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India Equity Analytics Today: Book Profit on Shree Cement and Axis Bank Stock

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Information about India Equity Analytics Today: Book Profit on Shree Cement and Axis Bank...
Finance

Published on February 25, 2014

Author: narnolialtd

Source: slideshare.net

Description

Narnolia Securities Limited believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.Also Value of Axis bank at Rs.1217/share implying 1.5 times of FY14E’s book value which is quite reasonable as per our view
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IEA-Equity Strategy India Equity Analytics 25th Feb, 2014 Daily Fundamental Report on Indian Equities SHREE CEMENT. "BOOK PROFIT " Edition : 213 25th Feb 2014 The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.so we recommend its a better pic to book profit. ................................................................. ( Page : 2-4) "BOOK PART PROFIT " AXIS BANK : 25th Feb 2014 We advice our investor to book part profit in Axis Bank as bank has achieve our target price level of Rs.1217. We still stick to our valuation on account of bank’s uncomfortable earnings and asset quality stress. Bank’s profitability was up by 19% YoY on the back of right back of investment depreciation provisions. Exposure to risky sector remained high which would keep asset quality under stress. These factors compel us to value bank at 1.5 times of FY14E’s book value......................................................... ( Page : 5-9) Nestle India :"The nest becomes weaker" "Neutral" 24th Feb 2014 For 4QCY13, Nestle Ind reported below numbers than street expectations in all counts, sales grew by 4.7%(YoY) led by 3.7% domestic growth and 20.9% export growth. Its domestic sales contribute 94% and exports 6% of sales. While, PAT marginally declined by 0.7% on YoY basis. At a CMP of Rs 5043, stock trades at 15.9x P/BV of CY14E. We have a “Neutral” view on stock. .................................................................. ( Page : 1012) Vardhman Textiles : "BUY" 24th Feb 2014 Considering the favourable export scenario and completion of capacity expansions, we remain positive on FY14. We, hereby, initiate our coverage with Vardhman Textiles to BUY with a target price of Rs.412 . Currently the stock is trading at 0.8x p/b , we cut our Earning parameter for FY15 and cut p/b to 0.7x for FY15 . Looking at the current earning growth and environment the stock is looking very good but due to lack of trigeers in FY15 we are really conservative for FY15 . ................................................. ( Page : 13-15) DENA BANK : "Neutral" 24th Feb 2014 Bank’s performance was lower than our expectation in all fronts and reported very weak set of numbers. Operating as well as financials metrics were remained muted. Profitability was declined by 67% YoY despite of tax reversal owing to muted growth in NII and higher operating expenses. We are pessimist about the growth parameters. We have neutral view on the stock. .............................................................. ( Page : 16- 20 ) BANKBARODA : "BUY" 21th Feb 2014 Bank of Baroda’s profitability was up by 3.6% YoY due to right back of depreciation provisions. Bank’s operating and financials metrics were remained muted except healthy loan growth. Margin compressed sequentially but management guided domestic NIM of 3% from present of 2.95% which seems achievable if we look at balance sheet structure. We value bank at Rs.634/share which implies 0.75 times of FY14E’s book value. ......................................................................... ( Page : 21- 25) J&K BANK : "BUY" 20th Feb 2014 J&K Bank’s profitability increased by 11% YoY on account of reversal of provisions against NPA and investments, further on account of lower tax rate profits inflated. Operating profit was flat at 1.4% YoY led by moderate NII growth which further led to margin compression. We lower our price target to Rs.1525 from earlier of Rs.1578 which implies 1.3 times of FY14E book and 6 times of price earning. .................................................................................... ( Page : 26- 30) Narnolia Securities Ltd,

SHREE CEMENT. Update Book Profit CMP Target Price Previous Target Price Upside Change from Previous 4772 4791 4791 0% NA Market Data BSE Code NSE Symbol 500387 SHREECEM 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume (Nos.) Nifty 5210/3413 16572 4143 6186 Stock Performance-% 1M 8.2 9.5 Absolute Rel. to Nifty 1yr 9.5 3.8 YTD 8.1 4.0 Share Holding Pattern-% 2QFY14 64.8 8.2 5.9 21.2 Promoters FII DII Others 1QFY14 4QFY13 64.8 64.8 8.2 8.1 5.7 5.9 21.3 21.2 1 yr Forward P/B 6000 PRICE 2x 3x 4x 5000 1.5x 2.5x 3.5x 4.5x 4000 3000 2000 1000 Apr-13 Nov-13 Sep-12 Jul-11 Feb-12 Dec-10 Oct-09 May-10 Mar-09 Jan-08 Aug-08 Jun-07 Apr-06 Nov-06 Sep-05 Jul-04 Feb-05 Dec-03 Oct-02 May-03 Mar-02 0 Source - Comapany/EastWind Research "Book Profit" 25th Feb' 14 Profitability and Earning drag may surprise for the next cosecutive quarters. The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.so we recommend its a better pic to book profit. Volumes grew by18 % but prices came down by 5%. So the EBITDA margin has hit badly:Shree Cement Ltd has reported a 47% fall in its December quarter net profit on lower sales as well as 5% degrowth in realization. PAT impacted due to lower other income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41% YOY). Volumes grew by18 % to3.8mn ton from 3.3mn ton QOQ. Net profit decreased by 47% yoy from Rs.217.44 crore (Rs.62.42 per share) in 2Q13 to Rs.115.49 crore (Rs.33.15 per share) in 2Q14.Total net income from operations stood at Rs.1318.13 crore in 2Q14, a 6% fall yoy from Rs.1401.23 crore in 2Q13.Other income decreased from Rs.30.2 crore in 2Q13 to Rs.9.9 crore in 2Q14.In the mean time company declares a Rs.10 as interim dividend/share. Power Segment: Realization Down By 15% : For power generation the net realization has come down from Rs 383 to Rs 334 compared to last year same quarter and in the first quarter it was still better at Rs 397.So the power realization is down by 13 percent and hence sales also have come down by 35 percent to Rs.290 Cr. At the same time 14% increase in its profitability from power segment to Rs112.56 crore while its cement segment reported 79% fall in its profitability to Rs37.65 crore. MAT Credit support the buttom line : During the Quarter Company got MAT (minimum alternative tax) credit entitlement of Rs9.25 crore and deferred tax of Rs1.79 crore. This reduced total tax payable amount to Rs15.27 crore from Rs26.31 crore. On the expansion front : The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of similar capacity along with 25MW of WHRS (at the same location) is expected by Jun’14.Two grinding units of 2m tons each, at Ras and in Bihar,are being constructed and expected by Jun’14.We expect Shree to be a 21.5m-tpa company by Jun’15.It plans to foray into high demanding eastern.Total capex for these expansion is Rs.3,000 crore which is spread over next 2 years. Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14 Revenue 1318 -7.7 5.6 1428 1248 EBIDTA 271 -24.7 8.8 360 249 Net Profit 115 -46.9 -32.9 217 172 EPS 33 -46.9 -32.9 62 49 EBIDTA% 21 -18.4 3.1 25 20 NPM% 9 -42.5 -36.5 15 14 (In Crs) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 2

SHREE CEMENT. Management Corner : From mid-January there is a big change in demand scenario because of the Indian calendar, the prices have improved, the demand has also improved and they think that January to June some impact of elections will be there pre-election demand and other things. So margins should be better than 21 percent. 1500 60 Revenue 1450 50 Growth 1400 40 1350 Outlook : From the view company Operations in the high utilisation North and Central markets, capacity expansions underway, low gearing and strong RoE are fundamental positives. We believe although, near term challenges in terms of a slowdown in demand for cement would remain, strong balance sheet and better efficiency in terms of cost remains a key positive for this company to overcome challenges.Company Management is bull for the rest two quarters of FY2014 as according to them demand has already buttom out.We are positive on the stock as it always beats its peers group with lower operational cost. The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.so we recommend its a better pic to book profit. we recommend book profit at a 11% high,and stay out from the stock for medium term,till the triggers hit. Company Description : Shree Cement (SCL) is a cement producer operating in the two segments cement and power. As of June 30, 2012, the company had a cement capacity of 13.5 million tonnes per annum (MTPA) and power capacity of 560 MW. The company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It has manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units at Khushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in Uttarakhand. P/L PERFORMANCE FY11 FY12 FY13 FY14E Net Revenue from Operation 3454 5898 5590 5409 Other Income 203 163 188 197 Total Income 3656 6061 5779 5550 Power and fuel 905 1500 1513 1409 Freight and forwarding 602 1006 915 1090 Expenditure 2569 4252 4029 4318 EBITDA 885 1646 1561 1091 Depriciation 676 873 436 562 Interest Cost 98 235 193 138 Net tax expense / (benefit) -99 69 115 54 PAT 365 619 1004 478 ROE% 20.8 23.1 26.1 11.0 Narnolia Securities Ltd, 30 1300 20 1250 10 1200 0 1150 -10 1100 -20 Source - Comapany/EastWind Research EBIDTA 450 400 INTEREST SERVICE COVERAGE RATIO 12 10 350 300 8 250 6 200 150 4 100 2 50 0 0 Source - Comapany/EastWind Research 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 - NPM % OPM % EBITDA % 3

SHREE CEMENT. B/S PERFORMANCE Share capital Reserve & Surplus Total equity Long-term borrowings Short-term borrowings Long-term provisions Trade payables Short-term provisions Total liabilities Intangibles Tangible assets Capital work-in-progress Long-term loans and advances Inventories Trade receivables Cash and bank balances Short-term loans and advances Total Assets RATIOS P/B EPS Debtor to Turnover% Creditors to Turnover% Inventories to Turnover% FY10 FY11 FY12 FY13 35 1798 1833 1789 318 28 171 472 4906 0 752 967 299 358 82 416 415 4906 FY10 4.4 212.3 2.3 4.7 1.0 35 1951 1986 1472 217 16 185 267 4940 0 1167 729 308 404 108 499 429 4940 FY11 3.6 118.6 3.1 5.3 1.2 35 2699 2734 818 143 17 584 178 5973 0 1521 97 205 503 181 459 363 5973 FY12 3.8 177.5 3.1 9.9 0.9 35 3809 3844 443 534 18 81 87 6160 0 1782 133 378 530 315 369 326 6160 FY13 4.2 288.2 5.6 1.4 0.9 Trading At : Source - Comapany/EastWind Research Narnolia Securities Ltd, 4

"BOOK PART PROFIT " AXIS BANK 25th Feb, 2014 Company Updated CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance 1M Absolute -2.2 Rel.to Nifty 0.8 BOOK PART PROFIT 1237 1217 1147 -2 6 532215 AXISBANK 1549/764 55229 3.14 lakh 6186 1yr -17.4 -21.0 YTD -17.4 -21.0 Share Holding Pattern-% Current 4QFY13 3QFY1 3 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 Axis Bank Vs Nifty Axis Bank is now trading at Rs.1237/share which met our target price of Rs.1217. This price implies P/BV multiple of 1.5 times which is quite reasonable as per our view. We advice our investor to book part profit from this stock as we neither see improvement of asset quality nor revival in economy in near term. In 3QFY14’s result, bank’s profitability was up by 19% largely due to reversal of investment depreciation otherwise operating profit was just up by 10.7% YoY. Bank’s exposure to risky sector (Power + Infrastructure) remained high at 12.87% as against 12.64% in previous quarter. However, fresh slippage was marginally softened to Rs.589 cr versus Rs.618 on sequential basis. Impairment of assets (GNPA+ Restructure Assets) remained stable at 3.7% of net advance which was higher among peers. Lower multiple on account of uncomfortable earnings and lower corporate loan demand We have lower valuation multiple of bank in compare to its peers on account of uncomfortable earnings and asset quality stress. Operating performance of bank was remained under pressure as bank’s core operating revenue (NII + Other Income) grew by 12.6 YoY owing to lower fee income led by muted corporate and retail fee income. Corporate loan segment which constituted 46% of total loan grew by 3% YoY while retail segment loan grew by 44% YoY which constituted 33% of total loan. Incremental loan growth came from retail segment implying that bank has to maintain retail growth trajectory for industry average loan growth of 15%. Demand of corporate loan remained weak due to prevailing economy scenario. So loan growth for FY14 is likely to be line with system credit growth due to weakness in corporate loan demand and moderation in retail loan. Asset quality pressure persist; exposure to risky sector remained high Asset quality pressure remained persist during the quarter with GNPA and net NPA increased by 10% and 20% YoY respectively in absolute term. Fresh slippage inch up improved to Rs.589 cr as against Rs.618 cr in previous quarter. In percentage term GNPA and net NPA stood at 1.42% and 0.47% as against 1.36% and 0.42% respectively in previous quarter. Provision coverage ratio without technical write off declined by 270 bps QoQ led by lower provisions made on sequential basis. Impairment of assets (GNPA + Restructure Assets) for the quarter remained stable at 3.7% which was higher among peers. Moreover bank’s exposure to risky sector (Power + Infrastructure) was remained high at 12.87% of net advance where slippage risks are relatively high. Financials NII Total Income PPP Net Profit EPS 2011 6566 11238 6377 3340 81.4 Narnolia Securities Ltd, 2012 8026 13513 7413 4224 102.2 Rs, Cr 2013 2014E 2015E 9666 12224 14775 16217 19146 21697 9303 11206 12367 5179 5826 6934 110.7 124.2 148.2 (Source: Company/Eastwind) 5

AXIS BANK Moderate growth in profit & loss Bank’s profitability was up by 19% due to reversal of investment depreciation. Overall provisions and contingencies were lower by 71% QoQ which led PBT growth of 22% YoY. At operating profit level, bank grew by 10.7% YoY which was lower among peers (HDFC Bank 29 YoY, ICICI bank 28.6%). Bank’s NII grew by 19.6% YoY largely due to margin expansion of 14 bps YoY which was supported by low cost deposits franchise. Core operating revenue (NII+ other income) grew 12.6% owing to muted other income growth of 1.8% YoY. Valuation & View We value bank at Rs.1217/share implying 1.5 times of FY14E’s book value which is quite reasonable as per our view. We have given this multiple on account of uncomfortable earning and asset quality stress. Bank’s profitability was up due to reversal of investment depreciation otherwise growth at operating profit level was remained lower as compare to its peers. Asset quality increased at moderate pace with high exposure in risky sector where fresh slippage risks are remaining high. Valuation Band 1 Yr forward P/BV 1 Yr forward P/E Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 6

AXIS BANK Fundamenatl throught graph NII growth led by healthy CD ratio and margin expansion on YoY basis Lower other income and higher CI ratio led muted PPP growth Profit growth was higher than expectation on the back of lower provisions Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 7

AXIS BANK Quarterly Result Quarterly Result Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax Net Profit 3QFY14 5557 2110 49 73 7789 1644 4628 4805 2984 1644 4628 655 1358 2013 2615 202 2413 808 1604 2QFY14 5394 2143 35 37 7609 1766 4703 4672 2937 1766 4703 644 1309 1953 2750 687 2062 700 1362 Balance Sheet Date Net Worth Deposits Loan 37649 36224 27027 262398 255365 244501 211467 201303 179504 Asset qualtiy( Rs Cr) GNPA NPA %GNPA %NPA 3008 1003 1.4 0.5 2734 838 1.4 0.4 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation 4907 13.3 3.0 5748 3.4 2014 4.8 -1.5 2235 5.9 25 97.7 39.4 35 -29.2 19 277.1 95.6 38 -47.4 6965 11.8 2.4 8056 3.4 1615 1.8 -6.9 1774 7.9 4110 12.6 -1.6 4780 3.3 4470 7.5 2.8 5049 5.1 2495 19.6 1.6 3006 0.8 1615 1.8 -6.9 1774 7.9 4110 12.6 -1.6 4780 3.3 615 6.5 1.7 0 1134 19.8 3.8 0 1749 15.1 3.1 2008 -0.3 2362 10.7 -4.9 2772 6.0 387 -47.7 -70.5 752 271.4 1975 22.2 17.0 2020 -16.3 628 28.8 15.5 687 -15.0 1347 19.1 17.7 1333 -16.9 2275 679 1.3 0.4 39.3 3.9 7.3 2.8 17.8 5.0 32.2 10.0 47.8 19.7 37558 272935 214892 -0.2 4.0 1.6 - Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 8

AXIS BANK FINANCIALS & ASSUPTION Income Statement 2011 2012 2013 2014E 2015E Interest Income Interest Expense NII Change (%) Non Interest Income Total Income Change (%) Operating Expenses Pre Provision Profits Change (%) Provisions PBT PAT Change (%) 15155 8589 6566 31.2 4671 11238 25.3 4860 6377 22.4 3033 3345 3340 34.8 21995 13969 8026 22.2 5487 13513 20.2 6100 7413 16.2 3189 4224 4224 26.5 27183 17516 9666 20.4 6551 16217 20.0 6914 9303 25.5 4124 5179 5179 22.6 31198 18974 12224 26.5 6922 19146 18.1 7940 11206 20.5 2402 8804 5826 12.5 38490 23716 14775 20.9 6922 21697 13.3 9330 12367 10.4 2461 9906 6934 19.0 189166 34 77758 18 26268 71788 142408 36 219988 16 91412 18 34072 92921 169760 19 252614 15 112100 23 43951 113738 196966 16 290506 15 124917 11 51266 129873 228481 16 334081 15 143655 15 58956 149354 265037 16 460 1404 3.1 549 1146 2.1 708 1304 1.8 813 1174 1.4 942 1174 1.2 Balance Sheet Deposits( Rs Cr) Change (%) of which CASA Dep Change (%) Borrowings( Rs Cr) Investments( Rs Cr) Loans( Rs Cr) Change (%) Valuation Book Value CMP P/BV Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 9

Nestle India "NEUTRAL" 24th Feb' 14 "The nest becomes weaker" Result update CMP Target Price Previous Target Price Upside Change from Previous NEUTRAL 5043 - Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty 500790 NESTLEIND 5865/4410 48593 21590 6091 Stock Performance 1M Absolute -3.7 Rel. to Nifty -1.0 1yr 10.7 7.4 YTD 3.4 1.8 Share Holding Pattern-% Current Promoters FII DII Others 1 yr Forward P/B 62.8 13.1 5.9 18.2 3QCY13 2QCY13 62.8 12.6 6.3 18.3 62.8 12.6 6.2 18.5 Weak numbers and showing up margin as well…, For 4QCY13, Nestle Ind reported below numbers than street expectations in all counts, sales grew by 4.7%(YoY) led by 3.7% domestic growth and 20.9% export growth. Its domestic sales contribute 94% and exports 6% of sales. While, PAT marginally declined by 0.7% on YoY basis. The company does not share volume growth numbers, but its statement did mention that sales rose mainly because of higher prices and product mix. For CY13, Company posted 9.2% sales growth, hugely impacted by weak consumer demand and high competitive intensity environment, PAT up by 6%. Management will continue to focus on reinforcing the fundamentals of growth drivers. Further, improve operational efficiencies, and keep rationalizing its SKUs. They are very confident of strategy to deliver long-term sustainable profitable growth, despite the short-term challenges. Margin dip: During the quarter, company has been efficient to maintain its mark of margin above than 20%. However, Margin ramp down by 210bps(YOY) to 21.1% because of inflationary pressure on raw material. There was improvement in raw material cost by 110 bps to 46.1% of adjusted net sales. PAT margin inched down by 70bps(YOY) to 12.7%. For CY13, EBITDA Margin and PAT margin were flat at 22.2% and 13%. Mix impact on RM Cost: Its top 3 inputs by value are milk and milk products, flour, and palm oil, which together account for two-thirds of its material cost. Milk and wheat flour have both seen prices increase, while a weak rupee has affected palm oil prices. However, other inputs such as green coffee and sugar have seen softer price trends. Jerk on Potential Market share: Nestle has been enjoying its leadership position (No.1) in all categories except soups and its positioning in Chocolates, noodles, Coffee has dominantly been unchallenged. Despite all facts, company has been facing many challenges over the past one and half years from Cadbury's and Ferrero Rocher in Chocolate, from HUL and ITC in noodles and from HUL in Coffee (Bru). Nestlé’s more focus on margin stability could sacrifice its volume. Company’s cash cow portfolio baby foods becoming weaker because of low ad spend. Now, Mead Jhonson and Danone are dominating in same segment. View and Valuation: Company’s less aggression on volume growth and the excessive focus on Margin expansion make us cautious on the stock. At same time, company believes on expansion of new plant set up by ignoring the dividend payout to investors. Consistently, its RoE is on downward direction. At a CMP of Rs 5043, stock trades at 15.9x P/BV of CY14E. We have a “Neutral” view on stock. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 4QCY13 2262.97 478.3 287.1 21.1% 12.7% 3QCY13 2360 503.9 289.6 21.4% 12.3% Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. Rs, Cr (QoQ)-% 4QCY12 (YoY)-% -4.1% 2161.1 4.7% -5.1% 504.1 -5.1% -0.9% 289.2 -0.7% (30bps) 23.3% (210bps) 40bps 13.4% (70bps) (Source: Company/Eastwind) 10

Nestle India Sales and Sales Growth(%) Sales growth led by 4.7% (YoY) India growth, contributed by net realization and volume growth in certain product categories (Source: Company/Eastwind) Margin-% RM inflation outlook appears adverse and that could impact margins to hold out. (Source: Company/Eastwind) Domestic and Export sales-(% of Sales) Domestic revenue growth continues to be very weak (Source: Company/Eastwind) Catalysts and Concerns; Catalysts: Nestle plays on “Urban consumption theme” and now urban consumption and demand are stagnant. Thus, we see steady growth in near term, while we maintain that Nestle is a great long-term story with excellent quality management, strong leadership across several categories in the food segment and with brand portfolio, there are several headwinds, which will keep volume growth muted. Concerns: (1)Continued input cost pressure could impacts its margin, (2) Competitive intensity impacting its market share adversely, (3) Any adverse impact of inflation on consumer demand would significantly impact sales and earnings growth assumptions. Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 11

Nestle India Financials Rs in Cr, Sales RM Cost Purchases of stock-in-trade WIP Employee Cost Ad Spend Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Sales EBITDA PAT Expenses on Sales-% RM Cost Ad Spend Employee Cost Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E CY10 6284.7 2560.1 578.4 (83) 433.4 302.6 1213.0 5004.7 1280.1 127.8 12.7 1165.0 1.1 1163.9 326.5 837.5 CY11 7526.6 2933.4 704.2 (48) 546.5 327.6 1474.2 5937.6 1589.0 153.3 15.1 1450.8 5.1 1445.7 426.4 1019.3 CY12 8334.5 3756.9 111.5 (92) 663.4 355.9 1680.9 6476.5 1858.0 277.2 31.0 1611.9 26.6 1585.3 484.7 1100.6 CY13 9101.1 3907.0 110.0 105 741.5 391.3 1826.3 7081.5 2019.6 330.0 83.1 1772.7 36.5 1736.2 560.9 1175.3 CY13E 9218.0 3871.6 110.62 175 760 488.6 1797.51 7203.9 2014.1 342.9 73.7 1744.9 36.0 1708.9 564.0 1145.0 CY14E 9904.9 4308.6 118.86 99 792.39 435.8 1931.45 7686.19 2218.69 402.0 49.5 1866.23 59.7 1806.5 578.1 1228.45 CY15E 10942.2 4814.6 142.25 131 875.38 492.4 2133.73 8589.64 2352.58 474.0 87.5 1966.08 83.7 1882.4 611.8 1270.62 21.9% 20.5% 27.9% 19.8% 24.1% 21.7% 10.7% 16.9% 8.0% 9.2% 8.7% 6.8% 10.6% 8.4% 4.0% 8.8% 9.9% 4.5% 10.5% 6.0% 3.4% 40.7% 4.8% 6.9% 19.3% 28.0% 39.0% 4.4% 7.3% 19.6% 29.5% 45.1% 4.3% 8.0% 20.2% 30.6% 42.9% 4.3% 8.1% 24.4% 32.3% 42.0% 5.3% 8.3% 19.5% 33.0% 43.5% 4.4% 8.0% 19.5% 32.0% 44.0% 4.5% 8.0% 19.5% 32.5% 20.4% 18.5% 13.3% 21.1% 19.3% 13.5% 22.3% 19.3% 13.2% 22.2% 19.5% 12.9% 21.9% 18.9% 12.4% 22.4% 18.8% 12.4% 21.5% 18.0% 11.6% 3795.2 9.6 855.4 86.9 88.7 97.9% 42.8 43.7 4569.3 9.6 1274.0 105.7 132.2 80.0% 34.6 43.2 4592.0 9.6 1798.4 114.2 186.6 61.2% 24.6 40.2 5189.0 9.6 2368.8 121.9 245.7 49.6% 21.1 42.6 5189.0 9.6 2369.6 119.3 246.8 48.3% 21.0 43.5 5043.0 9.64 3050.2 127.43 316.4 40.3% 15.9 39.57 5043.0 9.64 3773.9 131.81 391.5 33.7% 12.9 38.26 Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. (Source: Company/Eastwind) 12

Vardhman Textiles "Buy" 24th Feb' 14 On a Strong earning foot.. Initial Coverage CMP Target Price Previous Target Price Upside Change from Previous 341 412 NA 21% NA Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume (Nos.) Nifty 502986 VTL 410/241 2170 868 6155 VTL with its largest domestic capacity in terms of spindles, drives a significant por-tion of its revenue from spinning segment. Company is one of the largest cotton yarn exporters from India. Significant presence in Indian market and has emerged as a well known supplier of the global market. Past few quarters were the turnaround for the company . Company has strategic tie-ups with Japanese and Korean companies. Consistent expansion and technological up-gradation has given a global status to the company. VTL is the supplier of fabrics to the world’s leading brands such as Tommy Hil-figer, Esprit, Gap, Louis Philippe, Arrow, etc Profitability at the pick to serve Vardhman Textiles Ltd (VTL), India’s leading textile player, reported a significant revenue growth of 30.7% to Rs. 1431 Cr during Q3-FY14 over corresponding period previous year on the back of 45.8% YoY increase in fabric business to Rs.522 Cr, which constitutes 3540% of the overall revenue. While yarn segment, which is the highest contributor of the revenue, reported YoY growth of 30.5% to Rs.1182 Cr. Stock Performance-% 1M -3.8 -0.5 Absolute Rel. to Nifty 1yr 22.6 20.1 YTD 29.5 26.2 Share Holding Pattern-% Promoters FII DII Others 3QFY14 61.9 6.6 17.2 14.4 2QFY14 1QFY14 61.7 61.6 5.7 5.3 18.2 18.9 14.4 14.2 1 yr Forward P/B Source - Comapany/EastWind Research Operating profit of the company recorded substantial growth of 70.9% to Rs.274 Cr during Q3FY14 yoy and outpaced the revenue growth due to significant control over material cost, employee expenses and fuel charges. Material cost, which constitutes 60% of the total expenses, grew at YoY rate of 22.9% to Rs.660 Cr. As a result, EBITDA and operating profit margin re-ported a considerable improvement of 358bps and 455bps during Q3FY14 yoy respectively. PAT reported the YoY growth of 109.6%, while PAT margin improved by 466bps. VTL reported consistent and strong YoY growth in past several quarters with the average growth rate of more than 20%. Company reported compounded quarterly growth of 3.5% in past 10 quarters Despite expansion and heavy CAPEX for capacity enhancement, VTL managed to reduce its debt to equity on the back of significant expansion in reserves & surplus due to phenomenal improvement in profit-ability in past several quarters. Company operates at EBITDA and net margin of 24.9% and 12.2% respectively, which provides sufficient financial cushion against operating cost and financial expenses. With liquidity being excellent and cash flows positive, current ratio at 2.58 and cash ratio at 0.47 offer no worries. Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14 Net Revenue 1431 30.9 10.9 1093 1290 EBITDA 346 53.1 0.0 346 226 Depriciation 72 10.8 1.4 71 65 Interest Cost 31 -22.5 -11.4 35 40 Tax 68 83.8 9.7 62 37 PAT 175 108.3 -1.7 84 178 (In Crs) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 13

Vardhman Textiles Advantage India remains for most of FY14E Chinese players imported yarn from India owing to the high cotton prices. This led to the strong performance of Vardhman over the last three quarters. There is no clarity yet on the policy to be followed by China. If the current scenario continues, Indian spinners will continue to gain. However, if Chinese players are able to procure cotton at lower prices, it will have a negative impact on the demand for Indian yarn. We, thereby, remain conservative about our FY15 estimates. Business and its strategies VTL with its largest domestic capacity in terms of spindles drives a significant portion of its revenue from spinning segment. Company is one of the largest cotton yarn exporters from India. Significant presence in Indian market and has emerged as a well-known supplier of the global market. Past few quarters were the turnaround for the company. Company has strategic tie-ups with Japanese and Korean companies. Consistent expansion and technological up-gradation has given a global status to the company. VTL is the supplier of fabrics to the world’s leading brands such as Tommy Hilfiger, Esprit, Gap, Louis Philippe, Arrow, etc Views and Valuation Vardhman is geared to report a record profit in FY14. Despite weak macro-economic scenario and recent expansion, VTL managed to report significant improvement in its key metrics.Considering the favourable export scenario and completion of capacity expansions, we remain positive on FY14. We, hereby, initiate our coverage with Vardhman Textiles to BUY with a target price of Rs.412 . Currently the stock is trading at 0.8x p/b , we cut our Earning parameter for FY15 and cut p/b to 0.7x for FY15 . Looking at the current earning growth and environment the stock is looking very good but due to lack of trigeers in FY15 we are really conservative for FY15 . P/L PERFORMANCE Net Revenue from Operation Cost Of Projects & Contractual Power and fuel Other expences Employee benefit Expence Expenditure EBITDA Depriciation Interest Cost Tax PAT ROE% FY12 4641 2651 460 386 292 4025 616 274 174 66 141 6 FY13 4972 2316 559 486 349 3997 975 295 177 168 356 14 FY14E 6245 2741 647 887 433 4709 1536 343 160 336 720 23 Narnolia Securities Ltd, FY15E 6682 3007 702 1002 520 5231 1451 397 160 296 628 17 Source - Comapany/EastWind Research 14

Vardhman Textiles B/S PERFORMANCE Share capital Reserve & Surplus Total equity Long-term borrowings Short-term borrowings Long-term provisions Trade payables Short-term provisions Total liabilities Intangibles Tangible assets Capital work-in-progress Long-term loans and advances Inventories Trade receivables Cash and bank balances Short-term loans and advances Total Assets RATIOS P/B EPS Debtor to Turnover% Creditors to Turnover% Inventories to Turnover% FY10 FY11 FY12 FY13 57 1548 1604 2346 297 3 87 26 5077 0 2553 45 77 1297 476 262 272 5077 FY10 1.0 45.3 14.2 2.6 3.9 63 2202 2264 2925 20 3 123 30 6103 0 2534 156 111 1933 667 71 395 6103 FY11 0.7 82.5 15.1 2.8 4.4 63 2144 2207 2044 505 5 116 48 5967 18 2557 185 92 1535 630 84 326 5967 FY12 0.6 22.2 13.6 2.5 3.3 63 2444 2506 2100 778 6 84 64 6789 22 2679 213 147 1784 746 65 475 6789 FY13 0.7 56.0 15.0 1.7 3.6 CASH FLOWS Cash from Operation Changes In Working Capital Net Cash From Operation Cash From Investment Cash from Finance Net Cash Flow during year FY10 640 -629 11 -132 10 -111 FY11 933 -902 31 -456 234 -192 FY12 576 444 1020 -647 -355 18 FY13 843 -510 333 -517 165 -19 Source - Comapany/EastWind Research Source - Comapany/EastWind Research Trading At : Narnolia Securities Ltd, 15

DENA BANK "NEUTRAL" 24th Feb, 2014 ANNUAL REPORT UPDATE Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol NEUTRAL 51.55 57 55 11 - Bank’s performance was lower than street expectation and disappointed in most of operating metrics. GNPA remain high at 2.96% while net NPA were 1.97%. Provision coverage ratio (without technical write off) improved slightly on sequential basis. Valuation wise, stock is trading at 0.4 times of one year forward book which is quite reasonable. But looking at growth and operating metrics, we believe bank would be trade in the range of 0.3 to 0.4 times of one year forward book. We have neutral view on the stock with price target of Rs.57. 532121 DENABANK NII grew at moderate pace owing to margin compression on Y-o-Y Dena bank reported very weak set of numbers during quarter with NII grew by 7.5% YoY to Rs.661 cr largely due to margin compression in year on year basis led by higher cost of fund than fund yield. Higher cost of fund was due to 208 bps declined in low cost franchise deposits. Other income was lower at 10.7% YoY to Rs.129 cr 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance 1M Absolute -13.6 Rel.to Nifty -10.7 103/42 1809 1.16 lakh 6155 1yr -50.3 -53.9 YTD -50.3 -53.9 Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 66.6 55.2 55.2 FII 7.9 8.6 16.5 DII 4.9 7.3 8.1 Others 20.7 28.9 20.2 DENA Bank Vs Nifty versus Rs.144 cr in previous quarter. Total income was moderate at 4% YoY growth. Higher operating expenses led negative growth in PPP Operating expenses during quarter was higher at 32.5% YoY which escalated cost income ratio to 63.4% versus 51.4% in last year. Bank’s employee cost and other operating expenses both surged to 33% and 32% YoY respectively. This had make down operating profit to Rs.371 cr (down by 16.3% YoY) versus Rs.443 cr in last quarter and Rs.371 cr in previous quarter. Provision and contingencies were up on the back of deteriorating asset quality Provisions and contingencies were up by 44% QoQ on the back of deteriorating asset quality. In absolute term gross NPA and net NPA both increased by 5% YoY each. In percentage term GNPA and net NPA stood at 2.96% and 1.97 versus 3.04% and 2.02% in previous quarter. Cumulative provision was up by 4.7% which slightly improved provisions coverage ratio without technical write off to 33.4% from 33.5% in 2QFY14. Dena Bank's Capital Adequacy Ratio as per Basel III norms stood at 10.61% as against 10.21% in previous quarter. Financials NII Total Income PPP Net Profit EPS 2011 1763 2297 1224 612 18.3 2012 2101 2683 1528 803 22.9 Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. Rs, Cr 2013 2014E 2015E 2383 2551 3538 3039 3410 4397 1739 1808 1627 810 445 502 23.2 9.5 10.7 (Source: Company/Eastwind) 16

DENA BANK Profitability declined despite of tax reversal Profitability declined by 67% YoY due to reversal of tax to the tune of Rs. 79 cr as against reversal of Rs.73 cr in previous quarter. At PBT level, bank was negative at Rs.12 cr which was highly discouraging. This was basically due to moderate NII growth, higher operating expenses and higher provisions. Sequentially margin improved on the back of stable loan yield and slightly increased of cost of deposits NIM improved by 10 bps sequentially on the back of higher yield on advance than cost of deposits. During quarter, bank’s yield on advances remained flat at 11.6% while yield on investment improved by 4 bps QoQ to 7.6%. Cost of deposits increased by 5 bps QoQ to 7.6%. Going forward, management guided NIM at the range of 2.75% to 3%. Deposits growth faster than loan growth On balance sheet growth front, bank’s deposits grew by 13.2% YoY led by term deposits which grew by 17% YoY. Current account deposits de-grew by 5% YoY while saving account deposits grew by 9% YoY. Overall CASA ratio de-grew by 208 bps to 29%. Bank’s loan grew by 11% YoY aided by agriculture and MSME segment which was grown by 30.7% and 25.4% YoY respectively. Retail advance grew by moderate at 14.4% YoY. Management guided loan growth of 15-17% for FY14. We model 15% loan growth and 6% deposits growth for FY14. Valuation & View Bank’s performance was lower than street expectation and disappointed in most of operating metrics. GNPA remain high at 2.96% while net NPA were 1.97%. Provision coverage ratio (without technical write off) improved slightly on sequential basis. Valuation wise, stock is trading at 0.4 times of one year forward book which is quite reasonable. But looking at growth and operating metrics, we believe bank would be trade in the range of 0.3 to 0.4 times of one year forward book. We have neutral view on the stock with price target of Rs.57. Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 17

DENA BANK NII grew by 7.5% YoY to Rs.661 cr largely due to margin compression in year on year basis led by higher cost of fund than fund yield. Higher operating expenses led negative growth in PPP Profitability declined by 67% YoY due to reversal of tax to the tune of Rs. 79 cr as against reversal of Rs.73 cr in previous quarter. Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 18

DENA BANK Quarterly Result ( Rs Cr) Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions( Incl. tax provision) PBT Tax Net Profit 3QFY14 1848 654 3 30 2534 129 2663 1873 661 129 790 255 164 419 371 382 -12 -79 68 2QFY14 1790 644 9 7 2450 150 2600 1825 625 150 775 251 154 406 369 335 34 -73 107 3QFY13 1742 519 3 0 2264 144 2408 1649 615 144 759 192 124 316 443 157 286 80 206 Balance Sheet Data (Rs Cr) Deposits Saving Accounts Current Accounts Loan 96081 21983 5786 69895 93669 21476 5695 64785 84882 20216 6083 63040 Asset Quality GNPA (Rs Cr) NPA (Rs Cr) GNPA(%) NPA(%) PCR(%) (Without technical writeoff) 2066 1375 2.96 1.97 33 1968 1309 3.04 2.02 34 % YoY Gr % QoQ Gr 3QFY14E ariation(%) V 6.1 3.2 1931 -4.3 26.0 1.4 666 -1.9 -1.5 -70.1 9 -72.2 7541.0 303.8 4 707.6 11.9 3.4 2610 -2.9 -10.7 -13.9 150 -14.0 10.6 2.4 2760 -3.5 13.6 2.6 1926 -2.8 7.5 5.7 684 -3.3 -10.7 -13.9 150 -14.0 4.0 1.9 834 -5.3 32.8 1.6 225 13.4 32.1 6.1 150 9.2 32.5 3.3 375 11.7 -16.3 0.4 458 -19.1 144.2 14.1 351 8.9 -104.1 -134.2 107 -110.9 -199.3 8.6 21 -470.0 -67.2 -36.9 86 -21.1 1317 817 2.09 1.30 38 Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 19

DENA BANK P/L Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest on deposits Interest on RBI/Inter bank borrowings Others Interest Expended NII NII Growth(%) Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions Net Profit 2011 2012 3820 1193 16 4 5034 534 5567 3117 8 145 3270 1763 60.3 534 2297 688 385 1073 1224 612 612 5161 1544 38 51 6794 582 7376 4528 18 147 4693 2101 19.1 582 2683 715 440 1155 1528 725 803 2013 2014E 6819 2019 31 30 8899 655 9555 6234 59 223 6516 2383 13.4 655 3039 792 508 1300 1739 706 810 7421 2536 28 50 10035 859 10894 6583 0 228 7484 2551 7.1 859 3410 978 625 1603 1808 1308 445 2015E 8737 2307 28 50 11122 859 11981 7242 0 342 7583 3538 38.7 859 4397 1690 1080 2770 1627 1000 502 64210 25.1 1692 8.3 44828 26.4 18769 19.6 77167 20.2 3881 129.4 56693 26.5 23028 22.7 97207 26.0 8414 116.8 65781 16.0 34343 49.1 102068 5.0 6515 -22.6 72359 10.0 34203 -0.4 112274 10.0 9763 49.9 83213 15.0 38442 12.4 8.5 6.4 7.4 4.9 9.0 5.0 9.1 6.7 8.0 5.9 4.2 5.8 10.4 5.9 8.1 6.4 3.4 6.2 10.5 7.4 9.4 6.5 3.4 6.9 10.5 6.0 9.1 6.5 3.5 6.2 Key Balance sheet data Deposits Deposits Growth(%) Borrowings Borrowings Growth(%) Loan Loan Growth(%) Investments Investments Growth(%) Eastwind Calculation Yield on Advances Yield on Investments Yield on Funds Cost of deposits Cost of Borrowings Cost of fund Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 20

BANKBARODA "BUY" 21h Feb. 2014 ANNUAL REPORT UPDATE Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty BUY 513 624 22 532134 BANKBARODA 773/429 21627 18.25 Cr 6091 During quarter bank’s most of operating as well as financials was muted except loan growth of 18% YoY. Asset quality was better among peers but in tight liquidity situation it would remain challenging. Margin was compressed slightly in sequential basis but management continued to guided domestic NIM at 3% level from present of 2.95%. We value bank at Rs.634/share which is 0.75 times of FY14E’s book value. Moderate NII growth despite of healthy loan growth and stable CD ratio Bank’s NII growth moderate at 7.8% YoY to Rs. 3057 cr despite of healthy loan growth and stable CD ratio. This was due to margin compression of 28 bps YoY led by lower loan yield than cost of fund. However bank has taken several steps to reduce the cost as share of bulk deposits declined to 73.8% from 79.3% in last year and liability franchise increased by increased by 556 bps YoY. Other income (11% YoY) was supportively help to growth revenue by 8.4% YoY to Rs.3989 cr. Stock Performance 1M Absolute -18.8 Rel.to Nifty -15.3 1yr -32.4 -35.7 YTD -32.4 -35.7 Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 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 Higher operating expenses led de-growth in operating profit Operating expenses increased by 25.7% in which employee cost increased higher by 32.3% YoY followed by 17.3% other operating expenses. This was result of escalating cost to income ratio to 45% from 39% in last year. Higher cost income ratio and moderate income growth led operating profit de-growth by 2.6% YoY to Rs.2197 cr. Provisions lower on account of right back of investment depreciation Provisions and contingencies declined by 12% QoQ largely due to reversal of provisions against investment depreciation to the tune of Rs.120 cr as against Rs.93 cr in previous quarter. Loan loss provision was by and large same as in previous BANKBARODA Vs Nifty quarter and stood at Rs.819 cr versus Rs. 838 cr. With the reversal of provisions, PBT increased by 17% YoY and 14% QoQ to Rs.1436 cr. Profitability increased due to lower provisions Profitability increased by 3.6% YoY to Rs.1048 cr on account of higher tax provision made by bank led by DTL special reserve as per suggestion by RBI. In 9MFY14, total effective tax rate altogether came to 17%. Management guided tax rate for full year would be 20-22%. Financials NII Total Income PPP Net Profit EPS 2011 8802 11611 6982 4242 108.3 2012 10317 13739 8581 5007 121.8 Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. Rs, Cr 2013 2014E 2015E 11315 12218 14122 14946 16400 18304 8999 9206 10067 4481 4444 4819 106.4 105.5 114.4 (Source: Company/Eastwind) 21

BANKBARODA Asset quality by and large stable, PCR increased On asset quality front, bank’s gross NPA increased by 10% YoY and net NPA deteriorated by 5% in absolute term led by higher provision in balance sheet. In percentage term, GNPA and net NPA stood at 3.4% and 1.9% versus 3.2% and 1.9% in previous quarter. Provisions coverage ratio without technical write off was improved by 246 bps QoQ to 44.5%. Bank’s asset quality was better than among peers under our coverage universe. Margin compression on account of higher cost of fund than fund yield NIM compressed by 5 bps QoQ to 2.37% due to stable loan yield while cost of fund increased marginally by 10 bps to 5.4%. Bank has taken several steps to curtail cost by reducing share of bulk deposits and increasing CASA ratio. Domestic NIM improved to 2.95% versus 2.85% in previous quarter whereas oversea NIM remained flat at 1.18% as against 1.19%. Domestic NIM improvement was on account of higher investment yield to 7.98% from 7.9% on sequential basis. Loan growth healthy led by SME and retail Overall deposits de-grew by 4% YoY led by 10% declined of term deposits on year on year basis. Current account and saving account deposits registered growth of 19% and 13% YoY respectively. This was the result of CASA ratio increased by 556 bps YoY to 26.2%. Loan grew by 18% YoY led by SME growth of 39.2% YoY followed by 21% YoY growth retail. Corporate loan growth remained intact as bank’s has caution outlook towards corporate exposure in tight economy scenario. Valuation & View During quarter bank’s most of operating as well as financials was muted except loan growth of 18% YoY. Asset quality was better among peers but in tight liquidity situation it would remain challenging. Margin was compressed slightly in sequential basis but management continued to guided domestic NIM at 3% level from present of 2.95%. We value bank at Rs.634/share which is 0.75 times of FY14E’s book value. Narnolia Securities Ltd,22 Please refer to the Disclaimers at the end of this Report. 22

BANKBARODA Bank’s NII growth moderate at 7.8% YoY to Rs. 3057 cr despite of healthy loan growth and stable CD ratio. This was due to margin compression of 28 bps YoY led by lower loan yield than cost of fund Higher operating expenses led de-growth in operating profit Profitability increased due to lower provisions Source: eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 23

BANKBARODA Quarterly Result (Rs Cr) Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions Exceptional Items PBT Tax Net Profit 3QFY14 7061 2175 245 209 9691 932 10623 6634 3057 932 3989 1056 736 1792 2197 762 16 1436 372 1048 2QFY14 6832 2220 281 140 9473 974 10447 6579 2895 974 3869 1030 714 1744 2125 861 16 1264 80 1168 3QFY13 % YoY Gr 6485 8.9 1898 14.6 403 -39.2 58 258.2 8845 9.6 841 10.9 9686 9.7 6004 10.5 2841 7.6 841 10.9 3681 8.4 798 32.3 627 17.3 1426 25.7 2256 -2.6 1029 -26.0 12 25.0 1227 17.0 203 83.7 1012 3.6 Balance Sheet Date( Rs Cr) Equity Capital Reserve & Surplus Net Worth Total Deposits Borrowings Other liabilities and provisions Total Liability Cash in hand Cash and balances with RBI Total Investment Advances Fixed Assets Others Assets Total Assets 423 35232 35654 503772 29304 18638 587368 16742 87599 115210 352446 2562 12809 587368 423 35127 35549 484931 28558 13995 563033 15681 79980 111840 339855 2498 13179 563033 412 30966 31379 414733 27899 14552 488563 17147 58295 101848 299318 2399 9557 488563 11926 6624 3.4 1.9 44.5 10888 6316 3.2 1.9 42.0 7321 3363 2.4 1.1 54.1 Asset Quality GNPA( Rs Cr) NPA(Rs Cr) % GNPA % NPA % PCR (without technical writeoff) % QoQ Gr 3QFY14E 3.3 7173 -2.0 2350 -12.8 397 50.1 173 2.3 10092 -4.3 1102 1.7 11194 0.8 6792 5.6 3300 -4.3 1102 3.1 4402 2.5 1189 3.1 792 2.7 1981 3.4 2421 -11.5 897 0.0 0 13.6 1524 364.7 457 -10.3 1067 2.5 0.0 13.8 0.3 13.6 0.3 21.5 3.9 5.0 2.6 28.1 33.2 20.2 4.3 -2.4 6.8 50.3 9.5 13.1 3.0 17.7 3.7 6.8 2.6 34.0 -2.8 20.2 4.3 Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 24

BANKBARODA Income Statement 2011 2012 2013 2014E 2015E Interest Income Interest Expense NII Change (%) Non Interest Income Total Income Change (%) Operating Expenses Pre Provision Profits Change (%) Provisions PBT PAT Change (%) 21886 13084 8802 48.2 2809 11611 32.8 4630 6982 41.5 1331 5650 4242 38.7 29674 19357 10317 17.2 3422 13739 18.3 5159 8581 22.9 2555 6026 5007 18.0 35197 23881 11315 9.7 3631 14946 8.8 5947 8999 4.9 4168 4831 4481 -10.5 39065 26847 12218 8.0 4182 16400 9.7 7194 9206 2.3 3559 5647 4444 -0.8 45206 31084 14122 15.6 4182 18304 11.6 8237 10067 9.4 4043 6024 4819 8.4 305439 27 87589 23 22308 71261 228676 31 384871 26 103524 18 23573 83209 287377 26 473883 23 119981 16 26579 121394 328186 14 521272 10 135531 13 33273 122000 367568 12 573399 10 149084 10 36600 134200 404325 10 Avg. Yield on loans Avg. Yield on Investments Avg. Cost of Deposit Avg. Cost of Borrowings 8.0 7.0 4.3 5.5 8.7 7.8 5.1 6.7 8.4 6.4 5.2 5.4 8.6 7.3 5.2 5.5 9.3 8 5.4 5.5 Valuation Book Value CMP P/BV 536 963 1.8 668 794 1.2 759 652 0.9 846 513 0.61 929 513 0.6 Balance Sheet Deposits( Rs Cr) Change (%) of which CASA Dep Change (%) Borrowings( Rs Cr) Investments( Rs Cr) Loans( Rs Cr) Change (%) Ratio Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 25

J&K BANK Company Update CMP Target Price Previous Target Price Upside Change from Previous BUY 1329 1525 1578 15 -3 Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty 532209 J&KBANK 1496/995 6419 22.54lakh 6153 Stock Performance Absolute Rel.to Nifty 1M -4.6 -1.8 1yr 2.1 -1.8 YTD 2.1 -1.8 Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 53.2 53.2 53.2 FII 28.2 27.1 24.8 DII 4.5 4.3 5.0 Others 14.1 15.4 17.1 J&k Bank Vs Nifty "BUY" 20th Feb, 2014 We are disappointed with the growth parameters of bank and accordingly reduce our target price from Rs.1578 to Rs.1525 due to lower growth in balance sheet especially within state of Jammu & Kashmir. Bank’ profitability was up by 11% due to reversal of provisions towards NPA and investment depreciation while tax rate reduce to 28% versus 30% in last year. Bank’s management continued to guide loan growth of 20% in FY14 but we lower our loan growth assumption to 15% for FY14. We value bank at Rs.1525/share which implies that 1.3 times of FY14E book value and 6 times of price earnings. Moderate growth in deposits; CASA remained flat Bank’s deposits grew by 11% YoY in which 12% growth within state of J&K while deposits grew by 7% YoY in outside of state. CASA in absolute term reported growth of 9% YoY while share to total deposits declined by 65 bps YoY 38.8%. Saving deposits and current deposits registered growth of 5% and 10% YoY respectively whereas term deposits reported growth of 12% YoY. Despite of lower growth in CASA bank’s cost of deposits remain stable at 6.6% while cost of fund increased by 16 bps YoY. Loan grew handsomely led by corporate loan growth Loan grew by 21.5% YoY led by loan growth in J&K state by 25% YoY and 19% YoY growth in outside state. Incremental loan came from corporate loan book which grew by 23.4% YoY followed by agriculture (21.2% YoY) and SME (21% YoY). Corporate loan constituted 83% in outside J&K sate, mostly infrastructure segment which has high risk of restructure. Bank’s management guided loan growth of 20% in FY14 which means bank has to achieve 9% QoQ growth in loan as against quarterly run rate of 5%.We lower our loan growth assumption from 20% to 15% in FY14E. Credit deposits ratio improved by 611 bps YoY largely due to lower deposits growth as against loan. Margin compression on account of higher cost of fund than deposits Bank’s margin compressed by 36 bps QoQ to 3.97% due to 41 bps QoQ declined of loan yield to 11.7% while deposits cost increased by 47 bps to 6.6%. Investment yield improved by 55 bps to 7.7%. Overall cost of fund increased to 6.6% from 6.2% in previous quarter whereas yield on fund improved slightly from 9.8% to 9.9% which compressed margin by 36 bps sequentially. Rs, Cr Financials 2011 2012 2013 2014E 2015E NII 1544 1838 2316 2724 3356 Total Income 1908 2172 2800 3097 3728 PPP 1149 1370 1811 1952 2349 Net Profit 615 803 1055 1271 1535 EPS 105.7 126.9 165.7 217.6 262.2 (Source: Company/Eastwind) 26 Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report.

J&K BANK Stable asset quality; PCR highest in industry On asset quality front, bank’s GNPA increased by 2% QoQ in absolute basis while in percentage to gross advance, it slightly improved from 1.72% to 1.67% sequentially. During quarter, bank lowered its provisions by 1% which was the result of increased of net NPA by 25% QoQ in absolute term. However in percentage to net advance, it stood at 0.22% as against 0.19% in previous quarter. Fresh slippage ratio was at 1.4 %( annualized) during quarter which was lower from previous quarter of 1.9%. Provisions coverage ratio remained high at 86.6% (without technical write off) which was best in industry in our coverage universe. Moderate growth in NII despite of healthy loan growth Bank’s NII grew by 8.8% to Rs.647 cr despite of healthy loan growth and improvement in CD ratio led by margin compression. Other income was also lower to Rs.87 cr versus Rs.91 cr in last quarter and Rs.99 cr in previous quarter. With the lower support from other income, total revenue grew by 7.2% YoY to Rs.734 cr. Higher operating expenses led flat growth in operating profit Operating expenses increased by 17% YoY in which employee cost and other operating cost increased by 15% and 22% YoY respectively. Consequently CI ratio increased by 340 bps to 40%. Moderate loan growth, lower other income and higher operating cost led pre provisioning growth of 1.4% YoY. Profitability increased on account of reversal of provisions and lower tax rate Profitability increased by 11% YoY to Rs.321 cr despite of flat operating profit growth was due to reversal of provisions towards NPA and depreciation. Bank’s provisions and contingencies declined by 121% YoY due to Rs. 13 cr reverse from NPA provision and Rs.5 cr reverse from investment depreciation provision. Tax rate was also lower to 28% versus 31% in previous quarter and 30% in last quarter. We are disappointed with growth parameters of profit and loss account. Bank’s balance sheet within J&K state especially in deposits growth sense remained muted while credit growth grew handsomely. Overall we found mixed growth trend which discourage us to reduce price target. Valuation & View We are disappointed with the growth parameters of bank and accordingly reduce our target price from Rs.1578 to Rs.1525 due to lower growth in balance sheet especially within state of Jammu & Kashmir. Bank’ profitability was up by 11% due to reversal of provisions towards NPA and investment depreciation while tax rate reduce to 28% versus 30% in last year. Bank’s management continued to guide loan growth of 20% in FY14 but we lower our loan growth assumption to 15% for FY14. We value bank at Rs.1525/share which implies that 1.3 times of FY14E book value and 6 times of price earnings. Source: Eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 27

J&K BANK Moderate growth in NII despite of healthy loan growth Higher operating expenses led flat growth in operating profit Profitability increased on account of reversal of provisions and lower tax rate Source: eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 28

J&K BANK Quaterly Result (Rs. Cr) Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax Net Profit Balance Sheet Data ( Rs Cr) Net Worth Deposits Borrowings Advances Investment Asset Qaulity ( Rs Cr) GNPA NNPA GNPA(%) NNPA(%) PCR(%) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%) 1266 1244 1090 16.2 1.7 1322 -4.3 434 396 421 3.2 9.7 423 2.6 16 10 23 -31.4 60.2 13 16.6 0 0 0 0 1716 1650 1533 11.9 4.0 1759 -2.5 87 99 91 -3.4 -12.1 96 -8.8 1803 1749 1624 11.0 3.1 1855 -2.8 1069 968 939 13.8 10.4 1022 4.6 647 682 594 8.8 -5.2 738 -12.3 87 99 91 -3.4 -12.1 96 -8.8 734 781 685 7.2 -6.0 834 -11.9 188 177 164 14.7 6.3 180 4.3 105 108 86 22.3 -2.5 120 -12.2 293 285 250 17.3 2.9 300 -2.3 441 496 435 1.4 -11.2 533 -17.4 -5 56 22 -120.6 -108.3 48 -109.5 445 441 412 8.0 1.1 485 -8.2 124 138 123 0.9 -10.1 145 -14.7 321 303 289 11.0 6.2 339 -5.4 5797 63157 1150 43318 22714 5475 61171 1346 41121 22316 4898 57075 801 35658 22681 18.3 5.9 10.7 3.2 43.6 -14.6 21.5 5.3 0.1 1.8 725 97 1.67 0.22 87 709 78 1.72 0.19 89 582 50 1.63 0.14 91 24.7 2.3 95.7 5815 65907 1579 44081 24200 24.9 -0.3 -4.2 -27.2 -1.7 -6.1 Source: eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 29

J&K BANK P/L Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Total Interest Income Others Income Total Income Interest on deposits Interest on RBI/Inter bank borrowings Others Interest Expended NII NII Growth(%) Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions Net Profit Net Profit Grwoth(%) 2010 2011 2012 2013 2014E 2015E 2342 705 11 3057 416 3473 1841 83 14 1938 1119 2630 1066 17 3713 365 4078 2069 46 54 2169 1544 37.9 365 1908 524 235 759 1149 534 615 20.1 3394 1403 39 4836 334 5170 2902 41 54 2997 1838 19.1 334 2172 521 281 802 1370 567 803 30.6 4318 1723 97 6137 484 6621 3741 26 54 3821 2316 26.0 484 2800 652 337 989 1811 756 1055 31.4 5046 1713 56 6816 372 7188 3987 101 0 4092 2724 17.6 372 3097 675 469 1144 1952 137 1271 20.5 5703 1983 56 7742 372 8114 4386 139 0 4386 3356 23.2 372 3728 814 566 1379 2349 156 1535 20.8 44676 20.0 1105 0.4 26194 13.6 19696 41.1 53347 19.4 1241 12.3 33077 26.3 21624 9.8 64221 20.4 1075 -13.4 39200 18.5 25741 19.0 66789 4.0 1363 26.8 45080 15.0 24535 -4.7 73468 10.0 1884 38.2 51843 15.0 21099 -14.0 10.2 5.0 7.7 4.9 8.8 5.1 10.0 5.4 7.5 4.6 9.1 4.7 10.3 6.5 8.3 5.4 7.7 5.5 11.0 9.4 8.9 5.8 7.4 5.9 11.2 7.0 9.8 6.1 7.4 6.0 11.0 9.4 10.6 6.0 7.4 5.8 621 1.1 6.4 718 1.2 6.9 844 1.1 5.5 1003 1.3 5.9 1146 1.2 5.1 1412 0.9 4.2 416 1536 366 211 577 958 446 512 Key Balance sheet data Deposits Deposits Growth(%) Borrowings Borrowings Growth(%) Loan Loan Growth(%) Investments Investments Growth(%) 37237 1100 23057 13956 Eastwind Calculation Yield on Advances Yield on Investments Yield on Funds Cost of deposits Cost of Borrowings Cost of fund Valuation Book Value P/BV P/E Source: eastwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 30

N arnolia Securities Ltd 402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000 em ail: research@narnolia.com , w ebsite : w w w .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.

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