Stock Advisory for Today - Natural View on the Stock Dena Bank, Nestle India and Buy Vardhman Textiles

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Information about Stock Advisory for Today - Natural View on the Stock Dena Bank, Nestle...
Finance

Published on February 24, 2014

Author: narnolialtd

Source: slideshare.net

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Narnolia Securities Limited natural view on Stock of Dena Bank, Nestle India. Also we recommend BUY for the Vardhman Textiles stock with target price of Rs.412 because 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

IEA-Equity Strategy India Equity Analytics 24th Feb, 2014 Daily Fundamental Report on Indian Equities Nestle India :"The nest becomes weaker" "Neutral" Edition : 212 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 : 24) 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 : 5-7) 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 : 8- 12 ) 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 : 13- 17) 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 : 18- 22) 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 : 23-25) 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 : 26-28) Narnolia Securities Ltd,

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 magin 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) 2

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. 3

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) 4

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. 5

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 6

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, 7

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) 8

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. 9

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. 10

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. 11

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. 12

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) 13

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. 14

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. 15

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. 16

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. 17

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) 18 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. 19

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. 20

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. 21

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. 22

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. 23

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. 24

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. 25

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. 26

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. 27

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. 28

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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