Upload
narnolia-securities-limited
View
438
Download
2
Embed Size (px)
DESCRIPTION
Narnolia Securities Limited are positive to buy stock of Tata Steel Ltd, V-Guard Industries Ltd and Infosys with target prize Rs.401, Rs.525, Rs 3760 respectively. Also Book profit on Axis bank Stock
Citation preview
"BOOK PROFIT" 14th Mar 2014
Recent rally in Axis Bank is fundamentally not justified but is the result of sentiment boost up lead by Modi effect. Opinion poll suggests BJP led
NDA would come to power after the general election. NDA prime ministerial candidate Narendra Modi is perceived by foreign investor as a
decisive and development making leader. Market participates have hope for revival in economy and business growth opportunity to start again.
This would be result of diminishing NPA buffer and profitability boost up. We advice our clients to book part profit.
....................................................................................... ( Page : 2- 4)
"BUY" 14th Mar 2014
HCLTECH :"Retain confidence" "BUY" 12th Mar 2014
On performance front, it continues to be bullish on the rebid market and bullish on short-term to medium term, momentum on deals pipeline
also looking robust. Considering the increasing discretionary spends across the geographies like US and Europe, we expect healthy earnings
performance ahead. ...................................................................... ( Page : 16- 17 )
On fundamental wise, we are not very impressed with bank but in recent market rally, PSB as well as private banks participated more than any
sector likely due to outcome of exit poll for the coming election. We believe bank would rally more because of trading at lower side despite of
index is running at all time high. But with this fundamental Bank of Baroda would trade in range of Rs.635 to Rs.700 depending upon sentiment
as per our view. .................................................................... ( Page : 18-20)
TATA STEEL Ltd :
At current market capitalization of Rs. 23444 Crores, the stock is trading at a forward P/B of just 0.9. Tata Steel is a blue chip stock and is
available at a very cheap valuation. But if we look at its historical stock performance, in the past three years it had continued to trade between
0.6 to 1.9 P/B range.With the European crisis behind us, US economy getting stronger and better outlook for Indian economy on the expectation
of stable government at the Center, We feel Tata Steel share price may have some more price appreciation left given the improvement in
financial performance and Outlook. We recommend Buy on the stock at a medium term target price of Rs.401.
............................................................................ ( Page : 10-12)
Addressing an Investor Con Call, Infosys management has expressed its cautious view on earnings outlook as well as clients spending for near
term. They indicated that FY14E would be a year of lower earnings than NASSCOM guidance followed by FY13 and FY12. The company’s knee
jerk has not associated with single factor; these are partly company specific and partly external factors.
.......................................................................................................... ( Page : 5 - 6)
BANKBARODA "BUY" 11th Mar 2014
Shakti Pumps (India) Ltd : "Turnarround Counter" "BUY" 13th Mar 2014
The company was the first to get 5 star rating for energy efficiency for its products from BEE. In addition to submersible pumps, company also
producing Vertical Multistage Centrifugal pumps, Pressure booster pumps, Open well pumps, End suction pumps etc. Recently company
introduced pumps working with solar power. In next three years company incline to achieve sale revenue of Rs. 600 crore with the net margin of
9-10%. Company is planning to increase the Branch Network to 30 and Dealer network to 3 fold in coming few year. Further, Company have
plans to register our presence in all BRICS, G20 and European Union and in other growing countries in coming years. On valuation front shakti
pump is available at a single digit PE and EV/EBIDTA of 5.6x/4.1x and 4.7x/3.8x of its FY14E/15E estimates. In a volatile market, a company
available at single digit valuations certainly looks up for grabs .................................................................... ( Page : 13-15)
IEA-Equity
Strategy
14th Mar, 2014
Edition : 225
V-Guard Industries Ltd: "Colling Gun……..." "BUY" 14th Mar 2014
On recent interview management expect a sales growth of around 10% in 4QFY14 on back of strong sales growth of 12-12.5% in January and
February month of 2014. Last financial year for Q4 company had very low margins because of two reasons, higher ad spend and one-off items.
As Vguard product portfolio consist of 65-70% summer facing in nature and we believe that the strong summer expectation in 2014 and low
base of FY14 would lead a revenue growth of at least 18% in FY14E. ....................................................................... ( Page : 7-9)
Infosys: "Recovery delayed, but not denied" "BUY" 14th Mar 2014
AXIS BANK :
Narnolia Securities Ltd,
India Equity AnalyticsDaily Fundamental Report on Indian Equities
AXIS BANK
1385
1340
1220
-3
10
1M 1yr YTD
Absolute 25.2 -1.9 -1.9
Rel.to Nifty 17.9 -11.1 -11.1
Promoters 33.9 33.9 33.9
FII 43.2 43.4 40.7
DII 9.7 4.9 8.8
Others 13.2 17.8 16.6
Financials Rs, Cr
2011 2012 2013 2014E 2015E
NII 6566 8026 9666 12224 14775
Total Income 11238 13513 16217 19146 21697
PPP 6377 7413 9303 11206 12367
Net Profit 3340 4224 5179 5826 6934
EPS 81.4 102.2 110.7 124.2 148.2
2
Nifty 6493
Mkt Capital (Rs Cr)
(Source: Company/Eastwind)
Stock Performance
Average Daily Volume
Target Price
Previous Target Price
Upside
Change from Previous
Axis Bank Vs Nifty
Share Holding Pattern-%
26.18 cr
532215
NSE Symbol
Axis bank’s low cost deposits CASA has grown faster than peers like ICICI bank
and is stable at 43% at the end of 3QFY14. Bank’s management expects it to reach
at 46% in FY15E which would help to keep cost of deposits under control and hence
margin expansion. In loan growth parameter, Axis bank expects loan growth higher
than industry growth by 2%. Incremental loan growth would come from SME and
retail sector while corporate loan book is expected to remain sluggish. Bank’s capital
adequacy ratio is close to 17% in which tier -1 capital of 12.5% much healthier than
peers indicating no need to raise money for long tenure in near term. ROA at pre
provisioning profit is at 3% indicating strong capability to delivered profit once asset
quality issue resolve.
Company Updated BOOK PART
PROFITCMP
Stress loan (GNPA+ Restructure asset) is remained at 3.7% of advances but it might
go up as bank has significant exposure in power (5.54%) and Infrastructure (7.33%)
where slippage risk is relatively high in present economy scenario. Provision
coverage ratio reported by bank is 78% with technical write off which would provides
some cushion on earnings. Axis bank still have 46% of loan exposure in large
corporate where profitability uncertain due to ongoing recession. Therefore on asset
quality front, bank would still have to face tough time as per our view.
We believe market sentiment in recent days are boosted up on the hope that BJP
led NDA would come to power after the general election and revive economy. The
domestic equity market is supported by opinion poll result which suggests BJP led
NDA coming to power after the forthcoming election. Over the last few months, the
estimated numbers of seat, the NDA may win has increased from 165-175 to 220-
230 seats. The prime ministerial candidate of NPA Narendra Modi is known for his
development in Gujarat. Domestic as well as foreign investors are in hope that Indian
economy would come at track and business opportunity would start again. Banking
stocks are rallied more than other sectors in hoping of reducing fresh NPA creation.
64823
In last one month, Axis Bank has outperformed Bank Nifty and CNX Nifty by
6% and 18% respectively and is now trading at more than 1.7 times of FY14E
book value which is above of our upper side of valuation band. We value bank
in the range of 1.5 to 1.7 times of book lower than its peers group largely due
to some exposure in stress sector specially in infra and power companies
where slippage risk are relatively high. We value bank in the range of Rs.1220
to Rs.1340 per share that implying book value multiple of 1.5 to 1.7 based on
current fundamental and return ratios. The rise of stock price is supported by
opinion poll result which suggests BJP led NDA would come in power. NDA
prime ministry candidate Narendra Modi is perceived by foreign investor as a
decisive and development making leader and would rescue economy.
Domestic equity market boost-up by economy revival sentiment
Key positive trigger
Key negative trigger
AXISBANK
Market Data
BSE Code
"BOOK PART PROFIT "
14th March, 2014
Narnolia Securities Ltd,
3
Quarterly Result
AXIS BANK
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation
Interest/discount on advances / bills 5557 5394 4907 13.3 3.0 5748 3.4
Income on investments 2110 2143 2014 4.8 -1.5 2235 5.9
Interest on balances with Reserve Bank of India 49 35 25 97.7 39.4 35 -29.2
Others 73 37 19 277.1 95.6 38 -47.4
Total Interest Income 7789 7609 6965 11.8 2.4 8056 3.4
Others Income 1644 1766 1615 1.8 -6.9 1774 7.9
Total Income 4628 4703 4110 12.6 -1.6 4780 3.3
Interest Expended 4805 4672 4470 7.5 2.8 5049 5.1
NII 2984 2937 2495 19.6 1.6 3006 0.8
Other Income 1644 1766 1615 1.8 -6.9 1774 7.9
Total Income 4628 4703 4110 12.6 -1.6 4780 3.3
Employee 655 644 615 6.5 1.7 0
Other Expenses 1358 1309 1134 19.8 3.8 0
Operating Expenses 2013 1953 1749 15.1 3.1 2008 -0.3
PPP( Rs Cr) 2615 2750 2362 10.7 -4.9 2772 6.0
Provisions 202 687 387 -47.7 -70.5 752 271.4
PBT 2413 2062 1975 22.2 17.0 2020 -16.3
Tax 808 700 628 28.8 15.5 687 -15.0
Net Profit 1604 1362 1347 19.1 17.7 1333 -16.9
Balance Sheet Date
Net Worth 37649 36224 27027 39.3 3.9 37558 -0.2
Deposits 262398 255365 244501 7.3 2.8 272935 4.0
Loan 211467 201303 179504 17.8 5.0 214892 1.6
Asset qualtiy( Rs Cr)
GNPA 3008 2734 2275 32.2 10.0 -
NPA 1003 838 679 47.8 19.7 -
%GNPA 1.4 1.4 1.3 -
%NPA 0.5 0.4 0.4 -
4
AXIS BANK
FINANCIALS & ASSUPTION
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Income Statement 2011 2012 2013 2014E 2015EInterest Income 15155 21995 27183 31198 38490
Interest Expense 8589 13969 17516 18974 23716
NII 6566 8026 9666 12224 14775
Change (%) 31.2 22.2 20.4 26.5 20.9
Non Interest Income 4671 5487 6551 6922 6922
Total Income 11238 13513 16217 19146 21697
Change (%) 25.3 20.2 20.0 18.1 13.3
Operating Expenses 4860 6100 6914 7940 9330
Pre Provision Profits 6377 7413 9303 11206 12367
Change (%) 22.4 16.2 25.5 20.5 10.4
Provisions 3033 3189 4124 2402 2461
PBT 3345 4224 5179 8804 9906
PAT 3340 4224 5179 5826 6934
Change (%) 34.8 26.5 22.6 12.5 19.0
Balance SheetDeposits( Rs Cr) 189166 219988 252614 290506 334081
Change (%) 34 16 15 15 15
of which CASA Dep 77758 91412 112100 124917 143655
Change (%) 18 18 23 11 15
Borrowings( Rs Cr) 26268 34072 43951 51266 58956
Investments( Rs Cr) 71788 92921 113738 129873 149354
Loans( Rs Cr) 142408 169760 196966 228481 265037
Change (%) 36 19 16 16 16
Valuation
Book Value 460 549 708 813 942
CMP 1404 1146 1304 1174 1174
P/BV 3.1 2.1 1.8 1.4 1.2
Infosys
Reasons behind the weak outlooks:
1M 1yr YTD
Absolute 4.5 30.4 53.1
Rel. to Nifty 0.8 21.6 49.4
Current 2QFY14 1QFY14
Promoters 15.94 15.94 16.04
FII 40.65 39.93 39.55
DII 15.35 16.16 18.28
Others 28.06 27.97 26.13
Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%
Revenue 13026 12965 0.47 10424 25.0
EBITDA 3258.9 2836.9 14.88 2677 21.7
PAT 2874.9 2406.9 19.44 2369 21.4
EBITDA Margin 25.0% 21.9% 310bps 25.7% (70bps)
PAT Margin 22.1% 18.6% 350bps 22.7% (60bps)
5
Key facts from Investors Con Call
Previous Target Price 3910
Upside 12%
Change from Previous -4%
Market Data
Average Daily Volume
"Recovery delayed, but not denied"
CMP 3358
Target Price 3760
Company update BUY A gloomy outlook by Infosys; however, the best is yet to come.
Addressing an Investor Con Call, Infosys management has expressed its cautious view on
earnings outlook as well as clients spending for near term. They indicated that FY14E
would be a year of lower earnings than NASSCOM guidance followed by FY13 and FY12.
The company’s knee jerk has not associated with single factor; these are partly company
specific and partly external factors. We expect, this adverse scenario would impact its
earnings growth for next couple of quarters.
BSE Code 500209
NSE Symbol INFY
Share Holding Pattern-%
52wk Range H/L 3847/2190
Mkt Capital (Rs Crores)
Nifty 6493
1 year forward P/E
Rs, Crore
Please refer to the Disclaimers at the end of this Report.
Stock Performance
192799
View and Valuation: Infosys seems to be on its way to rediscovering its past mojo with
revenue momentum kicking, and the NRN invisible hand in play. Further announcement of
strategic acquisitions, better utilization of cash balances, better deal win, consistent client
traction and revenue momentum would help the company to bridge the gap with rivals
such as TCS. At a CMP of Rs 3358, it trades at 16x FY15E earnings. We retain our “BUY”
view on the stock with a target price of target price of Rs 3760 (revised from 3910).
Impact on Estimates: We expect that the recent developments of Infosys could adversely
impact our sales guidance by 2-3% and earnings growth guidance by 3-4% for FY15E. We
downgrade our revenue growth guidance from 16.5% to 13.7%.
(3) Challenges with skill mis-matches: Infosys CEO anticipated order cancellation from
some of its clients because of its skill mis-match issue. Infosys has also seen some
challenges with skill mis-matches between client’s needs and what company could have
provided; this has led to slowdown in ramp-ups.
■ The company might only be able to meet the lower end of its annual revenue growth
guidance of 11.5-12% for FY14E, and they are expecting weakness in client spending
throughout the current quarter (4QFY14E).
■ Slowdown in client sentiment in 4QFY14E could be remain continue in the next couple
of the quarters of the next financial year. We expect that 1HFY15E could be a part of
worrisome.
(1) Poor response from Retail and CPG verticals: In the retail segment (contributes 25%
of sales) a sluggish sales over the last 2 months, severe winter, and aggressive discounts
by retailers have led to lesser profitability. In addition, this has led to capping of additional
spending in CY14. Some retail clients have specific issues leading to categorization of
spends. We expect this is not specific for Infosys, it could be viral for the Industry growth.
(2) Portfolio related concern in Manufacturing: Recently, Manufacturing segment
(contributes 22% of sales) has adversely impacted by the reduced PC sales and capex
spending in networking and this will have an impact on revenue growth in this segment.
Revenue contribution from manufacturing segments stands larger than other peers.
1240448
"BUY"14th March' 14
Narnolia Securities Ltd,
6
Please refer to the Disclaimers at the end of this Report.
We believe that strong demand environment across the industry would offer Infosys
breathing space to tide over reorganization-related challenges. Its strategies on sales
effectiveness and cost optimization initiative could turn the growth story as before.
Now, we are waiting for next earning outlook and guidance by management for FY15E.
Financials
(Source: Company/Eastwind)
Why the best is yet to come?
Recent weak guidance given by Infosys management is not an episode of close out. The
company is working on various strategies to rediscovering its past sparkle days with
revenue momentum kicking.
Already, company has initiated to work closely with clients and focused on building
relationship for deal intake. To maintain margin stability and increase productivity,
company is working efficiently on cost optimization initiative. However, the management
indicated that early signs of sales effectiveness initiative would start showing from
1HFY15E.
Infosys.
Narnolia Securities Ltd,
Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E
Sales, INR 22742 27501 33734 40352 50217.7 57222.3
Employee Cost 12085 14856 18340 22565 28373.0 32330.6
Other expenses 2792 3677 4671 6254 8034.8 9441.7
Total Expenses 14877 18533 23011 28819 36407.8 41772.3
EBITDA 7865 8968 10723 11533 13809.9 15450.0
Depreciation 905 854 928 1099 1367.7 1558.5
Other Income 982 1211 1904 2365 2566.1 2861.1
EBIT 7942 9325 11699 12799 15008.3 16752.7
Interest Cost 0 0 0 0 0.0 0.0
PBT 7942 9325 11699 12799 15008.3 16752.7
Tax 1681 2490 3367 3370 4202.3 4690.7
PAT 6261 6835 8332 9429 10806.0 12061.9
Growth-%
Sales 4.8% 20.9% 22.7% 19.6% 24.4% 13.9%
EBITDA 9.3% 14.0% 19.6% 7.6% 19.7% 11.9%
PAT 4.6% 9.2% 21.9% 13.2% 14.6% 11.6%
Margin -%
EBITDA 34.6% 32.6% 31.8% 28.6% 27.5% 27.0%
EBIT 34.9% 33.9% 34.7% 31.7% 29.9% 29.3%
PAT 27.5% 24.9% 24.7% 23.4% 21.5% 21.1%
Expenses on Sales-%
Employee Cost 53.1% 54.0% 54.4% 55.9% 56.5% 56.5%
Other expenses 12.3% 13.4% 13.8% 15.5% 16.0% 16.5%
Tax rate 21.2% 26.7% 28.8% 26.3% 28.0% 28.0%
Valuation
CMP 2615.1 2765.1 2865.0 2400.0 3358.0 3358.0
No of Share 57.4 57.4 57.4 57.4 57.4 57.4
NW 23049.0 25976.0 31332.0 37994.0 45642.7 54345.7
EPS 109.1 119.0 145.1 164.2 188.2 210.1
BVPS 401.7 452.4 545.6 661.7 794.9 946.5
RoE-% 27.2% 26.3% 26.6% 24.8% 23.7% 22.2%
Dividen Payout ratio 25.1% 45.9% 24.0% 45.1% 22.9% 20.6%
P/BV 6.5 6.1 5.3 3.6 4.2 3.5
P/E 24.0 23.2 19.7 14.6 17.8 16.0
V- V-Guard Industries Ltd.
Key Points :CMP 453
Target Price 525
Previous
Target Price
475
Upside 14%
10%
BSE Code 532953
NSE Symbol
1,349
59,460
Nifty 6,493
1M 1yr YTD
Absolute (4.5) (9.0) 5.0
Rel. to Nifty (5.6) (13.6) (6.7)
3QFY14 2QFY14 1QFY14
Promoters 65.5 65.5 65.5
FII 18.5 17.4 14.5
DII 2.2 2.5 3.5
Others 13.8 14.5 16.4
About El Nino
7
• In its update on Thursday, the Australian Bureau of Meteorology said factors that lead to an El
Nino were now increasingly visible. "The tropical Pacific Ocean subsurface has warmed
substantially over the past few weeks
• Indian Met officials are treating the reports with caution, saying that though chances of an El
Nino developing around mid-2014 are growing, predictions made at this stage suffer from low
accuracy.
• US agency NOAA's Climate Prediction Center, which updated its forecast on Wednesday, said
temperature anomalies associated with El Nino had strongly increased since the end of January.
Further, NOAA said there was a 50% chance of El Nino developing during the summer or autumn
this year.
(Source: Times of India/ Eastwind Research)
El Nino — 'the boy' in Spanish
— is an unusual warming of
sea surface waters in eastern
and central equatorial Pacific
associated with changes in
wind patterns that impact
weather in many parts of the
world. It generally has an
adverse effect on the Indian
monsoon.
"Colling Gun……..."
Buy
• On recent interview management expect a sales growth of around 10% in 4QFY14 on back of
strong sales growth of 12-12.5% in January and February month of 2014.
• Last financial year for Q4 company had very low margins because of two reasons, higher ad
spend and one-off items. From that level, we expect there would been improvement this
quarter and margin would be somewhere around 8.51%.
• Company expect the ad spends in the current quarter are likely to be Rs. 11-12 crore (2.85%
of expected revenue in 4QFY14E), compared to 14 crore (3.7% of 4QFY13 revenue) which
should in our view aid in the margin expansion in current quarter.
• The El Niño visibility in 2014 would be the another factor for the revenue growth of
companies like Vgaurd. As Vguard product portfolio consist of 65-70% summer facing in nature
and we believe that the strong summer expectation in 2014 and low base of FY14 would lead a
revenue growth of at least 18% in FY14E.
Company update
Mkt Capital (Rs Crores)
52wk Range H/L 390/570
Market Data
Change from Previous
1 yr Forward P/B
V-GUARD
Please refer to the Disclaimers at the end of this Report.
Average Daily Volume
Stock Performance-%
Share Holding Pattern-%
Forecast updates strengthen El Nino fears
"Buy"4th Mar' 14
Narnolia Securities Ltd,
8
EBITDA % and PAT % Q-o-Q
• We expect margin to expand in 4QFY14E on back of lowered ad spends and non hoping of one-
off items which hit the p/l in past year of same quarter. However we restrict our EBITDA
expectation for FY14E to 8.9% against management guidance of 9-9.5% due to significant
reduction in copper prices both in dollar terms as well as in rupee terms as company value its
inventory on mark-to-market basis but apart from that there are no other issues we could see.
• The El Niño visibility in 2014 would be the another factor for the revenue growth of companies
like Vgaurd. As Vguard product portfolio consist of 65-70% summer facing in nature and we
believe that the strong summer expectation in 2014 and low base of FY14 would lead a revenue
growth of at least 18% in FY14E.
• At the current CMP of Rs. 452, the stock is trading at a PE of 17.0x and 13.4x of FY14E and
FY15E. The company can post RoE of 24.0% and 24.1% & EPS of Rs. 26.4 and Rs. 33.6 FY14E and
FY15E. We believe that from current level the growth would pick pace expected acceleration of
growth momentum, given the strong outlook of summer going forward. We revised our rating to
“Buy” from “Hold” with a revised price target of Rs. 525.
Revenue Q-o-Q
(Source: Company/ Eastwind Research)
Business segments, market size and existing competition in segment
(Source: Company/ Eastwind Research)
V-Guard Industries Ltd.
Strong Balance Sheet
•Total Debt has been reduced significantly as on 3Q FY14 to Rs. 117.7 crore, compared to Rs. 157
crore as on 3Q FY13. Working capital loan reduced to Rs. 77.1 vrore from 134.0 crore and whereas
term loan icreased to Rs. 40.6 crore from 22.9 crore.
• Working capital cycle on a TTM basis improves by 9 days to 76 days. Mainly Led by 15 days
reduction in debtors. Management has also guided for improvement in net working capital cycle
by 5- 10 days every year going forward. This will further improve its ROCE and ROE going forward.
• Strong cash generation in 9M. FY14 Cash from operations at Rs. 90 crore in 9M FY14 as
compared to Rs. 14.5 crore for full year FY13
Please refer to the Disclaimers at the end of this Report.
Outlook / Valuation
(Source: Company/ Eastwind Research)
Narnolia Securities Ltd,
Industry Size
(crore)
V-Guard
(Share FY13)
Production
ModelKey Players
Stabi l i sers 2100 201 100% Outsourced Bluebird, Capri , Logicstat, Premium, everest
PVC Cables 7000 289 100% In-House Havel ls , Finolex
LT Power Cables 6000 64 100% In-House Havel ls , Finolex
Motor Pumps 2000 152 90% Outsourced Crompton Greaves , Ki rloskar, CRI, Texmo
Water Heaters 800 72 90% Outsourced A.O.Smith,Racold,Baja j,Venus,Crompton
Fans 5000 57 90% Outsourced Crompton,Baja j Electrica ls ,Havel ls , Orient
UPS 3500 42 100% Outsourced Numeric,APC,Emerson
Digi ta l UPS 5500 73 100% Outsourced Microtek, Luminous, Su-Kam
Solar Water Heater 300 26 100% In-House Tata BP-Solar
9
Please refer to the Disclaimers at the end of this Report.
Key financials
V-Guard Industries Ltd.
(Source: Company/ Eastwind Research)
Narnolia Securities Ltd,
PARTICULAR 2010A 2011A 2012A 2013A 2014E 2015E
Performance
Revenue 454 727 994 1360 1523 1752Other Income 1 2 2 4 5 6Total Income 456 728 996 1364 1528 1758EBITDA 50 73 94 110 136 158EBIT 43 65 84 99 119 141DEPRICIATION 7 8 10 11 12 15INTREST COST 5 11 17 20 21 15PBT 40 55 69 82 102 132TAX 14 16 18 19 27 33Extra Oridiniary Items NA NA NA NA NA NAReported PAT 25 39 51 63 79 100Dividend (INR) 10 12 12 12 12 12DPS 3.5 4.1 4.1 4.1 4.1 4.0EPS 8.5 13.1 17.0 21.1 26.4 33.6
Yeild %
EBITDA % 11.1% 10.1% 9.4% 8.1% 8.9% 9.0%NPM % 5.6% 5.4% 5.1% 4.6% 5.2% 5.7%Earning Yeild % 9.6% 7.8% 9.2% 4.8% 5.8% 7.4%Dividend Yeild % 4.0% 2.4% 2.2% 0.9% 0.9% 0.9%ROE % 18.0% 22.7% 24.1% 24.1% 24.0% 24.1%ROCE% 13.8% 16.2% 21.2% 19.4% 22.1% 21.7%
Position
Net Worth 141 172 211 261 328 416Total Debt 81 139 109 165 125 115Capital Employed 222 311 320 427 453 531No of Share (Adj) 3 3 3 3 3 3CMP 89 168 186 435 452 452
Valuation
Book Value 47.4 57.6 70.6 87.6 109.9 139.5P/B 1.9 2.9 2.6 5.0 4.1 3.2Int/Coverage 8.4 5.7 4.9 4.9 5.6 9.4P/E 10.4 12.9 10.9 20.7 17.1 13.5
TATA STEEL Ltd.
336
401
440
19%
-9%
500470
32710
22897
6493
1M 1yr YTD
Absolute -9.3 -4.5 -3.0
Rel. to Nifty -16.4 -14.7 -14.2
3QFY14 2QFY14 1QFY14 Critical Debt LevelPromoters 31.4 31.4 31.4
FII 16.1 13.6 13.2
DII 25.4 26.1 26.3
Others 27.2 29.0 29.2
Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14
Net Revenue 36736 14.4 0.2 32107 36645
Depriciation 1522 4.0 5.4 1463 1444
Interest Cost 1108 7.3 3.9 1032 1067
EBIDTA% 10.9 290bps 80bps 7.0 10.1
OPM% 6.8 430bps 70bps 2.4 6.1
NPM% 1.4 370bps (110bps) -2.3 2.5(In Crs)
10
Change from Previous
Tata Steel is a blue chip stock and is available at a very cheap valuation. With the
European crisis behind us, US economy getting stronger and better outlook for Indian
economy on the expectation of stable government at the Center, We feel Tata Steel may
have price appreciation. valuing the financial performance We recommend Buy on the
stock at a medium term target price of Rs.401.
The consolidated EBITDA of Tata Steel came in at Rs. 4006.5 crore (EBITDA margin of
10.9%) , primarily on the back of operational efficiencies realized at its European division
while the ensuing consolidated PAT came in at Rs. 503.2 crore. The company incurred
capex to the tune of Rs.3900 crore in Q3FY14 and Rs.12300 crore in 9MFY14 wherein
majority of capex has been incurred for Kalinganagar project.
Market Data
Tata Steel reported a good set of Q3FY14 numbers, and positively surprised by the
EBITDA/tonne of Tata Steel Europe (TSE). The company reported a consolidated net
income from operations of Rs. 36735.8 crore for the quarter, higher by 0.2% QoQ and
14.4% YoY.In Q3FY14, Tata Steel India’s Steel deliveries stood at 2.1 MT while TSE
deliveries stood at 3.2 MT and South East Asia at 1.09MT. In Q3FY14, TSI reported
EBITDA of Rs.2936 crore while TSE reported an EBITDA of Rs.860 crore. On a consolidated
basis, consolidated steel sales stood at 6.4 MT. EBITDA/tonne of Indian operations came
in at Rs. 14183/tonne while that of European operations came in at US$ 43/tonne
Mkt Capital (Rs Crores)
Result Update BUYCMP
Target Price
Previous Target Price
Upside
Source - Comapany/EastWind Research
Please refer to the Disclaimers at the end of this Report.
Odisha Project could provide further upside in long-term: The Company aims to make
value added steel products at the new facility in Odisha (3mtpa) where the blended
realizations could be potentially higher than existing products by 2015. We believe timely
clearance for expansion of iron ore mine is critical for the plant. The company's Odisha
plant is highly automated and will require fewer employees/ton compared to its
Jamshedpur facility.
Share Holding Pattern-%
NSE Symbol TATASTEEL
On the back of a consistent operational improvement at the company’s European
operations We are positive on the stock in long run .However, on the back of ongoing
capacity expansion, the gross debt is expected to increase from 66074 crore (FY13) to
76919 crore (FY14E) and 77543 crore (FY15E).
In our view, unlike Karnataka and Goa, Odisha is very critical for the Indian steel industry.
We estimate Odisha iron ore production in FY13 stood at 62MT (accounting for ~45% of
India’s production).
1 yr Forward P/B
Average Daily Volume (Nos.)
Stock Performance-%
BSE Code
52wk Range H/L 435/195
Nifty
"BUY"14th March' 14
Narnolia Securities Ltd,
Business Outlook
TATA Steel India
Rupee depreciation is helping to restore balance in the market
Tata Steel Europe
Recommendation
11
Europe Turnover and Realization
At current market capitalization of Rs. 23444 Crores, the stock is trading at a forward P/B
of just 0.9. Tata Steel is a blue chip stock and is available at a very cheap valuation. But if
we look at its historical stock performance, in the past three years it had continued to
trade between 0.6 to 1.9 P/B range. After bottoming out in August 2013 at a stock price of
just under Rs. 200, Tata Steel stock have more than doubled in the past few months. Since
January 2014, the stock had corrected slightly but still it is available at a low P/B (very
much closer to the lower end of its P/B range). With the European crisis behind us, US
economy getting stronger and better outlook for Indian economy on the expectation of
stable government at the Center, We feel Tata Steel share price may have some more
price appreciation left given the improvement in financial performance and Outlook. We
recommend Buy on the stock at a medium term target price of Rs.401.
The political uncertainty still continues in Thailand with no clear solution at sight.
However, the business is focusing on customer relationships and service levels to drive
performance.
Europian Steel Deliveries
Southeast Asia Steel Deliveries
The ministry of coal deallocated two of TATA coal blocks at pachmo and Kotre
Basantpur. Tata steel appealed in the high court for this concern and waiting for the
hearing of high courts hearing on 26th march.
Sentiment has improved; though sectors like construction and auto continue to be
under pressure.
Liquid steel production improved further 1% QoQ to 3.91m tons. Sales volumes
however declined 8% QoQ (+5.6% YoY) to 3.19m tons due to seasonal factors leading to
increase in inventories by 300kt to 2.6m tons.
Operating leverage helping EBIDTA margin to improve.(EBIDTA /ton increased 72% to
Rs.273.)
EU steel demand expected to show signs of gradual recovery in Q4 (+3.3%) from a low
base and could translate into a recovery in end user sectors in 2014. TSE will ramp up
production from currently operating facilities. TSE expects to liquidate inventories in
4QFY14 leading to sales volumes surpassing production.
Southeast Asia Turnover and Realization
TATA STEEL
Indian Turnover and Realization
South East Asia Operation
Construction sector outlook remains positive in the region, hence showing a positive
signal for steel.
Indian Turnover and Realization
Indian Steel Deliveries
Indian Turnover and Realization
Indian Steel Deliveries
Narnolia Securities Ltd,
Global Up & Downs
12
TATA STEEL
One year Stock Performance
One year LME Steel Price
Financials
China's industrial output rose 8.6% in the first two months of 2014 from a
year earlier, the National Bureau of Statistics said on Thursday, missing
market expectations for a 9.5% rise.
Narnolia Securities Ltd,
V- Shakti Pumps (India) Ltd.
Key Points :
CMP 76
Target Price 105
NA
Upside 38%
0%
BSE Code 531431
NSE Symbol
116
13,645
Nifty 6,518
1M 1yr YTD
Absolute 1.5 44.2 72.4
Rel. to Nifty (6.0) 31.5 57.8
3QFY14 2QFY14 1QFY14
Promoters 45.0 44.9 44.9
FII 0.0 0.0 0.0
DII 9.9 10.5 10.5
Others 45.2 44.7 44.7
13
"Turnarround Counter………..."
Buy
38/88
Company update
SHAKTIPUMP
• The company was the first to get 5 star rating for energy efficiency for its products from BEE.
In addition to submersible pumps, company also producing Vertical Multistage Centrifugal
pumps, Pressure booster pumps, Open well pumps, End suction pumps etc. Recently company
introduced pumps working with solar power.
• In next three years company incline to achieve sale revenue of Rs. 600 crore with the net
margin of 9-10%.
• Company is planning to increase the Branch Network to 30 and Dealer network to 3 fold in
coming few year. Further, Company have plans to register our presence in all BRICS, G20 and
European Union and in other growing countries in coming years.
• On valuation front shakti pump is available at a single digit PE and EV/EBIDTA of 5.6x/4.1x
and 4.7x/3.8x of its FY14E/15E estimates. In a volatile market, a company available at single
digit valuations certainly looks up for grabs.
• Pledging of shares by promoters is the only reason for some concern.But ,since its financial
performance is improving quarter over quarter ,I don’t expect much issues from this
angle.Moreover pledge is not with any NBFC but with one of its bankers - Axis Bank.
52wk Range H/L
Please refer to the Disclaimers at the end of this Report.
Change from Previous
Previous Target Price
1 yr Forward P/B
Share Holding Pattern-%
Stock Performance-%
Market Data
Average Daily Volume
Mkt Capital (Rs Crores)
Company Profile
Shakti is a manufacturer of stainless steel submersible pumps and motors ranging from 0.5 HP to
255 HP used in domestic, industrial, irrigation, and fire-fighting and located at Pithampur
Madhya Pradesh. Company is the first five star rated pump manufacturer in India. In addition to
submersible pumps ,company also producing Vertical Multistage Centrifugal pumps, Pressure
booster pumps, Open well pumps, End suction pumps. The company is mainly focused on the
export market and sup-plies its products to around 50 countries, such as US, UK, Turkey, Spain,
Netherlands, Germany, France, Italy, Australia, Sri Lanka, etc. Nearly 58 per cent of its revenues
are from exports. Of the balance 42 per cent of domestic revenues, 60 per cent come from
supply to farmers, 20 per cent from domestic demand, 12 per cent from government institutions,
and the balance 8 per cent from various industrial sectors.
Industry Structure and Development
The Indian pump industry is estimated to be Rs. 8000 crores in 2012-13. It is likely to grow at 8%
and expected to reach Rs. 18000 crores by 2017-18. The market demand is driven by
infrastructure based spending, urbanisation, growth in manufacturing activity, refurbishment &
upgradation and overall increase in the population, insufficient rains and falling water tables have
led to demand for improvement in hydraulics and pump efficiency. The rising cost of oil has
positively influenced the demand for energy conservative pumps and pumps driven by renewable
energy sources. There will be strong demand for pumps from developing countries like China and
India due to industrialisation and investment in water and power segments. The developed
nations propose to repair and upgrade their old water infrastructure. This will lead to good
replacement demand for pumps in developed countries.
"Buy"13th Mar' 14
Narnolia Securities Ltd,
14
Shakti Pumps (India) Ltd.
Reasons of laggard performance :
At current price of Rs. 75, the stock is trading at P/E of 5.5 x for FY14E and 5.0 x the FY15E.
Escorts could post EPS of Rs. 13.6 for FY14E and Rs. 18.7 for FY15E. Considering management’s
aggressive expansion in production capacity and marketing network, I believe company can
deliver good growth in coming years. Further, we expect the company to benefit immensely from
the subdued steel prices currently. We expect the benefit to flow in for the next coming quarters
as well. We recommend a "Buyrating on stock with price target of Rs. 105
Having said that, there are reasons we believe this scrip may not perform as per the expectations
on the bourses. First and foremost, one should note that Shakti is in a business domain that has
low entry barriers and the products can be easily manufactured. Currently, Shakti manufactures
only steel sub-mersible pumps and though it posi- tions itself as an energy-efficient pump
manufacturer, there are other players too who manufacture such energy-effi-cient pumps.
However, the company is increas-ing its product line by adding boost-er pumps, mono-block, and
open well pumps to its portfolio. “Shakti is installing a new 65,000 unit per annum capacity for
booster pumps at a cost of Rs 35 crore, which is being funded through a combination of debt (Rs
25 crore) and internal accruals (Rs 10 crore). This expansion is expected to come on stream and
start generat-ing revenues in coming periods
Outlook :
It is one of the fastest growing companies from this sector .From Rs.41 Cr sales in 2006 it reached
a top line of Rs.210 Cr in 2013. Its export thrust and improvement in India’s rural economy is
expected to drive further growth .Company is targeting a turnover of Rs.600 Cr in next three years.
Please refer to the Disclaimers at the end of this Report.
Revenue Q-Q (In Crores)
(Source: Eastwind Research)
(Source: Eastwind Research)
Operating Profit Q-Q (In Crores)
To drive its domestic growth, Shakti has already strength-ened its marketing team and domestic
dealer network to 650 from 192 just two years back. Though this renewed focus should help
generate revenues for Shakti, the new product portfolio isn’t a unique one and is already
manufactured across the country. Thus Shakti seems to be a late entrant in these products and
therefore one will have to wait and watch the kind of growth it posts in these segments. Besides,
there is a huge unorganised market on the domestic front which firstly eats into the market share
(according to the management, Shakti’s market share is 3 per cent in the overall pump industry i.e.
includ-ing the unorganised market) and sec-ondly, it reduces the pricing power of the organised
players, thus impacting realisations and margins. However, Most Governments are insisting on the
use of Star-rated pumps wherever it is subsidising their purchase on account of higher energy
efficiency. With labour getting scare and expensive, there is a greater preference among
agriculturist to work with branded models that promise a higher uptime, circumventing the need
to invest in submersible pump extraction, repair or replacement. The result is that the market
share of the country’s unorganised sector has steadily declined from 95% to 80%; the performance
of the organised sector growth over the unorganised provides the industry optimism.
Valuation :
Narnolia Securities Ltd,
15
(Source: Eastwind Research) (Figures in crore)
Please refer to the Disclaimers at the end of this Report.
Shakti Pumps (India) Ltd.
Key financials :
Narnolia Securities Ltd,
PARTICULAR2011A
9M2012A 2013A 2014E 2015E 2016E
Performance
Revenue 135 192 209 270 338 422
Other Income 1 1 7 7 7 7
Total Income 136 193 215 277 344 429
EBITDA 25 31 30 41 51 63
EBIT 22 27 25 34 43 55
DEPRICIATION 3 4 5 7 7 8
INTREST COST 6 9 12 14 14 15
PBT 17 18 20 26 36 47
TAX 3 4 3 6 8 10
Reported PAT 13 14 17 21 28 37
Dividend 2 2 2 2 2 2
EPS 10.8 9.1 11.0 13.6 18.7 24.1
DPS 1.4 1.1 1.2 1.3 1.3 1.3
Yeild %
EBITDA % 18.4% 16.0% 14.4% 15.0% 15.0% 15.0%
NPM % 9.9% 7.2% 7.8% 7.5% 8.3% 8.6%
Earning Yeild % 20.6% 19.5% 25.5% 18.0% 24.6% 31.8%
Dividend Yeild % 2.6% 2.4% 2.7% 1.7% 1.7% 1.7%
ROE % 20.5% 15.9% 15.5% 16.3% 18.5% 19.5%
ROCE% 9.2% 8.2% 8.8% 10.0% 12.2% 13.7%
Position
Net Worth 65 87 109 128 154 189
Total Debt 81 83 82 80 80 80
Capital Employed 147 170 191 208 234 269
No of Share 1 2 2 2 2 2
CMP 52 47 43 76 76 76
Valuation
Book Value 52.6 57.3 71.3 83.7 101.1 123.9
P/B 1.0 0.8 0.6 0.9 0.8 0.6
Int/Coverage 3.6 2.9 2.1 2.4 3.1 3.6
P/E 4.9 5.1 3.9 5.6 4.1 3.1
HCLTECH
1M 1yr YTD
Absolute 2.6 85.5 135
Rel. to Nifty -5 75.9 122.9
Current 1QFY14 4QFY13
Promoters 61.75 61.84 61.92
FII 28.05 26.01 24.45
DII 4.20 5.70 6.49
Others 6 6.45 7.14
2QFY14 1QFY14 (QoQ)-% 1QFY13 (YoY)-%
8184 7961 2.8 6273.8 30.4
2125 2093 1.5 1417 50.0
1495 1416 5.6 965 54.9
26.0% 26.3% (30bps) 22.6% 340bps
18.3% 17.8% 50bps 15.4% 290bps
16
(2) Software-as-a-Service (SaaS): software that is owned, delivered and managed
remotely by one or more providers.
(3) Social Technologies: Technology that facilitates social interactions and is enabled by
a communications capability, such as the Internet or mobile device.
101643 (1) Smart Computing: Consulting Solution for next-generation IT infrastructure to
maximize workforce. The aggregation and management of Cloud services is executed
through HCL's proprietary MyCloud platform.
Mkt Capital (Rs Crores)
Market DataBSE Code 532281
NSE Symbol HCLTECH
Key takeaways from recent Investors Conference in Mumbai:
Trump Card on rebid Market: HCL Tech Management expressed its optimistic tone for
rebid opportunity with a deal of $45bn for negotiation in CY14E. Most of rebid would be
come from Infrastructures and traditional IT segments. Across the tier-1 IT space, HCL
Tech will be most beneficiary because of large exposures in Infrastructures space (36% of
sales).Change from Previous 5.8%
52wk Range H/L 1589/674
5 major technological changes are expected to open up new opportunities for service
providers:
EBITDA Margin
PAT Margin
"Retain confidence"
CMP 1454
Target Price 1650
Company update
Visionary approach to changing market dynamics: Forward looking statement from the
desk of BoD (Given on annual report 12-13) reveals 5 major strategies to compete market
dynamics and company is focused for the same.
Previous Target Price 1560
Upside 13%
Buy
Financials
Stock Performance
1 year forward P/E
Rs, Crore
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
Looking for strategic partnership with CSC: HCLTech is looking an opportunity of strategic
partnership to transform client’s services from legacy to cloud based technologies. As per
IT based Gartner survey, clients are looking to retire, replace, and revise 80-85% of their
applications over the next 2 years. The company expects to acquire and quantify of this
opportunity with CSC (Nasdaq-listed IT services firm Computer Sciences Corporation, CSC).
View and Valuation: HCL tech’s decent level of utilization, focused on cost control and
utilization of new market opportunities through vendor’s consolidation would provide a
new shape to the company in near future. On performance front, it continues to be bullish
on the rebid market and bullish on short-term to medium term, momentum on deals
pipeline also looking robust. Considering the increasing discretionary spends across the
geographies like US and Europe, we expect healthy earnings performance ahead. At a
CMP of Rs 1454, stock trades at 17.4x of FY14E earnings, We retain BUY on the stock and
revised our target price from Rs 1560 to Rs1650.
(4) Mobility: Mobility offering services from mobile application development and
integration to mobile application services, to fully managed mobility including
provisioning, hosting, and end-user support.
(5) Analytics: End-to-end life cycle of services including management and hosting of
customer assets, consolidation and migration services, virtualization and design and
management of green data centers.
Revenue
EBITDA
PAT
Average Daily Volume 1193062
Share Holding Pattern-%
Nifty 6512
"BUY"12th Mar' 14
Narnolia Securities Ltd,
17
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
Financials;
HCLTECH
Healthy deal pipeline:During the quarter, HCL Tech reported an addition of 15 transformational deals in the US
and Europe for the December quarter. These wins have been in the momentum markets
of manufacturing and Financial Services as well as the emerging momentum markets of
life sciences & Healthcare and Public Services. Across the geographies, USA and Europe
remain best to drive deal wins during the quarter because of healthy scenario of demand
environment.
Narnolia Securities Ltd,
Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E
Net Sales-USD 2704.6 3545.3 4151.5 4686.5 5464.6 6484.1
Net Sales 12136.3 15730.3 20830.6 25581.1 32787.8 39229.0
Raw Materials Cost 443.6 522.1 612.0 959.3 983.6 1176.9
Employee Cost 6253.7 8589.6 11104.6 12574.2 16066.0 19418.3
Operation and other expenses 3498.5 4163.2 5418.8 6386.4 7213.3 8826.5
Total Expenses 10195.7 13274.9 17135.3 19919.9 24262.9 29421.7
EBITDA 1940.6 2455.4 3695.2 5661.2 8524.8 9807.2
Depreciation 418.1 459.7 549.2 636.8 742.5 881.0
Other Income 154.1 299.7 206.5 306.6 460.5 590.2
Extra Ordinery Items 0.0 0.0 0.0 44.5 -491.8 78.5
EBIT 1522.5 1995.7 3146.0 5024.4 7782.3 8926.2
Interest Cost 204.1 142.6 142.6 105.6 79.2 59.4
PBT 1472.4 2152.8 3209.8 5269.9 7671.8 9535.5
Tax 213.4 488.5 782.7 1225.3 1841.2 2336.2
PAT 1259.0 1664.3 2427.1 4044.6 5830.5 7199.3
Growth-%
Sales-USD 24.1% 31.1% 17.1% 12.9% 16.6% 18.7%
Sales 18.6% 29.6% 32.4% 22.8% 28.2% 19.6%
EBITDA 5.9% 26.5% 50.5% 53.2% 50.6% 15.0%
PAT -4.6% 32.2% 45.8% 66.6% 44.2% 23.5%
Margin -%
EBITDA 16.0% 15.6% 17.7% 22.1% 26.0% 25.0%
EBIT 12.5% 12.7% 15.1% 19.6% 23.7% 22.8%
PAT 10.4% 10.6% 11.7% 15.8% 17.8% 18.4%
Expenses on Sales-%
Employee Cost 51.5% 54.6% 53.3% 49.2% 49.0% 49.5%
RM Cost 3.7% 3.3% 2.9% 3.8% 3.0% 3.0%
Operation and other expenses 28.8% 26.5% 26.0% 25.0% 22.0% 22.5%
Tax rate 14.5% 22.7% 24.4% 23.3% 24.0% 24.5%
Valuation
CMP 364.9 493.5 490.0 759.5 1454.0 1454.0
No of Share 67.9 68.9 69.3 69.6 69.6 69.6
NW 6288.8 7653.0 9837.9 13164.0 17854.4 23913.5
EPS 18.5 24.2 35.0 58.1 83.8 103.4
BVPS 92.6 111.1 141.9 189.1 256.5 343.5
RoE-% 20.0% 21.7% 24.7% 30.7% 32.7% 30.1%
Dividend Payout ratio 25.0% 31.5% 33.1% 20.0% 19.6% 15.8%
P/BV 3.9 4.4 3.5 4.0 5.7 4.2
P/E 19.7 20.4 14.0 13.1 17.4 14.1
BANKBARODA
651
700
624
8
12
1M 1yr YTD
Absolute 16.6 -8.3 -8.3
Rel.to Nifty 8.7 -21.4 -21.4
Current 4QFY13 3QFY1
3Promoters 55.4 55.4 55.4
FII 15.5 15.5 15.3
DII 19.6 19.6 19.0
Others 9.5 9.5 10.3
Financials Rs, Cr
2011 2012 2013 2014E 2015E
NII 8802 10317 11315 12218 14122
Total Income 11611 13739 14946 16400 18304
PPP 6982 8581 8999 9206 10067
Net Profit 4242 5007 4481 4444 4819
EPS 108.3 121.8 106.4 105.5 114.4
18
Change from Previous
BANKBARODA Vs Nifty
Share Holding Pattern-%
18.25 Cr
Nifty 6537
52wk Range H/L
21627
Provisions were lower by 11.5% YoY on account of reversal of investment
depreciation to the tune of Rs.120 cr offset additional provision towards non-
performing assets. But bank’s stress loan (slippage + Restructure) loans were
Rs.1275 cr which was almost in previous quarter. Lower provisions made 17% up
PBT but at operating profit level, it was down by 2.6% YoY. Tax rate was higher due
to creation of DTL as per advice by RBI.
View & Valuation
On fundamental wise, we are not very impressed with bank but in recent market rally,
PSB as well as private banks participated more than any sector likely due to
outcome of exit poll for the coming election. We believe bank would rally more
because of trading at lower side despite of index is running at all time high. But with
this fundamental Bank of Baroda would trade in range of Rs.625 to Rs.700
depending upon sentiment as per our view.
Mkt Capital (Rs Cr)
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
Stock Performance
CMP
ANNUAL REPORT UPDATE
Target Price
Previous Target Price
Profit inflated due to lower provisions led by reversal of investment
depreciation
Advance growth led by SME and retail
Average Daily Volume
At the current price of Rs.651/share stock is trading at 0.77 times of FY14E
book value which is now premium over its peer group. We value bank at the
range of Rs.634 to Rs.790 implying valuation multiple of 0.75 to 0.9 times of
one year forward book. But upper side of book value multiple would be
possible only if the improvement of asset quality along with improving sign of
fundamentals. But in its quarterly result, bank’s performance was muted all
around except healthy loan and deposits growth. CASA growth was remained
muted in compare to SBI and PNB. So cost of deposits is unlikely to soften in
near term while asset quality was deteriorated higher in percentage as
compare to PNB and SBI. In the following section we will discuss the
fundamental improvement of bank during quarter.
NII growth on the back of loan growth and margin expansion
Result update ADD
Bank’s NII grew by 7.6% YoY largely due to healthy loan growth and sequentially
margin improvement of 5 bps. Margin improve came from domestic push from 2.85%
to 2.95 while international NIM remained stable at 1.18%. Cost of fund declined by
14 bps quarterly due to lower borrowings as a percentage of percentage of NDTL.
Advances grew by 18% YoY largely came from SME and retail sector which grew by
39% and 21% YoY respectively. Bank continued to be cautions while expanding its
exposure towards large corporate owing to economy recession. Deposits grew by
21.5% YoY, added by foreign currency non- resident deposits but CASA franchise
remained flat at 26%. So in CASA front we are not impressed and going forward cost
of fund is unlike to be soften in our view.
Market Data
Upside
773/429
BSE Code 532134
NSE Symbol BANKBARODA
"ADD"11h March. 2014
Narnolia Securities Ltd,
19
BANKBARODA
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result (Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E
Interest/discount on advances / bills 7061 6832 6485 8.9 3.3 7173
Income on investments 2175 2220 1898 14.6 -2.0 2350
Interest on balances with Reserve Bank of India 245 281 403 -39.2 -12.8 397
Others 209 140 58 258.2 50.1 173
Total Interest Income 9691 9473 8845 9.6 2.3 10092
Others Income 932 974 841 10.9 -4.3 1102
Total Income 10623 10447 9686 9.7 1.7 11194
Interest Expended 6634 6579 6004 10.5 0.8 6792
NII 3057 2895 2841 7.6 5.6 3300
Other Income 932 974 841 10.9 -4.3 1102
Total Income 3989 3869 3681 8.4 3.1 4402
Employee 1056 1030 798 32.3 2.5 1189
Other Expenses 736 714 627 17.3 3.1 792
Operating Expenses 1792 1744 1426 25.7 2.7 1981
PPP( Rs Cr) 2197 2125 2256 -2.6 3.4 2421
Provisions 762 861 1029 -26.0 -11.5 897
Exceptional Items 16 16 12 25.0 0.0 0
PBT 1436 1264 1227 17.0 13.6 1524
Tax 372 80 203 83.7 364.7 457
Net Profit 1048 1168 1012 3.6 -10.3 1067
Balance Sheet Date( Rs Cr)
Equity Capital 423 423 412 2.5 0.0
Reserve & Surplus 35232 35127 30966 13.8 0.3
Net Worth 35654 35549 31379 13.6 0.3
Total Deposits 503772 484931 414733 21.5 3.9
Borrowings 29304 28558 27899 5.0 2.6
Other liabilities and provisions 18638 13995 14552 28.1 33.2
Total Liability 587368 563033 488563 20.2 4.3
Cash in hand 16742 15681 17147 -2.4 6.8
Cash and balances with RBI 87599 79980 58295 50.3 9.5
Total Investment 115210 111840 101848 13.1 3.0
Advances 352446 339855 299318 17.7 3.7
Fixed Assets 2562 2498 2399 6.8 2.6
Others Assets 12809 13179 9557 34.0 -2.8
Total Assets 587368 563033 488563 20.2 4.3
Asset Quality
GNPA( Rs Cr) 11926 10888 7321
NPA(Rs Cr) 6624 6316 3363
% GNPA 3.4 3.2 2.4
% NPA 1.9 1.9 1.1
% PCR (without technical writeoff) 44.5 42.0 54.1
20
BANKBARODA
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Income Statement 2011 2012 2013 2014E 2015EInterest Income 21886 29674 35197 39065 45206
Interest Expense 13084 19357 23881 26847 31084
NII 8802 10317 11315 12218 14122
Change (%) 48.2 17.2 9.7 8.0 15.6
Non Interest Income 2809 3422 3631 4182 4182
Total Income 11611 13739 14946 16400 18304
Change (%) 32.8 18.3 8.8 9.7 11.6
Operating Expenses 4630 5159 5947 7194 8237
Pre Provision Profits 6982 8581 8999 9206 10067
Change (%) 41.5 22.9 4.9 2.3 9.4
Provisions 1331 2555 4168 3559 4043
PBT 5650 6026 4831 5647 6024
PAT 4242 5007 4481 4444 4819
Change (%) 38.7 18.0 -10.5 -0.8 8.4
Balance SheetDeposits( Rs Cr) 305439 384871 473883 521272 573399
Change (%) 27 26 23 10 10
of which CASA Dep 87589 103524 119981 135531 149084
Change (%) 23 18 16 13 10
Borrowings( Rs Cr) 22308 23573 26579 33273 36600
Investments( Rs Cr) 71261 83209 121394 122000 134200
Loans( Rs Cr) 228676 287377 328186 367568 404325
Change (%) 31 26 14 12 10
RatioAvg. Yield on loans 8.0 8.7 8.4 8.6 9.3
Avg. Yield on Investments 7.0 7.8 6.4 7.3 8
Avg. Cost of Deposit 4.3 5.1 5.2 5.2 5.4
Avg. Cost of Borrowings 5.5 6.7 5.4 5.5 5.5
Valuation
Book Value 536 668 759 846 929
CMP 963 794 652 513 513
P/BV 1.8 1.2 0.9 0.61 0.6
Narnolia Securities Ltd402, 4th floor 7/ 1, Lords Sinha Road Kolkata 700071, Ph
033-32011233 Toll Free no : 1-800-345-4000
email: [email protected],
website : www.narnolia.com
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing “East wind” & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.