Share Analysis Today: Buy Stock of Bank of Baroda’s with Target Price Rs.634/share

50 %
50 %
Information about Share Analysis Today: Buy Stock of Bank of Baroda’s with Target Price...
Finance

Published on February 21, 2014

Author: narnolialtd

Source: slideshare.net

Description

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%. NSL value bank at Rs.634/share which is 0.75 times of FY14E’s book value.

IEA-Equity Strategy India Equity Analytics 21th Feb, 2014 Daily Fundamental Report on Indian Equities BANKBARODA : "BUY" Edition : 211 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 : 2- 7) 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 : 8- 12) Britannia Inds :"Decent quarter" "BUY" 19th Feb 2014 Once again, Britannia Industries revealed better earning performance than street expectation. Its consolidated revenue grew by 10.7% (YoY) led by 4-5% volume growth during the quarter.The company's margins are also likely to expand due to higher proportion of premium products and easing input costs. We have "BUY" view on the stock with a target price of Rs 1065. At a CMP of Rs915, stock trades at 9.3x FY15E P/BV. ................................................. ( Page : 13-15) eClerx Services :"Consistent Performer" "BUY" 18th Feb 2014 eClerx Services witnessed inline set of growth with 2.3 %(QoQ) sales growth in INR term and 4.7%(QoQ) in USD term (4% in CC term) led by some preponement of volume of work from Q4 into Q3 which has resulted into the slightly higher sequential growth. Company’s high RoE and dividend payout ratio make attractive to invest on the stock. ........................................................ ( Page : 16-18) State Bank of India : "BUY" 17th Feb 2014 SBIN’s profitability was declined by 34% YoY largely due to higher provisions and contingencies led by deterioration in asset quality and higher tax in order to create DTL special reserve as per suggestion by RBI. Bank’s NII grew by 13.3% YoY led by higher loan growth and stable NIM. Asset quality slightly deteriorated with GNPA stood at 5.9% versus 5.8% in previous quarter and net NPA further worsen to 3.2% against 2.9% sequentially due to lower loan loss provisions made. We value bank at Rs.1779/share which is 1.1 times of FY14E book value. .............................................................................................. ( Page : 19-23) SUNPHARMA :Robust Performance "NEUTRAL" 17th Feb 2014 Sun Pharmaceuticals Industries limited posted 3QFY14 results above street expectations with total revenues including other operating income at Rs 4312 Cr up 50.5 % YoY led by robust growth in US formulations and Taro business. The stellar performance of company was supported well from domestic operations. The US formulation business grew by more 56 % YoY to USD 434 Mn .................................................................................................. ( Page : 24-25) CIPLA : "BUY" 14th Feb 2014 Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. ................................................ ( Page : 26-27) Narnolia Securities Ltd,

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) 2

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, Please refer to the Disclaimers at the end of this Report. 3

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. 4

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. 6

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. 7

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) 8 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. 9

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. 10

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. 11

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. 12

Britannia Inds "BUY" 19th Feb' 14 "Decent quarter" Result update BUY Consistency on witnessing better numbers with Margin expansion: CMP Target Price Previous Target Price Upside Change from Previous 915 1065 16% - Once again, Britannia Industries revealed better earning performance than street expectation. Its consolidated revenue grew by 10.7% (YoY) led by 4-5% volume growth during the quarter. Even, company has hiked the prices of some of its brands during the quarter. PAT grew by 61% (YoY) because of its effective cost rationalization efforts. Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 500825 BRITANNIA 973/478 10967 248428 6127 Stock Performance 1M 1.7 3.8 Absolute Rel. to Nifty 1yr 86.9 82.8 YTD 34.57 18.27 Share Holding Pattern-% Promoters FII DII Others Current 50.75 20.11 8.77 20.38 1 year forward P/BV 2QFY14 1QFY14 50.8 50.85 19.11 19.48 9.59 9.89 20.5 19.78 The management expects the biscuit business to grow by 10-11% in FY14E, whereas the non-biscuit business to grow at a faster rate by 20-25% in FY14E. Over the last few quarter, company has more focused on its product portfolio expansion. We expect that new products expansion is likely to increase going forward. By judicious mix of cost rationalization and high value added biscuits, we expect its margin expansion gradually over next couple of quarters. Margin Pickup: EBITDA Margin improved by 250 bps to 8.9%. The operating profit has increased by 54% mainly due to decline in raw material cost by 420 bps to 54.7% and purchase of stock in trade by 100 bps to 7.3% of adjusted net sales. The company also expects to track margin expansion ahead by judicious mix of cost rationalization and increasing supply chain efficiency. No pressure on RM cost: High food price inflation remains a concern for the company. Thankfully, Britannia doesn’t import much raw materials from abroad and is thus not affected by rupee fluctuations. Its strategy of focusing on premium brands has not only allowed the company to hike prices but also improve its product mix as well. Pricing and Promotion: During the quarter, company initiated its price hike of some of its brand. The full benefit of these prices hikes will be seen in the March quarter. Its strategy of focusing on premium brands has not only allowed the company to hike prices but also improve its product mix as well. Healthy distribution reach: The Company is also taking initiative to increase its rural distribution reach for benefitting the opportunity of increasing consumption of food products in rural markets. The company plans to increase its overall distribution coverage by around 7-8% every year and rural coverage by around 10% every year. View and Valuation: Management also believes that volume growth will recover gradually over the next few quarters, driven by higher brand spends and portfolio expansion. The company's margins are also likely to expand due to higher proportion of premium products and easing input costs. We have "BUY" on the stock with a target price of Rs 1065. At a CMP of Rs915, stock trades at 9.3x FY15E P/BV. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 1771.94 159.7 99.8 9.0% 5.6% 2QFY14 1755.27 160.4 97.1 9.1% 5.5% (QoQ)-% 0.9 (0.4) 2.8 (10bps) 10bps 3QFY13 1620.4 103.5 62 6.4% 3.8% Rs, Crore (YoY)-% 9.4 54.3 61.0 260bps 180bps (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 13

Britannia Inds. Sales and Sales growth-%(YoY) Entry into new categories like cereals will also help drive growth. Consequently, the company's earnings are expected to grow 20% over the next 2 years. (Source: Company/Eastwind) Margin-% The company's margins are also likely to expand due to higher proportion of premium products and easing input costs. (Source: Company/Eastwind) Expenses on Sales-% volatility on key input (wheat, sugar, palm oil) would prices directly impact its margin picture, (Source: Company/Eastwind) Sale of Land in Chennai and Banglore could result in Value unlocking: The company plans to sell off its 8.60 acres industrial land in Chennai,which is located at Madras Thiruvallur High (MTH) Road, Padi, Chennai. We expect the company to realize around Rs120 crores to Rs150 crores from this land sale when it happens. Further the company has another 5.0 acres prime real estate land in Bangalore at old airport road which can fetch around Rs 350 crores. Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 14

Britannia Inds. Financials Rs in Cr, Net Sales Other Operating Income Total income from operations (net) Raw Materials Cost Purchases of stock-in-trade WIP Employee Cost Advertisement and Publicity Other expenses Total expenses EBITDA Depreciation Other Income EBIT Interest Cost Profit (+)/Loss (-) Before Taxes Provision for Taxes Net Profit (+)/Loss (-) FY10 3770.84 63.53 3834.37 2416.78 0 0 157.9 300.96 728.57 3604.21 230.16 58.23 0 171.93 23.46 148.47 5.58 142.89 FY11 4589.73 19.65 4609.38 2714.38 328.91 -15.68 177.49 332.84 834.76 4372.7 236.68 64.91 59.01 230.78 43.63 187.15 52.94 134.21 FY12 5460.75 24.62 5485.37 3109.12 437.68 -14.03 211.15 419.6 1010.98 5174.5 310.87 61.83 59.14 308.18 41.6 266.58 66.85 199.73 FY13 6135.91 49.5 6185.41 3350.51 518.51 -7.57 226.75 534.28 1142.39 5764.87 420.54 73.15 52.24 399.63 41.3 358.33 98.55 259.78 FY14E 6869.15 68.69 6937.84 3722.15 520.34 -76.32 270.58 610.53 1255.75 6303.03 634.81 84.12 27.75 578.44 8.88 569.57 176.57 393.00 FY15E 7693.45 76.93 7770.38 4196.01 543.93 -77.70 310.82 660.48 1398.67 7032.20 738.19 100.50 38.85 676.54 4.10 672.45 208.46 463.99 Growth-% (YoY) Sales EBITDA PAT 10.2% -16.8% -0.3% 21.7% 2.8% -6.1% 19.0% 31.3% 48.8% 12.4% 35.3% 30.1% 12.0% 51.0% 51.3% 12.0% 16.3% 18.1% 63.0% 8.0% 4.1% 19.3% 3.8% 58.9% 7.3% 3.9% 18.2% 28.3% 56.7% 7.7% 3.8% 18.5% 25.1% 54.2% 8.7% 3.7% 18.6% 27.5% 53.7% 8.9% 3.9% 18.3% 31.0% 54.0% 8.6% 4.0% 18.2% 31.0% 6.0% 4.5% 3.7% 5.1% 5.0% 2.9% 5.7% 5.6% 3.6% 6.8% 6.5% 4.2% 9.2% 8.3% 5.7% 9.5% 8.7% 6.0% 504.7 11.95258 555.58 21.73 46.48 46.8% 45.5% 10.9 23.2 915.0 11.97 829.55 32.83 69.30 47.4% 30.3% 13.2 27.9 915.0 11.97 1174.50 38.76 98.12 39.5% 25.7% 9.3 23.6 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-% Dividend payout-% P/BV P/E 1599.5 2.39 282.8 59.79 118.33 50.5% 126.4% 13.5 26.8 382.6 459.9 11.95 11.95 326.04 409.17 11.23 16.71 27.28 34.24 41.2% 48.8% (Source: Company/Eastwind) 51.8% 45.1% 14.0 13.4 34.1 27.5 (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 15

eClerx Services "BUY" 18th Feb' 14 "Consistent Performer" Result update Buy CMP Target Price Previous Target Price Upside Change from Previous 1212 1074 881 -11% 22% Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 532755 ECLERX 1255/599 3701 18894 6048 Stock Performance Absolute Rel. to Nifty 1M 20.4 14.6 1yr 26.3 20.5 YTD 30.6 16.3 Share Holding Pattern-% Promoters FII DII Others Current 52.95 26.21 11.27 9.57 1 year forward P/E 2QFY14 52.88 22.37 14.72 10.03 1QFY14 53.13 21.38 14.80 10.69 Inline numbers , and expects to report better than NASSCOM guidance(FY14E); eClerx Services witnessed inline set of growth with 2.3 %(QoQ) sales growth in INR term and 4.7%(QoQ) in USD term (4% in CC term) led by some preponement of volume of work from Q4 into Q3 which has resulted into the slightly higher sequential growth . It expects some impact of this on Q4 growth. While, PAT decline by 7.2%, sequentially. On demand environment, it indicated that there is no significant change and expects to grow same pace of 10-15% in USD terms in the medium term. On margins, it indicated that it will continue to operate in the mid 30% going forward. It continues to look at inorganic opportunities. Margin declined and expects to maintain stablity on demand: The OPM fell by 310 bps QoQ to 37% on the back of rise in Selling and Distribution costs due to increase in onsite headcount, bonus and commission and travel. Accordingly, PAT margin down by 270bps to 28.6%, sequentially. Management is very confident to maintain its PAT margin at 3031% in near term. Good growth from Financial Services: The Cable business grew faster on the low base, Financial Services also grew fast during the quarter. In the Cable business, there is lot of demand for its services. The digital and digital market has lot of demand and is another key area. Growth from Emerging revenue: It added 2 clients during the quarter. The Revenue growth from Top 5 grew by 8% YoY and Emerging grew by 35% QoQ respectively during the quarter. The Emerging revenue has continued to outpace growth in strategic clients in line with firm strategy. Approval on SEZ: The SEZ approval received for new floor in Airoli and planned go live on April 2014 (600 Seats). It is discussing additional floors in Airoli to consolidate Mumbai facilities, subject to regulatory approval. During the quarter, the Final payment is done for Agilyst acquisition (for the total acquisition cost ~ $21 million) during the quarter. View and Valuation: We expect that company’s organic revenue growth remains soft in near term, and company is very focussed on inorganic growth and expect to see growth from cable business . Furthermore, stable billing rate will support to maintain margin. Company’s high RoE and dividend payout ratio make attractive to invest on the stock. At a CMP of Rs 1212, stock trades at 12.5x FY15E earnings, we recommend ”BUY” view on the stock with a target price of Rs 1410 (revised from Rs 1350) . Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 219.5 88.81 62.33 40.5% 28.4% 2QFY14 214.6 92.8 67.91 43.2% 31.6% (QoQ)-% 2.3 (4.3) (8.2) (270bps) (320bps) 3QFY13 170.8 66.8 49 39.1% 28.7% Rs, Crore (YoY)-% 28.5 32.9 27.2 140bps (30bps) (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 16

eClerx Services. Sales (USD) and Sales growth-%(QoQ) On $term, Sales growth was up by 4.7% (QoQ) and 2.3% on INR term, (Source: Company/Eastwind) Margin-% (Source: Company/Eastwind) Employee Metrics-% Attrition decreased from 36% (2QFY14) to 31.8% . (Source: Company/Eastwind) Key Facts from Cnference Call (1) The billing rates expected to be flat to slight uptick for the FY15E. (2) Expect to see similar set of environment in FY 15E than FY14. (3) On margins, it indicated that it will continue to operate in the mid 30% (30-31%) going forward. (4) Tax rate is expected to see at 23% mark in FY15E. (5) It continues to look at inorganic opportunities. (6) Expects to maintain 51% of payout ratio. Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 17

eClerx Services. Operating Metrics; Sales Mix-Geography North America Europe RoW Client Concentration Top-5 Client addition Total Clients DSO,days Billing Mix FTE SEZ Revenue Employee Metrics Employee Utilization Attrition Total Employee Employee Cost 3QFY12 70% 24% 6% 4QFY12 70% 23% 7% 1QFY13 2QFY13 3QFY13 4QFY13 71% 75% 75% 74% 20% 19% 18% 21% 9% 6% 7% 5% 1QFY14 74% 21% 5% 2QFY14 74% 21% 5% 3QFY14 74% 21% 5% 3QFY12 86% 8 53 52 4QFY12 87% 10 55 29 1QFY13 2QFY13 3QFY13 4QFY13 80% 79% 78% 78% 8 4 7 6 54 54 60 73 30 41 31 33 1QFY14 76% 5 61 35 2QFY14 75% 5 65 41 3QFY14 74% 2 65 33 3QFY12 94% 67% 4QFY12 95% 72% 1QFY13 2QFY13 3QFY13 4QFY13 93% 93% 92% 91% 62% 58% 59% 60% 1QFY14 94% 60% 2QFY14 95% 60% 3QFY14 95% 60% 3QFY12 72% 39% 4QFY12 72% 30.9% 4405 45.1% 1QFY13 2QFY13 3QFY13 4QFY13 68% 68% 69% 69% 23.2% 30.2% 26.5% 27.3% 5545 5760 5837 5954 42.4% 46.0% 45.0% 45.2% 1QFY14 66% 25.2% 6389 44.1% 2QFY14 65.0% 36.4% 6543 42.2% 3QFY14 66% 31.8% 6620 43.6% Financials; Rs, Cr Sales Empolyee Cost Other expenses EBITDA Dep EBIT INT Other Income PBT Tax PAT Growth-% Sales-% PAT-% Margin-% EBITDA EBIT PAT Expense on Sales-% Employee cost-% Other expenses-% Tax Rate% Valuations CMP OS.Cr EPS NW BVPS P/E (x) P/BV (x) RoE-% FY11 366.12 147.65 59.87 158.6 9.13 149.47 0 0 149.47 16.76 132.71 FY12 495.19 203.87 79.28 212.04 12.89 199.15 0 0 199.15 39.47 159.68 FY13A 660.58 295.28 108.47 256.83 25.53 231.3 0 0 231.3 39.34 191.96 FY14E 852.54 370.00 130.44 352.10 33.10 319.00 0.00 28.99 347.98 83.52 264.47 FY15E 1020.87 449.18 158.24 413.45 43.10 370.35 0.00 10.21 380.56 91.33 289.22 39.5% 80.5% 35.3% 20.3% 33.4% 20.2% 29.1% 37.8% 19.7% 9.4% 43.3% 40.8% 36.2% 42.8% 40.2% 32.2% 38.9% 35.0% 29.1% 41.3% 37.4% 31.0% 40.5% 36.3% 28.3% 40.3% 16.4% 11.2% 41.2% 16.0% 19.8% 44.7% 16.4% 17.0% 43.4% 15.3% 24.0% 44.0% 15.5% 24.0% 783.95 2.9 45.76207 238.32 82.17931 17.131 9.54 55.7% 625 2.958 53.9824 342.92 115.93 11.5778 5.39 46.6% 650 2.9875 64.2544 438.32 146.718 10.116 4.43 43.8% 1212 2.99 88.52 615.20 205.93 13.69 5.89 43.0% 1212 2.99 96.81 816.84 273.42 12.52 4.43 35.4% (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 18

State Bank of India "BUY" 17th Feb, 2014 Result update CMP Target Price Previous Target Price Upside Change from Previous BUY 1473 1779 1776 21 - During quarter SBI’s profitability declined by 34% largely due to higher provisions and contingencies led by deteriorating asset quality and higher tax in order to create DTL special reserve as per suggestion by RBI. However, bank has seen growth in loan and deposits which translated into growth in profit loss to some extent. Due to higher operating expenses, operating profit growth was negative despite of 14% growth in revenue. We value bank at Rs.1779/share which would be 1.1 times of FY14E’s book value. Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty 500112 SBIN 2469/1452 110126 9.44 lakh 6048 Moderate NII growth led by lower growth in interest earnings assets than interest bearing liabilities Bank reported NII growth of 13.4% YoY to Rs.12641 cr lower than our expectation of Rs. 12959 cr largely due to lower interest income from advances than higher deposits and borrowing cost. Total income was grown by 13.7% YoY to Rs.16831 cr supported by other income growth of 15% YoY to Rs.4190 cr. Other income growth was led by exchange and commission income gain of Rs.2971 cr and forex income Rs.643 cr. Stock Performance 1M Absolute -10.2 Rel.to Nifty -5.9 1yr -35.8 -37.9 YTD -35.8 -37.9 Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 62.3 62.3 62.3 FII 8.8 8.9 9.8 DII 17.9 17.7 16.7 Others 10.9 11.1 11.2 SBIN Vs Nifty Operating profit reported negative growth due to higher operating expenses led by employee benefit provisions Operating expenses increased by 31.4% YoY to Rs.9212 cr in which employee cost and other operating cost increased by 35% and 25.7% respectively. Employee cost was led by higher provision for pension and gratuity to the tune of Rs. 1355 cr as against Rs.743 cr in 3QFY13 and Rs.1283 cr in 2QFY14. Adjusting the same, employee cost increased by 8% YoY. Operating profit was declined by 2.2% YoY to Rs.7618 cr. Cost income ratio increased by 735 bps YoY to 54.7% from 47.4% in 3QFY13. Moderate NII growth, higher operating expenses and higher provision and tax rate led profit de growth of 34% YoY SBI’s profitability was declined by 34% YoY largely due to higher provisions and contingencies led by deterioration in asset quality and higher tax rate in order to create DTL special reserve as per suggestion by RBI. Financials NII Total Income PPP Net Profit EPS 2011 32526 48351 25336 8265 130.2 2012 43291 57643 31574 11707 174.5 Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. Rs, Cr 2013 2014E 2015E 44331 49365 58302 60366 65288 74225 31081 29105 33401 14105 10241 11765 206.2 149.7 172.0 (Source: Company/Eastwind) 19

State Bank of India Continue to report week trend of asset quality During quarter bank increased provisions and contingencies by 37% QoQ to Rs. 4150 cr due to deteriorating asset quality. In absolute term GNPA and net NPA increased by 6% and 16% sequentially. In absolute term, GNPA and net NPA stood at 5.9% and 3.2% versus 5.8% and 2.9% in 2QFY14 respectively. During quarter bank’s loan loss provision increased by 29.6% sequentially and stood at Rs.23429 cr. Standard asset provisions and depreciation provisions were Rs.196 cr and Rs.621531 cr respectively. Net provisions were declined by 4% sequentially which resulted 16% rise in net NPA in absolute term. Consequently provision coverage ratio without technical writ off was declined by 475 bps QoQ to 45.2% from 50% in previous quarter. Strong traction in loan and deposits growth Loan grew by 17.4% YoY led by across the sectors. Loan to large corporate grew by 17% YoY, mid corporate grew by 19%, SME grew by 14% and retail loan grew by 19%. Strong traction in auto loan (21.2% YoY) and house loan (19.4% YoY) led retail loan growth. Deposits grew by 17% YoY largely supported by 20% YoY growth in term deposits followed by saving deposits and demand deposits which grew by 8% and 13% respectively. Overall CASA ratio was declined by 153 bps YoY to 41%. NIM declined on account of higher deposits cost and lower yield SBI’s net interest margin was flat at 3.19% versus 3.18% in previous year. Domestic NIM declined by 2 bps to 3.49% while oversea NIM declined by 1 bps sequentially to 1.49%. Cost of deposits increased to 6.25% from 6.22% sequentially while yield on advances inch up to 10.4% from 10.3% in previous quarter. Credit deposits ratio marginally declined from 85.3% to 85.1%. Valuation & View During quarter SBI’s profitability declined by 34% largely due to higher provisions and contingencies led by deteriorating asset quality and higher tax in order to create DTL special reserve as per suggestion by RBI. However, bank has seen growth in loan and deposits which translated into growth in profit loss to some extent. Due to higher operating expenses, operating profit growth was negative despite of 14% growth in revenue. We value bank at Rs.1779/share which would be 1.1 times of FY14E’s book value. Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 20

State Bank of India Moderate NII growth led by lower growth in interest earnings assets than interest bearing liabilities Operating profit reported negative growth due to higher operating expenses led by employee benefit provisions Moderate NII growth, higher operating expenses and higher provision and tax rate led profit de growth of 34% YoY Source: Esatwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 21

State Bank of India Quarterly Performance 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 26310 8228 92 241 34870 4190 39061 22230 12641 4190 16831 5867 3345 9212 7618 4150 3469 1234 2235 2QFY14 25379 8137 106 300 33922 3278 37200 21671 12251 3278 15529 5819 3399 9218 6312 3029 3283 908 2375 3QFY13 22800 7072 110 362 30344 3648 33992 19189 11154 3648 14803 4351 2661 7012 7791 2668 5123 1727 3396 Balance Sheet (Rs Cr) Deposits Borrowings Investments Loan 1349940 189969 426728 1148901 1292456 188937 398536 1103090 Asset Quality GNPA NPA % GNPA % NPA PCR(%)(w/o technical write-off) 67799 37167 5.9 3.2 45.2 64206 32151 5.8 2.9 49.9 % YoY -34.2 % QoQ 3QFY14E Variation(%) 3.7 25937 1.4 1.1 8303 -0.9 -13.0 109 -15.9 -19.7 349 -30.9 2.8 34699 0.5 27.8 3876 8.1 5.0 38575 1.3 2.6 21739 2.3 3.2 12959 -2.5 27.8 3876 8.1 8.4 16835 0.0 0.8 6364 -7.8 -1.6 3737 -10.5 -0.1 10101 -8.8 20.7 6734 13.1 37.0 3112 33.3 5.7 3622 -4.2 36.0 1087 13.6 -5.9 2535 -11.9 1156691 148374 359959 978115 16.7 4.4 28.0 0.5 18.5 7.1 17.5 4.2 53458 25370 5.5 2.6 52.5 26.8 5.6 46.5 15.6 15.4 16.3 -16.1 -33.3 14.9 14.9 14.9 15.8 13.3 14.9 13.7 34.8 25.7 31.4 -2.2 55.5 -32.3 -28.5 1337803 202402 415135 1152774 0.9 -6.1 2.8 -0.3 Source: Esatwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 22

State Bank of India Income Statement 2011 2012 2013 2014E 2015E 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 Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax 59976 19826 236 1356 81394 15825 97219 43235 2562 3071 48868 32526 15825 48351 15212 7804 23015 25336 17071 8265 0 8265 81078 23949 350 1144 106521 14351 120873 55644 3886 3700 63230 43291 14351 57643 16974 9095 26069 31574 13090 18483 6776 11707 90537 27200 545 1374 119657 16035 135691 67465 4124 3737 75326 44331 16035 60366 18381 10904 29284 31081 11131 19950 5846 14105 102590 32037 415 1253 136294 15923 152217 61066 10146 0 86929 49365 15923 65288 22795 13388 36183 29105 14253 14852 4611 10241 120306 39720 415 1253 161693 15923 177616 70226 11668 0 103391 58302 15923 74225 25719 15105 40824 33401 16594 16808 5042 11765 933933 16.1 461521 49 119569 295601 756719 1043647 11.7 467607 45 127006 312198 867579 1202740 15.2 539063 45 169183 350927 1045617 1383151 15.0 580923 42 215867 32037 1202459 1590623 15.0 668062 42 248248 39720 1382828 7.9 6.9 7.0 4.6 4.7 4.6 9.3 7.9 8.4 5.3 6.0 5.4 8.7 8.0 8.0 5.6 4.6 5.5 8.5 7.4 0.0 6.3 4.7 5.4 8.7 8.0 0.0 6.5 4.7 5.6 12.7 1023 2.7 13.9 1251 1.7 14.3 1446 1.4 9.3 1617 0.9 9.8 1617 0.9 Net Profit Deposits Change (%) of which CASA Dep Change (%) Borrowings Investments Loans Ratio Yield on Advances Yield on Investments Yield on Funds Cost of deposits Cost of Borrowings Cost of fund Valuation ROE(%) Book Value P/BV Source: Esatwind/Company Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 23

SUNPHARMA "NEUTRAL" 17th Feb' 14 Robust Performance Result Update NEUTRAL CMP Target Price Previous Target Price Upside Change from Previous 609 650 7% Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs, Cr) Average Daily Volume Nifty 524715 SUNPHARMA 650/385 126,119 535293 6048 Stock Performance-% Absolute Rel. to Nifty 1M 1.1 4.7 1yr 57.1 55.2 YTD 82.9 70 Share Holding Pattern-% Promoters FII DII Others Current 2QFY14 1QFY1 4 63.7 63.7 63.7 22.5 22.8 22.9 5.7 3.2 3.1 8.1 10.4 10.4 One Year Price vs Nifty Sun Pharmaceuticals Industries limited posted 3QFY14 results above street expectations with total revenues including other operating income at Rs 4312 Cr up 50.5 % YoY led by robust growth in US formulations and Taro business. The stellar performance of company was supported well from domestic operations as well. The US formulation business grew by more 56 % YoY to USD 434 Mn while International formulation sales outside US grew by 16 % YoY to USD 84 Mn. Overall international revenues accounted for more than 75% of total revenues for the quarter. The Sales of branded prescription formulations in India was Rs. 947 Cr up by 20% Yoy from Q3FY13 last year. The API business for the quarter witness some decline with sales falls to Rs 174 Cr translating decline of 17 % YoY. The operating EBITDA for the quarter came at Rs 1975 Cr grew by 57 % YoY and OPM stands at 46 %.There is improvement in OPM by 200 bps during the quarter owing to stronger operating metrics. The RM cost as percentage of sales was 14 % versus 15 % for the same corresponding period last fiscal. The employ cost as percentage of sales was 12 % in current quarter verses 14% for 3QFY13.The company managed to control its other expenses during the 3QFY14 and has dropped by 100 bps at 24 % of the sales. The net profit for the quarter came at Rs 1531 Cr compared to Rs. 881Cr for Q3 last year, up 74% YoY. The NPM for the 3QFY14 came at 36%.The other income for the 3QFY4 was Rs 134 Cr and Tax rate was at 12 %. The company on its R&D said that in the 3QFY14, ANDA for 5 products were filed. After counting these, and adjusting for filings that were dropped, cumulatively ANDAs for 468 products have been filed with the USFDA (as on December 31, 2013). ANDAs for 4 products received approvals in the third quarter, taking the total number of approvals to 337 (as on December 31, 2013). ANDAs for 131 products now await USFDA approval, including 14 tentative approvals. The management of the company after 3QFY14 results has revised its FY14E revenue guidance to 29 % from 25 % earlier. Guidance is at constant exchange rate. The company further said that capex for the FY14 would be on higher side of earlier guidance. The tax rate for the full year would be 15 % and R&D expected to be in the range of 6-8% of the Sales for the FY'14. View & Valuation The stock at its CMP of Rs 609 is trading at 22.1x of one year forward FY14E EPS of 27.60 and company has posted very strong 3QFY14 results however on account stretched valuations we do not see much upside to stock and therefore we turn neutral with TP 650. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 4312 2000 1531 46.4% 35.5% 2QFY14 4207 1843 1362 43.8% 32.4% (QoQ)-% 2.5 8.5 12.4 260bps 310bps 3QFY13 2865 1275 881 44.5% 30.8% Rs, Crore (YoY)-% 50.5 56.9 73.8 190bps 480bps (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 24

SUNPHARMA Sales and PAT Trend (Rs) Total revenues including other operating income came at Rs 4312 Cr up 50.5 % YoY led by robust growth in US formulations and Taro business. (Source: Company/Eastwind) OPM % There is improvement in OPM by 200 bps during the owing to stronger operating metrics. (Source: Company/Eastwind) NPM % The NPM for the 3QFY14 came at 36%.The other income for the 3QFY4 was Rs 134 Cr (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 25

"BUY" CIPLA Result Update BUY CMP Target Price Previous Target Price Upside Change from Previous 381 440 15% Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs, Cr) Average Daily Volume Nifty 500087 CIPLA 450/354 30,591 617290 6,001 Stock Performance-% Absolute Rel. to Nifty 1M -4.5 -1.7 1yr -3 -4.3 YTD -2 -14 Share Holding Pattern-% Promoters FII DII Others Current 2QFY14 1QFY1 4 36.8 36.8 36.8 23.8 23.8 23.1 10.6 10.9 10.8 28.8 28.5 29.3 One Year Price vs Nifty 14th Feb' 14 Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. The growth in export revenues was primarily due to growth in anti-retroviral, anti-cancer, anti-allergic and anti-biotic segments. The operating EBITDA for the quarter under review came Rs 403 Cr and OPM at 17.88 %.The OPM declines by more than 600 bps YoY due to the increase in the R&D and the ramp up in the Staff cost during the quarter. The employ cost as percentage of sales stands at 14 % while it was 12 % for the same time last fiscal. The other expenses as percentage of sales were 27% for the 3QFY14 versus 25 % in 3QFY13.The other expenditure increased largely due to rise in R&D expenses and rise in the cost owing to filings and setting up of the front end during the quarter. The R&D expenses 4.5% of Sales during the quarter. The net profits for the quarter came at Rs 261 Cr and NPM stands at 11.43 %. The Rs 40 Cr Forex gain is included in the other income during the quarter. The tax rate for the quarter was nearly at same rate as in corresponding last quarter at 25 %. The Company filed 10 ANDA's in the last nine months and got 6 approvals for the same period. It has 35 ANDA's under approval as on 31st December 2013. The few of the approval products are commercialized. Cipla Medpro formed as acquisition of Medpro,South Africa last year added 500 Cr to top line and 50 Cr to the operating profits during the quarter. The management of the company after the results said that the Global respiratory unit expects some of launches in the next year. It has set up new global respiratory team during the quarter. The Combination inhalers planned to launch in FY'15.Company expects to be more than 5% of Sales on the back of ramp up filings for the FY'15.The Capex is 90 Cr during the quarter and expects to be Rs 400 Cr FY'14. The Rollover Capex of previous year is Rs 150 Cr during the year. View & Valuation The stock at its CMP of Rs 381 is trading at 19.58 x of one year forward FY14E EPS of Rs 19.40.The stock has reacted negatively after 3QFY14 results however we don’t see any downside risks to our estimates. We further believe that Cipla-Medpro would be earning accretive in medium to long term horizons and we view the recent correction a good entry point for the stock. We maintain our view BUY for the stock with Target Price of Rs 440. Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 2282 403 261 17.7% 11.4% 2QFY14 2347 533 376 22.7% 16.0% (QoQ)-% (2.8) (24.4) (30.6) (500bps) (460bps) 3QFY13 2070 492 338 23.8% 16.3% (YoY)-% 10.2 -18.1 -22.8 (610bps) (490bps) (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 26

CIPLA Business Trend The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. (Source: Company/Eastwind) Revenue Trend % Net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to. (Source: Company/Eastwind) OPM & NPM Trend % The OPM declines by more than 600 bps YoY due to the increase in the R&D and the ramp up in the Staff cost during the quarter. (Source: Company/Eastwind) Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report. 27

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.

Add a comment

Related presentations

Related pages

Bank Of Baroda Stock Price, Share Price, Live BSE/NSE ...

Bank Of Baroda Stock/Share prices, ... What's your call on Bank of Baroda today? ... Buy Bank Of Baroda; target of Rs 195: ...
Read more

Bank of Baroda Share Price, NSE/BSE Live Stock Price ...

View Bank of Baroda NSE & BSE Live Share price. Get details on Bank of Baroda future ... "Buy Bank of Baroda with a target of Rs 138 ... Bank stocks bleed ...
Read more

Stock:Bank of Baroda (NSE:BANKBARODA) - See your portfolio ...

"Bank of Baroda is a 'BUY' call with a target of ... Shares of Bank of Baroda today fell ... % gain in stock price. Shares of the state-owned bank ...
Read more

Bank of Baroda Stock Price, Charts, Details and Latest ...

Get Bank of Baroda live share price, historical ... ago Bank recap plan lower than market ... Compare Bank of Baroda with other stocks. City Union Bank ...
Read more

StockTargetPrices

Projections of publicly traded stocks by analysts from Wall St. and beyond. StockTargetPrices Latest Reports Pricing Contact Sign in Sign up. ... Deutsche ...
Read more

Stock Quote - The Globe and Mail

The Globe and Mail offers the most ... that cover Royal Bank of Canada, the consensus rating is a buy. ... RBC targets market share gains in U.S ...
Read more

BAC stock quote - Bank of America Corporation Common Stock ...

Stock quote for Bank of America Corporation ... "Today's Low" The lowest sales price the stock has fallen to ... the largest share of the bank's ...
Read more

BOFI stock quote - BofI Holding, Inc. Common Stock price ...

Stock quote for BofI Holding, Inc ... "Today's Low" The lowest sales price the stock has ... is the number of shares of the stock traded on ...
Read more

The Best Shares to Buy - Latest Stock News & Analysis ...

The best shares to buy now on the S&P/ASX 200, backed by our team of expert analysts. Start profiting from the hottest stocks.
Read more