India Equity Analytics Today- Buy Stock of Oriental Bank and Finolex Cables Ltd

8/13/2019 India Equity Analytics Today- Buy Stock of Oriental Bank and Finolex Cables Ltd

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13th Feb 2014

Finolex Cables (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales and EBITDA margin. Decline in communication

cable segment segments as well as high raw material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore inthe quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter ended December 2012. Third Quarter result weremarginally below our expectaton which led us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even afterposting marginally below result the stock is quite attractive at current market price of Rs. 81 and left a limited upside of 11%, however weadvised our reader to book a part profit on stock . ......................................... ( Page : 2-3)

"BUY"Finolex Cables Ltd: "Reasonable prospects..."

13th Feb 2014

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to grow by 9-12% based on broad feedback loop fromcompanies and captives. Overall, Indian IT Industry is expected to reach the mark of USD130billion. For FY14, Indian IT industry is expected toreport 13% growth, in line with NASSCOM guidance at 12-14%. ....................................................... ( Page : 4-6)

IT Industry;NASSCOM Guidance : "FY15E; a year of growth opportunity"

ORIENTAL BANK : "BUY" 13th Feb 2014Orient Banks profitability declined by 31% YoY on the back of subdues growth at NII level led by margin compression. Higher operatingexpenses and tax rate caused muted return ratios. Asset quality pressure remained persist and asset impaired (GNPA + Restructure advance)remained at elevated level. We have buy rating on the stock due to inexpensive valuation. We value bank at Rs.216/share which is 0.4 times of FY14Es book. ................................................. ( Page : 7- 11)

TATAMOTORS :Strong Results "BUY" 11th Feb 2014

Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back of strong demand ,Growth in volume and favourableproduct mix and geography mix of Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new Range Rover Sport,New Range Rover and Jaguar F-Type . . .......................................................... ( Page :17- 18)

13th Feb, 2014

Edition : 205

IEA-EquityStrategy

Ambuja Cements Ltd: "Neutral" 10th Feb 2014

For the full year,net profit declined 1% to Rs 1278 crore as against Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs9795 crore in CY12.Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -1.9% YoY) . At current price of Rs 163,stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP Rs.163 for a target price Rs.165............................................................ ( Page : 22-24)

ACC Ltd: "BUY" 10th Feb 2014

ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC declined a mere 2% to Rs 10,908.41 crore, as the sales

relaisations remained low and Cost remained stable. Cement sales volumes remained flat for ACC .At current price of Rs 1046, stock is trading at2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks good from current level, hence we recommend Buy on the stock at CMP Rs.1046for a target price Rs.1257. ..................................................... ( Page : 19-21)

UNION BANK : "BUY" 12th Feb 2014

Union Banks profit growth was due to lower provisions led by lower slippage and restructure assets. Operating profit was negative due tomuted NII growth and higher operating expenses. Banks loan and deposits both are grown by 20% along with improvement in CD ratio. Thiswould help to expand margin and hence profitability. Like other PSBs, Union bank is trading at attractive valuation and we value Rs.152/sharewhich is 0.5 times of FY14Es book ...................................................... ( Page : 12- 16)

Narnolia Securities Ltd,

India Equity Analytics aily Fundamental Report on Indian Equities


2/25

V- Finolex Cables Ltd.

MP 81rget Price 90evious 73side 11%ange from 0%

E Code 500144E Symbol

wk Range 41/92kt Capital 1,238erage Daily 94,300fty 6,084

1M 1yr YTDsolute (4.1) 46.7 78.0l. to Nifty (2.7) 43.7 71.0

3QFY14 2QFY14 1QFY14omoters 35.8 35.8 35.8

1.8 1.1 1.0I 9.8 10.2 10.5

hers 52.5 52.9 52.8

Financials Rs, Crore3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-

Revenue 563.1 593.1 -5.1% 534.3 5.4%EBITDA 44.3 76.4 -42.0% 42.9 3.2%PAT 24.5 80.0 -69.4% 24.0 2.1%EBITDA Margin 7.9% 9.3% (140) bps 8.0% (10) bpsPAT Margin 4.3% 12.8% (850) bps 4.5% (20) bps

Valuation :

FCL being one of the leading players in the cable industry seems well placed to capture hugeopportunities considering the strengths & the industry in which the Company is operating.Derivative losses coupled with bleak performance by communication cable segment were themajor reasons for de-rating of the stock in past which in our view seems to have been overdone.The companys LT division is doing very well, they have recently entered into HT and Extra HighVoltage (EHV) cable verticals. The company has market share of around 15-16 percent in bothelectrical and telecommunication verticals. Further the company has approved setting up acaptive 5 MW solar power plant at its manufacturing facilities at Urse, Pune at an estimated cost

of Rs 40 crore.

Outlook :

arket Data

Finolex Cables (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower salesand EBITDA margin. Decline in communication cable segment segments as well as high rawmaterial prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crorein the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarterended December 2012. Third Quarter result were marginally below our expectaton which ledus to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Evenafter posting marginally below result the stock is quite attractive at current market price of Rs.81 and left a limited upside of 11%, however we advised our reader to book a part profit onstock

The copper rods segment was initially set up as backward integration for the cables segment. Theexcess production after captive consumption is sold off to third parties at market price. However,owing to thin and declining margins from third party transactions, FCL is gradually reducing itsexposure to the segment. The contribution of the segment to the top-line has decreased from

21% in FY2010 to ~5% currently. This trend is expected to continue, thereby improving theoverall EBIT margin of the company.

FINCABLES

Book Partial Profit

(Standalon

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

(Source: Company/ Eastwind Research)

We cut our earnings estimates to factor volume decline in electrical & communication cablesegment, margin decline in copper rod segment and losses in the others segment. Consequently,we cut our earnings estimates by 8.6% for FY14E (Rs. 11.6/Share) and 4.1% for FY15E (Rs.12.6/Share). At the CMP of Rs. 81 stock is trading at PE of 7.0/6.4 of FY14E/15E. We revised ourrating on stock from "Buy" to "Hold". However owing to slower pace of economic growth furtherwe advised our readers to book part profit on stock and hold the balance with a target price of Rs. 90

"Reasonable prospects..."

sult update

yr Forward P/B

are Holding Pattern-%

ock Performance-%

"Book Partial Profit "13th Feb' 14



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Finolex Cables Ltd.

ey financials :

urce: Company/ Eastwind Research)


ARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E

erformance

Revenue 1342 1619 2036 2064 2271 2315 2500Other Income 51 24 26 36 24 47 42

otal Income 1392 1643 2062 2100 2295 2362 2542BITDA 100 195 174 175 229 241 258BIT 61 157 135 135 182 191 205

Depriciation 39 37 39 39 47 50 53ntrest Cost 32 19 19 26 12 14 14BT -30 89 107 109 171 234 233AX 5 32 22 11 26 56 56

Derrivative Loss -109 -74 -34 -36 -23 10 0Reported PAT -35 58 85 98 145 178 185Dividend 3 9 11 12 18 23 23

PS -2.3 3.8 5.6 6.4 9.5 11.6 13.1DPS 0.2 0.6 0.7 0.8 1.2 1.5 1.5

Yeild %

BITDA % 7.4% 12.0% 8.5% 8.5% 10.1% 10.4% 10.8%NPM % -2.5% 3.5% 4.1% 4.7% 6.3% 7.5% 7.3%

arning Yeild % -12.0% 7.4% 11.7% 20.6% 20.9% 14.3% 16.2%Dividend Yeild % 1.0% 1.2% 1.5% 2.6% 2.6% 1.9% 1.9%ROE % -6.0% 9.0% 11.9% 12.3% 15.7% 16.5% 15.4%ROCE% -4.0% 6.3% 8.7% 10.1% 13.1% 14.3% 13.7%

osition

Net Worth 596 643 717 800 924 1079 1249otal Debt 296 275 260 172 184 160 160apital Employed 892 918 978 972 1109 1239 1409

No of Share 15 15 15 15 15 15 15MP 19 51 47 31 46 81 81

Valuation

ook Value 39.0 42.0 46.9 52.3 60.4 70.6 81.7/B 0.5 1.2 1.0 0.6 0.8 1.1 1.0nt/Coverage 1.9 8.4 7.0 5.2 14.6 13.6 14.6

/E -8.3 13.4 8.5 4.9 4.8 7.0 6.4


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IT Industry;NASSCOM Guidance


For FY14, Indian IT industry is expected to report 13% growth, in line with NASSCOMguidance at 12-14%. While, domestic revenue could be seen below expectation becauseof delay in decision-making and policy paralysis by government.

Despite various challenges across the Industry, overall ecosystem is changing and theyare transforming into dynamic era by adapting new verticals like SMAC (Social, Mobility,Analytics, and Cloud), Big data and Digital etc. Even, IT players are making its healthyexistence in US and Europe regions. They are also running for new geographies likeAfrica, APAC and MEA.Interesting analytical facts behind NASSCOM Guidance :

(a) Growth rate for the Big 4 (Infosys, Wipro, TCS and HCLT) has been better thanindustry growth from FY02-08. However, that trend started changing from FY09 with atleast two players underperforming the industry growth every year (with the exception ofFY11). For FY14E, a street expectation also indicates that still 2 players could beunderperformer.(b) Profitability growth is also equally important than revenue growth. While this may benitpicking, even in a healthy year of growth of 16% for the Indian IT industry in FY12, andEBITDA margins of Tier-1 IT (ex-HCLT) declined 50-180 bps. This was even after 6%depreciation of the Rupee against the US$ and favorable cross-currency trends.

(c) This is fact; the tempo of market share gain by top players is reducing combinedbecause of faster growth by global players, faster focus on captives, and dogfight overbidding and vendors consolidation. For FY15E, Tier-1 players are sanguine on beatingguidance by on an average 1-2% as record of accomplishment of previous 5 years.

Despite above facts, our optimism on Indian IT is based on possibility of acceleratedgrowth in 2014, on: (1) Improved business sentiment in the US and Europe; (2) signs of discretionary spending coming back; (3) continued market share gains for Indiancompanies; and (4) increased spending due to adoption of new technologies.

R/USD&CNX IT Performance(2013);

013 has been a year of innovation andtransformation and 2014 could be an

execution year.

er-1: TCS, INFY, HCLTECH, and WIPRO)

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market togrow by 9-12% based on broad feedback loop from companies and captives. Overall,Indian IT Industry is expected to reach the mark of USD130billion. Considering thebetter economic data, healthy growth pattern of US economy, and the increase inglobal IT spending & global sourcing models, Indian IT players are confident to see3.9% of global IT spending and 5.9% growth in Business Process Management space in2014.

(Source: Company/Eastwind)

FY14E and NASSCOM Guidance;

rformance of Our IT Coverage Optimistic guidance by NASSCOM (FY15E), IT Industry is fit-well for all grounds;After 3 consecutive conservative guidance, NASSCOM (National Association of Software and Services Companies) revealed earning guidance for FY15E with positiveoutlook led by favorable demand discretionary environment. Overall, Industry ischeering with NASSCOMs fair guidance and they are confident to catch up the growthtarget.

"FY15E; a year of growth opportunity"


ASSCOM Guidance and Industry Growth-USD termYear NASSCOM Guidance-% Actual Growth-%FY03 30 25

FY04 26-28 34

FY05 30-35 37

FY06 30-32 33

FY07 25-27 32

FY08 24-27 30

FY09 21-24 17

FY10 4-7 5

FY11 13-15 19

FY12 16-18 16

FY13 11-14 10

Y14E 12-14 13Y15E 13-15 -

xport Revenue (USD, mn)Year Tier-1 IT ExportsFY04 3670 12900FY05 5300 17700FY06 7163 23605

FY07 10142 31206FY08 14399 40418FY09 16200 47103FY10 17100 49690FY11 21342 59035FY12 25475 68687FY13 28165 75800

FY14E 31000-32000 84000-87000FY15E - -


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e have seen a significant increase in global technology spending this year, creatingportunities for the Indian software services sector to post double-digit growth againexport as well as in the domestic markets. FY15 promises to be bigger and stronger

an the last 3 years, which were marked by bloodbath in global markets due to Euro-ne crisis and falling consumer confidence in the US. Demand is set to pick up inctors like BFSI, healthcare, retail and transportation globally in the year ahead.

r FY15E, We expect that strong fundamentals should help to sustain earningomentum in FY15E. Foray into niche verticals and executions of large deal would play anportant factor for better earning visibility in near future. There is a window of portunity for competent large caps and midcaps to displace incumbents and gain somecremental business. In the past 4 quarters, large caps (four companies) have grown at4% CQGR, while midcaps (five companies) at 3.2%which is comparable to larger peers.

n Tier-1 IT players, we are positive on INFY, TCS and HCL Tech. While, across the Midp and niche players we are optimistic view on TECHM, PERSISTENT, ZENSARTECH,

CLERX and KPIT .

ew and Valuation;

IT Industry;NASSCOM Guidance

ur view on Industry Per se: NIFTY and CNX IT performance




CMP Upside(12.02.14) % FY13 FY14E FY15E FY13 FY14E FY15E FY13

S 2103.8 BUY 2510 19.3% 71.82 95.00 109.31 29.29 22.15 19.25 36.4% 37.5% 34.4%

FOSYS 3599.6 BUY 3910 8.6% 164.2 188.0 218.2 21.92 19.15 16.50 24.8% 23.7% 22.9%

CLTECH 1491.6 BUY 1560 4.6% 58.10 79.36 98.11 25.67 18.79 15.20 30.7% 31.5% 29.4%

PRO 562.15 NEUTRAL - - 25.0 31.07 33.5 22.44 18.10 16.78 21.7% 22.7% 20.8%

CHM 1875.55 BUY 2130 13.6% 123.97 155.37 175.50 15.13 12.07 10.69 34.8% 30.7% 26.0%MC 1424.45 NEUTRAL - - 75.27 86.04 92.35 18.92 16.56 15.42 24.1% 22.8% 20.7%

ITTECH 421.55 BUY 443 5.1% 36.28 43.33 54.18 11.62 9.73 7.78 20.0% 19.4% 19.6%

IT 167.15 BUY 177 5.9% 10.80 12.63 16.82 15.47 13.23 9.94 20.1% 19.3% 20.7%

XAWARE 144.55 NEUTRAL - - 13.9 15.0 16.0 10.40 9.61 9.03 27.4% 24.9% 22.5%

RSISTENT 1021.8 BUY 1065 4.2% 46.12 61.42 79.08 22.16 16.64 12.92 18.1% 20.3% 21.4%

LERX 1203.15 BUY 1358 12.9% 64.25 71.61 83.65 18.72 16.80 14.38 43.8% 37.9% 34.4%

ATAELXSI 392.1 N EUTRAL - - 10.63 24.02 28.36 36.89 16.32 13.83 16.9% 29.7% 27.4%

NSARTECH 365.65 BUY 440 20.3% 40.03 52.70 68.97 9.13 6.94 5.30 23.2% 24.5% 25.2%

NDTREE 1644.45 NEUTRAL - - 89.72 100.94 114.93 18.33 16.29 14.31 28.4% 25.6% 23.6%

RoE-%ompany View Target

EPS-Rs P/E-x

43.9%

3.1%


7/25

172

216222

26-2.703

1M 1yr YTDsolute -16.8 -44.4 -44.4l.to Nifty -13.8 -47.4 -47.4

Current 1QFY14 4QFY1omoters 59.1 58.0 58.0I 9.6 10.0 10.1

I 24.9 24.0 24.6hers 6.4 8.1 7.3

Financials Rs, Cr 2011 2012 2013 2014E 2015E

NII 4178 4216 4701 5136 6970Total Income 5138 5456 6356 6724 8558PPP 3245 3141 3691 3680 4707Net Profit 1503 1142 1328 1046 1812EPS 51.5 39.1 45.5 34.9 60.4

ORIENTAL BANK

ORIENTBANK

Muted NII growth on the back of margin compressionarket Data

pside

310/121wk Range H/L

Orien t bank repo r ted w eak se t o f quar te rly num bers wi th ne t p ro f i t dec l ined b y 3 1 % Yo Y d u e t o mu t e d g r o w t h i n N I I a n d h i g h e r o p e r a t i n g e x p e n s e s . A s s e t

qua l i ty p res su re remain pers i s t wi th to ta l impai red as se t (GNPA+ Res t ruc tu re advances ) remain h igh a t 11 .1% o f loan . Bank made lower p rov i s ions aga ins t b a d l o a n d e s p i t e o f d e t e r i o r a t i o n i n a s s e t . We h a v e b u y r a t i n g o n t h e s t o c k d u e t o i n e x p en s i v e v a l u at i o n . We Val u e b a n k a t R s . 21 6/s h a r e w h i c h i s 0 .5 times of FY14Es book value.

Operating expenses increased by 9% YoY in which employee cost and other operating cost increased by 1% and 20% respectively. Flat employee cost was dueto lower wage settlement provisions made by bank. Consequently CI ratio declined to45.4% from 41.5% in last quarter and 48.2% in previous quarter. Muted NII growth,lower other income and higher operating cost led pre provisioning profit declined to7% YoY.

esult update BUYMP

rget Priceevious Target Price


During quarter banks NII grew by 2% YoY lower than expectation largely due tomargin compression and lower growth in loan and deposits. Margin compression wason account of lower loan yield as compare to cost of deposits. Total interest incomegrew by 6% YoY while interest expenses increased by 18% YoY which drag lower growth in NII. Other income was lower by 10% YoY to Rs.341 cr versus Rs.378 cr inlast year led by 48% declined in treasury gain. Overall revenue de-grew by 1% YoYto Rs.1571 cr.


ock Performance

erage Daily Volume4920

Asset quality stress persistsDuring quarter bank made provisions and contingencies to tune of Rs.561 cr asagainst Rs.551 cr in previous quarter and Rs.604 cr in last quarter. During quarter bank reported fresh slippage of Rs. 1043 cr (3.1% annualized) as against Rs.1015 cr (3.2% annualized) in previous quarter. In absolute term GNPA increased by 6% YoYto Rs.5184 cr while provision decreased by 8% YoY to Rs.1351 cr. Consequently netNPA increased by 12% QoQ to Rs.3833 cr. In percentage term, gross GNPA and netNPA stood at 3.87% and 2.9% from 3.81% and 2.7% respectively sequentially. Dueto lower provisions PCR (without technical write off) declined from 30% to 26%.Fresh restructure sharply surged to Rs.1365 cr during quarter and outstandingrestructure book stood at Rs. 9687 cr

2.21 cr fty 6084

kt Capital (Rs Cr)

SE Code 500315SE Symbol

Subdue NII growth and higher operating expenses led negative growth in PPP

hange from Previous

RIENT BANK Vs Nifty


"BUY"13h Feb2014



8/25

nk reported 15 bps QoQ margin compressions on account of higher cost of fund than

an yield. During quarter banks cost of fund declined by 10 bps QoQ while yield on loan

clined by 38% QoQ to 10.8% from 11.2%. Yield in investment also declined from 7.4%

6.9% which also cause margin compression.

ofitability declined on account of muted NII growth, higher operating expenses

d tax rateient banks profitability declined by 31% YoY to Rs.224 cr lower than our expectation of

. 269 cr largely due to weak performance all around. During quarter bank reported

uted NII growth, lower other income, higher operating cost and higher tax rate.

luation & View

ORIENTAL BANK

ient bank reported weak set of quarterly numbers with net profit declined by 31% YoYe to muted growth in NII and higher operating expenses. Asset quality pressure remain

rsist with total impaired asset (GNPA+ Restructure advances) remain high at 11.1% of an. Bank made lower provisions against bad loan despite of stress in asset. We havey rating on the stock due to inexpensive valuation. We Value bank at Rs.216/shareich is 0.5 times of FY14Es book value.


argin compression on account of higher cost of fund than loan yield

bdue loan and deposits growthn balance sheet front, bank reported very sluggish growth rate with deposits grew by

% YoY in which current account and saving account deposits grew by 3% and 12%

Y. CASA deposits in absolute term grew by 10% YoY and in percentage to total

posits it stood at 24.2% as against 23.9% in last quarter. Loan grew by 8.4% YoY to

.1340 bn led by 16% YoY growth in retail loan followed by mid corporate and large

rporate. Credit deposits ratio for the quarter remained same and it stood at 73.4%.



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ORIENTAL BANK

Source : Eastwind/ Company


hart Focus

Muted NII growth on the back of margin

compression

Subdue NII growth and higher operating

expenses led negative growth in PPP

Profitability declined on account of muted NIIgrowth, higher operating expenses and taxrate



10/25

ORIENTAL BANK

Source: Company/Eastwind



uarterly Result ( Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14Eterest/discount on advances / bills 3622 3591 3507 3.3 0.9 3783come on investments 1075 1076 954 12.7 -0.1 1137

terest on balances with Reserve Bank of India 21 9 8 167.2 135.4 20thers 6 0 0 2868.4 5027.3 4otal Interest Income 4723 4676 4469 5.7 1.0 4943thers Income 341 312 378 -9.8 9.3 425otal Income 5064 4988 4847 4.5 1.5 5368terest on deposits 3322 3234 3150 5.5 2.7 0terest on RBI/Inter bank borrowings 93 93 79 17.9 0.0 0thers 78 68 35 119.1 14.9 0terest Expended 3493 3395 3264 7.0 2.9 3548II 1230 1281 1204 2.2 -3.9 1395ther Income 341 312 378 -9.8 9.3 425otal Income 1571 1593 1582 -0.7 -1.4 1820mployee 394 446 391 0.8 -11.7 496ther Expenses 319 322 265 20.3 -0.8 359perating Expenses 713 768 656 8.7 -7.1 856PP( Rs Cr) 858 825 926 -7.3 4.0 965rovisions 561 551 604 -7.1 1.9 581BT 297 275 323 -7.8 8.3 384ax 73 23 -4 -1996.1 215.3 115

et Profit 224 251 326 -31.3 -10.8 269

alance Sheet ( Rs Cr)eposits 182470 175153 164174 11.1 4.2 184299oan 133962 128353 123623 8.4 4.4 135102

sset QialityNPA 5184 4887 3690 40.5 6.1PA 3833 3423 2610 46.9 12.0

GNPA 3.9 3.8 3.0 NPA 2.9 2.7 2.1


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105.2

152163

45-7

1M 1yr YTDsolute -15.3 -54.8 -54.8l.to Nifty -11.9 -56.8 -56.8

Current 1QFY14 4QFY1

omoters 60.1 57.9 57.9I 8.8 10.2 11.9

I 17.0 17.8 17.7hers 14.1 14.2 12.8

Financials Rs, Cr 2011 2012 2013 2014E 2015E

NII 6216 6793 7543 7974 8953Total Income 8255 9241 10095 10704 11683PPP 4305 5254 5583 5256 5724Net Profit 2082 1787 2158 1427 1431EPS 39.7 29.9 36.2 22.6 22.7

UNION BANK

ompany Update BUY U n i o n b an k r e p o r te d p r o fi t g r o w t h o f 15 .4 % l a rg e l y d u e to l o w e r p r o v i s io n s and con t ingenc ies l ed by lower s l ippage and res t ruc tu re as se t s . At opera t ing

p r of it l ev el b an k r ep o rt ed n eg at iv e g r ow t h o f 7 .1 % YoY d u e t o m a rg i n c o mp r e s s i o n a n d h i g h e r o p e r at i n g e x p e n s e s . Banks l o a n a n d d e p o s i t s b o t h

a re g rown by 20% a long wi th improvemen t in CD ra t io . L ike o ther PBS, Un ion

B a n k a l s o t r ad i n g a t 0 . 4 t ime s o f o n e y e a r f o r w a r d b o o k w h i c h i s i mp r e s s i v e .We value bank at Rs.152/share which is 0.5 times of FY14Es book value.

MP

rget Priceevious Target Pricepsidehange from Previous

arket DataSE Code 532477

Higher operating expenses drag operating profit in negative zone

Muted NII growth due to margin compressionSE Symbol UNIONBANK During quarter, banks NII grew by 3.8% YoY despite of loan and deposits growth of

20%. Lower NII was driven by higher cost of fund than yield on fund (Loan+Investment). Total interest earned by bank was grown by 19.5% whereas interestexpenses increased by 26.2% which took muted NII growth. Other income was

Rs.680 cr versus Rs.611 cr in previous year and Rs.640 cr in last year. With the littlesupport from other income, revenue during quarter was grown by 4.4% YoY toRs.2643 cr.

wk Range H/L 255/97kt Capital (Rs Cr) 6281erage Daily Volume 2.37 cr

fty 6063

ock Performance



Operating expenses during quarter was higher at 17.8% YoY which drag operating

profit growth in negative direction to 7.1% YoY to Rs.1262 cr. Employee cost and

other operating expenses increased by 12.4% and 27% YoY respectively. Operating

leverage (opex to total asset) remained stable at 0.4%.


Provisions lower because of lower slippage and restructure assetsProvisions and contingencies were lower by 29% YoY and 35% QoQ on the back of

lower slippage and restructure assets. During quarter bank witness fresh slippage of Rs, 1154 cr versus Rs.1657 cr in previous quarter and thereby taking slippage ratioto 2.1% from 3.1% in previous quarter. Fresh restructure advance was come down toRs.1004 cr as compare to Rs.1534 cr in previous quarter and Rs.1205 cr in lastquarter. Sequentially lower recovery (Rs.265 cr Vs Rs.419 cr) and lower write off (Rs.174 cr Vs Rs.270 cr) caused spike in gross NPA. GNPA as a percentage to grossadvances was increased by 22.5 bps QoQ to 3.9% from 3.7%. Loan loss provisionswas increased by 10% QoQ taking slightly improvement in PCR to 42.5% (withouttechnical write off) from 42.1% in previous quarter. Net NPA stood at 2.3% asagainst 2.1% in previous quarter.

NION Bank Vs Nifty

"BUY"12h Feb, 2014



13/25

argin narrowed due to higher cost of fund and asset yield

UNION BANK

an and deposits grew by 20% YoY but CASA declinedn balance sheet front, deposits grew by 19% YoY in which current account and savingcount deposits grew by 3.3% and 12.2% YoY respectively. Overall CASA increased by% YoY and in percentage to total deposits CASA ratio declined by 245 bps YoY to

.8% due to higher growth in wholesale deposits. Term deposits grew by 23.4% YoYking overall deposits growth. Due to higher share in bulk deposits, cost of fund spikeom 7.4% to 7.8%. In loan growth perspective, it grew by 20% YoY to Rs.2230 bn.cremental loan growth came from MMSE (29.5% YoY) followed by retail (28% YoY) andriculture (18.7% YoY). Credit deposits ratio improved by 56 bps to 78.2%.


argin narrowed by 50 bps on account of higher cost of fund than yield on assets.

verall cost of fund increased from 7.8% to 7.4% largely due to higher share of bulk

posits and lower CASA ratio. Yield on loan declined by 30 bps to 10% from 10.3% in

t quarter. Investment yield improved by 28 bps YoY to 8.2% from 7.9% in 3QFY13.

gher profit on account of lower provisions led by lower slippage and restructuresetsnion Bank reported net profit growth of 15.4% YoY largely driven by lower provisions

d contingencies. Tax rate was higher at 46.4% versus 28% in previous quarter mainly

e to Rs.44 cr created for deferred tax liabilities on special reverse as per suggestion of

BI. Bank has also normalized tax rate of 30% in 9MFY14.

luation & View

nion bank reported profit growth of 15.4% largely due to lower provisions andntingencies led by lower slippage and restructure assets. At operating profit level bankported negative growth of 7.1% YoY due to margin compression and higher operatingpenses. Banks loan and deposits both are grown by 20% along with improvement in

D ratio. Like other PBS, Union Bank also trading at 0.4 times of one year forward bookhich is impressive. We value bank at Rs.152/share which is 0.5 times of FY14Es booklue.



14/25


15/25

UNION BANK




uarterly Performance 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%)terest/discount on advances / bills 5565 5288 4775 16.6 5.3 5422 2.6

come on investments 1911 1890 1478 29.3 1.1 1839 3.9

terest on balances with Reserve Bank of India 36 51 41 -11.7 -28.6 51 -28.8hers 38 43 26 46.3 -12.1 44 -14.7

otal Interest Income 7550 7271 6320 19.5 3.8 7356 2.6hers Income 680 611 640 6.3 11.2 684 -0.6

otal Income 8230 7882 6959 18.3 4.4 8040 2.4

terest Expended 5587 5317 4428 26.2 5.1 5313 5.1II 1964 1954 1891 3.8 0.5 2043 -3.9her Income 680 611 640 6.3 11.2 684 -0.6

otal Income 2643 2566 2531 4.4 3.0 2727 -3.1mployee 823 807 733 12.4 2.0 757 8.8

her Expenses 559 534 440 27.0 4.6 484 15.4perating Expenses 1382 1341 1173 17.8 3.1 1241 11.4

PP( Rs Cr) 1262 1225 1358 -7.1 3.0 1486 -15.1ovisions 610 937 857 -28.8 -34.8 913 -33.2

BT 651 288 501 30.0 126.0 573 13.7

ax 302 80 199 52.2 277.6 172 75.9et Profit 349 208 302 15.4 67.7 401 -13.0

alance Sheet ( Rs Cr)et Worth 18165 18046 15973 13.7 0.7 17847 1.8

eposits 285125 287029 239355 19.1 -0.7 271558 5.0

orrowings 31730 27664 22883 38.7 14.7 23945 32.5vestment 93778 95600 75117 24.8 -1.9 91294 2.7 dvances 223024 217295 185885 20.0 2.6 198543 12.3

sset QualityNPA( Rs Cr) 8776 8061 6384 37.5 8.9

PA ( Rs Cr) 5048 4670 3168 59.3 8.1 GNPA 3.9 3.7 3.4 NPA 2.3 2.1 1.7

CR(w/o technical write-off) (%) 42.5 42.1 50.4


16/25

UNION BANK




L 2011 2012 2013 2014E 2015Eterest/discount on advances / bills 12031 16027 19140 21702 23074come on investments 4003 4570 5671 7428 8313terest on balances with Reserve Bank of India 161 331 199 185 185

thers 258 101 115 169 169otal Interest Income 16453 21028 25125 29483 31741thers Income 2039 2448 2552 2730 2730otal Income 18491 23477 27677 32213 34471terest on deposits 9538 13406 16551 18844 21106terest on RBI/Inter bank borrowings 113 141 274 379 378thers 585 689 756 1309 1305terest Expended 10236 14235 17582 21509 22788II 6216 6793 7543 7974 8953II Growth(%) 48.3 9.3 11.0 5.7 12.3ther Income 2039 2448 2552 2730 2730otal Income 8255 9241 10095 10704 11683mployee 2600 2479 2755 3323 3634ther Expenses 1350 1508 1757 2124 2324perating Expenses 3950 3988 4512 5447 5958PP( Rs Cr) 4305 5254 5583 5256 5724ovisions 2223 3467 3425 3144 3680et Profit 2082 1787 2158 1427 1431

0.3 -14.2 20.7 -33.9 0.3

ey Balance sheet dataeposits 202461 222869 263762 290138 324954eposits Growth(%) 19.1 10.1 18.3 10.0 12.0orrowings 13316 17909 23797 32238 32138orrowings Growth(%) 44.5 34.5 32.9 35.5 -0.3oan 150986 177882 208102 228912 256382oan Growth(%) 26.5 17.8 17.0 10.0 12.0

vestments 58399 62364 80830 93811 103914vestments Growth(%) 7.3 6.8 29.6 16.1 10.8

astwind Calculationeld on Advances 8.0 9.0 9.2 9.5 9.0eld on Investments 6.9 7.3 7.0 7.9 8.0eld on Funds 7.2 8.3 8.3 9.1 8.8

ost of deposits 4.7 6.0 6.3 6.5 6.5ost of Borrowings 5.2 4.6 4.3 4.3 4.5ost of fund 4.7 5.9 6.1 6.7 6.4

aluationook Value 243 245 290 293 307

BV 1.4 1.0 0.7 0.4 0.3E 8.7 7.8 5.8 4.7 4.7


17/25


18/25


PM % & NPM %

The OPM surges by 330 bps due toimprovement in operational metrics.Thesharp rise in the profits came in due to anexceptional income of Rs 1,948 Cr accruing tothe local business


R Whole Sales Vol. Trend

The growth in the sales volume come from all

geographies including Brazil, China, India and

the United States.



TATAMOTORS

les and PAT Trend (Rs)

The revenue jumps by 38.59% YoY on theback of strong demand ,Growth in volumeand favorable product mix and geographymix of Jaguar and land Rover.



19/25

ACC Ltd.

10461257

112220%12%

500410

1963498176063

1M 1yr YTD Poor Operational Performance :solute -3.5 -22.3 -21.0l. to Nifty -1.9 -24.4 -22.8

Cureent 3QCY13 2QCY13

omoters 50.3 50.3 50.3 20.0 20.9 19.5

I 12.9 11.9 11.7hers 16.8 16.9 18.6

Management Quotes :

Financials : Q4CY13 Y-o-Y % Q-o-Q % Q4CY12 Q3CY1Net Revenue 2792 -12.2 8.6 3180 2570

EBITDA 361 -9.3 26.2 398 28Depriciation 153 -3.2 6.3 158 144Interest Cost 12 -55.6 9.1 27 11Tax -36 -190.0 -170.6 40 5PAT 278 16.3 129.8 239 12

(In Cr

1

sult Update BUY ACC's sales turnover slipped to Rs 11169 crore in 2013 against Rs 11358 crore in theprevious year. At first glance, consolidated net profit growth of 9% from the year-agoperiod looked impressive, given the dull market. But a closer look shows that net profit

for the quarter included a tax write-back. PAT was Rs.1094Cr. As this pat is incomparablewith previous year pat due to additional depreciation charge as extra-ordinary item inprevious year, we adjusted the pat and it reported Rs.1081Cr for Cy13 Down by -19%from Rs 1339Cr in CY12.

MPrget Price

evious Target Pricesideange from Previous

arket Data ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACCdeclined a mere 2% to Rs 10,908.41 crore, as the sales relaisations remained low andCost remained stable. Cement sales volumes remained flat for ACC .

E CodeE Symbol ACC

wk Range H/L 1355/912 Lower Cement Volume Impacted the Bottomline Growthkt Capital (Rs Crores) What is more worrying for the company is that it sold less cement in 2013 than what it

did in 2012. This comes as a major jolt for the cement giant which saw its cement salesvolume dropping to 23.93 million tonne compared with 24.11 million tonne. It not only

impacted its bottom-line growth but also hit its revenues.

erage Daily Volume (Nos.)fty

ock Performance-%

According to Management the economic environment in the country was sluggish, thusimpacting the demand for cement and concrete. As a result, the company's cementvolumes remained almost flat. The company appears not enthusiastic for demand growthgoing forward. Based on current demand indications, we do not foresee any significantimprovement in the cement.

Source - Comapany/EastWind Research


At the operating level, poor volumes down by 1.5% from the year-ago period and weakrealizations pulled down revenue during the quarter. Net consolidated sales fell by 13%to Rs.2,693.1 crore. Profitability was further hit as costs during the quarter, mainly onfreight and power, rose compared with the year-ago period and the September quarteras well.


During the CY13 Acc suffered through sluggish demand and at the same time withincreasing cost. Company unable to pass on the cost to the consumer due to lower salesvolume. Sales Volume come to 23.93 Mmt form 24.11 Mmt(down by ~1%). Rising InputCost mainly due to Raw Material and Freight Cost.Raw material cost increased 5% toRs.778/ton from Rs.740/ton and freight cost increased ~5% Rs.961/ton from Rs.920/ton.Other expenses increased ~9% to Rs.975/ton from Rs.894/ton.yr Forward P/B

"BUY"10th Feb' 14



20/25

utlook

luation And Recommendation

ompany Description :

CY11 CY12 CY13 CY14E10237 11358 11169 13027

191 263 219 21910428 11621 11389 19723

2199 2384 2384 01940 2219 2299 08316 9162 9540 109421921 2197 1848 2084

510 569 584 639

97 115 52 50215 391 132 3231276 1050 1094 129217.7 18.8 13.8 15.3

20

ACC Ltd.

Cement Sales Volume

ompany has made several capacity expansion plans in the region. ACC is replacing theisting facilities at Jamul, Chhattisgarh with a clinker plant with an annual productionpacity of 2.8 MT and local grinding capacity of 1.1 MT of cement, while a new plant

th annual capacity of 2.7 MT is scheduled to be built in Kharagpur. The capacitypansion plant will increase the company's total cement production capacity to 35 MTom the existing 30 MT.On a QoQ basis, the EBITDA/tonne improved 10.4% due to anprovement in realisations & comparatively lower increase in total expenditure/tonne,shows a positive view for the further quarters.onsidering the expansion plans wepect 4% growth in sales volume and 10% growth in realization for CY14.

Cement Realization

ment prices witnessed an increase during Oct-Nov,13 but also witnessed a sharp fallring Dec,13 which has contributed towards lower average realizations for the year fore company. Further, with a strong balance sheet with zero debt and better dividendeld of 3%, we continue to remain positive despite near term challenges. We revise ourtimates downwards to factor in lower demand growth scenario. At current price of Rs46, stock is trading at 2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looksod from current level, hence we recommend Buy on the stock at CMP Rs.1046 for aget price Rs.1257.

Cement Realization

CC Limited (ACC) is engaged in manufacture of cement & ready mixed concrete. Theompany has grinding plants in Karnataka and clinkering line in Maharashtra. Thempanys subsidiaries include ACC Mineral Resources Limited, Lucky Minmat Limited,

ulk Cement Corporation (India) Limited, National Limestone Company Private Limited

d Encore Cement and Additives Private Limited. The Company is subsidiary of Ambujament India Private Limited.

L PERFORMANCEet Revenue from Operationher Incometal Income

eight and forwardingxpenditure

AT

BITDA

wer and fuel

OE% Source - Comapany/EastWind Research

epriciation

terest Costx



21/25

CY10 CY11 CY12 CY13188 188 188 188

6093 6791 7184 76256281 6979 7372 7813

510 506 85 014 0 0 0188 126 157 89

1581 816 661 6421466 1051 1227 1081

11041 11921 11928 1210177 48 39 40

5230 6359 5893 60401564 370 314 322

283 461 566 880926 1113 1134 1122249 266 303 397

1086 1660 681 506162 279 325 340

11041 11921 11928 12101CY10 CY11 CY12 CY13

3.2 3.1 3.6 2.757.4 68.7 73.8 57.6

3.0 2.6 2.7 3.619.1 8.0 5.8 5.7

1.1 1.1 1.0 1.019632 20180 26240 20296

18.7 16.5 19.4 19.2

12.7 10.5 11.9 12.52.8 2.5 2.1 2.7

14.6 15.2 16.3 12.30.1 0.1 0.0 0.01.0 1.3 1.4 1.4

1823 1506 2027 2027(785) (258) (308) (308)(641) (768) (1066) (1066)

ading At :

21

ort-term provisions

ACC Ltd.

S PERFORMANCEare capitalserve & Surplustal equity

ng-term borrowingsort-term borrowingsng-term provisionsade payables

tal Assets

tal liabilitiestangiblesngible assetspital work-in-progressng-term loans and advancesventoriesade receivables

ash and bank balancesort-term loans and advances

ATIOSBPS

vidend Yield%

ebtor to Turnover%editors to Turnover%ventories to Turnover%VE

V/EBIDTA

OCE%ebt/Equityurrent Ratio


ash from Operationash From Investmentash from Finance



22/25

163165

NA1%NA

500425

2516612583

6063

1M 1yr YTDsolute -7.1 -18.6 -19.2 Decline in EBITDA marginl. to Nifty -5.4 -20.7 -21.0

Cureent 3QCY13 2QCY13

omoters 50.5 50.5 50.6 30.5 30.1 28.7

I 9.4 9.6 10.2hers 9.6 9.8 10.5

Key issues to watch out for1 Volume growth recovery and outlook23

Progress in ongoing mining land acquisition and capex in Nagaur plant of 4.5mtFinancials : Q4CY13 Y-o-Y % Q-o-Q % Q4CY12 Q3CY1Net Revenue 2209 -5.4 9.5 2335 2017

EBITDA 307 -31.8 14.6 450 268Depriciation 123 -33.9 -1.6 186 12Interest Cost 17 -29.2 -5.6 24 18Tax -61 -152.6 -192.4 116 6PAT 317 49.5 91.0 212 16

(In Cr

2

Ambuja Cements Ltd.

sult Update Neutral Net profit of Ambuja Cements decline 49% to Rs 317 crore in Q4CY13 as against Rs 212crore during Q4CY12. Sales declined 5% to Rs 2191 crore Q4CY13 as against Rs 2313crore during Q4CY12. For the full year,net profit declined 1% to Rs 1278 crore as against

Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs 9795 crore inCY12.

MPrget Price

evious Target Pricesideange from Previous Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -

1.9% YoY) .arket Data During the CY13 Ambuja Cement suffered through sluggish demand and at the same time

with increasing cost. Company unable to pass on the cost to the consumer due to lowersales volume. Sales Volume come to 21.6 Mmt form 21.99 Mmt(down by ~2%). RisingInput Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 63%to Rs.358/ton from Rs.219/ton and freight cost increased ~5% Rs.1097/ton fromRs.1046/ton. Other expenses increased 8% to Rs.847/ton from Rs.742/ton.

E CodeE Symbol AMBUJACEM

wk Range H/L 212/148kt Capital (Rs Crores)erage Daily Volume (Nos.)fty


The company is undertaking expansion at Rabriyawas (Rajasthan 0.8 mTPA) and Sankrail(WB, 0.8 mTPA) to be completed by CY14 and CY15 respectively.ock Performance-%

Key concerns for EBITDA margins to decline in CY13 are Lower realizations, Cost push andno seasonal benefits from operating leverage, Weak rupee push fuel costs higher asrupee depreciation likely to outweigh lower coal prices (more than 35 percent of totalrequirement comes by import), Higher freight costs and impact of diesel price hike Inchedup power fuel and Freight cost.


Challenging OutlookManagement views the company was able to keep its production cost flat year-on-yearand would continue to work on improving operational efficiencies, cost optimization andcontinued focus on customer and commercial excellence. Board has recommended a finaldividend of Rs 2.20 per share and together with the Rs 1.40 per share of interim dividend,the total dividend for the year is Rs 3.60 per share.

yr Forward P/B

Cement pricing outlook and sustainability, considering recent downtrend in Novemberand December


"Neutral "10th Feb' 14



23/25


24/25

CY10 CY11 CY12 CY13306 307 308 309

7021 7758 8489 91537327 8065 8797 9462

65 51 39 330 8 10 117 19 22 26

1109 961 949 9801079 1173 1421 1076

10320 11577 12457 1295716 42 47 6798

5616 6223 5904 0931 488 524 0299 504 641 307902 928 987 936128 248 221 235

1648 2073 2260 2345142 238 251 271

10320 11577 12457 12957CY10 CY11 CY12 CY13

3.0 3.0 3.5 3.08.1 8.2 10.2 8.11.7 2.9 2.3 2.6

15.0 11.2 9.7 10.71.2 1.1 1.0 1.0

20301 21829 28780 2586517.7 19.0 19.7 22.5

11.1 11.0 11.6 15.71.8 2.1 1.8 2.0

15.6 14.2 16.7 12.40.0 0.0 0.0 0.01.4 1.5 1.7 1.9

1896 1554 1900 0(527) (445) (388) 0(474) (473) (509) 0

24

ort-term provisions

Ambu a Cements Ltd.

S PERFORMANCEare capitalserve & Surplustal equity

ng-term borrowingsort-term borrowingsng-term provisionsade payables

tal Assets

tal liabilitiestangiblesngible assetspital work-in-progressng-term loans and advancesventoriesade receivables

ash and bank balancesort-term loans and advances

ATIOSBPS

vidend Yield%

ebtor to Turnover%editors to Turnover%ventories to Turnover%VE

V/EBIDTA

OCE%ebt/Equityurrent Ratio Source - Comapany/EastWind Research


ash from Operationash From Investmentash from Finance



25/25

N arno lia Securitie s Ltd

402, 4th floor 7/ 1, Lord s Sinh a Road Kolkat a 700071, Ph033-32011233 Toll Free no : 1-800-345-4000

ema il: resear ch@nar nolia.com ,website : www.narnolia.com

Risk Disclosure & Disclaimer: This report/message is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxationadvice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting anyaction based upon it. This report/message is not for public distribution and has beenfurnished to you solely for your information and should not be reproduced orredistributed to any other person in any from. The report/message is based upon publiclyavailable information, findings of our research wing East wind & information that weconsider 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 changewithout 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 thatpast 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 toassume that NSL and /or its Group or associate Companies, their Directors, affiliatesand/or employees may have interests/ positions, financial or otherwise, individually orotherwise in the recommended/mentioned securities/mutual funds/ model funds andother investment products which may be added or disposed including & other mentionedin this report/message.

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