Stock Advisory For Today - Natural View On The Stock KPIT Tech

India Equity Analytics
Daily Fundamental Report on Indian Equities
IEA-Equity Strategy 27th Jan, 2014 Edition : 192

27th Jan 2014
UCO BANK :
"BUY"
UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII along with higher than industry average loan growth. Banks asset quality improved sequentially despite of challenging macro environment. However banks CASA growth has declined marginally in sequential basis but still at comfortable level. UCO Banks operating as well as financials metrics has been improving continuously. We value bank at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14Es earning. ............................................................ ( Page :2-6)
KPIT Tech: "On billion dollar journey"
"NEUTRAL"
27th Jan 2014
KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in USD term due to the delay in project kick-off and additional loss of billing days in Q3FY14. Considering delay executions of some projects for next 2 quarters and ongoing change in organization structure, we have a Neutral view on the stock. .............................................................. ( Page :7-9)
Larsen & Toubro Ltd: "On Track of Revival"
"NEUTRAL"
24th Jan 2014
As per the management, the quarterly margins differ for every quarter as the project completion cycle is different and hence it is difficult to capture the EBITDA movement every quarter. Though we agree with the managements comment, we still believe that there would be some amount of pressure on the margins on a yearly basis due to risks related to competition, inflation, adverse mix and a slowdown. As regards the results we are of the opinion that, despite the gloomy scenario the results have been good. Consistent order inflow is a major positive factor. We expect the sector to witness revival in coming quarters, whereas we see a near term earnings growth muted and look for a better entry point. Currently we have a neutral view on a stock ......................... ( Page :10)
V-Guard: "Lower FY14 Sales growth guidence to 11-12%"
"HOLD"
24th Jan 2014
We believe that during the election period, the power supply could remain better (with political interest), consequently lowering the UPS demand. Hence, it could take a couple of quarters to witness a reversal in the trend, if any. On this backdrop, we have lowered our revenues estimates by 9% in FY2014 and 13% in FY2015. Consequently, we have revised down our EPS estimates by 21% in FY2014 and 16% in FY2015 ......................................................... ( Page : 11-13)
Dabur India Ltd : "Confident tone for growth"
"BUY"
24th Jan 2014
Dabur delivered inline set of numbers;During 3QFY14, Dabur reported 16.7% (YoY) sales growth led by 9% overall volume growth because of discretionary demand ramp up in rural area and price hikes by around 4-5% . PAT grew by 16%(YoY).Post earning, companys management stated that they would focus on pursuing aggressive and profitable growth strategy with brand building by judicious mix of price hike and product launch in near future. ............................................( Page :14-16)
Ultratech Cement : Moderated but Not outdated
"HOLD"
24th Jan 2014
Ultratech's Q3FY14 was in line to our estimates.The white cement Volume Growth and capacity expansions are positive in terms of fundamentals. We see the uptick of EBIDTA margin and volume growth for FY15. Currently the stock valuing at 3x in 1yr forward P/B, and we cut our stance for FY15 to 2.7x. Hence we maintain our positive stance on Ultratech Cement with Target price of Rs.1846/- . As from the current level the upside is very limited(7%), we recommend Hold Ultratech and Buy at Dips to get handsome return. ............................................................ ( Page : 17-19)
Public Sector Banks Result Preview 3QFY14E
24th Jan 2014
Most of PSBs are trading at lower range of valuation multiple owing to absence of core earnings, operating leverage, deteriorating asset quality and higher amount of restructure assets that are in pipeline. High inflation would be risk for the economy going forward. Any rise in inflation would result of rise in interest rate by RBI in its third quarter monetary policy review on 28th Jan.2014 which would be negative for banking industry. Most of banking stocks are expected to report moderate revenue and profit growth owing to multiple headwinds. In PSBs universe we like Canara Bank, UCO Bank, Union Bank. .............................................. ( Page : 20-23)
Narnolia Securities Ltd,
UCO BANK
Company Update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance
Absolute Rel.to Nifty 1M -0.7 -0.6 1yr -5.4 -9.0 YTD -5.4 -9.0
"BUY"
27h Jan, 2014
BUY
84 82 #####
UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII along with higher than industry average loan growth. Banks asset quality improved sequentially despite of challenging macro environment. However banks CASA growth has declined marginally in sequential basis but still at comfortable level. UCO Banks operating as well as financials metrics has been improving continuously. We value bank at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14Es earning. NII growth of 33% YoY led by higher than industry loan growth and high CD ratio During quarter, bank reported NII growth of 33% YoY to Rs.1566 cr below of our expectation of Rs. 1642 cr largely due to higher cost of fund than anticipated which led by sequentially declined of low cost deposits(CASA). NII growth of 33% YoY was much higher than its peers which have delivered result so far. Other income was Rs.190 cr versus Rs.209 cr in 2QFY14 and Rs.190 cr in 3QFY14. With the lower support from other income, total revenue growth was 28.5% YoY to Rs.1756 cr. Healthy NII growth and controlled cost income ratio led operating profit growth Operating expenses increased by 15.5% YoY in which employee cost and other operating expenses increased by 12.7% and 21% YoY respectively. Cost income ratio declined from 39.2% in 3QFY13 to 35.3% inn3QFY14. With the support from healthy NII growth and lower cost income ratio, banks operating profit grew by 37% YoY to Rs.1137 cr. Stable asset quality in sequential basis despite of challenging environment On delinquencies front, bank reported very stable asset quality in sequential basis
532205 UCOBANK 86.65/46 5561 2960821 6154
Share Holding Pattern-% Current 1QFY14 4QFY1 3 Promoters 69.3 69.3 69.3 FII 4.2 3.9 3.2 DII 12.4 12.5 13.0 Others 14.2 14.3 14.6 UCO Bank Vs Nifty
with GNPA deteriorated by 0.3% to Rs.7353 cr versus Rs.7376 cr in challenging macro environment. In percentage term GPA improved by 25 bps to 5.2% versus 5.5% in previous quarter. Provisions in absolute term declined by 0.7% in sequential basis which led net NPA improve to 0.3%. In percentage of gross NPA to gross advance, it stood at 5.2% versus 5.5% in 2QFY14 while net NPA in percentage term was improved to 3% from 3.1% in previous quarter. Provisions coverage ratio (without technical write-off), was 46.4% as against 46.6% in previous quarter. Rs, Cr Financials 2011 2012 2013 2014E 2015E NII 3845 3902 4582 6186 6289 Total Income 4770 4868 5534 7335 7438 PPP 2695 2811 3357 4850 5132 Net Profit 907 1109 618 1585 2101 EPS 16.5 17.7 9.3 23.8 31.6 (Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
UCO BANK
Loan and deposits reported higher growth than industry average On balance sheet growth front, banks advance grew by 16.5% YoY while deposits grew by 13.4% YoY led by CASA growth of 23% YoY in absolute term. CASA in percentage of total deposits improved to 30.5% versus 19.2% in 3QFY13. Saving deposits and current deposits increased by 13% and 38% YoY respectively. But in sequential basis, CASA deposits declined to 30.5% from 31.8% and 32.1% in 1QFY14. Credit deposits ratio for quarter stood at 73.5% as against 71.6% in 3QFY14 and 71.4% in previous quarter. Total business (Deposits +Advance) grew by 14.7% YoY to Rs.3.34 lakh Cr versus Rs.2.91 lakh Cr. Marginal expansion of NIM on account of declined loan yield than cost of fund NIM improved by 60 bps YoY to 3.06% from 2.42% largely due to lower cost of deposits which was lead by low cost franchise network. Cost of deposits stood at 6.27% versus 6.92% in 3QFY14. Yield on advance (EW calculation) declined from 10.5% to 10% which has restricted limited NIM growth. Profit tripled on account of healthy NII growth, lower CI ratio and stable asset quality UCO Bank reported net profit growth of 207% YoY to Rs.315 cr as against our expectation of Rs.338 cr largely due to robust growth in NII, lower cost income ratio, improving asset quality which led lower provisions and high credit deposits ratio. Valuation & View UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII along with higher than industry average loan growth. Banks asset quality improved sequentially despite of challenging macro environment. However banks CASA growth has declined marginally in sequential basis but still at comfortable level. UCO Banks operating as well as financials metrics has been improving continuously. We value bank at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14Es earning.

UCO BANK
Fundamental Through Graph
NII growth of 33% YoY led by higher than industry loan growth and high CD ratio
Healthy NII growth and controlled cost income ratio led operating profit growth
Profit tripled on account of healthy NII growth, lower CI ratio and stable asset quality
Source:Eastwind/Company
UCO BANK
Quarterly Performance
Quarterly Result Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax Net Profit Balance Sheet Net Worth Deposits Total Liabilities Advances Total Assets Asset Quality GNPA NPA % GNPA % NPA % PCR(Without technical writeoff)
3QFY14 3543 1138 29 19 4729 190 4919 3163 1566 190 1756 395 225 620 1137 812 325 10 315
2QFY14 3396 1026 8 14 4444 209 4653 2875 1569 209 1779 382 230 612 1166 759 408 7 400
3QFY13 3197 923 30 21 4171 190 4361 2994 1177 190 1367 351 186 536 831 728 103 1 102
% YoY
10.8 23.3 -2.7 -13.7 13.4 0.4 12.8 5.6 33.0 0.4 28.5 12.7 20.9 15.5 36.8 11.5 215.1 1536.5 206.9
% QoQ
4.3 11.0 243.2 31.7 6.4 -9.0 5.7 10.0 -0.2 -9.0 -1.3 3.3 -2.4 1.2 -2.5 7.0 -20.3 40.7 -21.4
11085 192406 203491 141457 141457
10770 188779 212416 135233 212416
9399 169711 179110 121455 121455
17.9 13.4 13.6 16.5 16.5
2.9 1.9 -4.2 4.6 -33.4
7,353 4217 5.2 3.0 46.4
7,376 4228 5.5 3.1 46.6
6,711 3927 5.5 3.2 41.5
9.6 7.4
-0.3 -0.3
Source: Eastwind/Company
UCO BANK
Income Statement
Interest Income Interest Expense NII Change (%) Non Interest Income Total Income Change (%) Operating Expenses Pre Provision Profits Change (%) Provisions PBT PAT Change (%)
2011
11371 7526 3845 65.4 925 4770 45.0 2075 2695 58.0 1788 907 907 -10.4
2012
14632 10730 3902 1.5 966 4868 2.0 2056 2811 4.3 1661 1150 1109 22.3
2013
16752 12170 4582 17.4 952 5534 13.7 2177 3357 19.4 2710 647 618 -44.2
2014E
18346 12160 6186 35.0 1149 7335 32.5 2485 4850 44.5 3217 1634 1585 156.4
2015E
22476 16186 6289 1.7 1149 7438 1.4 2306 5132 5.8 2798 2334 2101 32.5
Balance Sheet
Deposits( Rs Cr) Change (%) of which CASA Dep Change (%) Borrowings( Rs Cr) Investments( Rs Cr) Loans( Rs Cr) Change (%) 99071 32031 6 5475 42927 99071 20 115540 17 34403 7 12901 45771 115540 17 128283 11 55733 62 9492 52245 128283 11 153939 20 67707 21 12315 62692 153939 20 184727 20 81249 20 14777 75231 184727 20
Ratio
Avg. Yield on loans Avg. Yield on Investments Avg. Cost of Deposit Avg. Cost of Borrowimgs 8.6 6.6 4.7 12.5 9.9 7.1 6.5 6.1 10.0 7.1 6.6 7.0 9.0 6.8 7.0 6.0 9.0 7.5 6.4 6.0
Valuation Book Value CMP P/BV
135 107 0.8
137 79 0.6
146 50.1 0.3
173 75.25 0.4
185 75.25 0.4
Source: Company/Eastwind
KPIT Tech.
"On billion dollar journey"
Result update
CMP Target Price Previous Target Price Upside Change from Previous
"NEUTRAL"
27th Jan' 14
Neutral
151 -
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 532400 KPIT 189/92 2910 144511 6267
Stock Performance
Absolute Rel. to Nifty 1M -7.95 -7.65 1yr 32.66 29.16 YTD -17.1 -18.32
Share Holding Pattern-%

Promoters FII DII Others Current 22.53 41.96 6.99 28.52 2QFY14 1QFY14 22.87 24.25 36.42 32.79 11.12 10.93 29.59 32.03
Price Performance
KPIT Tech witnessed weak numbers, now..they will miss its earning guidance; KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in USD term due to the delay in project kick-off and additional loss of billing days in Q3FY14. Despite cost optimization strategy by company, PAT dip by 9% (QoQ). Now, Company will be in the position of short with its annual revenue guidance. The shortfall in the revenue is entirely because of deficit in SAP SBU revenue for FY14. However, on profit they are confident to exceed the higher end of the guidance despite the challenges faced on SAP SBU profitability. The company expects better earnings, confident of generating a positive cash flow for FY14E, after considering the balance payments for existing M&A deals. Steady set of margin: EBITDA margin almost flat at 15.3% and PAT margin declined by 50bps to 9%, sequentially. Commenting on margin, management stated that the higher margin growth business coming up apart from revenue growth would improve the margins going ahead. By next couple of quarter margin from SAP business would inch up. Growth inside the Europe: Europe region has been the leading growth market with 9.1%. During the quarter, USA had a marginal de-growth in USD terms and APAC declined by 18%(QoQ) because of seasonality and furloughs impact. In INR terms, Europe grew by 7.7%, US down by 2.5% and APAC 19.4%, on QoQ. Mix growth across verticals: On INR basis, KPIT reported 8% of growth from Energy & Utilities (15% contribution on sales), while Manufacturing (39% contribution on sales) down by 4%(QoQ) and Automotive & Transport-(36% contribution on sales) down by 1.5%, sequentially. Deal Momentum: There has been good momentum during Q3 across the business lines in terms of deal closure and pipeline building. Though in 3 large deals there has been almost a quarters delay in closure, two in SAP and one in A&E, that got closed during Q3. Company closed large deals in excess of USD 70 million during the quarter, which provides a sound platform, going into FY15E. View and Valuation: Impressive organic growth despite inorganic thrust (acquired 10 companies in the last 10 yrs), Potential option value from success of its hybrid engine venture Revolo (on trial). KPIT has targeted to reach $1bn sales by 2017. Its differentiated positioning and competitive edge in its focus areas, imperatives to the success of smaller-sized IT vendors impress to investors. Considering delay executions of some projects for next 2 quarters and ongoing change in organization structure, we have a Neutral view on the stock. Already we had advised to book profit on 8th Jan 2014 at a target price of Rs177(Initiated at Rs115). Our view on the stock could be change after favorable update on stock and healthy earning guidance for FY15E. At a CMP of Rs151, stock trades at 9x FY15E EPS.
Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 677.93 103.5 66.7 15.3% 9.8% 2QFY14 702.76 108.1 66.7 15.4% 9.5% (QoQ)-% (3.5) (4.3) 0.0 (10bps) 30bps 3QFY13 567.02 94.1 48 16.6% 8.5%

Rs, Crore (YoY)-% 19.6 10.0 39.0 (130bps) 130bps 7
KPIT Tech
Sales and Sales growth-%(QoQ)
(Source: Company/Eastwind)
Sales Mix
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 Sales Mix (% of Sales) - Geography USA UK & Europe RoW Sales Mix (% of Sales) - Verticles Automotive & Transportation Manufacturing Energy & Utilities Others 73.3% 14.4% 12.3% 37.1% 35.0% 11.6% 16.4% 76.2% 14.6% 9.2% 39.6% 32.9% 13.7% 13.8% 76.4% 12.1% 11.6% 38.8% 32.4% 15.3% 13.5% 74.7% 13.9% 11.4% 40.3% 34.0% 14.2% 11.5% 76.3% 11.3% 12.3% 38.5% 35.4% 13.5% 12.7% 75.0% 13.1% 11.9% 35.5% 39.6% 14.1% 10.8% 71.9% 13.8% 14.4% 36.1% 39.7% 13.6% 10.7% 72.6% 15.4% 12.0% 36.4% 38.9% 15.1% 9.7%
Margin-%
Revolo: The unit has been in the process of conducting trials in 40 vehicles, which has been yielding encouraging results, with fuel savings between 30-40%. KPIT is working to bring the costs down further and attaining regulatory approvals.As per the management, by next year it could be a part of revenue. Client Metrics: Amongst the top customer accounts, Cummins has grown by 4.7% on a Qo-Q basis with revenue share at 17.9% during the quarter. The top 5 and top 10 customers had Q-o-Q decline of 3.2% and 1% respectively. Headcounts Metrics: During the quarter, Considering the ramp up of deals, this quarter was good for hiring prospect, adding around 300+ people during the quarter.Over the next few quarters, we expect, company will introduce multiple initiatives to develop individuals to take on more responsibilities in future. During the quarter, Attrition at 18% (LTM).
KPIT Tech
Operating Metrics
4QFY12 Client Metrics No. of Customers Added No. of Active Customers Customers with run rate of >$1Mn Client Concentration Top Client Cummins Top 5 Clients Top 10 Clients DSO Employee Metrics Total Employee Onsite Utilization Offshore Utilization 4 169 59 19.5% 33.0% 42.2% 90 7719 94.5% 74.3% 1QFY13 3 172 65 20.6% 36.3% 44.0% 75 7873 94.7% 74.1% 2QFY13 4 176 69 19.7% 35.2% 43.7% 75 8111 94.5% 74.7% 3QFY13 2 178 72 19.1% 36.8% 45.2% 70 8286 92.8% 72.9% 4QFY13 5 183 78 16.6% 35.2% 44.0% 75 8321 94.3% 74.1% 1QFY14 6 189 78 16.8% 38.6% 47.3% 77 8456 94.2% 73.4% 2QFY14 3 192 78 16.5% 38.0% 46.3% 75 8816 92.4% 72.9% 3QFY14 3 195 78 17.9% 38.2% 47.6% 76 9136 88.1% 71.3%
Financials
Rs, Cr Net Sales-USD Net Sales Employee Cost Other expenses Total Expenses EBITDA Depreciation Other Income Extra Ordinery Items EBIT Interest Cost PBT Tax PAT PAT (excluding EO Items) Growth-% Sales EBITDA PAT Margin -% EBITDA EBIT PAT Expenses on Sales-% Employee Cost Other Exp Tax rate Valuation CMP No of Share NW EPS BVPS RoE-% Dividen Payout ratio P/BV P/E FY10 153.76 731.64 265.92 280.65 570.62 161.02 30.80 1.20 -26.45 130.22 2.74 102.23 16.91 85.32 111.77 -7.8% -12.2% 129.4% 22.0% 17.8% 11.7% 36.3% 38.4% 16.5% 115.00 7.90 387.11 10.80 49.00 22.0% 6.4% 2.35 10.65 FY11 224.07 987.05 529.95 254.81 838.77 148.28 41.12 6.74 0.00 107.16 3.78 110.12 15.49 94.63 94.63 34.9% -7.9% 10.9% 15.0% 10.9% 9.6% 53.7% 25.8% 14.1% 168.05 8.70 603.19 10.88 69.33 15.7% 6.8% 2.42 15.45 FY12 306.71 1500.00 771.78 430.30 1283.75 216.25 44.49 13.82 10.05 171.76 7.32 188.31 43.67 144.64 134.59 52.0% 45.8% 52.8% 14.4% 11.5% 9.6% 51.5% 28.7% 23.2% 122.90 17.80 712.55 8.13 40.03 20.3% 4.9% 3.07 15.12 FY13 410.46 2238.63 1140.79 762.32 1903.11 335.52 47.16 11.74 -1.30 288.36 13.99 284.81 76.55 208.26 209.56 49.2% 55.2% 44.0% 15.0% 12.9% 9.3% 51.0% 34.1% 26.9% 99.00 19.28 1036.23 10.80 53.75 20.1% 7.9% 1.84 9.17 FY14E 449.39 2696.33 1367.04 903.27 2270.31 426.02 58.32 13.48 -18.61 367.70 24.31 338.26 94.71 243.55 262.16 20.4% 27.0% 16.9% 15.8% 13.6% 9.0% 50.7% 33.5% 28.0% 151.00 19.28 1263.99 12.63 65.56 19.3% 6.5% 2.30 11.95 FY15E 543.42 3233.33 1649.00 1067.00 2715.99 517.33 77.73 16.17 16.17 439.60 24.59 447.35 123.02 324.33 308.16 19.9% 21.4% 33.2% 16.0% 13.6% 10.0% 51.0% 33.0% 27.5% 151.00 19.28 1565.76 16.82 81.21 20.7% 7.0% 1.86 8.98

VResult update
CMP Target Price Previous Target Upside Price Change from Previous
Larsen & Toubro Ltd.

"On Track of Revival"
Neutral
1033 NA NA NA NA
"Neutral"
24th Jan' 14
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 500510 LT 861/114 6 80,145 95,662 6,346
Stock Performance-%
Absolute Rel. to Nifty 1M (2.7) 1.1 1yr 0.8 4.6 YTD 13.5 11.6
Construction & engineering major, L&T posted a surprisingly set of numbers for the quarter ended Dec, 13. The company's net sales grew by a mere 11.8% on a yearly basis to Rs 14387.5crore. The company recurring bottom line witnessing a upstik of 12.15% , and came in at Rs. 1136.3 crore. the results have been adjusted for the quarter as it transferred hydrocarbon business to its subsidiary L&T Hydrocarbon Engineering with effect from April 1, 2013. Accordingly, the company restated suitably its earnings for the previous quarter ended September 2013 and numbers relating to previous periods. However, if we If we consider the exceptional gains on dilution of part stake in a subsidiary company, the overall PAT grew by 22.1 % during the quarter. While the operational performance has been good, the company has witnessed good traction in its order book also. Order inflow for the quarter stood at Rs 21722 crore showing a growth of 21% on Y-o-Y basis. The total order book as on December 31st 2013 stood at Rs 171184 crore showing an increase of 13 % on Y-o-Y basis. EBITDA margins for the Dec 2013 quarter expanded by 180 bps to 11.6% against 9.8% last year. However, as per the management, the quarterly margins differ for every quarter as the project completion cycle is different and hence it is difficult to capture the EBITDA movement every quarter. Though we agree with the managements comment, we still believe that there would be some amount of pressure on the margins on a yearly basis due to risks related to competition, inflation, adverse mix and a slowdown. As regards the results we are of the opinion that, despite the gloomy scenario the results have been good. Consistent order inflow is a major positive factor. We expect the sector to witness revival in coming quarters, whereas we see a near term earnings growth muted and look for a better entry point. Currently we have a neutral view on a stock. Why neutral??? Contribution margin expansion came as a surprise and in our recent meeting the management attributed it to quarterly skews rather than improvement in project-level profitability. We build slightly higher margins for FY2014E at 10.9% (versus 10% earlier). However, we believe margins face downward trajectory over FY2014-16E (build EBITDA margin of 10.5% in FY2015E and 10.3% in FY2016E) due to risks related to competition, inflation, adverse mix and a slowdown. L&T maintained its revenue growth guidance of 15% yoy for FY2014 (9% posted in 9MFY14). We build lower revenue growth of 12% in FY2014 implying 16% growth requirement in 4QFY14. L&T also maintained its inflow guidance of 15-20% in FY2014 (strong 23% growth in 9MFY14; but is a bit wary about maintaining this traction on delayed decision making by customers). Outlook We have a Neutral on L&T as we think it will be difficult rate L&T from todays level without earnings upgrade and/or uncertanity across sector. Downside risks are project delays, weaker margins and stronger Rupee. Upside risks are higher than expected order inflow and higher operating margins a head. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 14387.5 1674.8 1240.7 11.6% 8.4% 2QFY14 12308.4 1185.7 864.6 9.6% 6.8% (QoQ)-% 16.9% 41.3% 43.5% 200 bps 160 bps 3QFY13 12869.3 1258.3 1013.2 9.8% 7.5% Rs, Crore (YoY)-% 11.8% 33.1% 22.4% 180 bps 90 bps
(Standalone)

Promoters FII DII Others 3QFY14 0.0 17.9 36.6 45.5 2QFY14 1QFY14 0.0 0.0 15.3 16.1 37.4 36.9 47.4 47.2
Price Performance V/s NIFTY
(Source: Company/ Eastwind Research)

10
VResult update
V-Guard Industries Ltd.

"Lower FY14 Sales growth guidence to 11-12%..."
Hold
450 475 525 5% -11%
"Hold"
24th Jan' 14
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 532953 V-GUARD 390/570 1,374 59,460 6,344
Stock Performance-%
Absolute Rel. to Nifty 1M (4.5) (5.6) 1yr (9.0) (13.6) YTD 5.0 (6.7)
For the quarter ended Dec 2013, V-Guard reported a top line of Rs. 352.9 crore, compared to Rs. 349.0 crore in 3QFY13, marking a marginal YoY growth of 1.1%. EBITDA margins for the quarter were significantly improved to 8.2% (up 89 bps YoY) due to lower ad spends. Interest expense for the quarter were up by 10.0% YoY to Rs. 5.4 crore and after giving effect depreciation and taxes, the companys PAT stood at Rs. 17.5 crore (up 14.2% YoY). On conference call, the management of V-Guard lowered their top-line guidance to 11-12% from the earlier 18-20% in FY2014. However, they expect to achieve EBITDA margin of around 8.5% for FY2014. We believe that during the election period, the power supply could remain better (with political interest), consequently lowering the UPS demand. Hence, it could take a couple of quarters to witness a reversal in the trend, if any. On this backdrop, we have lowered our revenues estimates by 9% in FY2014 and 13% in FY2015. Consequently, we have revised down our EPS estimates by 21% in FY2014 and 16% in FY2015. Strong Balance Sheet Total Debt has been reduced significantly as on 3Q FY14 to Rs. 117.7 crore, compared to Rs. 157 crore as on 3Q FY13. Working capital loan reduced to Rs. 77.1 vrore from 134.0 crore and whereas term loan icreased to Rs. 40.6 crore from 22.9 crore. Working capital cycle on a TTM basis improves by 9 days to 76 days. Mainly Led by 15 days reduction in debtors. Management has also guided for improvement in net working capital cycle by 5- 10 days every year going forward. This will further improve its ROCE and ROE going forward. Strong cash generation in 9M. FY14 Cash from operations at Rs. 90 crore in 9M FY14 as compared to Rs. 14.5 crore for full year FY13 Outlook As expected, the companys contribution to revenue has improved from its non south market as compared to its incumbent southern market. All in all we observe this result as significantly below our estimates. Although company has reported increase in EBITDA margin in 3QFY14 by 80 bps, but it still below our full year expectaion of 9%. We believe that during the election period, the power supply could remain better (with political interest), consequently lowering the UPS demand. Hence, it could take a couple of quarters to witness a reversal in the trend, if any. On this backdrop, we have lowered our revenues estimates by 9% in FY2014 and 13% in FY2015. Consequently, we have revised down our EPS estimates by 21% in FY2014 and 16% in FY2015. However we belive company strong balance sheet, a wide range of products and a strong hold over its existing market, all of which give it an edge over its rivals. At the current CMP of Rs. 457, the stock is trading at a PE of 18.3x and 13.8x of FY14E and FY15E. The company can post RoE of 23.2% and 24.1% & EPS of Rs. 25.2 and Rs. 33.2 FY14E and FY15E. We belive that the current level is not attractive to make position in this stock, one should wait further correction from current level, however one who already own the stock can hold it with the revised price target of Rs. 475. Financials Consolidated Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 352.9 29.1 17.5 8.1% 4.9% 2QFY14 334.0 27.1 14.5 8.1% 4.3% (QoQ)-% 5.7% 7.7% -21.0% 0 bps 60 bps 3QFY13 349.0 25.7 15.4 7.3% 4.4% Rs, Crore (YoY)-% 1.1% 13.3% 14.2% 80 bps 50 bps
Standalone

Promoters FII DII Others 3QFY14 65.5 18.5 2.2 13.8 2QFY14 65.5 17.4 2.5 14.5 1QFY14 65.5 14.5 3.5 16.4
1 yr Forward P/B

11

Confrence Call Highlights
Non South market sales in Q3 FY'14 stood about 30% of total sales and grew by about 30% as well. The South market which constitutes about 70% degrew by about 8-9% in value terms and by about 13-15% in volume terms. Overall, thus company ended up with flattish kind of sales growth in Q3 FY'14. For Q4 FY'14, management expects about 10-12% sales growth. In Q3 FY'14, the company was able to improve its gross margin by 100 bps which was largely due to lower Advertisement expenditure YoY. Going forward Ad expenditure will be around 3.5-4% of sales. The Electronics segment, which constitute stabilizers and UPS, which contribute about 24% of total sales in Q3 FY'14, degrew by 18% YoY, Electrical which includes pumps, house wiring cable, electric water heater, fans and others, and contribute about 72% of total sales, grew by about 8%, with electric water heater and house wiring cables delivered a healthy growth, while the solar water heater which constitute about 4% of total sales, grew by about 30%. The premium variant of the electric water heater segment launched in FY'14 continues to get good response. As per the management, better power supply in States of Tamil Nadu and Andhra Pradesh together with lower sale of consumer durable products due to weak consumer sentiment, affected the growth of the company. Also due to sand mining ban in many parts of the country, construction activities were also slow leading to lower sale of wire business. As per the management, the power situation in South India should be temporary phenomena largely due to elections. Also extended monsoon also delayed some of the product sale and affected the demand. Total market of electric wires will be about Rs 7500 crore of which company has share of about 6%. By year end the company should be able to report about Rs 450-475 crore of electric wires. Polycab has highest market share of 20% followed by Finolex cables of about 12%. Raw material prices of cooper and other metals were steady and more on downward side. Management expects raw material prices to slightly inch up from March'14 onwards which is general seasonally trend. The new products introduced last year namely Induction Cooker, Mixer Grinder and Switchgears did well and are expected to post revenue of about Rs 50 crore totally in FY'14. Lower tax rate during the quarter was as a result of a 200% weightage deduction on R&D and on capital expenditure which the company received the approval from this year and going forward also the deduction will continue. Overall, management expects about 11-12% growth in FY'14 with Ebidta margin of about 8.5-9%. The management lowered its earlier guidance of about 20% growth in FY'14 largely due to current economic and environmental challenges.

12

Key financials
PARTICULAR Performance Revenue Other Income Total Income EBITDA EBIT DEPRICIATION INTREST COST PBT TAX Extra Oridiniary Items Reported PAT Dividend (INR) DPS EPS Yeild % EBITDA % NPM % Earning Yeild % Dividend Yeild % ROE % ROCE% Position Net Worth Total Debt Capital Employed No of Share (Adj) CMP Valuation Book Value P/B Int/Coverage P/E 47.4 1.9 8.4 10.4 57.6 2.9 5.7 12.9 70.6 2.6 4.9 10.9 87.6 5.0 4.9 20.7 108.7 4.2 5.6 18.3 137.9 3.3 9.4 13.8 141 81 222 3 89 172 139 311 3 168 211 109 320 3 186 261 165 427 3 435 324 125 449 3 460 412 115 527 3 460 11.1% 5.6% 9.6% 4.0% 18.0% 13.8% 10.1% 5.4% 7.8% 2.4% 22.7% 16.2% 9.4% 5.1% 9.2% 2.2% 24.1% 21.2% 8.1% 4.6% 4.8% 0.9% 24.1% 19.4% 8.7% 5.0% 5.5% 0.9% 23.2% 21.4% 9.0% 5.7% 7.2% 0.9% 24.1% 21.7% 454 1 456 50 43 7 5 40 14 NA 25 10 3.5 8.5 727 2 728 73 65 8 11 55 16 NA 39 12 4.1 13.1 994 2 996 94 84 10 17 69 18 NA 51 12 4.1 17.0 1360 4 1364 110 99 11 20 82 19 NA 63 12 4.1 21.1 1510 5 1515 131 119 12 21 102 27 NA 75 12 4.1 25.2 1736 6 1742 156 141 15 15 132 33 NA 99 12 4.0 33.2 2010A 2011A 2012A 2013A 2014E 2015E

13
Dabur India Ltd.

"Confident tone for growth"
Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance 1M Absolute 3.3% Rel. to Nifty 2.20% Share Holding Pattern-%
Current 2QFY14 1QFY14
"BUY"
24th Jan' 14
BUY 162 206 27% -
500096 DABUR 185/125 28197 908049 6346
1yr 25% 20%
YTD 24.0% 12.8%
Promoters FII DII Others
68.64 19.94 4.47 6.95
68.66 20.71 3.96 6.7
68.66 20.4 3.97 7
P/BV(x)-1year forward
Dabur delivered inline set of numbers ; During 3QFY14, Dabur reported 16.7% (YoY) sales growth led by 9% overall volume growth because of discretionary demand ramp up in rural area and price hikes by around 4-5% . PAT grew by 16%(YoY). The International Business grew by 26%. Organic business grew by 29% with 14% constant currency growth rate led by strong performance in GCC, Egypt and Nigeria. The GCC business reported a 21% growth, while sales in Egypt and Nigeria both grew by 16%. Domestic FMCG business grew by 14%. Post earning, companys management stated that they would focus on pursuing aggressive and profitable growth strategy with brand building by judicious mix of price hike and product launch in near future. Margin ramp down: During the quarter, EBITDA margin declined by 120 bps to 15.6% due to rise in A&P cost by 130 bps to 15.72% and employee cost by 60 bps to 8.58% of adjusted net sales. PAT margin flat at 12.8% on YoY basis. Volume growth in single digit: Because better discretionary demand environment in rural area and judicious pricing strategy overall volume growth increased by 9% (YoY) in 3QFY14 with 4-5% (YoY) pricing growth.For FY15E, management stated to hike its product prices by 4-5% to maintain its margin. Growth on all Categories: The Health Supplements business was a key driver of growth during the quarter, reporting a strong 19.5% surge. The Air Freshener business under the brand Odonil, continued to surge ahead with an over 27% growth. The Foods business also reported a robust near 18% growth. The Shampoo business grew by 25%. The Toothpaste business grew by over 14% while the Skin Care category reported an over 13% growth. Recent updates: (a)Introduced a host of new products and variants, including the new Fem Fairness Naturals facial bleach range and Vatika Hibiscus hair care range.(b)Dabur Tunisie, a wholly owned subsidiary, incorporated in Tunisia on Dec. 2013 with the object of buying, selling and manufacturing consumer care products, having meagre asset base at present. View and Valuation: Despite signs of weak discretionary demand and increased competitive intensity in the market, Dabur India has reported comparatively better volume growth in its key categories. On all operating parameters, its performance was satisfactory. Still, management is cautious for margin ramp up due to high inflation in India. The strong momentum in relatively low competition in the core categories with diversified portfolio, Dabur gets a better place than other peers and its rural distribution expansion should boost sales volumes. We retain our Buy view on the stock with a target price of Rs206. At a CMP of Rs 162 stock trades at 8.5x FY15E P/BV. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 1904.28 297.59 243.5 15.6% 12.8% 2QFY14 1748.81 329.24 249.83 18.8% 14.3% (QoQ)-% 8.9 (9.6) (2.5) 220bps 150bps 3QFY13 1635.98 274.51 209.87 16.8% 12.8% Rs, Crore (YoY)-% 16.4 8.4 16.0 120bps 14

Dabur India Ltd.

Sales and Sales Growth(%) -
Consolidated Volume Growth-%
The company has been looking to maintain 812% volume growth in the near term.
Margin-%
EBITDA margin declined by 120 bps to 15.6% due to rise in A&P cost by 130 bps to 15.72% and employee cost by 60 bps to 8.58% of adjusted net sales.
Expenses on sales-%
RM cost (on sales) decreased from 37.6% to 36.3% and AD spend down from 14.4% to 12%, historicaly low ad spend.

15
Dabur India Ltd.

Key facts from Management Commentary:
The company may hike prices by 4-5% in FY15E and focus will be on pursuing an aggressive and profitable growth strategy. Ad expenses to be within the range of 13-15 percent at the consolidated level for FY15E. Expanding rural distribution networks as a part of project double and new products as hair serums and professional hair care products were launched. There has been a softening of demand generally speaking in urban India. Overall much higher level of growth is coming from rural as compared to urban.
Financials
Rs in Cr, Sales RM Cost Purchases of stock-in-trade WIP Employee Cost Ad Spend Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Volume Pricing Sales EBITDA PAT Expenses on Sales-% RM Cost Ad Spend Employee Cost Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E FY10 3391.4 811.0 750 (10) 285 493.5 438.4 2767.3 624.1 50.0 39.4 613.5 12.3 601.2 100.5 500.7 FY11 4104.5 1806.8 252 (122) 309 534.6 524.1 3304.8 799.7 95.2 32.2 736.6 29.1 707.5 139.0 568.5 FY12 5305.4 2278.8 509 (103) 387 659.5 683.1 4415.2 890.2 103.4 57.4 844.2 53.8 790.4 146.4 644.0 FY13E 6178.9 2422.1 599 (2) 471 837.0 819.10 5146.6 1032.2 112.7 92.0 1011.5 58.9 952.6 182.62 770.0 FY14E 7070.30 2757.42 742.38 (71) 608.05 996.91 908.53 5942.59 1127.71 111.09 141.41 1158.03 54.69 1103.34 212.39 890.95 9.5% 4.5% 14.4% 9.3% 15.7% 39.0% 14.1% 8.6% 12.9% 19.3% 16.0% 16.4% 12.6% 162.0 174.3 2689.1 5.1 15.4 33.1% 10.5 31.7 FY15E 8203.32 3240.31 820.33 (41) 738.30 1132.06 1066.43 6956.42 1246.90 133.15 164.07 1277.82 51.95 1225.87 232.91 992.95 10.5% 5.0% 16.0% 10.6% 11.4% 39.5% 13.8% 9.0% 13.0% 19.0% 15.2% 15.6% 12.1% 162.0 174.3 3335.4 5.7 19.1 29.8% 8.5 28.4
20.9% 33.9% 28.1% 23.9% 14.6% 8.4% 12.9% 16.7% 18.4% 18.1% 14.8% 158.6 86.8 935.4 5.8 10.8 53.5% 14.7 27.5
21.0% 28.1% 13.5% 44.0% 13.0% 7.5% 12.8% 19.6% 19.5% 17.9% 13.9% 96.1 174.1 1391.1 3.3 8.0 40.9% 12.0 29.4
29.3% 11.3% 13.3% 43.0% 12.4% 7.3% 12.9% 18.5% 16.8% 15.9% 12.1% 103.2 174.2 1716.9 3.7 9.9 37.5% 10.5 27.9
16.5% 16.0% 19.6% 39.2% 13.5% 7.6% 13.3% 19.2% 16.7% 16.4% 12.5% 131.0 174.3 2124.4 4.4 12.2 36.2% 10.7 29.7

16
Ultratech Cement.
Moderated but Not outdated
Result Update
"Hold"
24th Jan' 14
Hold
1719 1846 1846 7% 0%
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume (Nos.) Nifty 532538 ULTRACEMCO 1405/2067 46885 18754 6346
Lower Realization and higher Operating Cost Impact PAT: UltraTechs 3QFY14 Sales, EBITDA & PAT declined 1%, 24% and 39% YoY respectively to Rs4818Cr, Rs796Cr and Rs370Cr respectively. On QoQ basis, Sales, EBITDA & PAT rose 7%, 17% and 40%. While EBITDA margin contracted ~499 bps YoY it expanded 149 bps QoQ to 16.5%. EBITDA per MT at Rs788 down 24% YoY and up 10% QoQ. At Rs.788 /Ton Average Realization Down 1% YOY : The benefit of lower coal prices (net of rupee devaluation) and optimization of the fuel mix led to an 6.5% yoy dip in power & fuel costs a ton. A 23.5% yoy drop in EBITDA and a 75.4% yoy rise in interest led to a 37.8% yoy fall in PAT. Despite of Weak Realization Ultratech has delivered QOQ margin Expansion :Despite 24%,7%,8% YOY increase in Rawmaterial cost, freight cost and other expenses respectively, Ultratechs variable input cost increased 6%YOY and -2%QOQ . Through better cost efficiency which has been one of the key factors resulting in UltraTechs results outperforming its large cap peer group over the last 45 quarters. Thus We believe UItraTech will deliver QoQ margin expansion despite marginally weak realization . Expansion Updates :In Jul13 it commissioned a 3.3m-ton clinker plant in Karnataka, adding to its earlier commissioning (Mar13) of similar capacity in Chhattisgarh. In Oct13 it commissioned a 1.6m-ton grinding unit in Jharsuguda, Orissa, adding to its earlier commissioning (Mar13) of similar capacity in Hotgi, Maharashtra. The balance five associated grinding units will be set up in 4QFY14 and FY15. Acquisition. During 2Q, Ultratech acquired JPAs 4.8m-ton unit in Gujarat, lifting its capacity to 59m tons, while ongoing expansions would further that to 70m tons by Mar15. The transaction, at an EV of 38bn (US$125 a ton) is expected to be completed only by 1QFY15 given multiple approvals required. Depreciation rose 11% yoy due to the commissioning of clinker capacity in Chhattisgarh, Karnataka, and grinding units in Maharashtra, Gujarat and Orissa. Other income too fell, 18% yoy, leading to a further crunch in PAT. Investment concerns :Key drivers of long-term growth would continue to be housing and infrastructure development.Revival in cement demand would be key catalyst for the stock performance.cement prices and demand are expected to pick-up post election.High operating leverage, especially post commissioning of new capacities in 1QFY14, could result in volatile earnings.Cement Makers may rise cement prices due to increase in variable input costs. Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY13 Net Revenue 4818 -1.3 6.5 4883 4522 EBITDA 796 -24.2 17.1 1050 679 Depriciation 264 10.7 0.0 239 264 Interest Cost 90 73.6 1.9 52 89 Tax 139 -45.2 30.0 254 107 PAT 370 -38.5 41.6 601 261
(In Crs)
Stock Performance-%
Absolute Rel. to Nifty 1M -7.3 -9.0 1yr -14.8 -19.9 YTD -10.2 -14.3

3QFY14 Promoters FII DII Others 62.0 21.0 4.6 12.4 2QFY14 1QFY14 62.0 20.7 4.8 12.6 62.0 20.7 4.6 12.7
1 yr Forward P/B
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0
Nov-06 Nov-09 Nov-12
Price 2x 4x 6x 8x
1x 3x 5x 7x
Feb-06
Feb-09
Aug-04
Aug-07
Aug-10
Feb-12
May-05
May-08
Source - Comapany/EastWind Research
May-11
Aug-13

17
Ultratech Cement.
OUTLOOK : We are expecting Demand Growth for the rest FY14 will be 4% - 5% and for FY15 it will be in the range of 8% - 12%.Demand already revived after the monsoon ,hence it reported a 4% realization growth in Q3FY14.The Ultratech's expansion plans are ramp up to become 70 mnTon cement producer in India by FY15 . Its waste heat recovery plants and efficient fuel mix (usage of petcock for energy instead of coal) moderates the Cost pressure, so to make Ultratech cost efficient among large cap peers. Govt initiatives to expedite large infrastructure projects have yielded little so far and this is putting pressure in the cement makers, especially those with debt that has become expensive to service due to high interest rates. We expect lower other income to revive after the settlement of volatile interest rates by Govt in coming quarters. At present ultratech is running at 79% of its capacity utilization. The utilization level may decline due to stabilization of supply from new capacities, owing to insufficient demand in Domestic Market. Ultratech is planning to strengthen its logistic infrastructures and increase its captive power plants capacity, which will help to reduce its Operational cost. Vew & Valuation : Ultratech's Q3FY14 was in line to our estimates.The white cement Volume Growth and capacity expansions are positive in terms of fundamentals. We see the uptick of EBIDTA margin and volume growth for FY15. Currently the stock valuing at 3x in 1yr forward P/B, and we cut our stance for FY15 to 2.7x. Hence we maintain our positive stance on Ultratech Cement with Target price of Rs.1846/- . As from the current level the upside is very limited(7%), we recommend Hold Ultratech and Buy at Dips to get handsome return.
P/L PERFORMANCE Net Revenue from Operation Other Income Total Income Power and fuel Freight and forwarding Expenditure EBITDA Depriciation Interest Cost Net Tax PAT ROE%
FY11 13798 154 13952 3280 2881 11102 2696 813 292 384 1367 12.8
FY12 19232 371 19603 4639 3741 15039 4194 963 256 948 2403 18.7
FY13 21319 304 21623 4646 4243 16480 4839 1023 252 1179 2678 17.6
FY14E 20797 346 21143 4315 4461 16957 3840 1110 325 759 1982 11.7
18
Ultratech Cement.
B/S PERFORMANCE Share capital Reserve & Surplus Total equity Long-term borrowings Short-term borrowings Long-term provisions Trade payables Short-term provisions Total liabilities Intangibles Tangible assets Capital work-in-progress Long-term loans and advances Inventories Trade receivables Cash and bank balances Short-term loans and advances Total Assets RATIOS P/B EPS Debtor to Turnover% Creditors to Turnover% Inventories to Turnover% EV P/E EV/EBIDTA Dividend Yield% ROCE% Debt/Equity Current Ratio Cash from Operation Cash From Investment Cash from Finance FY10 124 4495 4620 857 750 32 683 133 8375 6 4953 260 146 827 210 112 219 8375 FY10 3.1 88.1 2.9 9.5 1.2 15890 13.1 7.9 0.5 15.4 0.3 2.3 1673 (843) (740) FY11 274 10373 10647 3295 727 113 1830 473 21630 39 12265 760 583 2094 825 190 873 21630 FY11 2.9 49.9 6.0 13.3 1.5 34903 22.7 12.9 0.5 8.2 0.4 1.5 2195 (2240) 248 FY12 274 12550 12824 4843 705 121 2207 709 24904 40 12729 1940 1544 2198 1089 214 1041 24904 FY12 3.2 87.7 5.7 11.5 1.1 46634 17.2 11.1 0.5 11.8 0.4 1.6 3482 (3050) (353) FY13 274 14955 15230 5169 1227 135 2338 949 29590 62 14254 3601 1066 2541 1376 185 1048 29590 FY13 3.4 97.7 6.5 11.0 1.2 57428 19.1 11.9 0.5 11.3 0.4 1.4 4122 (4407) 715

19

Stock Performance During Quarter
Revenue growth tepid on account of moderate loan growth and high cost of fund We expect performance of Public Sector Banks (PSBs) to remain muted on the back of slower pace of loan growth and deteriorating asset quality led by ongoing restructure assets and stress in economy. We expect PSBs in our coverage universe to report NII growth of 17.2% YoY led by moderate loan growth of 18% YoY by the system and restructure assets which would likely to remain at elevated level as per most of bank management. Provision for loan loss would be elevated level owing to deteriorating asset quality and larger sum of restructure assets are in pipeline. Most of PSBs are expected to reported higher slippage of restructure asset as per management. Muted loan growth reported by system During quarter the banking system experience loan growth of 15% YoY as on 13th Dec.2013 (as per RBI data) as against 18% YoY loan growth in 2QFY14. Second quarter witnessed higher loan growth because of transfer of CD/CP borrowings to loan but during this quarter revival of bond yield and lower demand of corporate loan led slowdown in economy restricted moderate loan growth in the system. We expect loan growth of 10-15% in our coverage universe. Bank of Baroda, Canara Bank,
Nifty Vs Bank Nifty during Quarter
UCO bank and Union bank are expected to reported loan growth of >15% while PNB and SBIN would report <10% of loan growth. Deposits growth lead by flow of FCNR deposits Indian banks registered deposits growth of 17% YoY as on 13th Dec2014 according to RBI data preliminary due to flow of FCRN deposits through RBIs special concession window to the tune of Rs. $14 bn. Union Bank is likely to get more benefit from this route as per management. According to banks top official, bank raised more FCNR deposits than repo borrowing. Bond yield during this quarter soften to 7.5% as against 9.5% in second quarter and FCNR deposits are generally low cost of deposits. This would lead the margin expansion of more than 1%. Margin expansion would be seen in case of Union Bank. Cost of deposits of most of banks is expected to remain same but we expect actual benefit would come from 4QFY14E and onwards.
Loan (Rs tn) and YoY Gr(%)
Asset quality pressure likely to remain at elevated level Asset quality pressure is likely to persist due to ongoing slowdown in economy, high interest rate and continuous rising inflation. Gross slippages of banks are expected to remain at elevated level and most of bankers are guided higher amount of restructure assets in pipeline. We expect Andhra bank would hit more as their impairment of asset would be more than 18% of asset means 100% of liability has to service 82% of asset which would be tough itself for bank. We expect GNPA and net NPA for PSBs would be in the range of 3.5%-4% and 2 to 2.5% respectively in 3QFY14.

20

Profitability likely to declined due to absence of core earnings, high operating leverage and deteriorating asset quality Profitability of PSBs are expected to declined by 19.5% in our coverage universe in absence of core earnings, higher operating leverage due to wage revisions and high provision against loan loss due to deteriorating asset quality. Union Bank, Canara Bank and UCO Bank are expected to report healthy profit in our coverage because of healthy loan growth and margin expansion. Although these banks would not be free from impairment of asset and high operating leverage but would have comfortable profit due to healthy core earnings as per our view. Outlook Most of PSBs are trading at lower range of valuation multiple owing to absence of core earnings, operating leverage, deteriorating asset quality and higher amount of restructure assets that are in pipeline. High inflation would be risk for the economy going forward. Any rise in inflation would result of rise in interest rate by RBI in its third quarter monetary policy review on 28th Jan.2014 which would be negative for banking industry. Most of banking stocks are expected to report moderate revenue and profit growth owing to multiple headwinds. In PSBs universe we like Canara Bank, UCO Bank, Union Bank. ALBK
ALBK Rs Cr NII PPP Net Profit
3QFY14E 1169 750 182
2QFY14 1309 1154 276
3QFY13 % YoY Growth % QoQ Growth 1330 -12.1 -10.7 860 -12.7 -34.9 311 -41.4 -34.0
We expect bank to report profit growth of 4.2% YoY on the back of high operating leverage and high provisions. Higher operating leverage is expected due to higher employee provision and higher provisions on account of deteriorating asset quality as bank witnessed sequentially increased of gross NPA. Andhra Bank ANDHRABANK Rs Cr 3QFY14E NII 1169 PPP 750 Net Profit 166
2QFY14 1045 643 71
3QFY13 971 712 257
% YoY Growth 20.4 5.4 -35.4
% QoQ Growth 11.9 16.7 135.0
We expect bank to report loan growth and deposits growth of 14% and 18% respectively. Profit is expected to report negative growth on YoY basis largely due to high base and expected muted performance during the quarter. Asset quality during quarter is expected to report high deteriorating due to large chunk of restructure assets.
21

Bank of Baroda BANKBARODA Rs Cr 3QFY14E NII 3515 PPP 2539 Net Profit 1067
2QFY14 2895 2125 1168
3QFY13 2841 2256 1012
% YoY Growth 23.7 12.6 5.5
% QoQ Growth 21.4 19.5 -8.7
We expect profit growth of 5.5% YoY largely due to tax rate of 30% versus 6.3% in 2QFY14 and 17.5% YoY in 1QFY14. As per our expectation NII would be grew by 24% largely due loan growth of 20% YoY. Asset quality of bank is expected to remain high as management guided restructure pipeline is Rs.20bn. Bank of India
BANKINDIA Rs Cr NII PPP Net Profit
3QFY14E 2683 2218 602
2QFY14 2527 2102 622
3QFY13 % YoY Growth % QoQ Growth 2308 16.2 6.2 1856 19.5 5.5 803 -25.1 -3.3
We expect loan and deposits growth of 23% and 29% YoY respectively. Profit is lower by 25% YoY largely due to higher provisions. Bank is expected to report higher slippage as management guided restructure pipeline of Rs.10-15 bn. NIM is expected to improve by 20 bps YoY due to international NIM. Canara Bank
CANBK Rs Cr NII PPP Net Profit
3QFY14E 2606 1734 775
2QFY14 2191 1425 626
3QFY13 % YoY Growth 1988 31.1 1516 14.4 714 8.5
% QoQ Growth 18.9 21.7 23.8
Canara Bank is expected to report 30%+loan growth largely due to lower base. We expect loan to grow by 34% YoY and flat deposits growth. Asset quality of bank is expected to improve on sequential basis largely due to expected lower slippage. AT PBT level , we expect bank to grow by 12.5% but we assume tax rate of 25% versus 16% in 2QFY14 and 19% in 1QFY14 which lead profit growth of 8.5% YoY. Gross slippage and tax rate will be monitor able. Punjab National Bank
PNB Rs Cr NII PPP Net Profit 3QFY14E 4201 2874 607 2QFY14 4016 2535 505 3QFY13 3733 2682 1306 % YoY Growth 12.5 7.2 -53.5 % QoQ Growth 4.6 13.4 20.2
PNB is expected to report loan growth of less than 10% as bank is more focus on consolidating its balance sheet than growth. Asset quality is expected to remain at elevated level as banks slippage not concentrated in particular industry. NIM is expected to report in the range of 3.5-3.7%. Profit is expected to be dented on account of higher provisions.
22

State Bank of India SBIN Rs Cr 3QFY14E NII 12959 PPP 6734 Net Profit 2535
2QFY14 12251 6312 2375
3QFY13 11154 7791 3396
% YoY Growth 16.2 -13.6 -25.4
% QoQ Growth 5.8 6.7 6.7
We expect SBIN loan and deposits growth of 17% and 16% YoY respectively. NIN is expected to report in the range of 3.5-4% as bank has increased base rate during the quarter. Operating leverage and asset quality is expected to dent profit by 25% YoY. We remain have concern about banks deteriorating asset quality and continuous fall of PCR. Gross slippage and provisions make by bank is key monitor able as per our view. UCO Bank UCOBANK Rs Cr 3QFY14E 2QFY14 3QFY13 % YoY Growth % QoQ Growth NII 1642 1569 1177 39.5 4.7 PPP 1285 1166 831 54.6 10.2 Net Profit 338 400 102 231.4 -15.5 UCO bank is expected to report profit growth of 200%+ largely due to robust expected NII growth which is lead by low of fund. UCO Banks CASA grew exponential in past few quarter but after sanction of western countries in Iran, low cost deposits are likely to be stagnant. But bank is expected to get benefit of same in FY14. Key monitor able would be CASA trend and asset quality. Union Bank
UNIONBANK Rs Cr NII PPP Net Profit 3QFY14E 2015 1484 400 2QFY14 1954 1225 208 3QFY13 1891 1358 302 % YoY Growth 6.6 9.3 32.5 % QoQ Growth 3.1 21.1 92.3
We expect Union banks profit to grow by 32% YoY largely due to margin expansion and flow of FCNR deposits. Cost of fund is likely to soften this quarter as bank borrowed more money on repo and less MSF. Bond yield settled at 8.75% during quarter as against 9.5% in previous quarter. We expect loan and deposits growth of 17% and 18% YoY. Asset quality is likely to persist. Improvement in CASA and margin expansion would be key monitor able. Result Preview ; at a glance
PSU BANKS ALBK ANDHRABANK BANKBARODA BANKINDIA CANBK DENABANK IOB ORIENTBANK PNB SBIN SYNDIBANK UCOBANK UNIONBANK VIJAYABANK Total NII 1382 1169 3515 2683 2606 684 1467 1395 4201 12959 1480 1642 2015 660 36476 3QFY14E PPP Net Profit 1139 324 750 182 2539 1067 2218 602 1734 775 458 107.4 972 120 965 269 2874 607 6734 2535 847 319 1285 338 1484 400 385 127 23245 7448 NII 1309 1045 2895 2527 2191 107 1452 1281 4016 12251 1411 1569 1954 705 33404 2QFY14 PPP Net Profit 1154 276 643 71 2125 1168 2102 622 1425 626 369 625 791 133 825 251 2535 505 6312 2375 811 470 1166 400 1225 208 273 136 20601 7590 NII 1330 971 2841 2308 1988 615 1382 1204 3733 11154 1400 1177 1891 456 31120 3QFY13 PPP Net Profit 860 311 712 257 2256 1012 1856 803 1516 714 443 206 1017 116 926 326 2682 1306 7791 3396 864 508 831 102 1358 302 261 127 22513 9175 NII 3.9 20.4 23.7 16.2 31.1 11.2 6.2 15.9 12.5 16.2 5.7 39.5 6.6 44.7 17.2 YoY Growth PPP Net Profit 32.4 4.2 5.4 -29.2 12.6 5.5 19.5 -25.1 14.4 8.5 3.4 -47.9 -4.4 3.4 4.2 -17.5 7.2 -53.5 -13.6 -25.4 -2.0 -37.2 54.6 231.4 9.3 32.5 47.5 0.0 3.3 -18.8 QoQ Growth NII PPP Net Profit 5.6 -1.3 17.5 11.9 16.7 157.6 21.4 19.5 -8.7 6.2 5.5 -3.3 18.9 21.7 23.8 539.3 24.1 -82.8 1.0 22.9 -9.8 8.9 17.0 7.2 4.6 13.4 20.2 5.8 6.7 6.7 4.9 4.4 -32.1 4.7 10.2 -15.5 3.1 21.1 92.3 -6.4 41.0 -6.6 9.2 12.8 -1.9
Narnolia Securities Ltd, Please refer to the Disclaimers at the end of this Report.
23
N arnolia Securities Ltd

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Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any action based upon it. This report/message is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any from. The report/message is based upon publicly available information, findings of our research wing East wind & information that we consider reliable, but we do not represent that it is accurate or complete and we do not provide any express or implied warranty of any kind, and also these are subject to change without notice. The recipients of this report should rely on their own investigations, should use their own judgment for taking any investment decisions keeping in mind that past performance is not necessarily a guide to future performance & that the the value of any investment or income are subject to market and other risks. Further it will be safe to assume that NSL and /or its Group or associate Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise, individually or otherwise in the recommended/mentioned securities/mutual funds/ model funds and other investment products which may be added or disposed including & other mentioned in this report/message.

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India Equity Analytics

Daily Fundamental Report on Indian Equities

IEA-Equity Strategy 27th Jan, 2014 Edition : 192

KPIT Tech: "On billion dollar journey"

27th Jan 2014

Larsen & Toubro Ltd: "On Track of Revival"

24th Jan 2014

V-Guard: "Lower FY14 Sales growth guidence to 11-12%"

24th Jan 2014

Dabur India Ltd : "Confident tone for growth"

24th Jan 2014

Ultratech Cement : Moderated but Not outdated

24th Jan 2014

Public Sector Banks Result Preview 3QFY14E

24th Jan 2014

532205 UCOBANK 86.65/46 5561 2960821 6154

Narnolia Securities Ltd,

11085 192406 203491 141457 141457

10770 188779 212416 135233 212416

9399 169711 179110 121455 121455

17.9 13.4 13.6 16.5 16.5

2.9 1.9 -4.2 4.6 -33.4

7,353 4217 5.2 3.0 46.4

7,376 4228 5.5 3.1 46.6

6,711 3927 5.5 3.2 41.5

Valuation Book Value CMP P/BV

135 107 0.8

146 50.1 0.3

173 75.25 0.4

185 75.25 0.4

Share Holding Pattern-%

Narnolia Securities Ltd,

Rs, Crore (YoY)-% 19.6 10.0 39.0 (130bps) 130bps 7

Narnolia Securities Ltd,

Larsen & Toubro Ltd.

Share Holding Pattern-%

Price Performance V/s NIFTY

(Source: Company/ Eastwind Research)

Narnolia Securities Ltd,

V-Guard Industries Ltd.

Share Holding Pattern-%

(Source: Company/ Eastwind Research)

Narnolia Securities Ltd,

V-Guard Industries Ltd.

Narnolia Securities Ltd,

V-Guard Industries Ltd.

(Source: Company/ Eastwind Research)

Narnolia Securities Ltd,

Dabur India Ltd.

BUY 162 206 27% -

500096 DABUR 185/125 28197 908049 6346

1yr 25% 20%

YTD 24.0% 12.8%

Promoters FII DII Others

68.64 19.94 4.47 6.95

68.66 20.71 3.96 6.7

68.66 20.4 3.97 7

Narnolia Securities Ltd,

Dabur India Ltd.

Consolidated Volume Growth-%

Narnolia Securities Ltd,

Dabur India Ltd.

Narnolia Securities Ltd,