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

8/21/2019 Stock Advisory for Today - Natural View on the Stock Dena Bank, Nestle India and Buy Vardhman Textiles

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J&K BANK : "BUY" 20th Feb 2014

J&KBanksprofitability increased by 11% YoY on account of reversal of provisions against NPA and investments, further on account of lower ta

rate profits inflated. Operating profit was flat at 1.4% YoY led by moderate NII growth which further led to margin compression. We lower ou

price target to Rs.1525 from earlier of Rs.1578 which implies 1.3 times of FY14E book and 6 times of price earnin

.................................................................................... ( 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) le

by 4-5% volume growth during the quarter.The company's margins are also likely to expand due to higher proportion of premium products andeasing 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)

DENA BANK : "Neutral" 24th Feb 2014

Banksperformance was lower than our expectation in all fronts and reported very weak set of numbers. Operating as well as financials metric

were remained muted. Profitability was declined by 67% YoY despite of tax reversal owing to muted growth in NII and higher operatin

expenses. We are pessimist about the growth parameters. We have neutral view on the stock. .............................................................. ( Page

8- 12 )

Considering the favourable export scenario and completion of capacity expansions, we remain positive on FY14. We, hereby, initiate ou

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 paramete

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 o

trigeers in FY15 we are really conservative for FY15 .................................................. ( Page : 5-7)

IEA-Equity

Strategy

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 b

some preponement of volume of work from Q4 into Q3 which has resulted into the slightly higher sequential growth. Companyshigh RoE an

dividend payout ratio make attractive to invest on the stock. ........................................................ ( Page : 26-28)

Bank ofBarodasprofitability was up by 3.6% YoY due to right back of depreciation provisions. Banksoperating and financials metrics wer

remained muted except healthy loan growth. Margin compressed sequentially but management guided domestic NIM of 3% from present o

2.95% which seems achievable if we look at balance sheet structure. We value bank at Rs.634/share which implies 0.75 times ofFY14Esboo

value.......................................................................... ( Page : 13- 17)

24th Feb, 201

Edition : 212

BANKBARODA : "BUY" 21th Feb 2014

Vardhman Textiles : "BUY" 24th Feb 2014

Nestle India :"The nest becomes weaker" "Neutral" 24th Feb 2014

For 4QCY13, Nestle Ind reported below numbers than street expectations in all counts, sales grew by 4.7%(YoY) led by 3.7% domestic growt

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 CMP of Rs 5043, stock trades at 15.9x P/BV of CY14E. We have a Neutralview on stock. .................................................................. ( Page : 2

4)

Narnolia Securities Ltd,

India Equity Analytics aily Fundamental Report on Indian Equities


2/29

Nestle India

5043

-

--

-

1M 1yr YTD

bsolute -3.7 10.7 3.4

l. to Nifty -1.0 7.4 1.8

Current 3QCY13 2QCY13

omoters 62.8 62.8 62.8

13.1 12.6 12.6

I 5.9 6.3 6.2

hers 18.2 18.3 18.5

Financials Rs,

4QCY13 3QCY13 (QoQ)-% 4QCY12 (YoY)-%

Revenue 2262.97 2360 -4.1% 2161.1 4.7%

EBITDA 478.3 503.9 -5.1% 504.1 -5.1%

PAT 287.1 289.6 -0.9% 289.2 -0.7%

EBITDA Margin 21.1% 21.4% (30bps) 23.3% (210bp

PAT Margin 12.7% 12.3% 40bps 13.4% (70bps

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

(Source: Company/Eastwind)

ock Performance

For 4QCY13, Nestle Ind reported below numbers than street expectations in all coun

sales grew by 4.7%(YoY) led by 3.7% domestic growth and 20.9% export growth.

domestic sales contribute 94% and exports 6% of sales. While, PAT marginally declinby 0.7% on YoY basis. The company does not share volume growth numbers, but

statement did mention that sales rose mainly because of higher prices and produ

mix.

verage Daily Volume

ange from Previous

View and Valuation: Companys less aggression on volume growth and the excess

focus on Margin expansion make us cautious on the stock. At same time, compa

believes on expansion of new plant set up by ignoring the dividend payout

investors. Consistently, its RoE is on downward direction. At a CMP of Rs 5043, sto

trades at 15.9x P/BV of CY14E. We have a Neutral view on stock.

yr Forward P/B

are Holding Pattern-%

21590

fty 6091

"The nest becomes weaker"

MP

arket Data

pside

Weak numbers and showing up magin as well,

rget Price

evious Target Price

For CY13, Company posted 9.2% sales growth, hugely impacted by weak consum

demand and high competitive intensity environment, PAT up by 6%.

NESTLEIND Management will continue to focus on reinforcing the fundamentals of growth drive

Further, improve operational efficiencies, and keep rationalizing its SKUs. They a

very confident of strategy to deliver long-term sustainable profitable growth, desp

the short-term challenges.

Margin dip:During the quarter, company has been efficient to maintain its mark

margin above than 20%. However, Margin ramp down by 210bps(YOY) to 21.1% becau

of inflationary pressure on raw material. There was improvement in raw material cost

110 bps to 46.1% of adjusted net sales. PAT margin inched down by 70bps(YOY)

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, a

palm oil, which together account for two-thirds of its material cost. Milk and wheat flo

have both seen prices increase, while a weak rupee has affected palm oil pric

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

in all categories except soups and its positioning in Chocolates, noodles, Coffee h

dominantly been unchallenged. Despite all facts, company has been facing ma

challenges over the past one and half years from Cadbury's and Ferrero Rocher

Chocolate, from HUL and ITC in noodles and from HUL in Coffee (Bru).

Nestlsmore focus on margin stability could sacrifice its volume. Companyscash co

portfolio baby foods becoming weaker because of low ad spend. Now, Mead Jhons

and Danone are dominating in same segment.

esult update NEUTRAL

48593kt Capital (Rs Cr)

wk Range H/L 5865/4410

E Code 500790

SE Symbol

"NEUTRAL"24th Feb' 14



3/29

oncerns:(1)Continued input cost pressure could impacts its margin, (2) Competitive

tensity impacting its market share adversely, (3) Any adverse impact of inflation on

nsumer demand would significantly impact sales and earnings growth assumptions.


les and Sales Growth(%)




omestic and Export sales-(% of Sales)

atalysts and Concerns;

talysts: Nestle plays on Urbanconsumptionthemeand now urban consumption and

mand are stagnant. Thus, we see steady growth in near term, while we maintain that

estle is a great long-term story with excellent quality management, strong leadership

ross several categories in the food segment and with brand portfolio, there are severaladwinds, which will keep volume growth muted.

Nestle India

RM inflation outlook appears adversand that could impact margins to ho

out.

Domestic revenue growth continues be very weak

Sales growth led by 4.7% (YoY) India

growth, contributed by net realizatioand volume growth in certain produc

categories

argin-%



4/29


(Source: Company/Eastwi

Nestle India

nancials


s in Cr, CY10 CY11 CY12 CY13 CY13E CY14E CY15E

ales 6284.7 7526.6 8334.5 9101.1 9218.0 9904.9 10942.2

M Cost 2560.1 2933.4 3756.9 3907.0 3871.6 4308.6 4814.6

urchases of stock-in-trade 578.4 704.2 111.5 110.0 110.62 118.86 142.25

WIP (83) (48) (92) 105 175 99 131

mployee Cost 433.4 546.5 663.4 741.5 760 792.39 875.38

d Spend 302.6 327.6 355.9 391.3 488.6 435.8 492.4

ther expenses 1213.0 1474.2 1680.9 1826.3 1797.51 1931.45 2133.73

otal expenses 5004.7 5937.6 6476.5 7081.5 7203.9 7686.19 8589.64

BITDA 1280.1 1589.0 1858.0 2019.6 2014.1 2218.69 2352.58

epreciation and Amortisation 127.8 153.3 277.2 330.0 342.9 402.0 474.0

ther Income 12.7 15.1 31.0 83.1 73.7 49.5 87.5

BIT 1165.0 1450.8 1611.9 1772.7 1744.9 1866.23 1966.08

nterest 1.1 5.1 26.6 36.5 36.0 59.7 83.7

BT 1163.9 1445.7 1585.3 1736.2 1708.9 1806.5 1882.4

ax Exp 326.5 426.4 484.7 560.9 564.0 578.1 611.8

AT 837.5 1019.3 1100.6 1175.3 1145.0 1228.45 1270.62

rowth-% (YoY)

ales 21.9% 19.8% 10.7% 9.2% 10.6% 8.8% 10.5%

BITDA 20.5% 24.1% 16.9% 8.7% 8.4% 9.9% 6.0%

AT 27.9% 21.7% 8.0% 6.8% 4.0% 4.5% 3.4%

xpenses on Sales-%

M Cost 40.7% 39.0% 45.1% 42.9% 42.0% 43.5% 44.0%

d Spend 4.8% 4.4% 4.3% 4.3% 5.3% 4.4% 4.5%

mployee Cost 6.9% 7.3% 8.0% 8.1% 8.3% 8.0% 8.0%

ther expenses 19.3% 19.6% 20.2% 24.4% 19.5% 19.5% 19.5%

ax rate 28.0% 29.5% 30.6% 32.3% 33.0% 32.0% 32.5%Margin-%

BITDA 20.4% 21.1% 22.3% 22.2% 21.9% 22.4% 21.5%

BIT 18.5% 19.3% 19.3% 19.5% 18.9% 18.8% 18.0%

AT 13.3% 13.5% 13.2% 12.9% 12.4% 12.4% 11.6%

aluation:

MP 3795.2 4569.3 4592.0 5189.0 5189.0 5043.0 5043.0

o of Share 9.6 9.6 9.6 9.6 9.6 9.64 9.64

W 855.4 1274.0 1798.4 2368.8 2369.6 3050.2 3773.9

PS 86.9 105.7 114.2 121.9 119.3 127.43 131.81

VPS 88.7 132.2 186.6 245.7 246.8 316.4 391.5

oE-% 97.9% 80.0% 61.2% 49.6% 48.3% 40.3% 33.7%

/BV 42.8 34.6 24.6 21.1 21.0 15.9 12.9

/E 43.7 43.2 40.2 42.6 43.5 39.57 38.26


5/29

Vardhman Textiles

341

412

NA21%

NA

502986

Profitability at the pick to serve

2170

868

6155

1M 1yr YTD

solute -3.8 22.6 29.5

l. to Nifty -0.5 20.1 26.2

3QFY14 2QFY14 1QFY14

omoters 61.9 61.7 61.6

6.6 5.7 5.3

17.2 18.2 18.9

hers 14.4 14.4 14.2

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY1

Net Revenue 1431 30.9 10.9 1093 129

EBITDA 346 53.1 0.0 226 34Depriciation 72 10.8 1.4 65 7

Interest Cost 31 -22.5 -11.4 40 3

Tax 68 83.8 9.7 37 6

PAT 175 108.3 -1.7 84 17(In Cr

Company operates at EBITDA and net margin of 24.9% and 12.2% respectively, whic

provides sufficient financial cushion against operating cost and financial expenses. Wit

liquidity being excellent and cash flows positive, current ratio at 2.58 and cash ratio a

0.47 offer no worries.

On a Strong earning foot..

VTL with its largest domestic capacity in terms of spindles, drives a significant por-tion o

its revenue from spinning segment. Company is one of the largest cotton yarn exporter

from India. Significant presence in Indian market and has emerged as a well know

supplier of the global market. Past few quarters were the turnaround for the companyCompany has strategic tie-ups with Japanese and Korean companies. Consisten

expansion and technological up-gradation has given a global status to the company. VT

is the supplier of fabrics to the worlds leading brands such as Tommy Hil-figer, Espri

Gap, Louis Philippe, Arrow, etc

Vardhman Textiles Ltd (VTL), Indiasleading textile player, reported a significant revenu

growth of 30.7% to Rs. 1431 Cr during Q3-FY14 over corresponding period previous yea

on the back of 45.8% YoY increase in fabric business to Rs.522 Cr, which constitutes 35

40% of the overall revenue. While yarn segment, which is the highest contributor of th

revenue, reported YoY growth of 30.5% to Rs.1182 Cr.

fty

side

ange from Previous

tial Coverage

MP

rget Price

evious Target Price

arket Data

E Code

VTL

erage Daily Volume (Nos.)

E Symbol

wk Range H/L

kt Capital (Rs Crores)

410/241


ock Performance-%


yr Forward P/B

Source - Comapany/EastWind Research

Operating profit of the company recorded substantial growth of 70.9% to Rs.274 C

during Q3FY14 yoy and outpaced the revenue growth due to significant control ove

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 an

operating profit margin re-ported a considerable improvement of 358bps and 455bp

during Q3FY14 yoy respectively. PAT reported the YoY growth of 109.6%, while PAT ma

gin improved by 466bps.

VTL reported consistent and strong YoY growth in past several quarters with the averag

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 reduc

its debt to equity on the back of significant expansion in reserves & surplus due t

phenomenal improvement in profit-ability in past several quarters.

"Buy"24th Feb' 14



6/29

dvantage India remains for most of FY14E

usiness and its strategies

ews and Valuation

FY12 FY13 FY14E FY15E

4641 4972 6245 6682

2651 2316 2741 3007

460 559 647 702

386 486 887 1002

292 349 433 520

4025 3997 4709 5231

616 975 1536 1451

274 295 343 397

174 177 160 16066 168 336 296

141 356 720 628

6 14 23 17

6

her expences

Vardhman Textiles

TL with its largest domestic capacity in terms of spindles drives a significant portion of

revenue from spinning segment. Company is one of the largest cotton yarn exporters

om India. Significant presence in Indian market and has emerged as a well-known

pplier of the global market. Past few quarters were the turnaround for the company.

ompany has strategic tie-ups with Japanese and Korean companies. Consistent

pansion and technological up-gradation has given a global status to the company. VTL

the supplier of fabrics to the worldsleading brands such as Tommy Hilfiger, Esprit,

ap, Louis Philippe, Arrow, etc

inese players imported yarn from India owing to the high cotton prices. This led to

e strong performance of Vardhman over the last three quarters. There is no clarity yet

the policy to be followed by China. If the current scenario continues, Indian spinners

ll continue to gain. However, if Chinese players are able to procure cotton at lowerices, it will have a negative impact on the demand for Indian yarn. We, thereby,

main conservative about our FY15 estimates.

mployee benefit Expence

penditure

ITDA

rdhman is geared to report a record profit in FY14. Despite weak macro-economic

enario and recent expansion, VTL managed to report significant improvement in its

y metrics.Considering the favourable export scenario and completion of capacity

pansions, we remain positive on FY14. We, hereby, initiate our coverage with

rdhman Textiles to BUY with a target price of Rs.412 . Currently the stock is trading at

8x p/b , we cut our Earning parameter for FY15 and cut p/b to 0.7x for FY15 . Looking

the current earning growth and environment the stock is looking very good but due

lack of trigeers in FY15 we are really conservative for FY15 .

L PERFORMANCE

et Revenue from Operation

ost Of Projects & Contractual

wer and fuel


epriciation

terest Costx

AT

OE%



7/29

FY10 FY11 FY12 FY13

57 63 63 63

1548 2202 2144 2444

1604 2264 2207 2506

2346 2925 2044 2100297 20 505 778

3 3 5 6

87 123 116 84

26 30 48 64

5077 6103 5967 6789

0 0 18 22

2553 2534 2557 2679

45 156 185 213

77 111 92 147

1297 1933 1535 1784

476 667 630 746

262 71 84 65

272 395 326 475

5077 6103 5967 6789

FY10 FY11 FY12 FY13

1.0 0.7 0.6 0.7

45.3 82.5 22.2 56.0

14.2 15.1 13.6 15.0

2.6 2.8 2.5 1.7

3.9 4.4 3.3 3.6

FY10 FY11 FY12 FY13

640 933 576 843-629 -902 444 -510

11 31 1020 333

-132 -456 -647 -517

10 234 -355 165

-111 -192 18 -19

7

tal liabilities

tangibles

sh and bank balances



Vardhman Textiles

ade payables

ort-term provisions

ngible assets

pital work-in-progress

ng-term loans and advances

ventories

ade receivables

ASH FLOWS

S PERFORMANCE

are capital

serve & Surplus

tal equity

ng-term borrowingsort-term borrowings

ng-term provisions

sh from Operation

ort-term loans and advances

tal Assets

ATIOS

B

S

ebtor to Turnover%

editors to Turnover%

ventories to Turnover%

rading At :

anges In Working Capital

et Cash From Operation

sh From Investment

sh from Finance

et Cash Flow during year



8/29

51.55

5755

11

-

1M 1yr YTD

bsolute -13.6 -50.3 -50.3

el.to Nifty -10.7 -53.9 -53.9

Current 4QFY13 3QFY1

omoters 66.6 55.2 55.2

I 7.9 8.6 16.5

I 4.9 7.3 8.1hers 20.7 28.9 20.2

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1763 2101 2383 2551 3538Total Income 2297 2683 3039 3410 4397

PPP 1224 1528 1739 1808 1627

Net Profit 612 803 810 445 502

EPS 18.3 22.9 23.2 9.5 10.7

kt Capital (Rs Cr)



ock Performance

2wk Range H/L

hange from Previous

ENA Bank Vs Nifty

hare Holding Pattern-%

1.16 lakh

fty 6155

esult update NEUTRAL

MP

NNUAL REPORT UPDATE

arget Price

Banksperformanc e was low er than street expectat io n and disappo inted

mo st of operat ing m etr ics. GNPA remain high at 2.96% while net NPA we

1.97%. Provis ion co verage rat io (withou t techn ical write off) imp roved slig hton sequ ential basi s. Valuati on wi se, sto ck is tradin g at 0.4 tim es of on e ye

forw ard book whic h is quite reason able. Bu t look ing at grow th and operat in

met ric s, we beli eve bank wo uld be trade in the range of 0.3 to 0.4 tim es of on

year forward boo k. We have neutral view on the stock w ith pr ice target

Rs.57.

verage Daily Volume

1809

evious Target Price

arket Data

pside

103/42

SE Code 532121

SE Symbol DENABANK

DENA BANK

Provision and contingencies were up on the back of deteriorating asset quali

Higher operating expenses led negative growth in PPP

Operating expenses during quarter was higher at 32.5% YoY which escalated co

income ratio to 63.4% versus 51.4% in last year. Banksemployee cost and oth

operating expenses both surged to 33% and 32% YoY respectively. This had ma

down operating profit to Rs.371 cr (down by 16.3% YoY) versus Rs.443 cr in la

quarter and Rs.371 cr in previous quarter.

Provisions and contingencies were up by 44% QoQ on the back of deterioratiasset quality. In absolute term gross NPA and net NPA both increased by 5% Yo

each. In percentage term GNPA and net NPA stood at 2.96% and 1.97 vers

3.04% and 2.02% in previous quarter. Cumulative provision was up by 4.7% whi

slightly improved provisions coverage ratio without technical write off to 33.4% fro

33.5% in 2QFY14. Dena Bank's Capital Adequacy Ratio as per Basel III norms sto

at 10.61% as against 10.21% in previous quarter.

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

higher cost of fund than fund yield. Higher cost of fund was due to 208 bps decline

in low cost franchise deposits. Other income was lower at 10.7% YoY to Rs.129

versus Rs.144 cr in previous quarter. Total income was moderate at 4% YoY growt

"NEUTRAL"24th Feb, 2014



9/29

rofitability declined despite of tax reversal

ofitability declined by 67% YoY due to reversal of tax to the tune of Rs. 79 cr as against

versal of Rs.73 cr in previous quarter. At PBT level, bank was negative at Rs.12 cr

hich was highly discouraging. This was basically due to moderate NII growth, higher

perating expenses and higher provisions.

equentially margin improved on the back of stable loan yield and slightly

creased of cost of deposits

M improved by 10 bps sequentially on the back of higher yield on advance than cost of

eposits. During quarter, banksyield on advances remained flat at 11.6% while yield on

vestment improved by 4 bps QoQ to 7.6%. Cost of deposits increased by 5 bps QoQ to

6%. Going forward, management guided NIM at the range of 2.75% to 3%.

eposits growth faster than loan growth

n balance sheet growth front, banksdeposits grew by 13.2% YoY led by term deposits

hich grew by 17% YoY. Current account deposits de-grew by 5% YoY while savingccount deposits grew by 9% YoY. Overall CASA ratio de-grew by 208 bps to 29%.

anksloan grew by 11% YoY aided by agriculture and MSME segment which was grown

y 30.7% and 25.4% YoY respectively. Retail advance grew by moderate at 14.4% YoY.

anagement guided loan growth of 15-17% for FY14. We model 15% loan growth and

% deposits growth for FY14.

DENA BANK


aluation & View

anks performance was lower than street expectation and disappointed in most of

perating metrics. GNPA remain high at 2.96% while net NPA were 1.97%. Provision

overage ratio (without technical write off) improved slightly on sequential basis.

aluation wise, stock is trading at 0.4 times of one year forward book which is quiteasonable. But looking at growth and operating metrics, we believe bank would be trade

the range of 0.3 to 0.4 times of one year forward book. We have neutral view on the

ock with price target of Rs.57.



10/29

DENA BANK

Source: Eastwind/Company


NII grew by 7.5% YoY to Rs.661 cr largely du

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.



11/29

DENA BANK




arterly Result ( Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E ariation(%)

erest/discount on advances / bills 1848 1790 1742 6.1 3.2 1931 -4.3

ome on investments 654 644 519 26.0 1.4 666 -1.9

erest on balances with Reserve Bank of India 3 9 3 -1.5 -70.1

9 -72.2

ers 30 7 0 7541.0 303.8 4 707.6

al Interest Income 2534 2450 2264 11.9 3.4 2610 -2.9

ers Income 129 150 144 -10.7 -13.9 150 -14.0

al Income 2663 2600 2408 10.6 2.4 2760 -3.5

erest Expended 1873 1825 1649 13.6 2.6 1926 -2.8

661 625 615 7.5 5.7 684 -3.3

er Income 129 150 144 -10.7 -13.9 150 -14.0

al Income 790 775 759 4.0 1.9 834 -5.3

ployee 255 251 192 32.8 1.6 225 13.4

er Expenses 164 154 124 32.1 6.1 150 9.2erating Expenses 419 406 316 32.5 3.3 375 11.7

P( Rs Cr) 371 369 443 -16.3 0.4 458 -19.1

visions( Incl. tax provision) 382 335 157 144.2 14.1 351 8.9

T -12 34 286 - 104.1 -134.2 107 -110.9

-79 -73 80 -199.3 8.6 21 -470.0

t Profit 68 107 206 -67.2 -36.9 86 -21.1

ance Sheet Data (Rs Cr)

posits 96081 93669 84882

ing Accounts 21983 21476 20216rent Accounts 5786 5695 6083

n 69895 64785 63040

et Quality

PA (Rs Cr) 2066 1968 1317

A (Rs Cr) 1375 1309 817

PA(%) 2.96 3.04 2.09

A(%) 1.97 2.02 1.30

R(%) (Without technical writeoff) 33 34 38


12/29

DENA BANK




L 2011 2012 2013 2014E 2015Eerest/discount on advances / bills 3820 5161 6819 7421 8737

come on investments 1193 1544 2019 2536 2307

erest on balances with Reserve Bank of India 16 38 31 28 28

hers 4 51 30 50 50

tal Interest Income 5034 6794 8899 10035 11122

hers Income 534 582 655 859 859

tal Income 5567 7376 9555 10894 11981

erest on deposits 3117 4528 6234 6583 7242

erest on RBI/Inter bank borrowings 8 18 59 0 0

hers 145 147 223 228 342

erest Expended 3270 4693 6516 7484 7583

1763 2101 2383 2551 3538

Growth(%) 60.3 19.1 13.4 7.1 38.7

her Income 534 582 655 859 859

tal Income 2297 2683 3039 3410 4397

mployee 688 715 792 978 1690

her Expenses 385 440 508 625 1080

erating Expenses 1073 1155 1300 1603 2770

P( Rs Cr) 1224 1528 1739 1808 1627

ovisions 612 725 706 1308 1000

t Profit 612 803 810 445 502

ey Balance sheet data

posits 64210 77167 97207 102068 112274

posits Growth(%) 25.1 20.2 26.0 5.0 10.0

rrowings 1692 3881 8414 6515 9763

rrowings Growth(%) 8.3 129.4 116.8 -22.6 49.9an 44828 56693 65781 72359 83213

an Growth(%) 26.4 26.5 16.0 10.0 15.0

vestments 18769 23028 34343 34203 38442

vestments Growth(%) 19.6 22.7 49.1 -0.4 12.4

stwind Calculation

eld on Advances 8.5 9.1 10.4 10.5 10.5

eld on Investments 6.4 6.7 5.9 7.4 6.0

eld on Funds 7.4 8.0 8.1 9.4 9.1

st of deposits 4.9 5.9 6.4 6.5 6.5

st of Borrowings 9.0 4.2 3.4 3.4 3.5

st of fund 5.0 5.8 6.2 6.9 6.2


13/29

BANKBARODA

513

624-

22

1M 1yr YTD

bsolute -18.8 -32.4 -32.4

el.to Nifty -15.3 -35.7 -35.7


omoters 55.4 55.4 55.4

I 15.5 15.5 15.3

I 19.6 19.6 19.0

hers 9.5 9.5 10.3

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 8802 10317 11315 12218 14122

Total Income 11611 13739 14946 16400 18304

PPP 6982 8581 8999 9206 10067

Net Profit 4242 5007 4481 4444 4819

EPS 108.3 121.8 106.4 105.5 114.4

arket Data

pside

773/429

SE Code 532134

MP

NNUAL REPORT UPDATE

arget Priceevious Target Price

Dur ing q uar terbanksmost o f operat ing as wel l as f inancia ls was mu te

exc ept loan gro wt h of 18% YoY. As set qualit y was better among peers but

t ight l iquidity situat io n it wou ld remain challeng ing. Margin was com press e

sl ight ly in sequent ia l basis but management cont inued to guided dom est

NIM at 3% level from pr esen t of 2.95%. We valu e bank at Rs.634/share wh ich

0.75 times of FY14Es book value.hange from Previous

ANKBARODA Vs Nifty


18.25 Cr

fty 6091

SE Symbol BANKBARODA

esult update BUY

Moderate NII growth despite of healthy loan growth and stable CD ratio

Banks NII growth moderate at 7.8% YoY to Rs. 3057 cr despite of healthy lo

growth and stable CD ratio. This was due to margin compression of 28 bps YoY l

by lower loan yield than cost of fund. However bank has taken several steps

reduce the cost as share of bulk deposits declined to 73.8% from 79.3% in last ye

and liability franchise increased by increased by 556 bps YoY. Other income (11YoY) was supportively help to growth revenue by 8.4% YoY to Rs.3989 cr.

2wk Range H/L

kt Capital (Rs Cr)



ock Performance

verage Daily Volume

21627

Profitability increased by 3.6% YoY to Rs.1048 cr on account of higher tax provisio

made by bank led by DTL special reserve as per suggestion by RBI. In 9MFY1

total effective tax rate altogether came to 17%. Management guided tax rate for f

year would be 20-22%.

Higher operating expenses led de-growth in operating profit

Operating expenses increased by 25.7% in which employee cost increased higher

32.3% YoY followed by 17.3% other operating expenses. This was result

escalating cost to income ratio to 45% from 39% in last year. Higher cost incom

ratio and moderate income growth led operating profit de-growth by 2.6% YoY

Rs.2197 cr.

Provisions lower on account of right back of investment depreciation

Provisions and contingencies declined by 12% QoQ largely due to reversal

provisions against investment depreciation to the tune of Rs.120 cr as against Rs.

cr in previous quarter. Loan loss provision was by and large same as in previo

quarter and stood at Rs.819 cr versus Rs. 838 cr. With the reversal of provision

PBT increased by 17% YoY and 14% QoQ to Rs.1436 cr.

Profitability increased due to lower provisions

"BUY"21h Feb. 2014



14/29


sset quality by and large stable, PCR increased

n asset quality front, banks gross NPA increased by 10% YoY and net NPA

eteriorated by 5% in absolute term led by higher provision in balance sheet. In

ercentage term, GNPA and net NPA stood at 3.4% and 1.9% versus 3.2% and 1.9% in

evious quarter. Provisions coverage ratio without technical write off was improved by46 bps QoQ to 44.5%. Banksasset quality was better than among peers under our

verage universe.

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

aluation & View

uring quarter banks most of operating as well as financials was muted except loan

owth of 18% YoY. Asset quality was better among peers but in tight liquidity situation it

ould remain challenging. Margin was compressed slightly in sequential basis but

anagement continued to guided domestic NIM at 3% level from present of 2.95%. We

lue bank at Rs.634/share which is 0.75 times of FY14Es book value.

M compressed by 5 bps QoQ to 2.37% due to stable loan yield while cost of fund

creased marginally by 10 bps to 5.4%. Bank has taken several steps to curtail cost by

ducing share of bulk deposits and increasing CASA ratio. Domestic NIM improved to

95% versus 2.85% in previous quarter whereas oversea NIM remained flat at 1.18% as

gainst 1.19%. Domestic NIM improvement was on account of higher investment yield to

98% from 7.9% on sequential basis.

oan growth healthy led by SME and retail

verall deposits de-grew by 4% YoY led by 10% declined of term deposits on year on

ar basis. Current account and saving account deposits registered growth of 19% and

3% YoY respectively. This was the result of CASA ratio increased by 556 bps YoY to

6.2%. Loan grew by 18% YoY led by SME growth of 39.2% YoY followed by 21% YoY

owth retail. Corporate loan growth remained intact as banks has caution outlook

wards corporate exposure in tight economy scenario.

BANKBARODA



15/29

BANKBARODA

Source: eastwind/Company


BanksNII growth moderate at 7.8% YoY to

3057 cr despite of healthy loan growth astable CD ratio. This was due to mar

compression of 28 bps YoY led by lower lo

yield than cost of fund

Higher operating expenses led de-growth in

operating profit

Profitability increased due to lower provisio



16/29

BANKBARODA




arterly Result (Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E

erest/discount on advances / bills 7061 6832 6485 8.9 3.3 7173

ome on investments 2175 2220 1898 14.6 -2.0 2350

erest on balances with Reserve Bank of India 245 281 403 -39.2 -12.8 397

hers 209 140 58 258.2 50.1 173

tal Interest Income 9691 9473 8845 9.6 2.3 10092

hers Income 932 974 841 10.9 -4.3 1102

tal Income 10623 10447 9686 9.7 1.7 11194

erest Expended 6634 6579 6004 10.5 0.8 6792

3057 2895 2841 7.6 5.6 3300

her Income 932 974 841 10.9 -4.3 1102

tal Income 3989 3869 3681 8.4 3.1 4402

ployee 1056 1030 798 32.3 2.5 1189

her Expenses 736 714 627 17.3 3.1 792

erating Expenses 1792 1744 1426 25.7 2.7 1981

P( Rs Cr) 2197 2125 2256 -2.6 3.4 2421

ovisions 762 861 1029 -26.0 -11.5 897

ceptional Items 16 16 12 25.0 0.0 0

T 1436 1264 1227 17.0 13.6 1524x 372 80 203 83.7 364.7 457

t Profit 1048 1168 1012 3.6 -10.3 1067

ance Sheet Date( Rs Cr)

uity Capital 423 423 412 2.5 0.0

serve & Surplus 35232 35127 30966 13.8 0.3

t Worth 35654 35549 31379 13.6 0.3

tal Deposits 503772 484931 414733 21.5 3.9

rrowings 29304 28558 27899 5.0 2.6

her liabilities and provisions 18638 13995 14552 28.1 33.2

tal Liability 587368 563033 488563 20.2 4.3

sh in hand 16742 15681 17147 -2.4 6.8

sh and balances with RBI 87599 79980 58295 50.3 9.5

tal Investment 115210 111840 101848 13.1 3.0

vances 352446 339855 299318 17.7 3.7

ed Assets 2562 2498 2399 6.8 2.6

hers Assets 12809 13179 9557 34.0 -2.8

tal Assets 587368 563033 488563 20.2 4.3

set Quality

PA( Rs Cr) 11926 10888 7321

A(Rs Cr) 6624 6316 3363

GNPA 3.4 3.2 2.4

NPA 1.9 1.9 1.1

PCR (without technical writeoff) 44.5 42.0 54.1


17/29

BANKBARODA




ncome Statement 2011 2012 2013 2014E 2015E

terest Income 21886 29674 35197 39065 45206

terest Expense 13084 19357 23881 26847 31084

II 8802 10317 11315 12218 14122

hange (%) 48.2 17.2 9.7 8.0 15.6

on Interest Income 2809 3422 3631 4182 4182

otal Income 11611 13739 14946 16400 18304

hange (%) 32.8 18.3 8.8 9.7 11.6

perating Expenses 4630 5159 5947 7194 8237

re Provision Profits 6982 8581 8999 9206 10067

hange (%) 41.5 22.9 4.9 2.3 9.4

rovisions 1331 2555 4168 3559 4043

BT 5650 6026 4831 5647 6024

AT 4242 5007 4481 4444 4819

hange (%) 38.7 18.0 -10.5 -0.8 8.4

alance Sheet

eposits( Rs Cr) 305439 384871 473883 521272 573399

hange (%) 27 26 23 10 10

f which CASA Dep 87589 103524 119981 135531 149084

hange (%) 23 18 16 13 10

orrowings( Rs Cr) 22308 23573 26579 33273 36600

vestments( Rs Cr) 71261 83209 121394 122000 134200

oans( Rs Cr) 228676 287377 328186 367568 404325

hange (%) 31 26 14 12 10

atio

vg. Yield on loans 8.0 8.7 8.4 8.6 9.3

vg. Yield on Investments 7.0 7.8 6.4 7.3 8

vg. Cost of Deposit 4.3 5.1 5.2 5.2 5.4

vg. Cost of Borrowings 5.5 6.7 5.4 5.5 5.5

aluation

ook Value 536 668 759 846 929

MP 963 794 652 513 513/BV 1.8 1.2 0.9 0.61 0.6


18/29

J&K BANK

1329

15251578

15

-3

1M 1yr YTD

bsolute -4.6 2.1 2.1

el.to Nifty -1.8 -1.8 -1.8


omoters 53.2 53.2 53.2

I 28.2 27.1 24.8

I 4.5 4.3 5.0hers 14.1 15.4 17.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1544 1838 2316 2724 3356Total 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

532209

SE Symbol J&KBANK

Loan grew by 21.5% YoY led by loan growth in J&K state by 25% YoY and 19% Y

growth in outside state. Incremental loan came from corporate loan book which gre

by 23.4% YoY followed by agriculture (21.2% YoY) and SME (21% YoY). Corpora

loan constituted 83% in outside J&K sate, mostly infrastructure segment which h

high risk of restructure. Banksmanagement guided loan growth of 20% in FY

which means bank has to achieve 9% QoQ growth in loan as against quarterly r

rate of 5%.We lower our loan growth assumption from 20% to 15% in FY14E. Credeposits ratio improved by 611 bps YoY largely due to lower deposits growth

against loan.

Margin compression on account of higher cost of fund than deposits

SE Code

Moderate growth in deposits; CASA remained flat

Banksdeposits grew by 11% YoY in which 12% growth within state of J&K wh

deposits grew by 7% YoY in outside of state. CASA in absolute term reported grow

of 9% YoY while share to total deposits declined by 65 bps YoY 38.8%. Sav

deposits and current deposits registered growth of 5% and 10% YoY respectivewhereas term deposits reported growth of 12% YoY. Despite of lower growth

CASA bankscost of deposits remain stable at 6.6% while cost of fund increased

16 bps YoY.

Loan grew handsomely led by corporate loan growth

1496/995

kt Capital (Rs Cr)

MP

arget Price

We are disappointed w ith the growth p arameters of bank and acc ording

reduce our target pr ice from Rs.1578 to Rs.1525 due to lower g rowth

balance sheet espec ial ly within state of Jammu & Kashmir.Bank

p rof i tabi l iwas up by 11% due to reversal of provis ions tow ards NPA and inves tme

depreciat io n wh ile tax rate reduce to 28% versus 30% in last year. Bank

manag ement con tinued to guid e loan grow th of 20% in FY14 but we lower o

loan gro wth ass um ption to 15% for FY14. We value bank at Rs.1525/sha

which impl ies that 1.3 t imes of FY14E book value and 6 t imes of p r i

earn ings.

hange from Previous

ompany Update BUY

evious Target Price

arket Data

pside



ock Performance

2wk Range H/L

&k Bank Vs Nifty


22.54lakh

fty 6153

Banksmargin compressed by 36 bps QoQ to 3.97% due to 41 bps QoQ declined

loan yield to 11.7% while deposits cost increased by 47 bps to 6.6%. Investme

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% whi

compressed margin by 36 bps sequentially.

verage Daily Volume

6419

"BUY"20th Feb, 2014



19/29

e are disappointed with the growth parameters of bank and accordingly reduce our

rget price from Rs.1578 to Rs.1525 due to lower growth in balance sheet especially

thin state of Jammu & Kashmir. Bankprofitability was up by 11% due to reversal of

ovisions towards NPA and investment depreciation while tax rate reduce to 28% versus

0% in last year. Banksmanagement continued to guide loan growth of 20% in FY14 but

e lower our loan growth assumption to 15% for FY14. We value bank at Rs.1525/share

hich implies that 1.3 times of FY14E book value and 6 times of price earnings.

J&K BANK



able asset quality; PCR highest in industry

n asset quality front, banksGNPA increased by 2% QoQ in absolute basis while in

ercentage to gross advance, it slightly improved from 1.72% to 1.67% sequentially.

uring quarter, bank lowered its provisions by 1% which was the result of increased of

et NPA by 25% QoQ in absolute term. However in percentage to net advance, it stood0.22% as against 0.19% in previous quarter. Fresh slippage ratio was at 1.4 %(

nnualized) during quarter which was lower from previous quarter of 1.9%. Provisions

verage ratio remained high at 86.6% (without technical write off) which was best in

dustry in our coverage universe.

oderate growth in NII despite of healthy loan growth

anksNII grew by 8.8% to Rs.647 cr despite of healthy loan growth and improvement in

D ratio led by margin compression. Other income was also lower to Rs.87 cr versus

s.91 cr in last quarter and Rs.99 cr in previous quarter. With the lower support from

her income, total revenue grew by 7.2% YoY to Rs.734 cr.

gher operating expenses led flat growth in operating profit

perating expenses increased by 17% YoY in which employee cost and other operating

st increased by 15% and 22% YoY respectively. Consequently CI ratio increased by

40 bps to 40%. Moderate loan growth, lower other income and higher operating cost led

e provisioning growth of 1.4% YoY.

rofitability increased on account of reversal of provisions and lower tax rate

ofitability increased by 11% YoY to Rs.321 cr despite of flat operating profit growth was

ue to reversal of provisions towards NPA and depreciation. Banks provisions and

ntingencies declined by 121% YoY due to Rs. 13 cr reverse from NPA provision and

s.5 cr reverse from investment depreciation provision. Tax rate was also lower to 28%

rsus 31% in previous quarter and 30% in last quarter. We are disappointed with growth

arameters of profit and loss account. Banksbalance sheet within J&K state especially

deposits growth sense remained muted while credit growth grew handsomely. Overall

e found mixed growth trend which discourage us to reduce price target.

aluation & View



20/29

J&K BANK



Moderate growth in NII despite of healloan growth

Higher operating expenses led flat growth

operating profit

Profitability increased on account of rever

of provisions and lower tax rate



21/29

J&K BANK




aterly Result (Rs. Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation(%)

erest/discount on advances / bills 1266 1244 1090 16.2 1.7 1322 -4.3

ome on investments 434 396 421 3.2 9.7 423 2.6

erest on balances with Reserve Bank of India 16 10 23 -31.4 60.2 13 16.6

ers 0 0 0 0

al Interest Income 1716 1650 1533 11.9 4.0 1759 -2.5

ers Income 87 99 91 -3.4 -12.1 96 -8.8

al Income 1803 1749 1624 11.0 3.1 1855 -2.8

erest Expended 1069 968 939 13.8 10.4 1022 4.6

647 682 594 8.8 -5.2 738 -12.3

er Income 87 99 91 -3.4 -12.1 96 -8.8

al Income 734 781 685 7.2 -6.0 834 -11.9

ployee 188 177 164 14.7 6.3 180 4.3

er Expenses 105 108 86 22.3 -2.5 120 -12.2

erating Expenses 293 285 250 17.3 2.9 300 -2.3

P( Rs Cr) 441 496 435 1.4 -11.2 533 -17.4

visions -5 56 22 -120.6 -108.3 48 -109.5

T 445 441 412 8.0 1.1 485 -8.2

124 138 123 0.9 -10.1 145 -14.7

t Profit 321 303 289 11.0 6.2 339 -5.4

ance Sheet Data ( Rs Cr)

t Worth 5797 5475 4898 18.3 5.9 5815 -0.3

posits 63157 61171 57075 10.7 3.2 65907 -4.2

rowings 1150 1346 801 43.6 -14.6 1579 -27.2

vances 43318 41121 35658 21.5 5.3 44081 -1.7

estment 22714 22316 22681 0.1 1.8 24200 -6.1

et Qaulity ( Rs Cr)

PA 725 709 582 24.7 2.3

PA 97 78 50 95.7 24.9

PA(%) 1.67 1.72 1.63

PA(%) 0.22 0.19 0.14

R(%) 87 89 91


22/29

J&K BANK




L 2010 2011 2012 2013 2014E 2015Eerest/discount on advances / bills 2342 2630 3394 4318 5046 5703

ome on investments 705 1066 1403 1723 1713 1983

erest on balances with Reserve Bank of India 11 17 39 97 56 56

tal Interest Income 3057 3713 4836 6137 6816 7742hers Income 416 365 334 484 372 372

tal Income 3473 4078 5170 6621 7188 8114

erest on deposits 1841 2069 2902 3741 3987 4386

erest on RBI/Inter bank borrowings 83 46 41 26 101 139

hers 14 54 54 54 0 0

erest Expended 1938 2169 2997 3821 4092 4386

1119 1544 1838 2316 2724 3356

Growth(%) 37.9 19.1 26.0 17.6 23.2

her Income 416 365 334 484 372 372

tal Income 1536 1908 2172 2800 3097 3728

ployee 366 524 521 652 675 814

her Expenses 211 235 281 337 469 566

erating Expenses 577 759 802 989 1144 1379

P( Rs Cr) 958 1149 1370 1811 1952 2349

ovisions 446 534 567 756 137 156

t Profit 512 615 803 1055 1271 1535

t Profit Grwoth(%) 20.1 30.6 31.4 20.5 20.8

y Balance sheet data

posits 37237 44676 53347 64221 66789 73468

posits Growth(%) 20.0 19.4 20.4 4.0 10.0

rrowings 1100 1105 1241 1075 1363 1884

rrowings Growth(%) 0.4 12.3 -13.4 26.8 38.2

an 23057 26194 33077 39200 45080 51843

an Growth(%) 13.6 26.3 18.5 15.0 15.0

estments 13956 19696 21624 25741 24535 21099

estments Growth(%) 41.1 9.8 19.0 -4.7 -14.0

stwind Calculation

ld on Advances 10.2 10.0 10.3 11.0 11.2 11.0

ld on Investments 5.0 5.4 6.5 9.4 7.0 9.4

ld on Funds 7.7 7.5 8.3 8.9 9.8 10.6

st of deposits 4.9 4.6 5.4 5.8 6.1 6.0

st of Borrowings 8.8 9.1 7.7 7.4 7.4 7.4

st of fund 5.1 4.7 5.5 5.9 6.0 5.8

luation

ok Value 621 718 844 1003 1146 1412

BV 1.1 1.2 1.1 1.3 1.2 0.9

E 6.4 6.9 5.5 5.9 5.1 4.2


23/29

Britannia Inds

1M 1yr YTD

solute 1.7 86.9 34.57

l. to Nifty 3.8 82.8 18.27


omoters 50.75 50.8 50.85

20.11 19.11 19.48

8.77 9.59 9.89

hers 20.38 20.5 19.78

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 1771.94 1755.27 0.9 1620.4 9.4

EBITDA 159.7 160.4 (0.4) 103.5 54.3

PAT 99.8 97.1 2.8 62 61.0

EBITDA Margin 9.0% 9.1% (10bps) 6.4% 260bp

PAT Margin 5.6% 5.5% 10bps 3.8% 180bp

side 16%

ange from Previous -

year forward P/BV

Rs, Cro



View and Valuation: Management also believes that volume growth will recov

gradually over the next few quarters, driven by higher brand spends and portfo

expansion. The company's margins are also likely to expand due to higher proportion

premium products and easing input costs. We have "BUY" on the stock with a targ

price of Rs 1065. At a CMP of Rs915, stock trades at 9.3x FY15E P/BV.

Healthy distribution reach:The Company is also taking initiative to increase its ru

distribution reach for benefitting the opportunity of increasing consumption of fo

products in rural markets. The company plans to increase its overall distributi

coverage by around 7-8% every year and rural coverage by around 10% every year.

"Decent quarter"

MP 915

rget Price 1065

Consis tency on wi tness ing b et ter num bers wi th Margin expans ion:esult update BUY

Once again, Britannia Industries revealed better earning performance than stre

expectation. Its consolidated revenue grew by 10.7% (YoY) led by 4-5% volume grow

during the quarter. Even, company has hiked the prices of some of its brands dur

the quarter. PAT grew by 61% (YoY) because of its effective cost rationalization effor

The management expects the biscuit business to grow by 10-11% in FY14E, where

the non-biscuit business to grow at a faster rate by 20-25% in FY14E. Over the last f

quarter, company has more focused on its product portfolio expansion. We expe

that new products expansion is likely to increase going forward. By judicious mix

cost rationalization and high value added biscuits, we expect its margin expansi

gradually over next couple of quarters.

No pressure on RM cost:High food price inflation remains a concern for the compan

Thankfully, Britannia doesnt import much raw materials from abroad and is thus n

affected by rupee fluctuations. Its strategy of focusing on premium brands has not o

allowed the company to hike prices but also improve its product mix as well.

arket Data

E Code 500825

E Symbol


10967

erage Daily Volume 248428

evious Target Price -

Pricing and Promotion: During the quarter, company initiated its price hike of some

its brand. The full benefit of these prices hikes will be seen in the March quarter.

strategy of focusing on premium brands has not only allowed the company to hike pric

but also improve its product mix as well.

BRITANNIA


fty 6127

kt Capital (Rs Crores)

ock Performance

Margin Pickup:EBITDA Margin improved by 250 bps to 8.9%. The operating profit h

increased by 54% mainly due to decline in raw material cost by 420 bps to 54.7% a

purchase of stock in trade by 100 bps to 7.3% of adjusted net sales. The company aexpects to track margin expansion ahead by judicious mix of cost rationalization a

increasing supply chain efficiency.

"BUY"19th Feb' 14



24/29

Britannia Inds.

les and Sales growth-%(YoY)

Entry into new categories like cereals w

also help drive growth. Consequently, t

company's earnings are expected to gr

20% over the next 2 years.


le of Land in Chennai and Banglore could result in Value unlocking: The company

ans to sell off its 8.60 acres industrial land in Chennai,which is located at Madrasiruvallur High (MTH) Road, Padi, Chennai. We expect the company to realize around

120 crores to Rs150 crores from this land sale when it happens. Further the company

s another 5.0 acres prime real estate land in Bangalore at old airport road which can

tch around Rs 350 crores.

volatility on key input (wheat, sugar, pa

oil) would prices directly impact

margin picture,

The company's margins are also likely

expand due to higher proportion

premium products and easing input cos


penses on Sales-%



argin-%



25/29


Britannia Inds.

inancials




s in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

et Sales 3770.84 4589.73 5460.75 6135.91 6869.15 7693.45

Other Operating Income 63.53 19.65 24.62 49.5 68.69 76.93

otal income from operations (ne 3834.37 4609.38 5485.37 6185.41 6937.84 7770.38aw Materials Cost 2416.78 2714.38 3109.12 3350.51 3722.15 4196.01

urchases of stock-in-trade 0 328.91 437.68 518.51 520.34 543.93

WIP 0 -15.68 -14.03 -7.57 -76.32 -77.70

mployee Cost 157.9 177.49 211.15 226.75 270.58 310.82

dvertisement and Publicity 300.96 332.84 419.6 534.28 610.53 660.48

Other expenses 728.57 834.76 1010.98 1142.39 1255.75 1398.67

otal expenses 3604.21 4372.7 5174.5 5764.87 6303.03 7032.20

BITDA 230.16 236.68 310.87 420.54 634.81 738.19

epreciation 58.23 64.91 61.83 73.15 84.12 100.50

Other Income 0 59.01 59.14 52.24 27.75 38.85

BIT 171.93 230.78 308.18 399.63 578.44 676.54

nterest Cost 23.46 43.63 41.6 41.3 8.88 4.10rofit (+)/Loss (-) Before Taxes 148.47 187.15 266.58 358.33 569.57 672.45

rovision for Taxes 5.58 52.94 66.85 98.55 176.57 208.46

et Profit (+)/Loss (-) 142.89 134.21 199.73 259.78 393.00 463.99

ales 10.2% 21.7% 19.0% 12.4% 12.0% 12.0%

BITDA -16.8% 2.8% 31.3% 35.3% 51.0% 16.3%

AT -0.3% -6.1% 48.8% 30.1% 51.3% 18.1%

M Cost 63.0% 58.9% 56.7% 54.2% 53.7% 54.0%

d Spend 8.0% 7.3% 7.7% 8.7% 8.9% 8.6%mployee Cost 4.1% 3.9% 3.8% 3.7% 3.9% 4.0%

Other expenses 19.3% 18.2% 18.5% 18.6% 18.3% 18.2%

ax rate 3.8% 28.3% 25.1% 27.5% 31.0% 31.0%

BITDA 6.0% 5.1% 5.7% 6.8% 9.2% 9.5%

BIT 4.5% 5.0% 5.6% 6.5% 8.3% 8.7%

AT 3.7% 2.9% 3.6% 4.2% 5.7% 6.0%

MP 1599.5 382.6 459.9 504.7 915.0 915.0

o of Share 2.39 11.95 11.95 11.95258 11.97 11.97W 282.8 326.04 409.17 555.58 829.55 1174.50

PS 59.79 11.23 16.71 21.73 32.83 38.76

VPS 118.33 27.28 34.24 46.48 69.30 98.12

oE-% 50.5% 41.2% 48.8% 46.8% 47.4% 39.5%

ividend payout-% 126.4% 51.8% 45.1% 45.5% 30.3% 25.7%

/BV 13.5 14.0 13.4 10.9 13.2 9.3

/E 26.8 34.1 27.5 23.2 27.9 23.6

rowth-% (YoY)

aluation:

Margin-%

xpenses on Sales-%


26/29

eClerx Services

1M 1yr YTD

solute 20.4 26.3 30.6

l. to Nifty 14.6 20.5 16.3


omoters 52.95 52.88 53.13

26.21 22.37 21.38

11.27 14.72 14.80

hers 9.57 10.03 10.69

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 219.5 214.6 2.3 170.8 28.5

EBITDA 88.81 92.8 (4.3) 66.8 32.9

PAT 62.33 67.91 (8.2) 49 27.2

EBITDA Margin 40.5% 43.2% (270bps) 39.1% 140bps

PAT Margin 28.4% 31.6% (320bps) 28.7% (30bps)

erage Daily Volume 18894

View and Valuation:We expect thatcompanysorganic revenue growth remains soft

near term, and company is very focussed on inorganic growth and expect to see grow

from cable business . Furthermore, stable billing rate will support to maintain marg

Companys high RoE and dividend payout ratio make attractive to invest on the sto

At a CMP of Rs 1212, stock trades at 12.5x FY15E earnings, we recommend BU

view on the stock with a target price of Rs 1410 (revised from Rs 1350) .

On demand environment, it indicated that there is no significant change and expe

to grow same pace of 10-15% in USD terms in the medium term. On margins,

indicated that it will continue to operate in the mid 30% going forward. It continues

look at inorganic opportunities.

Margin declined and expects to maintain stablity on demand:The OPM fell by 310 b

QoQ to 37% on the back of rise in Selling and Distribution costs due to increase in ons

headcount, bonus and commission and travel. Accordingly, PAT margin down by 270b

to 28.6%, sequentially. Management is very confident to maintain its PAT margin at 3

31% in near term.Good growth from Financial Services:The Cable business grew faster on the low ba

Financial Services also grew fast during the quarter. In the Cable business, there is lot

demand for its services. The digital and digital market has lot of demand and is anoth

key area.

Growth from Emerging revenue:It added 2 clients during the quarter. The Reven

growth from Top 5 grew by 8% YoY and Emerging grew by 35% QoQ respectively duri

the quarter. The Emerging revenue has continued to outpace growth in strategic clien

in line with firm strategy.

Approval on SEZ:The SEZ approval received for new floor in Airoli and planned go li

on April 2014 (600 Seats). It is discussing additional floors in Airoli to consolida

Mumbai facilities, subject to regulatory approval. During the quarter, the Final paymeis done for Agilyst acquisition (for the total acquisition cost ~ $21 million) during t

quarter.

fty 6048

arket Data

E Code 532755

E Symbol ECLERX

ock Performance

year forward P/E

Rs, Cro




kt Capital (Rs Crores) 3701


"Consistent Performer"

MP 1212

rget Price 1074

esult update 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 I

term and 4.7%(QoQ) in USD term (4% in CC term) led by some preponement of volum

of work from Q4 into Q3 which has resulted into the slightly higher sequential growt

It expects some impact of this on Q4 growth. While, PAT decline by 7.2%, sequentia

ange from Previous 22%

Buy

evious Target Price 881

side -11%

"BUY"18th Feb' 14



27/29

) The billing rates expected to be flat to slight uptick for the FY15E.

) Expect to see similar set of environment in FY 15E than FY14.

) Tax rate is expected to see at 23% mark in FY15E.

) It continues to look at inorganic opportunities.

) Expects to maintain 51% of payout ratio.


) On margins, it indicated that it will continue to operate in the mid 30% (30-31%) going

rward.

ey Facts from Cnference Call

argin-%


mployee Metrics-%

Attrition decreased from 36% (2QFY14)

31.8% .



eClerx Services.

les (USD) and Sales growth-%(QoQ)

On $term, Sales growth was up by 4.

(QoQ) and 2.3% on INR term,



28/29



nancials;

eClerx Services.

perating Metrics;


ales Mix-Geography 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY1

orth America 70% 70% 71% 75% 75% 74% 74% 74% 74%

urope 24% 23% 20% 19% 18% 21% 21% 21% 21%

oW 6% 7% 9% 6% 7% 5% 5% 5% 5%

ient Concentration 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY1

op-5 86% 87% 80% 79% 78% 78% 76% 75% 74%

ient addition 8 10 8 4 7 6 5 5 2

otal Clients 53 55 54 54 60 73 61 65 65

SO,days 52 29 30 41 31 33 35 41 33

lling Mix 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY1

TE 94% 95% 93% 93% 92% 91% 94% 95% 95%

EZ Revenue 67% 72% 62% 58% 59% 60% 60% 60% 60%

mployee Metrics 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY1

mployee Utilization 72% 72% 68% 68% 69% 69% 66% 65.0% 66%

ttrition - 30.9% 23.2% 30.2% 26.5% 27.3% 25.2% 36.4% 31.8%

otal Employee - 4405 5545 5760 5837 5954 6389 6543 6620

mployee Cost 39% 45.1% 42.4% 46.0% 45.0% 45.2% 44.1% 42.2% 43.6%

Rs, Cr FY11 FY12 FY13A FY14E FY15E

ales 366.12 495.19 660.58 852.54 1020.8

mpolyee Cost 147.65 203.87 295.28 370.00 449.18

Other expenses 59.87 79.28 108.47 130.44 158.24

BITDA 158.6 212.04 256.83 352.10 413.45

Dep 9.13 12.89 25.53 33.10 43.10

BIT 149.47 199.15 231.3 319.00 370.35

NT 0 0 0 0.00 0.00

Other Income 0 0 0 28.99 10.21

BT 149.47 199.15 231.3 347.98 380.56

ax 16.76 39.47 39.34 83.52 91.33

AT 132.71 159.68 191.96 264.47 289.22

Growth-%

ales-% 39.5% 35.3% 33.4% 29.1% 19.7%

AT-% 80.5% 20.3% 20.2% 37.8% 9.4%

Margin-%

BITDA 43.3% 42.8% 38.9% 41.3% 40.5%

BIT 40.8% 40.2% 35.0% 37.4% 36.3%

AT 36.2% 32.2% 29.1% 31.0% 28.3%

xpense on Sales-%

mployee cost-% 40.3% 41.2% 44.7% 43.4% 44.0%

Other expenses-% 16.4% 16.0% 16.4% 15.3% 15.5%

ax Rate% 11.2% 19.8% 17.0% 24.0% 24.0%Valuations

CMP 783.95 625 650 1212 1212

OS.Cr 2.9 2.958 2.9875 2.99 2.99

PS 45.76207 53.9824 64.2544 88.52 96.81

NW 238.32 342.92 438.32 615.20 816.84

VPS 82.17931 115.93 146.718 205.93 273.42

/E (x) 17.131 11.5778 10.116 13.69 12.52

/BV (x) 9.54 5.39 4.43 5.89 4.43

RoE-% 55.7% 46.6% 43.8% 43.0% 35.4%


29/29

Narnolia Securities Ltd

402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph

033-32011233 Toll Free no : 1-800-345-4000

email: [email protected],website : www.narnolia.com

Risk Disclosure & Disclaimer: This report/message is for the personal information of

the authorized recipient and does not construe to be any investment, legal or taxation

advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any

action based upon it. This report/message is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or

redistributed to any other person in any from. The report/message is based upon publicly

available information, findings of our research wing East wind& information that we

consider reliable, but we do not represent that it is accurate or complete and we do not

provide any express or implied warranty of any kind, and also these are subject to 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 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

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