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Index

� Stock Update >> Wipro

� Stock Update >> Marico

� Stock Update >> GlaxoSmithKline Consumer Healthcare

� Stock Update >> Union Bank of India

� Stock Update >> V-Guard Industries

� Stock Update >> Eros International Media

� Stock Update >> Dishman Pharmaceuticals & Chemicals

� Stock Update >> Deepak Fertilisers & Petrochemicals Corporation

� Sector Update >> Insurance

2Sharekhan Home NextNovember 02, 2012

investor’s eye stock update

Wipro Apple Green

Stock Update

Hive off of non-core businesses to support valuations Hold; CMP: Rs363

Company details

Price target: Rs390

Market cap: Rs89,851 cr

52-week high/low: Rs453/326

NSE volume: 13.9 lakh(no. of shares)

BSE code: 507685

NSE code: WIPRO

Sharekhan code: WIPRO

Free float: 53.4 cr(no. of shares)

Price performance

(%) 1m 3m 6m 12m

Absolute -8.0 3.1 -12.6 -2.9

Relative -6.8 -4.2 -19.3 -8.7to Sensex

Price chart

Shareholding pattern

Result highlights (IFRS)

� Muted volume growth continues, pricing uptick salvages performance: Wipro

continues to disappoint on the volume front. In Q2FY2013 the company’s volume

growth dropped sequentially to the lowest level in 12 quarters at 0.2% quarter

on quarter (QoQ). The growth is lower than our expectation of a 1.5% sequential

growth. However, a sequential pricing uptick (1.4% offshore and 1.9% onsite)

saved the day on the revenue front, as the revenues of IT services business rose

by 1.7% QoQ to $1,540.7 million (marginally lower than our estimate of $1,545

million), and met the mid level of the guidance range ($1,520-1,550 million).

On a constant currency basis, the revenues of IT services business rose by 1.3%

QoQ to $1,535 million. In rupee terms, revenues of IT services business grew

0.7% QoQ to Rs8,373.2 crore.

� Margin surprises positively helped by productivity improvement: The IT

services business’ earnings before interest and tax (EBIT) margin showed a

marginal decline of 30 basis points QoQ to 20.7% (ahead of our expectations of

18.8%), driven largely by realisation improvement.

� Net other income jumped by 103.5% QoQ to Rs269.7 crore on account of a higher

treasury income and lower marked-to-market (MTM) foreign exchange (forex) losses

on the external currency borrowings (ECB). The treasury income rose by 20% QoQ

to Rs323.4 crore and the forex loss was lower by 73% QoQ at Rs27.2 crore.

Results: consolidated (under IFRS) Rs cr

Particular Q2FY13 Q2FY12 Q1FY13 YoY % QoQ %

Net sales 10639.7 9007.0 10483.2 18.1 1.5

Direct costs 7316.2 6497.9 7287.0 12.6 0.4

Gross profit 3323.5 2509.1 3196.2 32.5 4.0

SG&A 1464.8 1021.3 1324.0 43.4 10.6

EBIT 1858.7 1487.8 1872.2 24.9 -0.7

Net other income 269.7 86.3 132.5 212.5 103.5

Affiliate profit/(loss) -3.5 9.9 -10.2 -135.4 -65.7

PBT 2124.9 1584.0 1994.5 34.1 6.5

Tax provision 507.9 284.1 404.6 78.8 25.5

PAT 1617.0 1299.9 1589.9 24.4 1.7

Minority interest 6.4 -1.0 9.7 -740.0 -34.0

Net profit 1610.6 1300.9 1580.2 23.8 1.9

Equity capital (FV Rs2/-) 492.3 492.3 492.3

EPS (Rs) 6.5 5.3 6.4

Margin (%)

GPM 31.2 27.9 30.5

EBIT margins 17.5 16.5 17.9

NPM 15.1 14.4 15.1

Tax rate 23.9 17.9 20.3

Foreign9%

Institutions4%

Non-promoter corporate

3%

Promoters78%

Public & Others6%

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3Sharekhan November 02, 2012 Home Next

� The consolidated revenues for the quarter were up by

1.5% QoQ to Rs10,639.7 crore and the net profit was

up by 1.9% QoQ to Rs1,610.6 crore (ahead of our

expectations of Rs1,526 crore).

� Management sees deal pipeline improving but

decision making remains uncertain: Wipro signed a

few large deals towards the end of the quarter and

expects to see a ramp-up in these deals in Q4FY2013.

The management also foresees a decent deal pipeline

but the decision making on the deals remains

uncertain. The deals are coming in the traditional

outsourcing business as well as the newer service lines

of cloud and mobility. On client mining, the company

has as of now made investments in the top 55 client

accounts. Going ahead, the company plans to extend

the investments to 134 client accounts. On the other

hand, the company is moving out of the so-called tail

accounts, which, it believes, are not strategic to the

company’s growth. The tail accounts have reduced

from 87 to 45 and would go down to zero in the coming

quarters. This strategy has led to loss of revenue to

the tune of $8 million in the quarter.

� Outlook and valuation: Wipro’s IT services business

continues to struggle to catch up with the peers and

has reported less than 1% sequential volume growth in

the last three quarters. Worst still, we do not anticipate

any dramatic improvement in the volume growth in

the near future. Nevertheless, the company’s move

to hive off the non-core businesses provides

opportunity to investors to earn a decent return by

opting for the 7% redeemable preference shares in

Wipro Enterprises (for details refer to the box). Thus,

we believe the business demerger move would support

the stock price in the medium term. However, we

remain circumspect about any meaningful revival in

Wipro’s core IT services business in the medium term

and continue to prefer Tata Consultancy Services (TCS)

and HCL Technologies (HCL Tech). We increase our price

target to Rs390 and maintain our Hold recommendation

on the stock.

Segment-wise performance

IT products

The IT products segment’s revenues fell by 5.7% QoQ and

10.2% year on year (YoY) to Rs899 crore. The Y-o-Y drop

in the revenues could be attributed to the sluggishness in

the India and Middle-East business. The EBIT margin for

the segment improved by 80 basis points QoQ but fell by

150 basis points YoY to 3%.

Consumer care and lighting business

The division’s revenues grew by 2.8% QoQ and 25.9% YoY

to Rs1,007.5 crore. The EBIT margin for the segment was

down 30 basis points QoQ and up 30 basis points YoY to

11.3%. ‘Santoor’ grew by 22% YoY and ‘Yardley’ grew by

70% YoY. The company also saw a good growth in the office

furniture business.

Segmental performance Rs cr

Particulars Q2 Q2 Q1 YoY QoQ

FY13 FY12 FY13 % %

IT revenues ($ mn) 1540.7 1472.5 1514.8 4.6 1.7

Avg. exchange rate 54.3 46.4 54.9 17.2 -1.0

IT services 8373.2 6829.4 8314.3 22.6 0.7

IT products 899.0 1000.8 953.3 -10.2 -5.7

IT services & products 9272.2 7830.2 9267.6 18.4 0.0

Con. care & lighting 1007.5 800.2 979.8 25.9 2.8

Others 377.8 457.0 388.7 -17.3 -2.8

Eliminations -0.9 7.1 16.9

Total revenues 10656.6 9094.5 10653.0 17.2 0.0

EBIT

IT services 1730.5 1364.0 1744.3 26.9 -0.8

IT products 27.2 45.1 21.1 -39.7 28.9

IT services & products 1757.7 1409.1 1765.4 24.7 -0.4

Con. Care & lighting 113.4 88.2 113.9 28.6 -0.4

Others 18.0 4.1 9.7 -339.0 -85.6

Eliminations -30.4 -13.6 -16.8

Total EBIT 1858.7 1487.8 1872.2 24.9 -0.7

EBIT margin (%)

IT services 20.7 20.0 21.0

IT products 3.0 4.5 2.2

IT services & products 19.0 18.0 19.0

Con. care & lighting 11.3 11.0 11.6

Others 4.8 0.9 2.5

Source: Company and Sharekhan Research

Other highlights

� During Q2FY2013, Wipro made a net addition of 2,017

employees in the IT services business. The total

headcount in the IT services business at the end of

Q2FY2013 stood at 140,569 people.

� The utilisation excluding trainees was stable at 77.9%

and including trainees was down by 180 basis points

to 73.7%.

� At the end of Q2FY2013, the voluntary quarterly

annualised attrition rate decreased to 14.4% as

compared with 15.2% in Q1FY2013. On a trailing

twelve-month (TTM) basis, the attrition was down 100

basis points to 14.6%.




Wipro to demerges consumer care & lighting and other businesses into WEL

� The board of directors of Wipro has approved the demerger of the Wipro Consumer Care & Lighting (including

the furniture business), Wipro Infrastructure Engineering (hydraulics and water businesses) and medical diagnostic

product & services business (through its strategic joint venture) into a separate company to be named Wipro

Enterprises Ltd (WEL).

� Wipro will remain a publicly listed company that will focus on IT. WEL will be an unlisted company. Currently, IT

services and products business contributes about 86% of revenues and 95% of the EBIT.

� The appointed date for the demerger is the opening of the business hours on April 1, 2012, and the demerger is

expected to be completed by the next fiscal. This demerger is subject to Indian court approval and regulatory

approvals.

Options

I

Resident Indian shareholders Non-resident shareholders

excluding ADR holders

ADR holders

II Receive one 7% redeemable

preference share of WEL for

every 5 equity shares of Wipro

redeemable after 12 months at

Rs235.2

III Exchange WEL equity shares

received in the above ratio for

Wipro equity shares held by

promoter in ratio of 1 share of

Wipro for 1.65 shares of WEL

Exchange WEL equity shares for

Wipro equity shares held by

promoter in ratio of 1 equity

share of Wipro for 1.65 equity

shares of WEL

Exchange WEL shares received

in the ratio of 1 equity share

for every 5 equity shares of

Wipro for Wipro equity shares

held by promoter in ratio of 1

share of Wipro for 1.65 shares

of WEL

Receive 1 equity share of WEL

for 5 equity shares of Wipro

and hold the shares of WEL

Receive 1 equity share of WEL

for 5 equity shares of Wipro

and hold the shares of WEL

Our view: we recommend resident investors opt for Option II and receive 7% redeemable preference shares

(face value Rs50) redeemable in 12 months for Rs235.2. (The potential yield based on the current market

price) works out to around 12%.

Potential implied return on opting for 7% redeemable preference shares

CMP (Rs) 365

5 share of Wipro gets one 7% redeemable preference share in Wipro Enterprises 5:1

Effective cost (CMP*5) 1825

Redemption value after one year (Rs) 235.2

Capital gain (redemption value - face value of Rs 50) 185.2

Long-term capital gain @10.3% (Rs) 19.1

Net redemption value per share (Rs) 216.1

7% dividend on FV of Rs 50 (Rs) 3.5

Total value including dividend (Rs) 219.6

Potential yield (%) total value/effective cost 12.0



Operating matrix

Particulars Q2FY13 Q2FY12 Q1FY13 YoY % QoQ %

Geographic mix (%)

Americas 51.5 51.7 51.6 4.2 1.5

Europe 28.2 28.8 28.1 2.5 2.1

Japan 1.1 1.3 1.3 -11.5 -13.9

India & Middle East 8.6 9.3 8.8 -3.2 -0.6

APAC & others 10.6 8.9 10.2 24.6 5.7

Service offering (%)

Tech Infra. Services 23.2 22.1 22.8 9.8 3.5

Analytics & Information Mgmt 7.1 6.6 7.1 12.6 1.7

Business application services 30.7 30.5 30.7 5.3 1.7

BPO 8.7 8.8 8.4 3.4 5.3

Product Engg. 8.2 8.4 8.5 2.1 -1.9

ADM 22.1 23.6 22.5 -2.0 -0.1

R&D business 11.6 12.5 12.0 -2.9 -1.7

Consulting 2.4 3.2 2.5 -21.5 -2.4

Industry verticals (%)

Global Media & Telecom 14.4 15.7 14.9 -4.0 -1.7

Finance Solutions 27.0 27.1 26.4 4.2 4.0

Manufacturing & Hitech 19.0 19.0 19.4 4.6 -0.4

Healthcare, life sciences 9.5 9.8 10.1 1.4 -4.3

& services

Retail & Transportation 15.0 14.7 15.0 6.8 1.7

Energy & Utilities 15.1 13.7 14.2 15.3 8.2

Client contribution (%)

Top client 3.5 3.7 3.5 -1.0 1.7

Top 5 clients 13.0 11.6 12.2 17.3 8.4

Top 10 clients 22.3 20.0 20.9 16.7 8.5

Others 77.7 80.0 79.1 1.6 -0.1

� Americas grow inline with company

� Europe grows at 1.7% on constant-currency basis

� India and Middle East remain soft due to softness in demand

� Infrastructure services seeing traction

� BPO services leads the growth with 5.3% Q-o-Q growth

� Business application services grows in line with the company

but R&D business reports a fall

� Energy & utilities vertical leads growth

� Manufacturing continues to see traction

� Financial services growth led by retail banking

Investment banking remains sluggish

� Telecom OEM space remains sluggish whereas telecom

service providers segment is doing reasonably well

� Top 10 clients grow at 8.5%. This is indicated by increase

in clients with revenue contribution of more than $100

million by 1 to 9 and increase of 2 to 16 in clients with

revenue contribution of more than $75 million

Remarks

Source: Company & Sharekhan Research

� The cash and cash equivalents at the end of Q2FY2013

increased to Rs6,657.4 crore and that including the

investments increased to Rs13,339.6 crore.

� The total hedge at the end of Q2FY2013 stood at $1.7

billion, up from $1.6 billion at the end of the previous

quarter.

� The DSO days were down to 66 from 69 days in the

previous quarter.

� Clients: The company added 53 new clients in the

quarter and the active number of clients for the quarter

increased to 939 (919 in the previous quarter). The

clients contributing more than $100 million increased

to nine from eight in the previous quarter and five in

the corresponding quarter of the previous year.

� Deal wins: The company won deals towards the end

of the quarter the benefit of which would be seen

from Q4FY2013 onwards. The deal wins include a multi-

year, multi-million deal from one of the largest non-

profit healthcare providers in the USA, a deal from

one of the largest retail departmental store chains

based in North America, a large multi-year engagement

from a leading provider of renewable energy

headquartered in Germany and a long-term strategic

partnership with Qatar Airways.

� Outlook and valuation: Wipro continues to struggle

to catch up with peers in terms of growth and the

muted volume growth of the last three quarters do

not favour business revival in the near term.

Nevertheless, the company’s move to hive off the non-

core businesses provides opportunity to investors to

earn a decent return by opting for the 7% redeemable

preference shares in Wipro Enterprises (for details refer

to the box). Thus, we believe the business demerger

move would support the stock price in the medium

term. However, we remain circumspect about any

meaningful revival in Wipro’s core IT services business

in the medium term and continue to prefer TCS and

HCL Tech. We have increased our price target to Rs390

and maintained our Hold recommendation on the stock.


Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.


One-year forward PE band

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Valuation

Particulars FY2011 FY2012 FY2013E FY2014E

Net sales (Rs cr) 31,054.2 37,197.1 42,758.5 47,015.8

Net profit (Rs cr) 5297.7 5573.0 6179.1 6748.9

EPS (Rs) 21.5 22.7 25.1 27.5

YoY change (%) 13.6 5.2 10.9 9.2

PER (x) 17.0 16.2 14.6 13.4

EV/EBIDTA(x) 15.4 13.8 12.0 11.2

RoCE (%) 21.6 20.8 20.7 19.7

RoNW (%) 23.9 20.8 19.6 18.6

Dividend yield (%) 1.6 1.6 1.7 1.9

Source: Bloomberg



Marico Apple Green

Stock Update

Price target revised to Rs217 Hold; CMP: Rs204

Company details

Price target: Rs217


52-week high/low: Rs217/134


BSE code: 531642

NSE code: MARICO

Sharekhan code: MARICO


Price performance

(%) 1m 3m 6m 12m

Absolute 4.7 6.9 18.6 36.2

Relative 6.1 -0.8 9.4 28.1to Sensex

Price chart


Result highlights

� Q2FY13 – moderation in organic volume growth: Marico posted a disappointing

performance in Q2FY2013 with profit after tax (PAT) growing by 11% year on

year (YoY), lower than our and the Street’s expectation of close to 30% YoY

growth for the quarter. The organic sales volume growth stood at 9% YoY in

Q2FY2013, which is lower than the 16% volume growth in Q1FY2013.The lower

canteen stores department (CSD) sales and deceleration in the rate of acquisition

of new customer on its products led to moderation in volume growth during the

quarter. The international business continues to disappoint with a constant

currency growth of 3% YoY during the quarter. However, the highlight of the

quarter was performance of Kaya Skin Care (Kaya) business, which registered a

revenue growth of 38% YoY and achieved a profit before interest and tax of

~Rs6.0 crore

� Results snapshot: Marico’s net sales grew by 19.4% YoY to Rs1,159.5 crore in

Q2FY2013. The growth was driven by a 14% year-on-year (Y-o-Y) sales volume

growth during the quarter. The organic volume growth (excluding contribution

for Paras brand) stood at 9% YoY. The gross profit margin (GPM) improved

significantly by 684 basis points YoY to 49.5% on account of a 33% Y-o-Y correction

in the copra prices on a Y-o-Y basis and a low base of Q2FY2012. The large part

of GPM savings were invested towards advertisement activities behind existing

products and new products such as Saffola Oats, Saffola Muesli and Parachute

Advansed Body Lotion. The advertisement spends as a percentage of its total

sales increased by about 450 basis points YoY to 13.7% during the quarter. This

along with 24% Y-o-Y growth in other expenses led to a 79-basis-point Y-o-Y

improvement in the operating profit margin (OPM) to 13.0%. The operating

profit grew by 27.2% YoY to Rs151.2 crore. However, the lower Y-o-Y other

Results Rs cr

Particular Q2FY13 Q2FY12 YoY % Q1FY13 QoQ %

Net sales 1,159.5 970.8 19.4 1,270.33 -8.7

Expenditure 1,008.2 851.9 18.4 1,082.44 -6.9

Operating profit 151.2 118.9 27.2 187.89 -19.5

Other income 3.9 9.6 -59.2 14.51 -72.9

Interest expenses 14.5 10.4 40.1 17.03 -14.6

Depreciation 22.5 17.7 26.8 19.33 16.2

PBT 118.2 100.5 17.6 166.05 -28.8

Tax 29.3 20.5 42.8 40.26 -27.2

Adjusted PAT (before MI) 88.9 80.0 11.1 125.78 -29.4

Minority interest (MI) 3.0 1.7 79.6 1.95

Reported PAT 85.9 78.3 9.7 123.8 -30.7

Adjusted EPS 1.4 1.3 5.9 1.95 -29.4

GPM (%) 51.6 44.8 684 bps 49.5 212 bps

OPM (%) 13.0 12.3 79 bps 14.8 (174) bps

Others7%

Foreign & Institutions

33% Promoters60%

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income and higher incidence of tax led to just 11.0%

Y-o-Y growth in the PAT before minority interest to

Rs88.9crore (lower than our expectation of

Rs103.1crore).

� Outlook and valuation: We have fine-tuned our

earning estimates to factor in the higher advertisement

spends, higher interest expenses and incremental

revenues from youth brands. We expect Marico’s top

line and bottom line to grow at a compounded annual

growth rate (CAGR) of 19% and 29% over FY2012-14.

However, any significant moderation in the sales

volume growth of some of the key domestic segments

and any substantial increase in the prices of the key

inputs would act as a key risk to the earning estimates.

At the current market price, the stock trades at 33.2x

its FY2013E earnings per share (EPS) of Rs6.2 and 25.0x

its FY2014E EPS of Rs8.2. In view of the limited upside

from the current level, we maintain our Hold

recommendation on the stock with the revised price

target of Rs217 (rolling it over average earnings of

FY2014-15).

Domestic consumer product business

The domestic consumer product business achieved

revenues of Rs793 crore in Q2FY2013, a growth of around

19% over Q2FY2012. The revenues of the acquired portfolio

of Paras consumer care business stood at Rs46 crore during

the quarter. Excluding the revenues from the Paras

portfolio, the organic value growth in the domestic

consumer product business could be just 12% YoY. The

organic volume growth in the domestic consumer business

stood at 10% YoY, which is lower than a 16% volume growth

in Q2FY2012. The lower CSD sales and deceleration in the

rate of acquisition of new customer on its products led to

moderation in the volume growth during the quarter. The

OPM of the business stood at 17%, ahead of the

consolidated OPM of 13.0% for the quarter.

Coconut oil: steady volume growth of 9%

� Parachute Coconut Oil (rigid packs) registered a steady

state growth of 14% in value terms and 9% in volume

terms during the quarter. The company attributes this

growth to a shift in consumer’s choice from the loose

oil to branded coconut oil. During the quarter,

Parachute improved its market share by 390 basis

points over the previous year.

� Marico’s volume share (including Parachute and Nihar)

stood at 57.2% in Q2FY2013 as against 53.3% in

Q2FY2012.

� The copra prices were down by about 33% YoY in

Q2FY2013, which helped the GPM to improve

significantly during the quarter. The company offered

several promotional offers (including Rs2 off on

Parachute Coconut Oil [PCNO] 100-ml pack, Rs2 off

on PCNO 45-ml pack, PCNO 250 ml + Jas 50 ml free,

PCHO 500ml + 20% free) during the quarter. If the copra

prices maintain its stability in the coming months, we

might see a reduction in the prices of key packs in the

coming quarters.

� We expect the volume growth to sustain in the range

of 8-10% in the medium term. The key drivers of the

volume growth would be the sustenance of the

consumer’s shift from loose oil to branded oil. Loose

oil constitutes around 40% of the overall coconut

market in India. Also, in the long run, an increase in

the distribution reach in rural India would add to the

overall volumes of Parachute.

Value-added hair oil portfolio— achieved around 20%

Y-o-Y volume growth

� Valued added hair oil registered a value growth of 23%

YoY in Q2FY2013 with the volume growth standing at

20% YoY. This was largely on account of all the brands

recording healthy growths and market share gains

during the quarter.

� Marico has maintained its leadership positioning with

a volume market share of about 25.3%. There is a

positive shift in market share by 260 basis points in

Q2FY2013 over Q2FY2012. The market share gains can

be attributed to product innovation and participation

in sub-segment of value added hair oils category along

with continued media supports.

� With the increasing acceptance of the value-added hair

oil in the domestic market, we expect the volume

growth to sustain in the range of 18-20% in the coming

quarters.

Trend in volume growth of focus portfolio

Brands Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13

Parachute 14 11 5 5 10 10 13 11 18 9

Saffola 18 18 13 14 15 11 15 3.3 12 6

Value-added hair oil 27 14 31 21 32 25 20 17.5 25 20



Saffola: volume growth improved to double digits

� The Saffola edible oil portfolio grew by 13% YoY in

value terms in Q2FY2013. The volume growth

decelerated to 6% YoY in Q2FY2013 from 13% YoY in

Q1FY2013. The sustenance of high food inflation had

an impact of on the sales of the discretionary segments.

The pace at which the consumers were upgrading to

the Saffola brands has slowed down during the quarter.

� The company had come up with several promotional

offers to improve volume growth in the coming

quarters. The company expects the volume growth to

come back in double digits in the medium term.

� The brand maintained its leadership in the super

premium edible oils segment with a market share of

about 58.6% (improvement of 30 basis points on a

sequential basis).

� The prices of kardi oil and the rice bran oil remained

higher by 59% and 16% YoY respectively in Q2FY2013.

However, the company will watch the price movement

of these key inputs for some more months before taking

any pricing action.

List of Key Promotional Offers during Q2FY13

Parachute Coconut Oil (PCNO)

PCNO 100ML - Rs 2 off

PCNO 45ML - Rs 2 off

PCNO 250ML + Jas 50ML free

PCNO 500ML+20% free

Saffola Super Premium Refined Edible Oils

Saffola Gold 1Ltr + 20% free

Saffola Gold 5Ltr + 1Ltr Free

Saffola Original 5Ltr + 1Ltr Free

Performance of the new launches

� Saffola Oats (including the savoury variant) continues

to gain good traction in the southern market. After

gaining good response in south India, the company has

rolled out the product nationally during the quarter.

It has also extended the range by introducing three

new flavours in the market. With this, Saffola offers a

bucket of six flavours in savoury oats category. Saffola

Oats commands a value market share of 14%

(improvement of 200 basis points on a sequential basis)

and is the number two player in the domestic market.

The category is growing at 35-40% per annum.

� Saffola strengthened its position in the breakfast

category by introducing Muesli on a national basis.

The product is available in three variants. The market

size of Muesli is estimated to be around Rs 80-100crore

growing at rapid pace of 40% per annum.

� Parachute Advansed Body Lotion has achieved a market

share of 6% within a short period of time and has

become the number three player in the market. Since

the penetration level is low at 20% for the category, it

is expected to maintain the strong growth momentum

of over 25% in the coming years.

� The company expects Saffola Oats and Parachute

Advansed Body Lotion to achieve revenues of around

Rs 50-55crore in FY2013.

Internal business—muted quarter with a 3% organic

growth

The international business, which contributes close to 25%

to Marico’s total turnover, registered a revenue growth

of 16% to Rs275 crore in Q2FY2013. However, the organic

growth stood at a muted 3% YoY, while a 13% Y-o-Y revenue

growth was driven by a favourable currency translation.

The muted performance was on account of flat revenues

from Bangladesh (39% of international business) and South

Africa (11% of international business) due to the persistent

macro uncertainties and sustained high inflation during

the quarter. The EBIDTA margin of the international

business stood at 10%, which is a 150 basis-point

improvement on the sequential basis. The company

expects the performance of key geographies such as

Bangladesh, South Africa and Middle East region to improve

in the second half of the year. We could see organic growth

rate coming back to double digit in the coming quarters.

Also, the EBIDT margins of the international business are

expected to improve on a quarter-on-quarter (Q-o-Q)

basis.

� Bangladesh: Bangladesh (which contributes about 40%

to the international business’ revenues) has seen an

improvement in the macro environment on a sequential

basis. However, the business environment is still

challenging for Marico. Marico’s flagship brand has an

80% market share in the Bangladesh hair oil market.

Going ahead, focusing on the long-term growth

potential, the company continues to make investment

behind the existing brand and add new products in

the portfolio. The company expects the performance

of Bangladesh to improve in the coming quarter and it

will achieve a growth of 10% YoY in the medium term.

� Egypt: The overall business environment in Egypt has

improved with gradual signs of revival in the economy.

The company’s business in Egypt grew by 11% YoY during

the quarter. In the Middle East, the company has lost

some momentum due to the new pack transition.

However, the company has made efforts to

communicate the same to the end consumers and

expects things to improve in the coming quarters.


�


Overall, the Mena region revenues grew by 6% YoY

during the quarter.

� South Africa: The South African business recorded a

flat revenue growth mainly due to a transportation

strike during the month of September 2012, which

adversely affected all the businesses. Hence, this can

be looked as a one-off quarter and expect the region

to perform well in the coming quarters.

� South-East region: The business in Vietnam grew by

23% YoY in Q2FY2013 on account of a drop in the

inflation to single digit and good traction show by

portfolio of products. On the other hand, Malaysian

business continues to grow at a very healthy rate.

Kaya performance exceeds expectations driven by

higher promotions

� Kaya performed better than expected, achieving a

turnover of Rs91.5 crore. The revenue grew by 38% on

a Y-o-Y basis (~25% in the constant currency terms).

The business posted a profit of Rs5.7 crore at the PBIT

level compared with a loss of Rs4.8 crore in Q2FY2012.

The trend during the last couple of years has been

encouraging.

� Kaya achieved same store-sales-growth of about 10%

in India and in the Middle East on account of higher

promotional activities and introduction of loyalty

programs.

� The products from Derma Rx portfolio continued to

gain good traction in India. About 25% revenues from

the Indian operations came from the sales of Derma

Rx products.

� Regarding the new store addition, the management

intends to maintain a run rate of opening three to four

stores every year.

� The management has indicated that the current

quarter performance was a one–off, driven largely by

promotional activities. The company would like to

observe few more quarters to gain confidence about

the sustain profitability.

Outlook and valuation: We have fine-tuned our earning

estimates to factor in the higher advertisement spends,

higher interest expenses and incremental revenues from

youth brands. We expect Marico’s top line and bottom

line to grow at a compounded annual growth rate (CAGR)

of 19% and 29% over FY2012-14. However, any significant

moderation in the sales volume growth of some of the

key domestic segments and any substantial increase in

the prices of the key inputs would act as a key risk to the

earning estimates.

At the current market price, the stock trades at 33.2x its

FY2013E earnings per share (EPS) of Rs6.2 and 25.0x its

FY2014E EPS of Rs8.2. In view of the limited upside from

the current level, we maintain our Hold recommendation

on the stock with the revised price target of Rs217 (rolling

it over average earnings of FY2014-15).

Valuations

Particulars FY11 FY12 FY13E FY14E FY15E

Net sales (Rs cr) 3,135.0 4,008.3 4,822.0 5,657.1 6,503.8

Adj. net profit (Rs cr) 256.4 318.9 396.7 525.8 609.1

EPS (Rs) 4.2 5.2 6.2 8.2 9.4

Y-o-Y growth (%) 0.9 24.2 18.6 32.6 15.8

PER (x) 48.9 39.3 33.2 25.0 21.6

Book value (Rs) 14.9 18.6 30.8 38.1 46.8

P/BV (x) 13.7 11.0 6.6 5.3 4.4

EV/EBIDTA (x) 31.1 26.6 20.8 16.9 14.5

RoCE (%) 26.1 24.3 26.5 26.9 26.7

RoNW (%) 32.7 31.0 25.3 23.7 22.3





GlaxoSmithKline Consumer Healthcare Evergreen

Stock Update

Upgrade to Buy, price target revised to Rs3,450 Buy; CMP: Rs3,079

Company details

Price target: Rs3,450


52-week high/low: Rs3,200/2,179


BSE code: 500676

NSE code: GSKCONS

Sharekhan code: GSKCONS


Price performance

(%) 1m 3m 6m 12m

Absolute 1.2 14.8 8.2 30.6

Relative 2.5 6.6 -0.2 22.9to Sensex

Price chart


Result highlights

� Operating performance came in line with expectation: In Q3CY2012,

GlaxoSmithKline Consumer Healthcare (GSK Consumer)’s operating performance

was largely in line with our expectation, with a ~15% year-on-year (Y-o-y) growth

in revenues and the operating profit margins (OPMs) standing at 17%. Despite a

slowdown in canteen store department sales, the company was able to achieve

a volume growth of 6% year on year (YoY; ahead of 3% volume growth in

Q2CY2012). However, excluding the impact of lower canteen sales department

(CSD) sales, the volume growth in the domestic market would have been 7.5%

for the quarter. The export sales continue to disappoint with 3% sales growth.

� Performance snapshot: GSK Consumer’s net sales grew by 14.9% YoY to Rs827.5

crore (our expectation was of Rs832 crore) driven by a 6% volume growth and

an approximately 10% YoY price-led growth in Q3CY2012. The malted food drinks

(MFD) segment grew by 16.2% YoY (volume growth of 6%) with Horlicks growing

by 16% YoY (volume growth of 4.5% YoY) and Boost growing by 22% YoY (volume

growth of 8.5% YoY). The gross profit margins (GPMs) improved by 39 basis

points YoY to 62.5%. The steady GPMs are largely on judicious price increases in

the portfolio. The OPM improved by 59 basis points YoY to 17.0% and the operating

profit grew by 19.0% YoY to Rs140.5 crore. The business auxiliary income grew

Results Rs cr

Particular Q3CY12 Q3CY11 YoY % Q2CY12 QoQ %

Net sales 827.5 720.1 14.9 729.7 13.4

Business auxiliary inc. 30.2 24.5 23.0 28.7 5.1

Total operating income 857.7 744.6 15.2 758.4 13.1

Total expenditure 687.1 602.1 14.1 619.1 11.0

Raw material cost 310.4 272.9 13.8 270.3 14.8

Employee expenses 77.5 66.3 17.0 79.1 -2.0

Advertisement expenses 138.6 119.6 15.9 116.1 19.4

Other expenses 160.5 143.3 12.0 153.6 4.5

Operating profit 140.5 118.0 19.1 110.7 26.9

Other income 27.6 23.1 19.5 28.5 -3.2

EBIDTA 198.3 165.6 19.7 167.9 18.1

Interest 0.3 1.0 -73.8 0.8 -67.5

PBDT 198.0 164.6 20.3 167.1 18.5

Depreciation 7.7 11.7 -33.9 8.6 -9.9

PBT 190.3 153.0 24.4 158.5 20.0

Tax 61.7 49.9 23.6 51.9 18.9

Reported PAT 128.6 103.0 24.8 106.6 20.6

Adjusted EPS (Rs) 31 24 24.8 25 20.6

GPM (%) 62.5 62.1 39 bps 63.0 (47) bps

OPM (%) 17.0 16.4 59 bps 15.2 181 bps(excluding other operating inc.)

Promoters43%

FIIs15%

Others25%

Domestic institutions

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by 23% YoY to Rs30.2 crore and the other income grew

by 19.5% YoY to Rs27.6 crore during the quarter. This

led to a strong 24.8% Y-o-Y growth in the reported profit

after tax (PAT) to Rs128.6crore (slightly ahead of our

expectation of Rs122.6 crore) during the quarter.

� Outlook and valuation: In view of the portfolio of strong

brands and a thrust on enhancing the distribution reach,

we believe GSK Consumers is well poised to achieve a

mid-to-high teens topline growth in the coming years

(with volume growth standing in range of 6-9%). If the

key inputs’ prices continue to remain stable in the

coming quarters, we expect the company to post better

profitability in CY2013 and CY2014. Overall, we expect

GSK Consumer’s top line and bottom line to grow at a

CAGR of 16% and 18% over CY2011-14.

At the current market price, the stock is trading at

29.7x its CY2012E EPS of Rs103.5 and 25.7x its CY2013E

EPS of Rs119.7. Our revised price target stands at

Rs3,450, rolling it over to CY2014 earnings of Rs138.2.

In view of a strong market positioning in the MFD

segment and a robust cash pile of above Rs1,350 crore

(could be utilised for growth initiatives or to reward

investors with good dividend), we upgrade our rating

on the stock from Hold to Buy.

Business performance

� MFD segment - maintained double-digit growth: The

MFD segment grew by 16.2% YoY in value terms (volume

growth of 6% YoY), in line with the industry growth of

17% during the quarter. Excluding the impact of the

lower CSD sales, the value growth could have been 18%

YoY. Horlicks and Boost maintained its double-digit

growth momentum with value growth of 16% YoY and

22% YoY respectively during the quarter. Horlicks volume

growth stood at 4.5% YoY (excluding the CSD impact, it

was 6% YoY). On the other hand, Boost clocked a volume

growth of 8.5% YoY on account of several initiatives

undertaken to improve growth of the brand in the

domestic market. Going ahead, the management

expects to achieve volume growth in the range of 7-9%

YoY. This will be driven by an increase in reach in the

rural markets, increased focus on improving sales in

the north and western regions and launch of new

variants in the segment. The company is planning to

add new products in the super premium MFD segment,

which is growing at around 35% YoY per annum.

Volume growth in MFD segment stood at 6%

Lower CSD sales affected the volume growth of MFD

segment

� Non-MFD segment – strong growth momentum

sustained: The non-MFD segment (~6% of overall

revenues) continues to perform well for the company.

The revenues of this segment grew by 35% YoY during

the quarter. The biscuit segment, the largest

contributor in the non-MFD segment, grew by 29%

YoY in Q3CY2012, largely driven by strong volume

growth of 23% YoY in Q3CY2012. The company

launched Horlicks Nutribic biscuit in the premium

biscuit segment, which is growing at a brisk space.

The Horlicks Nutribic biscuit gaining good acceptance

in the market, achieved a market share of 8% in south

India. The company is planning to enhance the biscuit

portfolio with new variants in the segment. On the

other hand, Horlicks Oats maintained its number three

position with a market share of 11% in south India.

� Exports continue to disappoint: The export sales,

which contribute around 5% to GSK Consumer’s total

revenues, grew moderately by 3% YoY in Q3CY2012.

20.0%

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Horlicks volume growth Boost volume growth



The moderate growth can be attributed to lower sales

in the Sri Lankan market and a high base of Q3CY2012.

Sri Lanka, which is one of the key export markets for

GSK Consumer, is reeling under inflationary pressure.

On the other hand, Bangladesh continues to clock good

performance for the company.

Other key highlights

� Key input prices remained flat sequentially: The

malted barley and skimmed milk powder prices were

up by 6% YoY and 7% YoY respectively. However, the

same continues to remain flat on a sequential basis.

The wheat prices which had remained stable for the

past several quarters, saw around 13% Y-o-Y surge in

Q3CY2012. The Y-o-Y inflation in raw material cost

stood at 8% in Q3CY2012. The company expects the Y-

o-Y inflation to be 5% in Q4CY2012. The company has

already undertaken judicious price increases in its

portfolio to mitigate the input cost impact. Having

said that, if the key input prices continue to remain

stable in the coming months, we should see a

substantial improvement in the margins in CY2013.

� Business auxiliary income continues to grow

strongly: The business auxiliary income grew by ~23%

YoY to Rs30.2crore in Q3CY2012. The strong growth in

the income can be attributed to the robust

performance of Sensodyne toothpaste and Eno. On the

other hand, the other income grew by 19.5% YoY to

Rs27.5crore, achieving higher yield on a strong cash

pile of above of Rs1,300 crore.

Region wise revenue break-up

� Capex of Rs ~270 crore for CY2013: The company

had planned a capital expenditure (capex) of Rs120-

130 crore for CY2012 for the expansion of its capacity.

It has already incurred a capex of Rs 65 crore. Going

ahead, for CY2013, the company is planning to incur

the capex of Rs270 crore. The capex would be funded

through internal accruals.

� Focus on enhancing rural reach: The company has

maintained its thrust on enhancing its distribution

reach (especially in rural India). Currently, GSK

Consumer’s covers around 50,000 villages in India,

which contributes to around 27% of the domestic sales.

It would be adding additional 10,000 villages by the

end of CY2012.

Outlook and valuation: In view of the portfolio of strong

brands and a thrust on enhancing the distribution reach,

we believe GSK Consumers is well poised to achieve a mid-

to-high teens topline growth in the coming years (with

volume growth standing in range of 6-9%). If the key inputs’

prices continue to remain stable in the coming quarters,

we expect the company to post better profitability in

CY2013 and CY2014. Overall, we expect GSK Consumer’s

top line and bottom line to grow at a CAGR of 16% and 18%

over CY2011-14.

At the current market price, the stock is trading at 29.7x

its CY2012E EPS of Rs103.5 and 25.7x its CY2013E EPS of

Rs119.7. Our revised price target stands at Rs3,450, rolling

it over to CY2014 earnings of Rs138.2. In view of a strong

market positioning in the MFD segment and a robust cash

pile of above Rs1,350 crore (could be utilised for growth

initiatives or to reward investors with good dividend), we

upgrade our rating on the stock from Hold to Buy.

Valuations

Particulars CY10 CY11 CY12E CY13E CY14E

Revenues (Rs cr) 2306.1 2685.5 3119.8 3651.4 4218.7

Operating margins (%) 16.3 15.8 16.6 16.7 16.6

PAT (Rs cr) 299.8 355.2 435.4 503.5 581.1

EPS (Rs) 71.3 84.5 103.5 119.7 138.2

P/E (x) 43.2 36.5 29.7 25.7 22.3

EV/Sales (x) 5.2 4.4 3.8 3.2 2.7

EV/EBIDTA (x) 24.2 20.1 16.3 13.8 11.6

RoNW (%) 32.2 33.8 34.6 33.4 32.3

RoCE (%) 48.7 51.7 52.8 50.9 49.3


North India6%

West India5%

Exports5%

East India38%

South India46%


Promoter55%

Foreign10%

MF & FI20%

Public & others15%

Company details

Price chart


Price performance

(%) 1m 3m 6m 12m

Absolute -5.9 16.6 -9.3 -9.9

Relative -4.6 8.3 -16.3 -15.3to Sensex

Union Bank of India Ugly Duckling

Stock Update

Price target revised to Rs206, downgrade to reduce Reduce; CMP: Rs223

Price target: Rs206


52 week high/low: Rs274/150


BSE code: 532477

NSE code: UNIONBANK

Sharekhan code: UNIONBANK


Result highlights

� In Q2FY2013, Union Bank of India (Union Bank)’s net profit was marginally lower

than our estimates as it grew by 57.2% year on year (YoY; 8.4% quarter on

quarter [QoQ]) to Rs554.6 crore. The growth in profit was on account of lower

provisions, which declined by 21.8% YoY (down 6.1% QoQ).

� The net interest income (NII) grew by 11.4% YoY (1.6% QoQ) in line with our

estimates. However, the net interest margins (NIMs) were stable at 3.02% in

Q2FY2013 as the drop in yield was offset by a similar decline in the cost of

funds.

� The business growth was steady as advances grew by 19.4% YoY (- 0.6% QoQ),

while the deposits grew 15.6% YoY. The current account savings account (CASA)

stood at 30.5% as against 30.9% in the previous quarter.

� During Q2FY2013, the asset quality improved as gross and net non-performing

assets (NPAs) declined led by lower slippages and improved recoveries. However,

the bank restructured Rs839 crore of advances in Q2FY2013 taking the

restructured advances book to 8.3% of total advances.

� The non-interest income grew by a healthy at 11.1% QoQ on account of a strong

growth in the fee income, which grew by 19% QoQ. The treasury profits also

grew 36% QoQ but foreign (forex) income declined significantly on a quarter-

on-quarter (Q-o-Q) basis.

Results Rs cr

Particulars Q2FY13 Q2FY12 YoY % Q1FY13 QoQ %

Interest earned 6,109.8 5,110.6 19.6 6,069.9 0.7

Interest expense 4,259.7 3,449.2 23.5 4,248.2 0.3

Net interest income 1,850.2 1,661.4 11.4 1,821.7 1.6

Other income 545.8 500.9 9.0 491.2 11.1

- Fee and other income 351.0 298.0 17.8 295.0 19.0

- Trading income 61.0 61.0 - 83.0 (26.5)

- others 131.0 141.9 (7.7) 113.0 15.9

Total income 2,396.0 2,162.4 10.8 2,312.9 3.6

Operating expenses 1,123.4 957.1 17.4 1,045.9 7.4

- Employee cost 678.7 591.4 14.8 679.5 (0.1)

- Other costs 444.6 365.7 21.6 366.4 21.3

Operating profit 1,272.7 1,205.3 5.6 1,267.1 0.4

Prov for contingencies 487.1 622.8 (21.8) 518.5 (6.1)

PBT 785.6 582.5 34.9 748.6 4.9

Tax 231.0 229.7 0.5 237.0 (2.5)

PAT 554.6 352.7 57.2 511.6 8.4

Gross NPA (%) 3.66 3.49 17 bps 3.76 -10 bps

Net NPA (%) 2.06 2.04 2 bps 2.20 -14 bps


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� Valuation and outlook: In Q2FY2013, Union Bank’s

results were stable with some improvement in asset

quality on a sequential basis. Further, the asset quality

is likely to be under pressure with rise in restructured

loans and exposure to troubled sectors. We expect the

return ratios to lag as compared with its peers, though

the valuations seem unreasonable in view of the asset

quality concerns. We have revised our target price to

Rs206 (0.85x FY14 adjusted book value). We downgrade

the recommendation to reduce.

NII growth in line; NIMs stable on QoQ at 3.02%

Union Bank’s NII grew by 11.4% YoY (1.6% QoQ), largely in

line with our estimates. The growth in NII was backed by

a growth in advances and steady margins. During the

quarter, the margins were maintained at 3.02% as the

drop in yields (9.16% vs 9.34% in Q1FY2013) was

compensated by almost a similar decline in the cost of

funds (6.38% vs 6.54% in Q1FY2013).

Non-interest income


- Fee income 351.0 298.0 17.8 295.0 19.0

- Trading and 61.0 61.0 - 83.0 (26.5)Forex income

- Treasury profit 75.0 100.0 (25.0) 55.0 36.4

- Misc. income 56.0 41.9 33.6 58.0 (3.4)

Total 543.0 500.9 8.4 491.0 1,059.1

Steady business growth

During Q2FY2013, the advances grew at a healthy rate of

19.4% YoY (down 0.6% QoQ). The incremental growth in

advances was driven by corporate (up 8% QoQ) and small-

and medium-enterprise sectors (up 9.2%). The retail

advances grew 5.1% QoQ (22% YoY) while the trade loans

declined sharply (-48% QoQ) due to reduction in bills

discounting and letter of credit. The management has

guided for a credit growth of ~17% in FY2013.

Business growth

Particulars Q2 Q2 YoY Q1 QoQFY13 FY12 % FY13 %

Advances 172,901 144,854 19.4 173,911 (0.6)

Deposits 226,095 195,572 15.6 222,110 1.8

CD Ratio (%) 76.5 74.1 241 bps 78.3 -183 bps

CASA ratio declines to 30.5%

The deposits grew by 15.6% YoY (1.8% QoQ) as the bank

focused on reducing the bulk deposits. The bank has bulk

deposits of 17% (including certificate of deposits), which

the management plans to reduce to below 15% by end of

the fiscal. The savings deposits grew by 11.5% YoY while

the term deposits increased by 18.3% YoY. The CASA ratio,

dipped by 40 basis points to 30.5% in Q2FY2013 from 30.9%

as on Q1FY2013.

Asset quality improvement led by recoveries, but

challenges remain

After showing a sharp rise in slippages during Q1FY2013,

the bank’s slippages declined in Q2FY2013 to Rs792 crore.

Consequently, the gross and net NPAs declined to 3.66%

and 2.06% respectively from 3.76% and 2.20% in Q1FY2013.

Moreover, the asset quality improved as slippages were

lower at Rs792 crore (Rs1,631 crore in Q1FY2013) and

recoveries were higher at Rs863 core (Rs 863 crore in

Q1FY2013). The bank restructured loans to the tune of

Rs839 crore, thereby taking the total restructured loan

book to Rs14,630 crore (8.31% of loan book). Going ahead,

the bank expects around Rs2,500 crore of loans to get

restructured over the next two quarters, which in our

view will stress the asset quality.

Provisioning expected to remain high

During the quarter, the provisions declined by 21% YoY as

the slippages were relatively lower. Decline in NPAs’

provisions coupled with a reversal of investment provisions

(Rs46 crore) contributed to the decline in provisions. The

provision coverage ratio improved to 61.4% vs 58.8% in

Q1FY2013. Going ahead, the asset quality pressures and

the increase in provision restructured loans by the Reserve

Bank of India are likely to impact Union Bank’s earnings.

Provision expenses

Particulars Q2 Q2 YoY Q1 QoQFY13 FY12 % FY13 %

- For NPAs/ 367.0 498.0 (26.3) 443.0 (17.2)Standard assets

- For investment (46.0) 82.0 (156.1) 66.0 (169.7)Depreciation/amortisation

- Others 168.0 42.0 300.0 9.0 1,766.7

Total 489.0 622.0 (21.4) 518.0 (5.6)

Moderate growth in non-interest income

The non-interest income increased by 9% YoY (11% QoQ),

driven by a strong growth in the fee income. The fee

income increased by 18% YoY (19% QoQ) contributed by

the loan syndication fees. The treasury income grew by

36% QoQ to Rs75 crore, aided by growth in the non-

interest income. However, forex income declined sharply

by 27% QoQ.


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20.0%

Advances QoQ Grow th

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

Q2F

Y10

Q4F

Y10

Q2

FY

11

4QF

Y11

Q2F

Y12

Q4F

Y12

Q2F

Y13

0.0%

0.5%

1.0%

1.5%2.0%

2.5%

3.0%

3.5%

4.0%

Q2F

Y10

Q4F

Y10

Q2

FY

11

4QF

Y11

Q2F

Y12

Q4F

Y12

Q2F

Y13

Gross NPA Net NPA

2.0%

2.2%

2.4%

2.6%2.8%

3.0%

3.2%

3.4%

3.6%

Q2F

Y10

Q4F

Y10

Q2

FY

11

4QF

Y11

Q2F

Y12

Q4F

Y12

Q2F

Y13

Cost-income ratio


Trend in gross and net NPAs

Trend in NIM Trend in advance growth

Valuation and outlook: In Q2FY2013, Union Bank’s results

were stable with some improvement in asset quality on a

sequential basis. Further, the asset quality is likely to be

under pressure with rise in restructured loans and

exposure to troubled sectors. We expect the return ratios

Valuations matrix (based on Q2FY2013 reported figures in %)

Banks Gross NPA Restructured advances/ Stressed PCR Tier-I P/BV (x)# RoA #total advances Loans

BOB 2.0 5.8 7.8 75.7 9.6 0.9 1.0

BOI 3.4 6.8 10.2 61.0 8.1 0.7 0.7

PNB 4.7 9.4 14.1 54.3 8.7 0.7 1.0

ALLBK* 2.0 9.7 11.7 73.6 9.3 0.5 0.9

UBI 3.7 8.3 12.0 61.5 8.2 0.7 0.8

* based on Q1FY13 reported numbers

# FY14

to lag as compared with its peers, though the valuations

seem unreasonable in view of the asset quality concerns.

We have revised our target price to Rs206 (0.85x FY14

adjusted book value). We downgrade the recommendation

to reduce.


30.0%

30.5%

31.0%

31.5%

32.0%

32.5%

33.0%

33.5%

Q2F

Y10

Q4F

Y10

Q2

FY

11

4QF

Y11

Q2F

Y12

Q4F

Y12

Q2F

Y13


Profit and loss statement (Rs cr)

Particulars FY10 FY11 FY12 FY13E FY14E

Net interest income 4,192 6,216 6,909 7,735 9,115

Non-interest income 1,975 2,039 2,332 2,557 2,812

Net total income 6,167 8,255 9,241 10,292 11,927

Operating expenses 2,507 3,950 3,986 4,527 5,260

Pre-provisioning profit 3,660 4,305 5,255 5,765 6,667

Provision & contingency 826 1,352 2,541 2,409 2,659

PBT 2,833 2,953 2,714 3,356 4,008

Tax 758 873 926 1,040 1,282

PAT 2,075 2,080 1,788 2,315 2,725

Balance sheet (Rs cr)


Liabilities

Networth 10,424 12,652 14,522 16,431 18,678

Deposits 170,040 202,461 222,869 260,757 308,997

Borrowings 9,215 13,427 18,020 20,861 24,411

Other liabilities & 5,483 7,443 6,800 8,185 8,857provisions

Total liabilities 195,162 235,983 262,211 306,233 360,943

Assets

Cash & balances 12,468 17,610 11,634 15,645 17,613with RBI

Balances with banks 3,308 2,488 4,042 4,203 4,329& money at call

Investments 54,404 58,399 62,364 71,957 83,403

Advances 119,315 150,986 177,882 208,122 248,706

Fixed assets 2,305 2,293 2,336 2,453 2,575

Other assets 3,361 4,206 3,955 3,853 4,316

Total assets 195,162 235,983 262,211 306,233 360,943

Financials

Key ratios


Per share data

EPS 41 40 32 42 50

BV 174 211 236 272 315

ABV 155 177 181 192 243

Spreads (%)

Yield on advances 9.0 8.9 9.7 9.4 9.2

Cost of deposits 5.5 5.1 6.3 6.0 5.9

Net interest margins 2.6 3.2 3.2 3.1 3.1

Operating ratios (%)

Credit to deposit 70.2 74.6 79.8 79.8 80.5

Cost to income 40.7 47.8 43.1 44.0 44.1

CASA 31.7 31.8 31.3 31.9 32.2

Non interest income/ 32.0 24.7 25.2 24.8 23.6Total income

Return ratios (%)

RoE 21.7 18.0 13.2 15.0 15.5

RoA 1.17 0.96 0.72 0.81 0.82

Assets/equity 18.6 18.7 18.3 18.4 19.0

Asset quality ratios (%)

Gross NPA 2.2 2.4 3.0 3.7 3.3

Net NPA 0.8 1.2 1.7 2.1 1.6

Provision coverage 61.5 49.0 43.1 43.4 53.1

Growth (%)

NII 10.0 48.0 11.0 12.0 18.0

PPP 19.0 18.0 22.0 10.0 16.0

PAT 20.0 - -14.0 29.0 18.0

Advances 24.0 27.0 18.0 17.0 20.0

Deposits 22.6 19.1 10.1 17.0 18.5

Valuation ratios (%)

P/E 5.4 5.6 6.9 5.3 4.5

P/BV 1.3 1.1 0.9 0.8 0.71

P/ABV 1.4 1.3 1.2 1.2 0.9

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000Q

2FY

10

Q4F

Y10

Q2

FY

11

4QF

Y11

Q2F

Y12

Q4F

Y12

Q2F

Y13

-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%

Deposits QoQ Grow th

Trend in deposits growth Trend in CASA




Company details

Price chart


Price performance

(%) 1m 3m 6m 12m

Absolute 10.8 45.8 132.6 118.7

Relative 12.2 35.4 114.6 105.7to Sensex

V-Guard Industries Ugly Duckling

Stock Update

Growth on track, price target revised to Rs451 Hold; CMP: Rs430

Price target: Rs451




BSE code: 532953

NSE code: VGUARD

Sharekhan code: VGUARD


Result highlights

� Top line growth led by non-south region and products like digital UPS, pumps

and fans: In Q2FY2013, V-Guard Industries (V-Guard) continued to a post stellar

performance with revenues growing by 49% year on year (YoY) to Rs312 crore

(10% above expectations). This was driven by a robust growth in the sales of

digital uninterrupted power supply (UPS; up 255% YoY), fans (up 55% YoY) and

pumps (54% YoY). Further, the non-south region, which accounts for 23% of the

company’s sales, demonstrated a robust growth of 67% in Q2FY2013.

� Margin under slight pressure: The operating profit margin (OPM) for the quarter

came in at 9.6%, slightly lower than our expectation of 10%, on account of

input cost pressure. The raw material cost as a percentage of sales increased

to 73.8% from ~71% it maintained earlier, mainly led by an increase in the

purchase of traded goods. However, the margins are not comparable with a

7.1% margin recorded in Q2FY2012 as it was abnormally low on account of

discounts and incentives offered to increase the then subdued demand. The

selling and distribution expenses came much lower at 4.2% of sales this quarter

(vs 7-9% in the previous year). Overall, the operating profit nearly doubled to

Rs30 crore from Rs15 crore reported in Q2FY2012.

� Net profit rose by 163% YoY: A lower increase in the interest and depreciation

expenses coupled with a higher other income contributed towards the profit

after tax (PAT) of Rs18 crore (up 163% YoY), which is 15% higher than our

expectation. The tax rate remained low during the quarter at 24.8% because of

the increased contribution from the company’s new Kachipuram plant, which

enjoys tax benefits.

Results Rs cr

Particulars Q2FY12 Q2FY13 YoY % H1FY12 H1FY13 YoY %

Income from operations 210 312 48.6 448 629 40.3

Other operating income 2 2 1.4 3 3 6.5

Operational income 211 313 48.2 452 632 40.0

Total expenditure 196 283 44.3 414 568 37.3

Operating profits 15 30 98.8 38 64 69.8

Other income 0 1 206.2 1 2 115.1

EBIDTA 15 31 101.4 39 66 70.7

Interest 4 4 1.6 8 9 8.7

Depreciation 2 3 24.0 5 6 22.7

PBT 9 24 169.3 26 51 98.6

Tax 2 6 191.1 7 13 90.6

Adjusted PAT 7 18 162.8 19 39 101.4

Ratio (%)

Operating margin 7.1 9.6 8.4 10.2

PAT margin 3.2 5.7 4.2 6.1

Tax rate 23.0 24.8 26.0 25.0

Promoters65%

Foreign10%

DIIs3%

Others22%

140

180

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260

300

340

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420

460

Nov

-11

Feb

-12

May

-12

Aug

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Nov

-12



� Estimates fine-tuned: The company has upgraded its

revenue growth target for FY2013 to 35-40% YoY (from

30% growth guidance given earlier) and indicated an

OPM of 9.5-10% for the same period. We have fine-

tuned our earnings estimates for FY2013 and FY2014

after incorporating better revenue offtake in digital

UPS segment. We are now expecting a compounded

annual growth rate (CAGR) of 31% in the company’s

revenues and 38% in its earnings over FY2012-14.

� Maintain Hold: The company has continued to deliver

results in line or ahead of its growth guidance. Hence,

V-Guard remains our preferred pick on the Indian

consumption boom theme. The company’s foray into

product segments like induction cookers and

switchgears also holds promise. Amid tough

competition, the company has been able to register a

good growth in its distribution network, while the

working capital cycle also improved. At the current

level, the stock is trading at 17.1x and 13.4x its FY2013

and FY2014 expected earnings, which looks a bit

stretched, and offer limited upside from the current

level. Hence, we maintain our Hold rating on the stock

with a price target of Rs451 (14x target multiple on its

FY2014 earnings per share [EPS]).

Valuation

Particulars FY10 FY11 FY12E FY13E FY14E

Net sales (Rs cr) 454.1 726.3 993.6 1,342.0 1,699.9

Y-o-Y growth (%) 43.3 60.0 36.8 35.1 26.7

Operating margin (%) 11.1 10.0 9.4 9.8 9.8

Net profit (Rs cr) 25.5 39.0 50.8 75.1 96.0

Adjusted EPS (Rs) 8.5 13.1 17.0 25.15 32.18

Y-o-Y growth (%) 46.9 53.1 30.2 47.8 28.0

PER (x) 50.5 33.0 25.3 17.1 13.4

P/B (x) 9.1 7.5 6.1 4.7 3.6

EV/EBIDTA (x) 26.2 19.0 14.5 10.6 8.3

RoCE (%) 23.8 25.0 27.3 32.5 31.8

RoNW (%) 19.0 24.9 26.6 30.9 30.3

Key takeaways from the conference call

� Reduction in working capital cycle to 65 days: The

working capital cycle reduced to 65 days in Q2FY2013

from 74 days in Q2FY2012 and 68 days in Q1FY2013.

This was led by a reduction in the inventory days to 64

days from 52 days in Q2FY2012. The total debt liability

of the company stands at Rs117.5 crore down from

Rs131.2 crore in Q2FY2012.

� Update on new products: The company has launched

new consumer appliances, like induction cooker and

switchgear, in H1FY2013, whose production would be

mainly outsourced. The company indicated that its

capital expenditure requirement for FY2013 stands at

Rs22 crore as most of the new products would be

sourced mainly from China.

� Guidance: The company upgraded its FY2013 revenue

growth guidance to 35-40% from earlier guidance of

30% growth. This implies growth of 25% in its top line

for H2FY2013, which looks achievable considering its

track record of outpacing the industry. For FY2013,

the advertising spends is expected to be at 3.5-4% of

revenues.

Margins improved during the quarter

Product-wise sales: sales of stabilisers, pumps and inverters

picked up Rs cr

Particulars Q2 Q2 YoY H1 H1 YoY

FY12 FY13 % FY13 FY12 %

Stabiliser 42 50 20 131 100 30

Cable 64 89 40 170 128 33

LT cables 13 20 51 39 30 31

Pump 28 43 54 92 64 44

WH 26 29 14 49 40 22

SWH 7 7 4 11 12 -3

UPS 12 15 27 27 21 30

FAN 10 15 55 38 30 28

Digital UPS 11 37 255 76 26 193

Others 0 8 3174 10 2 496

Total 211 313 48 643 452 42

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Q2F

Y09

Q3F

Y09

Q4F

Y09

Q1F

Y10

Q2F

Y10

Q3F

Y10

Q4F

Y10

Q1F

Y11

Q2F

Y11

Q3F

Y11

Q4F

Y11

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q1F

Y13

Q2F

Y13

Operating margin PA T margin


Zone-wise sales Rs cr

Particulars Q2 Q2 YoY H1 H1 YoY

FY12 FY13 % FY13 FY12 %

South zone 171 247 44 491 351 40

Non-south zone 43 72 67 164 107 54

Total 214 319 49 656 458 43

As a % of sales

South zone 80 77 75 77

Non-south zone 20 23 25 23

Cost break-up Rs cr

Particulars Q2FY12 Q2FY13 YoY % H1FY13 H1FY12 YoY %

Consumption of RM 78.1 98.1 26 198.1 145.5 36

as % of sales 36.9 31.3 31.3 32.2

Purchase of traded goods 88.3 141.4 60 283.6 179.7 58

as % of sales 42 45 45 40

Incr/decr in stock -17.1 -8.3 -52 -20.3 -4.4 358

as % of sales -8 -3 -3 -1

Raw material cost 149.3 231.3 55 461.4 320.8 44

as % of sales 70.6 73.8 73.0 71.0

Employee expenses 11.6 16.9 45 32.8 22.5 46

as % of sales 5.5 5.4 5.2 5.0

Selling and distribution expenses 14.0 13.1 -6 30.8 36.1 -15

as % of sales 6.6 4.2 4.9 8.0

Other expenses 21.4 22.2 3 43.2 34.3 26

as % of sales 10.1 7.1 6.8 7.6

Total expenditure 196.4 283.5 44 568.2 413.8 37



PE band

15x

12x

9x

6x

0

50100

150

200250

300

350400

450

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

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Jun-

09

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

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Dec

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-11

Jun-

11

Sep

-11

Dec

-11

Mar

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Jun-

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-12


140

170

200

230

260

290

Nov

-11

Feb

-12

May

-12

Aug

-12

Nov

-12

Promoters78%

Institutions2%

Foreign7%


5%

Public & Others8%

Company details

Price chart


Price performance

(%) 1m 3m 6m 12m

Absolute 0.3 -3.1 -12.2 -36.2

Relative 1.6 -10.0 -19.0 -40.0to Sensex

Price target: Rs267




BSE code: 533261

NSE code: EROSMEDIA

Sharekhan code: EROSMEDIA


Result highlights

Performance above expectation: For the second quarter of FY2013, Eros

International Media Ltd (EIML) reported a strong performance in a seasonally weak

quarter, which is much ahead of our and the Street’s expectations. The

outperformance was led by a higher catalogue revenues and partial pre-booking of

film revenues from the next quarter. The revenues were up by 31.2% year on year

(YoY) to Rs229.3 crore ahead of our expectation of Rs192.3 crore. The EBITDA

margin was down by 530 basis points YoY to 18.4%, which is ahead of our expectation

of 14.5%. The net profit was down by 4.8% YoY to Rs26.1 crore, which is much

ahead of our expectation of Rs17.1 crore.

� The consolidated revenues grew by 31.2% YoY to Rs229.3 crore. The revenues

of the Hindi film business (stand-alone) grew by 50.2% to Rs227.2 crore. The

company released three Hindi films and 16 regional films, including Tamil. The

Hindi film revenues were boosted by revenues from the films released in the

quarter like “Cocktail” and “Shirin Farhad Ki Toh Nikal Padi” as well booking of

television syndication revenues of deals signed in the quarter. The

outperformance was mainly driven by booking of partial revenues of music

rights and minimum guarantee for theatrical release from “English Vinglish”

and “Maatraan” released in October 2012.

Eros International Media Emerging Star

Stock Update

Performance above expectation Buy; CMP: Rs168


Results Rs cr


Net sales 229.3 174.8 31.2 257.0 -10.8

Direct costs 175.0 117.4 49.0 190.3 -8.1

Gross profit 54.3 57.4 -5.3 66.7 -18.6

SG&A 12.1 16.0 -24.3 15.0 -19.7

EBITDA 42.3 41.4 2.0 51.7 -18.3

Depreciation and amortisation 1.7 1.4 17.5 1.7 0.0

EBIT 40.6 40.0 1.5 50.0 -18.9

Other income 1.8 0.8 137.3 2.2 -19.8

Interest 2.7 3.4 -18.2 2.1 30.5

PBT 39.6 37.4 5.9 50.1 -21.0

Tax provision 15.2 10.7 42.0 20.5 -25.7

PAT 24.4 26.7 -8.7 29.6 -17.8

Minority interest -1.7 -0.7 148.5 -1.8 -3.4

Net profit 26.1 27.4 -4.8 31.4 -17.0

EO 0.0 0.0 0.0

Reported net profit 26.1 27.4 -4.8 31.4 -17.0

Equity capital (FV Rs10/-) 91.8 91.8 91.8

EPS (Rs) 2.8 3.0 3.4

Margin (%)

GPM 23.7 32.8 26.0

EBITDA 18.4 23.7 20.1

EBIT 17.7 22.9 19.5

NPM 11.4 15.6 12.2

Tax rate 38.5 28.7 40.9



Upcoming film slate

Name Star cast Tentative release

English Vinglish Sridevi, Priya Anand, Mehdi Nebbou 5-Oct-12

Maatraan (Tamil) Suriya, Kajal Aggarwal 12-Oct-12

Bhoot 2 Ram Gopal Verma 12-Oct-12

Chakravyuh Arjun Rampal, Abhay Deol (Prakash Jha) 24-Oct-12

Son of Sardar Ajay Devgn, Sonakshi Sinha, Sanjay Dutt 13-Nov-12

Khiladi 786 Akshay Kumar, Paresh Rawal FY2013

Attacks of 26/11 Ram Gopal Verma FY2013

Kochadaiyaan - 3D (Tamil) Rajinikanth, Deepika Padukone FY2013

Dishkiyaaoon Sanjay Dutt, Harman Baweja FY2013

3G Neil Nitin Mukesh, Sonal Chauhan FY2013

Go Goa Gone Saif Ali Khan, Kunal Khemu, Vir Das, Puja Gupta FY2013

Table No 21 Paresh Rawal, Rajeev Khandelwal FY2013

Dekh Tamasha Dekh Satish Kaushik & others FY2013

Rangeeley (Punjabi) Jimmy Shergill FY2013

Sadi Love Story Jimmy Shergill, Amrinder Gill FY2013

Warning (3D) Santosh Barmola, Madhurima Tuli, Manjari Phadnis FY2013

Peddlers Gulshan Devaiah, Kriti Malhotra (Vasan Bala) - Selected forInternational Critic's Week, Cannes 2012 FY2013

Ranjhna Dhanush, Kangna Ranaut FY2014

Ram Leela Ranvir Singh, Kareena Kapoor, (Sanjay Leela Bhansali) FY2014

Tanu Weds Manu Season 2 R Madhavan, Kangana Ranaut FY2014

Namak Shahid Kapoor (Prabhu Deva) FY2014

Untitled Saif Ali Khan FY2014

Akele Akele Arjun Rampal FY2014

Purani Jeans Tanushree Basu FY2014

Sarkar 3 Amitabh Bachchan, Abhishek Bachchan FY2014

Rana (Hindi, Tamil & Telugu) Rajnikanth, Deepika Padukone FY2014

Untitled Rohit Dhawan FY2014

Chalo China Shashank Shah FY2014

Source: Company

� The EBITDA margins were down 530 basis points YoY to

18.4% affected by the higher film acquisition/

production costs coupled with loss in subsidiary

(Ayngaran International) to the tune of Rs 6.9 crore

� The effective tax rate increased to 38.4% from 28.6%

in the corresponding quarter of the previous year,

mainly due to the timing differences of tax incidence.

The management expects the tax rate to normalise in

the coming quarters.

� On the account of lower margins and higher tax rate,

the net profit fell by 4.8% to Rs26.1 crore. However, it

is still much ahead of our and the Street’s expectations.

� Valuation: EIML continues to see strong revenues

visibility (notwithstanding quarterly volatility) owing

to impressive slate of films and healthier monetisation

capabilities through the satellite rights, which lend

support to improve the margins in the coming years.

On the other hand, compulsory digitalisation by the

end of 2014 would act as a further catalyst for demand

of films amongst the broadcasters, which would help

in getting better prices for the satellite rights in the

coming years. EIML, with a films catalogue of more

than 1,100 films, will be a key beneficiary. We continue

to maintain our preference for EIML as the best player

in the entertainment space. At the current market

price of Rs168, the stock is attractively available at

8.8x and 7.2x FY2013 and FY2014 earnings estimates.

We maintain our Buy rating on the stock with a price

target of Rs267.

Entertainment industry entering the stronger half…: The

second half of the fiscal year is generally the strong business

half for the entertainment industry, which contributes to

more than 60% of revenues of the industry. Of that, the

third quarter being a festival season would see a host of

big releases lined up for the quarter. EIML has at least two

big releases in Q3FY2013, namely “Son of Sardar” (to be

released on the day Diwali) and “Khiladi 786” (to be

released in December 2012), and at least one in Q4FY2013,

namely “Kochadaiyaan”, along with other small- and

medium-sized releases. The other big releases in Q3FY2013

include “Jab Tak Hai Jaan”, “Talaash” and “Dabaangg 2”.



….EIML has strong films lined up: We expect EIML to report

a strong performance in H2FY2013 and FY2014. EIML has

already seen the successful release of “English Vinglish”

released on October 5, 2012, which reported a worldwide

gross collection of Rs27 crore in the first weekend. Going

ahead, H2FY2013 is expected to be a strong half with three

big releases namely the Ajay Devgn starrer “Son Of Sardar”,

the Akshay Kumar starrer “Khiladi 786” and the Rajnikanth

starrer Tamil 3D film “Kochadaiyaan”. Along with these big

releases, the company has a mix of small- and medium-

budget films. As per the film slate announced, the company

has about 17 releases in FY2013 with a mix of Hindi, Tamil

and Punjabi films, which gives it strong visibility for FY2013,

and about 11 releases in FY2014.

Other highlights

� During the quarter, the company released 19 films: three

films in Hindi and 16 regional films, including Tamil and

other regional language films. The releases include

“Cocktail” and “Shirin Farhad Ki Toh Nikal Padi”.

� For the quarter, all the subsidiaries taken together

reported a 91.3% fall in the revenues to Rs2 crore with

a loss of Rs6.9 crore at the EBITDA level against a profit

of Rs4.3 crore in the corresponding quarter of the

previous year. The subsidiaries reported a net loss of

Rs5.8 crore against profit of Rs4 crore in the

corresponding quarter of the previous year.

� The net debt on books is Rs150 crore and content

advance stood at Rs457.2 crore.

Valuation: EIML continues to see strong revenues visibility

(notwithstanding quarterly volatility) owing to impressive

slate of films and healthier monetisation capabilities

through the satellite rights, which lend support to improve

the margins in the coming years. On the other hand,

compulsory digitalisation by end 2014 would act as a

further catalyst for demand of films amongst the

broadcasters, which would help in getting better prices

for the satellite rights in the coming years. EIML, with a

films catalogue of more than 1,100 films, will be a key

beneficiary. We continue to maintain our preference for

EIML as the best player in the entertainment space. At

the current market price of Rs168, the stock is attractively

available at 8.8x and 7.2x FY2013 and FY2014 earnings

estimates. We maintain our Buy rating on the stock with

a price target of Rs267.

Valuations


Revenues (Rs cr) 707.0 943.9 1,245.9 1,521.2

Net profit (Rs cr) 117.3 147.8 174.9 214.2

Y-o-Y growth (%) 42.3 27.9 16.8 22.5

EPS (Rs) 12.8 16.3 19.1 23.4

EV/EBITDA (x) 10.3 7.8 6.2 5.7

P/E (x) 13.0 10.4 8.8 7.2

RoE (%) 25.6 19.5 19.0 19.5

RoCE (%) 21.6 19.1 18.4 18.9



Company details

Price chart


Price performance

(%) 1m 3m 6m 12m

Absolute -1.0 38.9 112.2 86.0

Relative 0.3 29.0 95.8 75.0to Sensex

Dishman Pharmaceuticals & Chemicals Ugly Duckling

Stock Update

Strong traction continues Buy; CMP: Rs96

Price target: Rs135

Market cap: Rs778 cr



BSE code: 532526

NSE code: DISHMAN

Sharekhan code: DISHMAN


Result highlights

� Unsold stock influences operating results; expect stronger traction ahead:

In Q2FY2013, Dishman Pharmaceuticals &Chemicals (Dishman) reported a

moderate 7.4% year-on-year (Y-o-Y) rise in the net sales to Rs289.3 crore, which

is 11% lower than our estimates. However, if we consider the unsold stock

(increase in stock-in-trade by Rs59.9 crore in), the revenues would have been

much higher. Such increase in the stock in trade also helped operating profit

margin (OPM) to surge by 963 basis points year on year (YoY) to 20.1%. However,

OPM was also benefited from the cost optimisation at Carbogen Amcis and

Dishman Netherlands. This led the net profit turning around to Rs26.6 crore as

compared with a net loss of Rs6.3 crore in Q2FY2012. However, adjusted for

foreign exchange gains of Rs11.2 crore, adjusted net profit is worked out at

Rs15.4 crore. We expect stronger traction in H2FY2013, as the unsold stock

would be realised by Carbogen Amcis and the newly started facilities would

give better contribution.

� Focus on de-risking the business: Although the products pipeline for the contract

research and manufacturing services (CRAMs) business is pretty strong, the

revenues have not been consistent due to irregular offtake by client companies.

To de-risk this scenario, the company is focusing on new revenue streams from

the commercialisation of generic active pharmaceutical ingredient (API). This

will give a consistency in the revenue stream for the company. The company is

currently working on 20 APIs, part of which will be filed as drug master files with

US Food and Drug Administration. The sizeable revenues are expected from this


Foreign7%

Institutions6%


12%

Promoters62%

Public and others13%

30

50

70

90

110

Nov

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Feb

-12

May

-12

Aug

-12

Nov

-12

Results Rs cr

Particulars Q2FY13 Q2FY12 YoY % Q1FY13 QoQ % H1FY13 H1FY12 YoY %

Net sales 289.3 269.2 7.4 315.3 -8.3 604.5 506.4 19.4

Expenditure 231.0 241.0 -4.1 231.7 -0.3 462.7 434.5 6.5

Operating profit 58.2 28.3 106.0 83.6 -30.3 141.8 72.0 97.1

Other Income 3.5 0.5 664.1 2.6 33.1 6.2 6.9 -10.8

EBIDTA 61.7 28.7 114.9 86.2 -28.4 148.0 78.9 87.6

Interest 18.8 15.0 25.3 23.1 -18.5 42.0 29.7 41.6

Depreciation 20.4 20.7 -1.4 19.4 5.5 39.8 39.4 1.1

PBT 22.5 -7.0 LP 43.7 -48.6 66.2 9.8 572.2

Taxes 7.1 -0.7 LP 5.0 40.6 12.1 1.1 1044.0

Adj.PAT 15.4 -6.3 LP 38.7 -60.2 54.1 8.8 515.7

Reported PAT 26.6 -6.3 LP 38.7 -31.3 65.3 8.8 639.5

EPS 3.3 -0.8 LP 4.8 -31.3 8.1 0.4 2148.4

Margins (%) bps bps bps

OPM 20.13 10.50 963 26.51 -638 23.46 14.21 925

EBIDTA 21.34 10.67 1067 27.35 -601 24.47 15.57 890

PATM 5.33 -2.34 767 12.27 -694 8.95 1.74 722

Effective tax rate 31.54 9.82 2172 11.52 2001 18.32 10.76 755

LP - Loss to profit



business in FY2014 and FY2015, which will supplement

the growth from the CRAMs business.

� We maintain our estimates, price target and

recommendation: Although H1FY2013 profits

constitute nearly 62% of our annual estimates for

FY2013, we prefer to maintain our estimates intact

given time uncertainty in CRAMs business. The stock

is currently trading at 5.6x FY2014E earnings per share

(EPS). We maintain our Buy rating on the stock with a

price target of Rs135 (8x FY2014E earnings).

Good traction in CRAMs business, unsold stock impacts

Carbogen Amcis: During the quarter, the revenues from

Dishman’s CRAMs business jumped by 23% YoY to Rs77

crore. However, the revenues from Carbogen Amcis

witnessed a moderate 4.5% Y-o-Y rise to Rs111 crore.

During the quarter, Rs45 crore of inventory was supplied

by Dishman to Carbogen Amcis, which remained unsold

by the end of September 2012. We believe the revenues

from these inventories would be realised in the subsequent

quarters. The total revenues from CRAMs business jumped

by 11.6% YoY to Rs188.4 crore in Q2FY2013.

Ramp-up of vitamin D business helps marketable

molecules business: During the quarter, the company’s

marketable molecules business, which includes revenue

from the specialty chemicals, reported a decline of 27%

YoY to Rs4,837 crore. However, the vitamin D business,

which includes vitamin-D3 business that started in

Q1FY2013, witnessed an impressive 55.3% Y-o-Y rise to

Rs52.2 crore.

HiPo facility getting more traction: The company has

registered more number of clients for supply of oncology

products from its Hi-Potency (HiPo) plants situated at

Ahemedabad. The players like Novartis, Merck and other

big pharmaceutical players have shown their interest in

HiPo-based products. The management expects US$6-7

million of revenues to come from this facility (earlier

guidance of US$5 million) in FY2013.

China facility to break even by end of FY2013: The

facility in China, which started commercialisation of

intermediates in Q1FY2013, is progressing well and is likely

to break-even by end of FY2013.

OPM improves across the segments; expect healthy

margin to continue

During the quarter, the OPM jumped by 963 basis points

YoY to 20.1% mainly due to stock adjustments (an increase

in the stock, reducing material costs) and low base effect.

However, the cost rationalisation at Carbogen Amcis is

also playing out to help margin.

During the quarter, the OPM of Carbogen Amcis jumped

to 18.1% from 7.19% in Q2FY2012, while Dishman

Netherlands (vitamin D business) reported an OPM of 32%

during the quarter as compared with 15.9% in Q2FY2012.

We expect the OPM to remain healthy through H2FY2013

and FY2014 in the range of 21-22%.

Interest costs jumps 25% YoY on higher level of debts;

debt level to recede by end of FY2013: By end of this

quarter, the company had gross debts of Rs882 crore, after

repaying Rs53 crore. This is higher than Rs812 crore by

end FY2012. This resulted in 25% Y-o-Y rise in interest

costs to Rs18.8 crore, excluding foreign exchange gains.

However, the management indicated that it is close to a

deal for selling its land in the special economic zones

which should fetch Rs100 crore. The revenues obtained

would be utilised to repay part of debts. Therefore, we

expect the debt level to reduce by Rs100 crore by the

end of FY2013 and that should reduce the interest costs.

Effective tax rate jumps sharply during the quarter;

expect 25% effective tax rate in FY2013: During the

quarter, the effective tax rate stood at 31%, presumably

due to higher provisioning for stock not sold during the

quarter. In H1FY2013, effective tax rate stood at 18%. We

expect effective tax rate of 25% for FY2013.

Revenue break-up Rs (cr)


Crams business 188.4 168.8 11.6 197.0 -4.4 385.0 328.0 17.6

Dishman CRAMs 77.0 62.6 23.0 64.0 20.3 141.0 140.8 0.1

Carbogen Amcis 111.0 106.2 4.9 133.0 -16.2 244.0 186.8 30.8

MM business 100.9 100.4 0.5 118.3 -14.7 219.0 178.9 22.5

Marketable molecules 48.7 66.8 -27.1 54.0 -10.3 103.0 99.5 3.5and others

Vitamin-D business 52.2 33.6 55.3 64.0 -18.5 116.0 79.4 46.3

Total revenue 289.0 269.0 7.5 315.0 -8.3 605.0 507.0 19.4



Cost analysis Rs (cr)


Adjusted material cost 86.8 97.7 -11.2 84.2 3.1 170.9 173.4 -1.4

% of sales 30.0 36.3 26.7 28.3 34.2

Employee Expenses 84.6 69.7 21.4 86.2 -1.9 170.7 141.7 20.5

% of sales 29.2 25.9 27.3 120.4 196.9

Other expenses 59.7 73.6 -18.9 61.3 -2.6 121.1 119.4 1.4

% of sales 20.6 27.3 19.5 78.9 151.5

Total 231.0 241.0 231.7 -0.3 462.7 434.5

We are positive on the stock: The management kept its

revenue guidance intact at Rs1,250-1,300 crore and net

profit of Rs90-100 crore for FY2013. Although H1FY2013

revenue and net profit constitute 48% and 65% of annual

guidance respectively, time uncertainty in CRAMs business

prompts management to go on conservative. We believe

Dishman has lot more value to be unlocked from its HiPo

facility and API business. In Q1FY2013, the company

received US$5 million income from its research services

out of US$13 million deal. Therefore, we expect the

remaining US$8 million to come in the next couple of

quarters. We expect the revenues and net profit CAGR of

16.5% and 56% respectively over FY2012-14E.

We maintain our estimates, price target and

recommendation: Although H1FY2013 profits constitute

nearly 62% of our annual estimates for FY2013, we prefer to

maintain our estimates intact given time uncertainty in CRAMs

business. The stock is currently trading at 5.6x FY2014E

earnings per share (EPS). We maintain our Buy rating on the

stock with a price target of Rs135 (8x FY2014E earnings).

Valuations


Net sales (Rs cr) 990.8 1122.1 1306.0 1521.9

PAT (Rs cr) 80.2 56.3 86.7 138.1

Shares in issue (cr) 8.1 8.1 8.1 8.1

EPS (Rs) 9.9 7.0 10.7 17.1

Y-o-Y change % -31.8 -29.7 53.9 59.3

PER (x) 9.7 13.8 9.0 5.6

Cash EPS (Rs) 18.5 16.5 22.0 28.8

Cash PER (x) 41.7 46.7 35.0 26.7

EV/EBIDTA (x) 7.9 6.6 5.5 4.3

Book value (Rs/share) 108.9 115.3 123.4 137.9

P/BV (x) 0.9 0.8 0.8 0.7

MCap/sales 0.8 0.7 0.6 0.5

RoCE (%) 7.5 9.0 10.2 13.2

RoNW (%) 9.1 6.1 8.7 12.4



Company details

Price chart


Price performance

(%) 1m 3m 6m 12m

Absolute 0.0 2.0 -0.6 -19.2

Relative 1.3 -5.2 -8.3 -24.0to Sensex

Deepak Fertilisers & Petrochemicals Corporation Ugly Duckling

Stock Update

Higher input cost erodes margin Buy; CMP: Rs129

Price target: Rs179


52 week high/low: Rs170/ 118


BSE code: 500645

NSE code: DEEPAKFERT

Sharekhan code: DEEPAKFERT


Result highlights

� Revenue in line with expectation; margin disappoint: The revenues of Deepak

Fertilisers and Petrochemicals Corporation Ltd (DFPCL) were up by 20.1% year

on year (YoY), which was in line with our expectation. DFPCL reported total

revenues of Q2FY2013 to Rs693.4 crore. The revenues were mainly driven by

higher volume in the fertiliser segment. Growth in fertiliser segment was led

by a higher volume (both production and traded) growth and an increase in

realisation. The operating profit margin (OPM) stood at 11.6%, which was lower

by 540 basis points on a year-on-year (Y-o-Y) basis (our estimate was 17.0%), on

account of a higher input cost (ammonia, major raw material), unexpected

plant shut down of isopropyl alcohol (IPA) for 20 days and zero production of

methanol during the quarter due to higher gas price.

� Margin pressure along with high depreciation led to profit decline: During

the Q2FY2013, the RPAT for the company declined by 24.2% YoY to Rs40.6 crore,

which was much lower than ours and the Street’s expectation. The margin

pressure along with higher depreciation charges led to a decline of profit during

the quarter as compared with the same period of last year. During the quarter,

depreciation has increase by 25.6% to Rs25 crore due to the capitalisation of

the new technical ammonium nitrate (TAN) plant. During the quarter, the tax

rate stood at 25.5%, which was in line with our expectation.

� Favourable demand environment going ahead for chemical and fertiliser

segments: The demand in the chemical segment will remain firm despite a

slow down in the mining activities. In the chemical segment, the company has

started to focus on export market, which will drive the incremental volumes in

TAN (16% of the total revenue in Q2FY2013). In the fertiliser segment, the

demand for the manufactured and traded fertiliser will remain robust because

Results Rs cr

Particulars Q2FY13 Q2FY12 YoY % 6MFY13 6MFY12 YoY %

Total income from operation 693.4 577.2 20 1,327.5 1051.1 26

Total expenditure 613.1 479.3 28 1,145.0 840.3 36

Operating profit 80.3 97.9 -18 182.5 210.8 -13

Other income 15.3 11.9 29 25.5 18.6 37

EBIDTA 95.6 109.7 -13 208.0 229.4 -9

Depreciation 25.0 19.9 26 47.7 39.0 22

Interest 15.8 15.0 6 42.4 27.7 53

PBT 54.7 74.9 -27 117.9 162.8 -28

Tax 14.1 21.3 -34 31.8 45.2 -30

Adjusted PAT 40.6 53.6 -24 86.1 117.5 -27

Exceptional items 0.0 0.0 0.0 0.0

RPAT 40.6 53.6 -24 86.1 117.5 -27

Margins (%) bps bps

OPM 11.6 17.0 -538 13.7 20.1 -631

NPM 5.9 9.3 -342 6.5 11.2 -469


Promoter44%

Foreign13% MF & FI

8%

Public & others35%

115

125

135

145

155

165

175

Nov

-11

Feb

-12

May

-12

Aug

-12

Nov

-12



of a good start to the rabi season. The overall volumes

in manufactured chemicals saw a decline of 24% during

the quarter inspite of a robust demand, mainly on

account of a lower production of IPA (unexpected IPA

plant shut down for 20 days) and shut down of methanol

plant due to high spot gas price. In the fertiliser

segment, the volume has seen a sharp increase of 20%

due to revival in the monsoon season in later part of

the quarter.

Outlook and valuation: Though the profits of DFPCL

were marginally subdued on account of margin pressure

due to increase in the price of ammonia and shut down

of the IPA plant. We have marginally revised our

revenue estimates upward, mainly to factor in better

volume growth in the fertiliser and chemical segments.

However, we have also factored in the high price of

key inputs in the chemical segment (ammonia and

propylene), thus lowering our margin expectation. We

continue to prefer DFCL and maintain our “Buy” rating

with a price target of Rs179. At the current market

price of Rs129, the stock trades at a very attractive

valuation of 5.3 and 3.9x its FY2013E and FY2014E

earnings respectively.

Key takes ways of conference call

� DFPCL is targeting a total volume of 2.5 lakh tonne for

TAN in the chemical segment for FY2013, including a

new TAN plant. Going ahead, the company will focus

more on the export market for the TAN, due to high

quality. The company will also focus on increasing the

exports of TAN to South East Asia, Australia and other

parts of the world.

� The current market price of the TAN stood at Rs23,000

per tonne, while the IPA realisation stood at Rs80,000

per tonne and that of ammonium nitrate phosphate

(ANP) fertiliser realisation comes at Rs28,000 per

tonne.

� The prices of the raw material remain high during the

quarter due to demand supply mismatch. But the

management believes that going ahead the price of

ammonia may decline in Q1FY2014 on account of start-

up of the plants that are currently closed and adding

up of the new capacity in ammonia.

� During the quarter, the total gas received by the

company was 50 SM3 at a rate of Rs13 SM3. The

company has seen a decline in supply of the gas from

the KG-D6 basin on account of a decline in the gas

output.

� The sales of fertiliser may increase going head mainly

because of a good rainfall in the rabi season.

� DFPCL has started the work of capacity expansion on

its ANP fertiliser plant from 2 lakh tonne to 6 lakh

tonne, with a total capital expenditure (capex) of

Rs360 crore, which may commence production from

Q4FY2015. The company is also expanding its capacity

of Bensulf with a capex of Rs50 crore.

� Zero production of methanol was mainly on account

of higher spot price of gas, which has resulted in an

increase in the cost of manufacturing of methanol.

The current price of methanol is Rs19,000 per tonne,

whereas the cost of production due to high gas price

arrives at Rs30,000 per tonne.

Chemical segment

The chemical segment’s total revenues grew marginally

by 4.1% during the quarter to Rs373.4 crore on account of

higher volume of TAN and dilute nitric acid (DNA). The

profit before interest and tax (PBIT) margin in the

chemical segment was affected by the increase in the

prices of ammonia and propane, which reduced the margin

by 1,000 basis points to 13% during the quarter. Going

ahead, we believe that the price of ammonia may remain

Segmental performance Rs cr

Revenue Q2FY13 Q2FY12 YoY % 6MFY13 6MFY12 YoY %

Chemicals 373.42 358.67 4.11 843.39 691.38 21.99

Fertiliser 339.11 230.70 46.99 518.61 378.14 37.15

Total 712.53 589.37 20.90 1,362.00 1,069.52 27.35

PBIT

Chemicals 50.07 84.66 (40.86) 146.17 179.15 (18.41)

Fertiliser 44.71 27.44 62.94 58.29 50.07 16.42

Total 94.78 112.1 (15.45) 204.46 229.22 (10.80)

PBIT margin (%) bps bps

Chemicals 13 24 -1020 17 26 -858

Fertiliser 13 12 129 11 13 -200



firm on account of lower supply and higher demand. In

the current quarter, the price of ammonia arrives at

Rs36,000 per tonne as compared with Rs26,000 per tonne

in Q2FY2012.

Fertiliser segment

The revenues from the fertiliser segment have increased

by 47% YoY to Rs339.1 crore. The growth in the fertiliser

revenues was largely on account of the higher sales volume

of indigenously manufactured and traded fertilisers. The

overall earnings before interest and tax (EBIT) margin in

the fertiliser segment was higher by 129 basis point to

13% on YoY basis for Q2FY2013. Improvement in margin

was mainly due to improved realisation and stable prices

of major inputs.

Volumes during the quarter: The volumes of DNA, TAN

and strong nitric acid (SNA) increased by 8%, 14% and 3%

respectively while there was a decline of 9%, 98% and

34% in the volumes of CNA, methanol and IPA. The capacity

utilisation of the overall TAN capacity was in range of 50%

during Q2FY2013. The company is targeting a total

turnover of 2.5 lakh tonne of TAN in FY2013 and 75%

capacity utilisation in FY2014, of which 1 lakh tonne will

be exported.

Sales quantity (tonnes)

Particulars Q2 Q2 YoY 6M 6M YoY

FY13 FY12 % FY13 FY12 %

CNA 16,147 17,656 -9 34,497 32,785 5

DNA 10,051 9,293 8 19,823 19,981 -1

Methanol 295 17,978 -98 15,003 37,908 -60

IPA 14,398 21,829 -34 35,791 36,266 -1

TAN 47,513 41,688 14 116,014 99,250 17

ANP 50,466 41,982 20 80,727 74,303 9

Bensulf 1,889 3,097 -39 8,965 7,256 24

SNA 5,503 5,355 3 10,908 10,000 9

Propane 2,935 4,289 -32 6,964 7,326 -5

Realty business continues to post a loss at EBIT level

In Q2FY13, the revenues from the real estate business (ie

the mall business) contracted by 71.3% YoY to Rs0.54 crore.

The lower revenues were reported mainly due to the

change in revenue model in the real estate segment from

a fixed revenue model to a revenue sharing model. The

segment reported a loss of Rs4.7 crore at the EBIT level

during the quarter. Moreover, the company has completed

its modification work at Ishanya Mall at a cost of Rs57

crore. The real estate business will not break even in

FY2013 mainly due to a change in the revenue sharing

model and economic slowdown.

Valuation and outlook: Though the profits of DFPCL were

marginally subdued on account of margin pressure due to

increase in the price of ammonia and shut down of the

IPA plant. We have marginally revised our revenue

estimates upward, mainly to factor in better volume

growth in the fertiliser and chemical segments. However,

we have also factored in the high price of key inputs in

the chemical segment (ammonia and propylene), thus

lowering our margin expectation. We continue to prefer

DFCL and maintain our “Buy” rating with a price target of

Rs179. At the current market price of Rs129, the stock

trades at a very attractive valuation of 5.3 and 3.9x its

FY2013E and FY2014E earnings respectively.

Valuation


Net sales (Rs cr) 1,296.6 1,564.8 2,342.8 2,726.4 3,246.5

Rep. net profit (Rs cr) 172.1 186.6 213.0 215.9 292.0

EPS (Rs) 19.5 21.2 24.1 24.5 33.1

PER (x) 6.6 6.1 5.3 5.3 3.9

Book value (Rs) 105.5 120.9 139.0 153.7 178.4

P/BV (x) 1.2 1.1 0.9 0.8 0.7

EV/EBITDA (x) 6.3 5.4 4.7 5.1 4.0

RoCE (%) 12.9 12.0 13.1 11.6 13.7

RoNW (%) 19.9 18.7 18.6 16.6 19.7

Green market ammonia US Gulf C&F

0

100

200

300

400

500

600

700

800

Jul-1

1Ju

l-11

Aug

-11

Sep

-11

Sep

-11

Oct

-11

Nov

-11

Nov

-11

Dec

-11

Jan-

12F

eb-1

2F

eb-1

2M

ar-1

2A

pr-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-1

2Ju

l-12

Aug

-12

Sep

-12

Sep

-12

Oct

-12

$ pe

r to

nne

Segmental PBIT margin

13.4% 13.2%

23.6%

11.9%

Chemicals Fertilizers

Q2FY13 Q2FY12



investor’s eye sector update

Insurance

Sector Update

APE growth continues to slow down

� The growth in the annual premium equivalent (APE)

of the life insurance industry continues to slow down.

It declined by 18.7% year on year (YoY) in September

2012, the third consecutive month of slowing growth.

The slowdown was mainly contributed by Life Insurance

Corporation of India (LIC), which showed a decline of

13.4%, 26.5% and 19.% in the months of July, August

and September respectively. The private players posted

a decline of 18.3% YoY in September. On a year-till-

date (YTD) basis (April-September 2012), the private

players fared better than LIC as these fell by merely

0.4% YoY as compared with the 10.9% year-on-year (Y-

o-Y) decline seen by LIC. The industry’s APE decline

by 7.5% on a YTD basis. The YTD growth in the private

industry was led by players like ICICI Prudential Life

(ICICI Prudential; 14.4%) and Bajaj Allianz (15.1%).

� On a month-on-month (M-o-M) basis, the APE numbers

for the industry declined by 14.1% led by a 22.4% fall

in the APE of LIC. However, the private players posted

a growth of 1.1% month on month (MoM). On an M-o-M

basis, 16 out of 22 players posted an increase in the

APE, with Max Life Insurance and Bajaj Allianz posting

a growth of 28.2% and 14.7% respectively.

� The market share of the private players improved by

about 250 basis points to 34.9% (LIC, 65.1%) in the

April-September 2012 period compared with 32.4% in

APE* growth (Rs cr)

Insurer Sep-12 Sep-11 YoY % MoM % YTDFY13 YTDFY12 YoY %

Bajaj Allianz 165.8 160.6 3.2 14.7 782.2 679.6 15.1

ING Vysya 49.7 74.8 -33.6 6.1 208.9 255.2 -18.2

Reliance Life 108.3 135.6 -20.1 13.3 513.6 548.0 -6.3

SBI Life 199.8 225.6 -11.4 5.9 922.2 924.2 -0.2

Tata AIG 44.1 86.0 -48.7 13.6 204.0 380.9 -46.4

HDFC Life 253.6 293.1 -13.5 4.1 1,177.3 1,195.3 -1.5

ICICI Prudential 259.3 361.3 -28.2 -3.2 1,751.3 1,530.4 14.4

Birla SunLife 123.0 227.1 -45.8 -8.5 672.6 758.3 -11.3

Aviva Life 38.3 42.0 -8.9 5.3 296.2 281.4 5.2

Kotak Life 53.2 46.3 15.0 -21.3 251.4 257.7 -2.5

Max New York Life 151.2 139.2 8.7 28.2 659.2 702.8 -6.2

MetLife 39.9 47.4 -15.8 -0.8 262.4 197.8 32.6

Private total 1,664 2,035.1 -18.3 1.1 8,701.8 8,737.0 -0.4

LIC 2,341 2889.1 -19.0 -22.4 16,221.3 18,203.9 -10.9

Industry 4005.0 4924.2 -18.7 -14.1 24,923.1 26,940.9 -7.5

* APE=10% single premium + non single premium

the corresponding period of the previous year. During

the period under review, companies like Tata AIA Life

Insurance (2.3 vs 4.4%), Max Life Insurance (7.6% vs

8.0%) and Reliance Life Insurance (5.9%vs 6.3%) showed

a decline in their market share. Moreover, ICICI

Prudential turned out to be a major gainer as its market

share improved by about 260 basis points to 20.1%.

� The APE growth for the industry has been affected by

the regulatory overhaul and the uncertainty with

regard the new regulations. However, the government

is likely to take several measures to boost the insurance

sector, which includes faster approval of products, tax

breaks, easing of investment norms, easier know-your-

customer (KYC) norms etc. Therefore, the growth in

the APE is likely to pick up in the second half of FY2013.

-49%-46%

-34%-28%

-20%-19%-19%-18%-16%-13%-11% -9%

3%9% 15%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Tat

a A

IA

Birl

a S

unlif

e

ING

Vys

ya

ICIC

I Pru

dent

ial

Rel

ianc

e Li

fe

LIC

Indu

stry

Priv

ate

Tot

al

Met

life

HD

FC

Life

SB

I Life

Avi

va L

ife

Baj

aj A

llian

z

Max

Life

Kot

ak L

ife

Industry growth (YoY %) in September 2012

Source: IRDA



Trend in market share (MoM)

Source: IRDA, Sharekhan Research

Trend in industry growth (YoY %)


Trend in industry growth (MoM %)


Trend in APE growth of major private players


20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%S

ep-0

9

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep

-11

Nov

-11

Jan-

12

Mar

-12

May

-12

Jul-1

2

Sep

-12

Private LIC

-75%-50%-25%

0%25%50%75%

100%125%150%175%

Sep

'09

Nov

'09

Jan'

10

Mar

'10

May

'10

Jul'1

0

Sep

'10

Nov

'10

Jan'

11

Mar

'11

May

'11

Jul'1

1

Sep

'11

Nov

'11

Jan'

12

Mar

'12

May

'12

Jul'1

2

Sep

'12

Private LIC

-120%-80%-40%

0%40%80%

120%160%200%240%280%

Sep

'09

Nov

'09

Jan'

10

Mar

'10

May

'10

Jul'1

0

Sep

'10

Nov

'10

Jan'

11

Mar

'11

May

'11

Jul'1

1

Sep

'11

Nov

'11

Jan'

12

Mar

'12

May

'12

Jul'1

2

Sep

'12

Private LIC Industry

-75%-50%-25%

0%25%50%75%

100%125%150%175%200%

Sep

'09

Nov

'09

Jan'

10

Mar

'10

May

'10

Jul'1

0

Sep

'10

Nov

'10

Jan'

11

Mar

'11

May

'11

Jul'1

1

Sep

'11

Nov

'11

Jan'

12

Mar

'12

May

'12

Jul'1

2

Sep

'12

ICICI Pru Bajaj Allianz HDFC Std Max New York Life SBI Life

APE declined by 7.5% on YTD basis

On a YTD basis, the APE declined by 7.5% for the industry

largely contributed by LIC, which showed a decline of

10.9%. During the period (April-September 2012), the

private players posted a marginal decline of 0.4% YoY while

LIC showed a decline of 10.9% YoY in the APE. Since the

Insurance Regulatory and Development Authority has

gradually started granting approval for new products and

the second half is seasonally strong, the premium growth

is likely to improve in the coming months.

Market share of private players expands

The market share of the private players increased

marginally from 32.4% to 34.9% over April-September

2012. Consequently, LIC’s market share declined from

67.6% to 65.1% in the same period.

ICICI Prudential remains top insurer

ICICI Prudential continued to be the dominant player

among the private insurers. The market share of ICICI

Prudential increased from 17.5% to 20.1% in September

2012. HDFC Life Insurance has a market share of 13.5%

followed by SBI Life (10.6%), Bajaj Allianz (9.0%) and Birla

Sun Life (7.7%).



Market share of the private players in corresponding YTD FY2012


Market share of private players in YTD FY2013



Others12%

SBI Life11%

HDFC Life14%

Aviva Life3%

MetLife3%

Kotak Life3%

Reliance Life6%

Max Life8%

Birla SunLife8%

Bajaj Allianz9%

ING Vysya2% Tata AIA

2% ICICI Prudential19%

HDFC Life14%

Others12%SBI Life

11%

Tata AIA4%

Max Life8% Birla SunLife

9%

Bajaj Allianz8%

Reliance Life6%

Aviva Life3%

Kotak Life3%

ICICI Prudential17%

MetLife2%

ING Vysya3%

Outlook

The APE growth for the industry has been affected by the

regulatory overhaul and the uncertainty with regard the

new regulations. However, the government is likely to

take several measures to boost the insurance sector

including faster approval of products, tax breaks, easing

of the investment norms, easier KYC norms etc. Therefore,

the APE growth is likely to improve in the second half of

FY2013.


Evergreen

GlaxoSmithKline Consumer HealthcareHousing Development Finance CorporationHDFC BankInfosysLarsen & ToubroReliance IndustriesTata Consultancy Services

Emerging Star

Axis Bank (UTI Bank)CMCCadila HealthcareEros International MediaGateway DistriparksGreaves CottonIL&FS Transportation NetworksIRB Infrastructure DevelopersKalpataru Power TransmissionMax IndiaOpto Circuits IndiaPersistent SystemsRelaxo FootwearsThermaxYes BankZydus Wellness

Apple Green

Aditya Birla NuvoApollo TyresBajaj AutoBajaj FinServBajaj Holdings & InvestmentBank of BarodaBank of IndiaBharat ElectronicsBharat Heavy ElectricalsBharti AirtelCorporation BankCrompton GreavesDivi's LaboratoriesGAIL IndiaGlenmark PharmaceuticalsGodrej Consumer ProductsGrasim IndustriesHCL TechnologiesHindustan UnileverICICI BankIndian Hotels CompanyITCMahindra & MahindraMaricoMaruti Suzuki IndiaLupinOil IndiaPiramal Enterprises (Piramal Healthcare)PTC IndiaPunj LloydSintex IndustriesState Bank of IndiaTata Global Beverages (Tata Tea)Wipro

Ugly Duckling

AGC NetworksAshok LeylandBajaj CorpCESCDeepak Fertilisers & Petrochemicals CorporationDishman Pharmaceuticals & ChemicalsFederal BankGayatri ProjectsIndia CementsIpca LaboratoriesJaiprakash AssociatesKewal Kiran ClothingMcleod Russel IndiaNIIT TechnologiesOrbit CorporationPolaris Financial TechnologyPratibha IndustriesProvogue IndiaPunjab National BankRatnamani Metals and TubesRaymondSelan Exploration TechnologySun Pharmaceutical Industries Torrent PharmaceuticalsUltraTech CementUnion Bank of IndiaUnited PhosphorusV-Guard Industries

Vulture’s Pick

Mahindra Lifespace DevelopersOrient Paper and IndustriesTata ChemicalsUnity Infraprojects

Cannonball

Allahabad Bank

Andhra Bank

IDBI Bank

Madras Cements

Shree Cement

Sharekhan Stock Idea

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