1,927 1,727 Hold 58,217 79.2 91.5 117.0 24.3 21.1 16.5 12.7 10.1 8.1 11.9 14.3 15.6 12.9 13.1 14.6Motherson Sumi (MOTSUM) 255 239 Hold 22,476 5.0 8.0 12.2 50.6 31.7 20.9 18.1 10.2 8.1 10.1 22.0 26.1 19.4 26.3 32.4Tata Motors (TELCO) 406 475 Buy 121,372 31.0 44.7 52.7 13.1 9.1 7.7 5.1 3.9 3.7 23.2 23.8 23.5 26.3 26.5 25.8Wabco India (WABTVS) 1,957 2,012 Hold 3,712 69.0 57.0 74.0 28.4 34.4 26.4 18.5 22.4 17.8 26.6 17.2 18.9 20.2 14.5 16.1

#N/AAviationJet Airways (JETAIR) 278 245 Hold 3,160 -90.0 -225.5 -28.7 NA NA NA 17.0 -41.9 10.7 9.0 -4.4 17.8 NA NA NASpiceJet (MODLUF) 18 12 Sell 934 -3.9 -14.1 -1.6 NA NA NA -12.2 -4.2 34.4 -5.2 -53.7 6.8 NA NA NA

#N/ACapital GoodsAIA Engineering (AIAENG) 550 617 Buy 5,185 22.4 31.7 34.1 24.6 17.3 16.1 16.4 11.4 10.0 17.3 21.9 21.1 14.8 18.0 16.8BGR (BGRENE) 136 104 Hold 980 21.7 21.5 22.0 6.3 6.3 6.2 6.8 6.9 6.9 11.1 11.2 11.0 12.3 11.5 11.0BHEL (BHEL) 184 122 Sell 44,913 27.1 16.6 13.6 6.8 11.1 13.5 4.3 7.5 7.5 27.2 13.9 12.7 22.3 12.7 10.0Greaves Cotton (GREAVE) 77 65 Buy 1,869 5.5 6.0 6.9 13.8 12.9 11.0 7.3 7.6 6.5 27.3 23.2 25.0 19.0 18.8 19.9Jyoti Structure (JYOSTR) 36 27 Hold 298 8.0 9.1 9.2 4.5 4.0 4.0 3.7 3.8 4.0 16.8 16.3 15.9 9.1 9.5 8.9Kalpataru Power (KALPOW) 98 99 Buy 1,509 8.9 10.2 13.2 11.0 9.6 7.4 6.3 5.3 4.9 11.2 12.2 12.6 7.4 7.9 9.4KEC Internnational (KECIN) 69 54 Hold 1,770 2.6 4.1 6.1 26.7 16.7 11.3 8.8 7.4 6.8 11.2 13.3 14.1 5.6 8.4 11.3Larson & Toubro (LARTOU) 1,277 1,162 Hold 118,439 52.3 51.3 57.9 24.4 24.9 22.0 19.8 18.0 15.7 15.2 15.1 15.9 17.4 15.7 16.1Thermax Ltd (THERMA) 742 590 Hold 8,844 29.8 24.8 33.3 24.9 29.9 22.3 17.5 18.4 14.6 23.9 20.6 22.0 19.1 14.5 17.1

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)Sector / Company

CMP as on January 07, 2014


Page 60

Exhibit 42: Valuation Matrix CMP #N/A M Cap

(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EConstructionNCC (NAGCON) 37 27 Hold 938 2.4 1.5 1.7 15.0 24.8 21.0 7.6 8.1 6.9 6.7 7.0 8.2 2.6 1.5 1.8Simplex Infrastructure (SIMCON) 147 87 Hold 729 11.3 11.3 12.4 13.1 13.1 11.9 6.2 5.7 5.5 9.3 9.6 9.9 4.8 4.3 4.5Supreme Infra (SUPINF) 225 221 Hold 452 65.5 60.9 70.5 3.4 3.7 3.2 4.2 4.5 3.7 18.9 16.9 17.4 23.0 17.6 15.0

#N/ACementACC^ (ACC) 1,365 1,122 Hold 25,634 58.3 67.8 79.1 23.4 20.1 17.3 16.9 13.3 11.2 10.0 13.0 13.8 14.0 14.8 15.7Ambuja Cement^ (GUJAMB) 203 174 Hold 31,446 8.4 9.7 10.8 24.3 21.0 18.8 17.4 16.8 14.0 11.4 6.4 7.1 13.6 7.8 8.2Heidelberg Cement (MYSCEM) 43 37 Hold 972 -1.8 -1.0 0.9 NA NA 48.4 25.6 10.9 8.7 -0.5 4.5 6.1 -4.9 -2.9 2.5India Cement (INDCEM) 66 50 Hold 2,015 5.3 -0.3 0.9 12.3 NA 74.1 5.8 7.9 7.8 8.1 4.7 4.9 4.0 -0.2 0.7JK Cement (JKCEME) 250 190 Hold 1,747 33.4 8.0 26.4 7.5 31.0 9.4 4.8 11.3 6.8 14.5 4.6 9.7 13.8 3.3 9.9JK Laxmi Cement (JKCORP) 124 77 Buy 1,457 14.9 6.5 10.5 8.3 19.1 11.8 5.2 9.1 6.8 11.5 4.8 7.1 13.9 5.7 8.6Mangalam Cement (MANCEM) 126 106 Hold 335 29.0 10.6 19.4 4.3 11.8 6.5 3.7 16.5 5.9 14.0 1.3 8.0 15.7 5.4 9.3Shree Cement (SHRCEM) 5,661 5,080 Buy 19,721 288.5 213.1 354.5 19.6 26.6 16.0 12.9 15.1 10.4 21.4 14.9 20.6 26.1 17.9 23.3UltraTech Cement (ULTCEM) 2,150 2,040 Buy 58,967 96.8 65.2 107.0 22.2 33.0 20.1 13.2 17.0 12.0 18.7 11.3 15.9 17.4 10.4 14.7

#N/AConsumer DiscritionaryAsian Paints (ASIPAI) 531 468 Hold 50,905 11.6 12.9 16.4 45.7 41.0 32.4 30.0 26.4 21.4 51.8 49.4 53.6 37.8 35.4 38.9Bajaj Electricals (BAJELE) 271 274 Buy 2,700 5.1 4.6 19.9 52.7 58.5 13.6 27.8 18.6 7.4 9.8 13.8 32.0 7.0 6.1 21.6Essel Propack (ESSPAC) 62 70 Buy 968 5.2 7.0 9.4 12.0 8.8 6.6 5.2 4.4 3.6 11.0 13.3 15.4 8.6 10.7 12.9Havells India (HAVIND) 893 766 Hold 11,145 46.6 37.8 47.7 19.2 23.6 18.7 17.3 15.4 12.0 24.0 24.6 29.5 40.3 26.7 27.7Kansai Nerolac (GOONER) 1,142 1,200 Buy 6,154 54.2 45.6 58.0 21.1 25.0 19.7 18.3 15.2 11.9 21.5 22.4 25.9 22.7 16.9 18.7Pidlilite Industries (PIDIND) 314 304 Hold 16,066 8.4 9.3 12.2 37.6 33.6 25.7 26.6 21.8 17.8 31.2 32.5 35.4 25.7 24.7 28.1Symphony (SYMCOM) 716 502 Hold 2,506 17.2 24.1 31.4 41.7 29.8 22.8 31.2 22.8 17.4 33.7 39.1 41.6 27.1 31.7 33.6VGuard (VGUARD) 464 437 Hold 1,390 21.1 22.4 29.9 22.0 20.7 15.5 14.0 13.9 10.1 22.9 19.8 24.0 24.1 21.7 23.8

#N/AFMCGColgate-Palmolive (COLPAL) 1,391 1,365 Hold 18,912 36.5 35.4 44.6 38.1 39.2 31.2 28.1 29.2 21.9 125.2 99.3 125.6 101.5 90.8 97.1Dabur India Ltd (DABIND) 180 180 Buy 31,380 4.4 5.2 6.5 41.0 34.3 27.9 30.0 26.3 21.2 39.3 41.2 44.0 39.9 38.7 39.3Hindustan Unilever Ltd (Hinlev) 605 590 Hold 130,908 17.6 17.8 18.0 34.5 34.1 33.7 32.3 28.7 25.4 140.9 116.5 111.8 142.0 106.0 91.6ITC (ITC) 345 387 Buy 274,186 9.4 11.3 12.8 36.7 30.5 26.9 25.5 21.0 18.7 43.7 46.2 46.2 33.3 34.9 35.1Jyothi Laboratories (JYOLAB) 208 175 Hold 3,765 1.2 5.4 8.6 173.9 38.6 24.2 32.0 21.0 17.7 10.0 10.8 11.5 3.0 11.1 15.8Marico Ltd (MARIN) 210 262 Buy 13,533 6.1 7.9 9.7 34.2 26.4 21.6 22.3 18.6 14.0 26.5 25.5 29.7 25.3 22.4 23.7Nestle India (NESIND) 4,836 5,100 Hold 46,625 110.7 119.0 130.1 43.7 40.6 37.2 25.5 23.8 21.2 55.5 47.7 58.5 59.4 47.8 48.8Tata Global Beverages (TATTEA) 152 182 Buy 9,412 6.4 7.2 8.6 23.9 21.2 17.7 12.2 12.2 10.0 10.5 9.5 11.0 7.7 10.0 9.6VST Industries (VSTIND) 1,685 2,021 Buy 2,602 81.8 91.2 118.4 20.6 18.5 14.2 14.2 11.9 9.1 52.0 61.2 73.7 41.6 45.6 54.0

EPS (|) P/E (x) RoE (%)Sector / Company

EV/EBITDA (x) RoCE (%)

CMP as on April 4, 2014


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(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EHotelEIH (EIH) 70 61 Hold 4,027 0.7 1.6 2.1 96.2 43.0 33.4 16.5 14.2 11.8 4.1 5.0 6.2 1.6 3.6 4.4Hotel Leela (HOTLEE) 17 14 Sell 752 -10.4 -11.1 -8.7 NA NA NA 50.2 38.8 36.9 -0.4 -0.7 -0.5 -35.5 -66.8 -108.1Indian Hotel (INDHOT) 75 67 Hold 6,068 -5.3 -3.9 1.2 NA NA 63.4 17.8 15.1 14.3 3.3 4.3 4.2 -14.4 -11.3 3.3Taj GVK Hotels (TAJGVK) 66 63 Hold 414 1.4 0.6 2.0 47.1 110.7 32.6 9.9 11.1 9.3 6.8 5.3 7.3 2.5 1.1 3.7

#N/AInfrastructureGVK Power (GVKPOW) 12 10 Hold 1,903 -2.1 -1.3 -0.9 NA NA NA 26.6 18.3 8.1 1.2 2.3 5.4 -10.7 -6.8 -5.1IRB Infrastructure (IRBINF) 112 85 Hold 3,737 16.7 13.3 13.0 6.7 8.5 8.6 6.8 8.0 7.2 9.8 9.1 8.7 17.1 12.5 11.3Jaiprakash Associate (JAIASS) 53 42 Hold 11,717 2.2 -0.4 0.0 23.8 NA NA 10.9 12.2 10.2 6.9 5.6 6.3 3.8 2.2 0.0Sadbhav Engineering (SADENG) 99 113 Buy 1,501 4.9 6.8 8.0 20.2 14.6 12.4 14.2 9.1 7.2 8.0 11.9 13.7 8.9 11.0 11.7

#N/AITEclerx (ECLSER) 1,243 1,122 Hold 3,734 56.9 83.8 102.0 21.8 14.8 12.2 13.6 9.6 8.1 59.7 63.0 56.0 39.1 44.5 42.9Firstsource Solutions (FIRSOU) 28 29 Buy 1,870 2.8 2.9 4.5 10.0 9.7 6.3 10.0 7.1 4.8 7.5 10.5 13.3 9.3 10.1 13.0HCL Tech* (HCLTEC) 1,398 1,530 Buy 97,781 57.1 87.9 98.5 24.5 15.9 14.2 16.3 10.6 9.7 37.0 42.4 35.0 30.6 34.4 29.8Infosys (INFTEC) 3,316 3,650 Hold 189,480 164.9 184.1 213.4 20.1 18.0 15.5 14.5 12.2 10.1 28.5 27.5 27.2 25.7 24.2 23.7Infotech (INFENT) 338 380 Buy 3,783 20.7 25.2 31.5 16.3 13.4 10.7 9.5 7.3 5.8 26.5 28.6 28.9 18.6 19.6 20.9KPIT Cummins (KPISYS) 165 150 Hold 3,203 10.5 13.3 17.1 15.6 12.4 9.7 7.9 6.0 4.6 27.8 26.2 27.6 22.8 22.8 23.8Mastek (MASTEK) 204 240 Buy 453 14.0 23.2 34.5 14.6 8.8 NA 6.3 2.9 NA 5.6 10.8 13.3 6.5 9.9 11.7Mindtree (MINCON) 1,419 1,600 Buy 5,915 81.8 107.9 129.9 17.4 13.2 10.9 12.8 9.5 7.6 29.5 30.7 30.1 25.8 27.1 26.1NIIT Ltd. (NIIT) 32 28 Hold 525 1.5 0.7 3.7 20.8 44.3 8.5 7.9 4.3 2.7 NM NM 1.3 3.8 1.8 9.1NIIT Technologies (NIITEC) 411 415 Buy 2,495 35.4 39.0 47.1 11.6 10.6 8.7 7.0 6.1 5.0 26.7 25.8 27.3 21.3 19.9 20.8Persistent Systems (PERSYS) 1,086 1,000 Hold 4,345 46.1 64.4 77.6 23.6 16.9 14.0 12.7 9.7 7.9 27.3 29.7 29.2 19.8 23.0 23.1Sasken Communication (SASCOM) 195 135 Hold 415 13.1 12.1 13.8 14.9 16.1 14.1 9.3 8.4 7.1 5.2 6.1 7.3 7.6 7.5 8.3TCS (TCS) 2,139 2,450 Buy 418,943 71.0 97.3 111.0 30.1 22.0 19.3 22.8 16.3 14.4 45.8 48.7 43.2 36.0 37.3 33.6Tech Mahindra (TECMAH) 1,813 1,900 Hold 42,312 82.4 113.6 135.6 22.0 16.0 13.4 12.8 8.9 7.2 40.3 42.2 36.7 33.5 33.2 29.4Wipro (WIPRO) 553 610 Buy 135,667 25.0 31.2 35.4 22.2 17.7 15.6 15.5 12.7 11.0 23.6 28.1 26.9 21.6 24.8 25.4

#N/ALogisticsBluedart Express (BLUDAR) 3,685 3,085 Hold 8,743 63.5 52.1 71.5 58.0 70.7 51.5 31.9 47.9 34.4 35.0 23.5 22.9 29.0 19.1 26.9Container Corporation (CONCOR) 910 827 Buy 17,739 47.7 51.4 54.4 19.1 17.7 16.7 14.1 13.1 11.5 15.6 13.4 13.4 16.7 14.2 13.5Essar Ports (ESSSHI) 55 60 Hold 2,338 7.7 8.8 10.4 7.1 6.2 5.3 6.4 7.1 6.1 11.2 10.3 11.7 12.2 14.6 14.7Gateway Distriparks (GATDIS) 160 139 Hold 1,733 11.7 11.5 12.7 13.6 13.9 12.5 7.5 7.1 6.3 19.2 18.1 19.1 16.1 15.2 16.0Gujarat Pipavav (GUJPPL) 85 81 Buy 4,104 4.0 4.9 5.6 21.4 17.5 15.3 16.6 13.8 11.4 11.4 11.0 10.7 13.7 14.3 14.1Transport Corp (TRACOR) 109 105 Buy 793 9.5 8.2 9.4 11.4 13.3 11.6 6.1 7.0 6.2 25.1 19.2 19.7 15.9 12.3 12.7

RoE (%)P/E (x)Sector / Company

EPS (|) EV/EBITDA (x) RoCE (%)



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(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EMediaDB Corp (DBCORP) 294 350 Buy 5,391 11.9 15.7 19.5 24.7 18.7 15.1 14.4 10.5 8.3 27.2 31.9 33.1 21.2 23.2 23.6DISH TV (DISHTV) 51 50 Hold 2,713 -0.6 -0.9 -0.3 NA NA NA 5.1 5.2 4.2 -6.7 -23.7 27.8 42.4 39.0 10.0Entertainment Network (ENTNET) 384 383 Hold 1,830 14.3 18.4 18.2 26.8 20.9 21.1 14.4 10.8 9.5 14.5 17.0 15.4 13.6 15.0 13.0Eros International (EROINT) 169 185 Buy 1,555 16.8 21.2 26.4 10.1 8.0 6.4 7.8 6.3 5.1 15.9 16.8 18.0 15.7 16.7 17.4Hathway Cables (HATCAB) 246 320 Buy 3,736 1.1 -4.9 -3.5 224.2 NA NA 16.2 17.4 14.4 6.1 2.3 3.0 1.9 -7.5 -5.6HT Media (HTMED) 87 74 Hold 2,035 7.1 8.5 8.7 12.2 10.2 10.0 8.0 6.8 5.2 9.0 7.7 9.0 10.5 11.2 10.3Jagran Prakashan (JAGPRA) 105 116 Buy 3,485 7.7 7.4 8.3 13.7 14.2 12.7 12.7 9.2 7.5 12.1 19.3 19.9 27.3 20.7 19.9PVR (PVRLIM) 552 673 Buy 2,268 11.2 10.7 22.5 49.2 51.6 24.6 23.9 13.3 10.1 4.6 9.1 12.1 6.9 6.2 11.6Sun TV (SUNTV) 404 440 Buy 15,958 18.0 18.7 21.9 22.4 21.6 18.4 11.0 9.8 8.5 33.2 32.0 33.9 24.6 23.4 24.2TV18 Broadcast (GLOBRO) 27 23 Sell 4,647 -0.1 0.5 0.8 NA 57.2 33.7 43.4 26.7 19.2 1.9 3.5 5.0 -0.8 2.4 4.0Zee Ent. (ZEETEL) 276 268 Hold 26,513 7.5 8.9 9.9 36.6 30.9 28.0 27.2 23.1 19.6 23.3 23.8 23.3 18.4 18.6 17.6Metals & MiningCoal India (COALIN) 282 320 Buy 177,932 27.5 22.3 23.0 10.3 12.7 12.2 6.5 8.5 7.6 32.3 29.4 27.0 35.8 34.2 31.1Graphite India (CAREVE) 85 78 Hold 1,651 6.9 7.0 8.1 12.3 12.1 10.4 7.7 6.9 6.1 8.6 8.9 10.0 7.9 7.7 8.6HEG (HEG) 212 190 Sell 846 26.5 19.7 36.3 8.0 10.8 5.8 7.3 7.8 6.0 10.2 8.2 10.4 12.3 8.6 14.1Hindalco (HINDAL) 138 108 Hold 28,419 15.8 10.3 8.5 8.7 13.4 16.2 9.5 10.0 8.6 5.3 4.2 4.4 8.6 5.3 4.3Hindustan Zinc (HINZIN) 130 152 Buy 54,971 16.3 15.9 15.2 8.0 8.2 8.5 5.2 4.2 4.0 18.1 16.5 13.0 21.4 18.1 15.5JSW Steel (JINVIJ) 1,064 820 Sell 25,725 59.7 93.9 85.1 17.8 11.3 12.5 6.7 6.1 6.1 11.1 11.0 10.2 7.7 10.6 8.9NMDC (NATMIN) 140 160 Buy 55,665 16.0 16.1 14.9 8.8 8.7 9.4 4.7 4.6 5.1 26.3 25.6 22.0 23.1 21.5 18.3SAIL (SAIL) 71 54 Sell 29,451 5.3 7.6 6.3 13.6 9.3 11.3 10.2 11.4 9.4 5.4 4.5 5.2 5.4 7.5 5.9Sesa Sterlite (SESGOA) 190 175 Hold 56,358 26.2 22.2 25.7 7.3 8.6 7.4 93.1 4.5 2.8 1.3 8.8 13.1 13.0 9.1 9.6Tata Steel (TISCO) 402 390 Hold 39,043 3.4 35.9 41.5 117.5 11.2 9.7 7.5 6.7 5.9 6.6 8.2 9.3 0.9 8.8 9.5Usha Martin (USHBEL) 37 30 Hold 1,137 2.6 0.8 2.4 14.4 46.5 15.7 7.5 6.6 5.8 6.3 6.7 7.6 4.1 1.3 3.6Oil & GasAban Offshore (ABALLO) 545 591 Buy 2,446 37.2 63.5 102.2 14.6 8.6 5.3 6.9 6.0 4.9 9.4 10.2 11.1 11.5 5.5 8.6Bharat Petroleum (BHAPET) 444 421 Hold 32,076 36.6 26.8 27.9 12.1 16.6 15.9 7.9 10.5 10.5 10.3 7.0 7.1 15.9 11.0 10.8Cairn India Ltd (CAIIND) 339 364 Buy 64,745 63.1 64.6 67.1 5.4 5.3 5.1 3.8 3.2 2.4 23.5 19.9 19.0 25.3 21.6 19.1Gail India (GAIL) 362 408 Buy 45,944 31.7 35.1 35.6 11.4 10.3 10.2 8.0 6.9 6.7 16.9 16.6 15.5 16.6 16.3 14.9Gujarat Gas (GUJGAS) 288 253 Hold 3,696 22.3 36.2 29.0 13.0 8.0 9.9 7.7 4.3 5.1 38.3 55.4 39.8 26.2 26.2 26.2Gujarat State Petronet Ltd (GSPL) 66 65 Hold 3,723 9.6 7.5 7.8 6.9 8.8 8.5 4.0 4.2 3.9 20.3 17.0 15.3 18.3 12.9 12.0Hindustan Petroleum (HINPET) 314 258 Hold 10,645 26.7 19.5 27.3 11.8 16.1 11.5 11.1 9.9 7.5 4.2 4.0 6.1 6.6 4.8 6.5Indian Oil Corporation (INDOIL) 282 238 Hold 68,371 20.6 17.9 26.1 13.7 15.8 10.8 10.7 10.2 6.6 5.7 4.5 8.3 8.2 6.8 9.3Indraprastha Gas Ltd (INDGAS) 291 289 Hold 4,072 25.3 27.2 28.9 11.5 10.7 10.1 5.6 5.0 4.3 31.1 28.9 26.7 23.7 21.3 19.3Mangalore Refinary (MRPL) 47 61 Buy 8,307 -4.3 -3.4 3.7 NA NA 12.8 43.0 68.1 6.4 -2.1 -3.6 9.1 -11.7 -10.1 10.4Oil India Limited (OILIND) 483 505 Hold 29,044 59.7 51.5 59.6 8.1 9.4 8.1 8.1 9.4 8.1 18.5 14.5 16.3 18.7 14.8 15.5ONGC (ONGC) 326 297 Hold 278,610 28.3 30.1 28.4 11.5 10.8 11.5 11.5 10.8 11.5 19.7 18.9 17.8 15.7 15.4 13.8Petronet LNG (PETLNG) 140 132 Hold 10,474 15.3 9.0 9.5 9.1 15.5 14.7 6.3 9.8 8.5 24.4 12.6 11.8 25.8 13.8 13.2

EV/EBITDA (x) RoCE (%) RoE (%)Sector / Company

EPS (|) P/E (x)



Page 63

Exhibit 45: Valuation Matrix

CMP #N/A M Cap(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

Pharma Apollo Hospitals (APOHOS) 900 983 Hold 12,522 21.9 24.1 27.9 41.1 37.4 32.2 21.4 19.0 15.7 11.7 12.1 13.5 11.1 11.3 12.0Aurobindo Pharma (AURPHA) 565 470 Hold 16,464 10.1 35.4 36.8 56.0 16.0 15.4 22.1 10.0 10.4 10.6 24.2 19.1 11.3 28.9 23.5Biocon (BIOCON) 433 399 Sell 8,660 25.4 20.6 24.9 17.0 21.0 17.4 14.3 11.8 9.8 13.6 15.1 16.1 18.9 13.9 15.1Cadila Healthcare (CADHEA) 1,025 972 Hold 20,982 31.9 37.3 48.1 32.1 27.5 21.3 19.6 19.4 15.3 16.7 15.7 18.2 22.2 21.7 22.9Cipla (Cipla) 404 424 Hold 32,446 19.2 16.8 18.8 21.0 24.0 21.4 14.2 15.7 13.7 18.7 14.6 15.7 17.1 13.3 13.2Divi's Lab (DIVLAB) 1,350 1,508 Buy 17,914 46.1 62.2 68.4 29.3 21.7 19.7 21.6 16.3 13.6 28.4 30.2 29.3 23.9 26.5 24.3Dr Reddys (DRREDD) 2,650 3,239 Buy 45,080 98.8 133.4 138.2 26.8 19.9 19.2 17.5 13.2 11.9 19.2 23.1 22.0 23.0 24.5 20.9Glenmark (GLEPHA) 586 673 Buy 15,888 22.7 25.5 32.6 25.8 22.9 18.0 17.8 14.0 11.2 18.8 22.5 25.2 22.5 22.4 23.8Indoco Remedies (INDREM) 140 135 Hold 1,287 4.6 6.3 10.7 30.2 22.3 13.1 15.0 11.3 8.0 13.2 16.2 21.0 10.3 12.5 18.1IPCA Labs (IPCLAB) 832 915 Buy 10,499 25.6 36.7 47.2 32.4 22.7 17.6 3.9 3.4 2.8 24.7 28.1 26.9 20.8 23.7 23.9Jubilant Life Sciences (VAMORG) 166 131 Hold 2,648 9.6 5.4 25.4 17.3 31.0 6.5 5.9 6.2 5.0 12.1 11.6 13.6 6.1 3.4 14.4Lupin (LUPIN) 977 1,021 Buy 43,811 29.3 38.8 42.8 33.3 25.2 22.8 19.6 15.9 13.7 30.1 33.9 33.7 25.3 26.5 23.9Natco Pharma (NATPHA) 748 800 Buy 2,473 21.3 32.1 35.6 35.1 23.3 21.0 18.7 13.5 12.8 14.5 15.0 14.4 13.5 14.0 13.7Torrent Pharma (TORPHA) 563 574 Hold 9,523 25.6 35.1 37.1 22.0 16.0 15.2 13.8 10.8 9.5 28.8 31.7 23.0 30.4 33.1 28.7Unichem Laboratories (UNILAB) 220 244 Buy 1,998 12.5 18.3 16.2 17.6 12.0 13.6 11.3 10.1 8.1 18.0 16.9 19.1 15.6 19.8 15.9

#N/APowerCESC (CESC) 511 502 Buy 6,390 38.3 40.6 46.1 13.4 12.6 11.1 9.6 9.4 7.8 8.3 7.7 8.9 9.1 9.5 10.1JP Hydro (JAIHYD) 15 14 Hold 4,539 1.2 0.8 1.9 12.7 18.8 8.2 12.8 13.2 8.4 5.8 5.6 8.1 5.5 3.5 7.1NHPC (NHPC) 19 19 Hold 21,200 1.8 2.7 2.4 10.6 7.2 8.0 10.8 13.0 9.3 6.9 7.0 7.8 8.1 10.8 9.2NTPC (NTPC) 120 128 Hold 99,193 15.3 13.4 10.9 7.8 9.0 11.0 7.7 7.2 8.3 12.6 11.7 9.1 15.7 12.8 9.8Power Grid Corp (POWGRI) 107 112 Buy 55,769 9.1 9.3 10.8 11.7 11.5 9.9 10.8 9.4 8.6 8.7 9.1 9.4 15.2 12.8 13.4PTC India Ltd (POWTRA) 68 61 Hold 2,016 4.3 5.3 6.1 15.9 12.9 11.2 4.2 0.8 -2.6 7.7 12.0 10.7 5.5 8.4 7.0Tata Power (TATPOW) 83 102 Buy 22,549 -5.1 0.7 5.0 NA 114.6 16.6 8.2 10.0 6.8 10.1 7.5 11.9 2.0 4.9 11.8

#N/AReal EstateOberoi Realty (OBEREA) 222 285 Buy 7,275 15.4 8.8 19.1 14.4 25.3 11.6 10.1 16.5 7.8 14.0 7.9 16.4 12.1 6.6 12.8Mahindra Lifespace (GESCOR) 387 478 Buy 1,580 29.2 34.6 28.5 13.3 11.2 13.6 9.9 10.2 7.2 9.5 9.9 8.1 10.3 10.9 8.4Sobha Developers (SOBDEV) 383 303 Hold 3,756 22.1 24.1 32.1 17.3 15.9 12.0 9.2 8.1 6.2 13.9 14.8 17.1 10.2 10.4 12.7

#N/ARetailFuture Retail (PANRET) 90 90 Hold 1,999 7.9 0.3 0.2 11.3 295.3 437.1 3.8 5.8 7.0 14.8 7.8 6.3 10.3 0.3 0.1Shoppers Stop (SHOSTO) 367 440 Buy 3,056 -1.4 -1.0 2.5 NA NA 144.4 36.4 30.1 19.8 1.8 2.8 7.6 NA NA 4.2Titan Industries (TITIND) 270 280 Buy 23,952 8.2 8.3 10.5 33.0 32.7 25.8 22.6 22.5 17.9 48.5 27.9 27.8 36.9 29.6 29.7

Sector / CompanyEPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)



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(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EShippingGE Shipping (GESHIP) 338 301 Hold 5,051 35.3 41.7 43.2 9.6 8.1 7.8 7.6 5.8 5.1 4.7 6.4 6.8 8.5 9.4 9.0Global Offshore (GARSHI) 284 115 Hold 701 21.0 17.3 21.1 13.5 16.5 13.4 14.3 10.4 9.9 4.8 6.8 7.1 14.4 11.4 12.3Guj Pipavav Port (GUJPPL) 85 81 Buy 4,104 4.0 4.9 5.6 21.4 17.5 15.3 16.6 13.8 11.4 11.4 11.0 10.7 13.7 14.3 14.1Pipavav Defence (PIPSHI) 37 33 Hold 2,735 0.4 0.1 0.1 90.6 0.0 516.5 8.4 8.4 8.6 6.3 6.3 5.7 1.1 1.4 0.2Shipping Corp. of India (SCI) 43 26 Sell 2,005 -2.5 -9.6 -8.8 NA NA NA 19.2 17.3 14.7 -2.7 -2.7 -2.3 -1.8 -7.2 -7.1

#N/ATelecomBharti Airtel (BHATE) 316 355 Buy 126,273 6.0 6.9 13.4 52.8 45.8 23.5 7.7 6.6 5.5 7.4 9.3 11.5 4.5 4.6 8.2Idea Cellular (IDECEL) 140 170 Buy 46,491 3.1 5.8 7.3 45.9 24.3 19.2 9.8 7.2 6.0 9.5 12.6 15.0 7.1 12.1 13.4Reliance Comm. (RELCOM) 129 120 Hold 26,647 3.3 5.0 4.7 39.6 25.9 27.4 10.6 8.8 7.7 2.9 4.4 4.7 2.0 3.0 2.7

#N/AApparelsKewal Kiran (KEWKIR) 1,160 1,025 Hold 1,430 43.3 53.2 64.8 26.8 21.8 17.9 18.8 14.9 12.1 25.3 29.3 35.3 21.0 23.2 28.2Lovable Lingerie (LOVLIN) 341 320 Hold 573 11.2 13.3 14.6 30.3 25.7 23.3 24.9 21.5 17.4 11.6 12.2 13.9 10.9 11.7 11.7Page Industries (PAGIND) 5,939 5,820 Hold 6,624 100.9 128.7 173.3 58.9 46.2 34.3 38.1 28.8 21.8 52.6 57.6 60.9 52.7 49.5 49.2Rupa & Co. (RUPACO) 225 Unrated Unrated 1,787 8.1 8.4 9.5 27.6 26.8 23.7 15.9 15.4 13.8 25.8 24.1 24.3 26.6 22.9 22.0Vardhman Textiles (MAHSPI) 342 430 Buy 2,177 57.0 102.2 94.1 6.0 3.3 3.6 5.4 3.7 3.6 12.8 18.1 15.7 16.3 24.9 19.4

#N/AOthersCox & Kings (CNKLIM) 159 170 Buy 2,168 18.2 30.9 30.9 8.7 5.1 5.1 7.0 5.4 4.1 9.5 11.4 13.3 22.4 27.5 21.5InfoEdge (INFEDG) 609 625 Buy 255 8.4 13.0 17.4 72.6 47.0 34.9 -2.3 -2.7 -3.2 15.7 19.4 20.2 13.2 17.2 19.0Maharashtra Seamless (MAHSEA) 227 160 Hold 1,538 21.6 12.6 14.0 10.5 18.1 16.2 5.7 7.4 6.7 4.4 2.2 2.6 5.4 3.1 3.4Jindal SAW (SAWPIP) 58 47 Hold 1,610 -0.7 4.1 13.9 NA 14.4 4.2 10.3 8.1 5.3 4.4 5.6 9.3 -0.5 3.0 9.4Kajaria Ceramics (KAJCER) 363 360 Hold 3,161 14.2 15.6 21.1 25.6 23.3 17.2 14.2 12.6 9.8 28.2 27.5 27.9 29.0 22.5 22.1McLeod Russel (MCLRUS) 289 340 Buy 6,640 25.0 30.1 34.0 11.5 9.6 8.5 17.7 15.7 13.4 14.6 15.4 16.6 14.0 15.0 15.0Navneet Publications (NAVPUB) 62 80 Buy 1,472 4.4 5.1 6.0 13.9 12.1 10.3 8.6 7.5 6.5 31.6 32.2 34.4 27.3 27.4 28.3Sintex Industries (SININD) 44 30 Sell 1,370 10.4 10.0 10.7 4.2 4.4 4.1 5.1 5.7 5.8 9.1 8.6 8.1 10.4 9.3 9.2TTK Prestige (TTKPRE) 3,087 3,360 Buy 3,594 117.2 103.8 126.0 26.3 29.7 24.5 18.0 19.2 15.4 38.1 27.0 28.4 33.7 20.3 21.3Talwarkars (TALWAL) 166 173 Buy 434 11.5 14.5 19.2 14.4 11.4 8.6 7.8 6.0 4.7 15.5 15.9 18.6 14.4 15.5 17.0United Spirits (MCDOWE) 2,644 3,072 Buy 38,427 -8.0 20.9 25.0 NA 126.6 105.7 42.6 39.5 31.0 9.2 7.9 10.3 -2.1 3.9 4.5

RoCE (%) RoE (%)Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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(|) TP(|) Ratings (| Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EPSU BanksBank of Baroda (BANBAR) 756 720 Buy 32,453 106.0 104.9 119.6 7.1 7.2 6.3 1.2 1.2 1.0 0.9 0.8 0.8 15.1 13.3 13.6Bank of India (BANIND) 233 220 Hold 14,965 46.1 46.6 58.6 5.1 5.0 4.0 0.8 0.8 0.7 0.7 0.6 0.6 12.3 11.7 13.4Dena Bank (DENBAN) 61 47 Sell 3,281 23.2 9.6 15.6 2.6 6.4 3.9 0.5 0.7 0.7 0.8 0.4 0.6 15.8 8.0 11.4Punjab National Bank (PUNBAN) 752 700 Hold 27,217 134.3 107.6 117.6 5.6 7.0 6.4 1.1 1.1 1.0 1.0 0.8 0.7 15.7 11.3 11.3State Bank of India (STABAN) 1,903 1,900 Buy 142,058 206.2 148.7 177.3 9.2 12.8 10.7 1.7 1.6 1.5 1.0 0.6 0.6 15.4 9.6 10.0Syndicate bank (SYNBN) 96 70 Sell 6,018 33.3 27.8 32.5 2.9 3.5 3.0 0.7 0.7 0.7 1.0 0.7 0.7 20.5 15.5 16.1

#N/APrivate BanksAxis Bank (UTIBAN) 1,428 1,450 Hold 67,101 110.7 132.4 149.8 12.9 10.8 9.5 2.1 1.8 1.6 1.7 1.7 1.7 18.5 17.3 16.9City Union Bank (CITUNI) 53 56 Buy 2,852 6.0 6.7 7.6 8.8 7.9 6.9 1.8 1.6 1.3 1.6 1.5 1.4 22.3 20.0 19.2Development Credit Bank (DCB) 60 65 Buy 1,503 4.1 6.1 8.1 14.7 9.8 7.4 1.7 1.5 1.2 1.0 1.3 1.4 11.7 15.1 16.9Federal Bank (FEDBAN) 94 88 Hold 8,074 9.8 9.0 11.2 9.6 10.5 8.4 1.4 1.3 1.2 1.3 1.0 1.1 13.9 12.0 14.2HDFC Bank (HDFBAN) 725 750 Hold 174,039 28.3 34.5 41.9 25.7 21.0 17.3 4.8 4.3 3.6 1.8 1.9 2.0 20.3 21.3 22.3Indusind Ban (INDBA) 501 510 Hold 26,317 20.3 25.3 32.0 24.7 19.8 15.7 3.5 3.1 2.7 1.6 1.6 1.7 17.2 16.2 17.8Jammu & Kashmir Bank (JAMKAS) 1,665 1,600 Buy 8,073 217.5 248.7 282.4 7.7 6.7 5.9 1.7 1.4 1.2 1.6 1.6 1.6 23.6 22.6 21.7Kotak Bank (KOTMAH) 755 700 Sell 58,166 18.2 19.6 22.8 41.4 38.6 33.1 6.1 5.3 4.7 1.8 1.7 1.7 15.6 14.5 14.5South Indian Bank (SOUIN0) 23 22 Hold 3,051 3.8 3.9 4.7 6.0 5.8 4.8 1.2 0.1 0.1 1.1 1.0 1.0 20.5 17.2 17.9Yes Bank (YESBAN) 423 375 Hold 15,260 36.3 42.6 52.7 11.7 9.9 8.0 2.6 2.2 1.8 1.5 1.4 1.5 24.8 23.6 23.8

#N/ANBFCsHDFC (HDFC) 895 850 Hold 139,683 31.4 34.4 39.5 28.5 26.0 22.7 5.7 5.2 4.7 2.7 2.5 2.5 22.0 20.3 21.3IDFC (IDFC) 125 150 Buy 18,946 12.1 13.4 13.4 10.3 9.3 9.4 1.4 1.3 1.2 2.8 2.8 2.5 14.1 14.0 12.5LIC HF (LICHF) 243 220 Hold 12,263 20.3 25.6 29.0 12.0 9.5 8.4 1.9 1.7 1.5 1.4 1.5 1.4 16.3 17.7 17.6Reliance Capital Ltd (RELCAP) 344 375 Hold 8,440 33.0 27.4 30.1 10.4 12.6 11.4 0.9 0.8 0.8 2.1 1.5 1.5 6.9 5.5 5.8

P/BV (x) RoNA (%)

PBV (x)

RoE (%)EPS (|) P/E (x)

SBI and Kotak Bank Standalone EPS CMP as on April 04, 2014


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Pankaj Pandey Head – Research [email protected] ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

Disclaimer The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. This report is prepared as a compilation of the historical research reports last released by ICICI Securities Ltd. on the above mentioned scrips and is not prepared based on latest company data available on the date of release of this tracker. ICICI Securities has been assigned an investment banking mandate from Group Company’s of Tata Steel Ltd. This report is prepared on the basis of publicly available information.

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