Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

India Equity Analytics for Today - Buy Stocks of CMC with Target Price from Rs 1490 to Rs 1690

VIEWS: 43 PAGES: 23

CMC has recent healthy demand environment across the IT space, Narnolia Securities Limited positive for the "BUY" view on the stock and we revise our target price from Rs 1490 to Rs 1690.

More Info
									                                                                                                                                          IEA-Equity
                                                                                                                                           Strategy
                                                   India Equity Analytics                                                               20th Dec, 2013


CMC : "On track to deliver"                                                 "BUY"             20th Dec 2013
Considering recent healthy demand environment across the IT space with favorable supply side scenario, we remain confident on the stock for
better earning visibility and stable margin picture. Still, we reiterate our positive stance on the long-term story of CMC due to its focus on high
margin SI and ITES businesses.At a CMP of Rs 1510, stock trades at 14.9X FY14E earnings. We have "BUY" view on the stock and we revise our
target price from Rs1490 to Rs1690.............................. (Page : 2-3)

DIVISLAB : Good Growth Ahead                                                 "BUY"             19th Dec 2013
The company posted strong 2QFY4 results with net sales growing to Rs 566 Cr up by 19.7% YoY on the back of good growth coming from all
business segments. The generic API grew by 18% YoY to Rs 261 Cr for the quarter and CRAMS business segment grew by 20% YoY to Rs 271
Cr............................................. ( Page : 4-6)

AXIS BANK :                                                                          "Neutral"          19th Dec 2013

Axis bank is trading at 1.6 times of one year forward book which is almost upper side of bear case valuation band. We are not seeing bank’s
earnings better than expectation as bank’s has significant exposure in riskier sector like infrastructure and power as compare to its peers. We
have taken bank’s valuation multiple in bear case scenario on account of non visibility of ROE improvement and expected muted earnings
growth. We assume loan and deposits growth of 16% and 15% along with margin at 3.5%. Better than expected performance will lead price
performance and valuation multiple............................... ( Page : 7-10)

Godrej Consumer Product : " Strategy Shining"                                    "BUY"            19th Dec 2013

Its strong 20%+ growth in the domestic household insecticides business is the key growth driver. We expect strong momentum to continue in
its international business led by Megasari and consolidation of Darling business. Despite some concerns related to higher leverage, lost
domestic focus and currency risk, we remain confident of achieving the 20%+ sales growth with strong PAT growth for FY14E & beyond.
........................................... ( Page : 11-12)

BANK OF INDIA :                                                                           "BUY"            18th Dec 2013
Bank of India is trading at 0.5 times of one year forward book which is the lowest in valuation band despite of performing better than
expectation largely due to lower CAR and slower economic growth. With the capital infusion to the tune of Rs.1000 cr and improving sign of
asset quality would re-rate the stock as it did previously in our view. The management guided fresh slippage in line with 2QFY and inch up
higher restructure asset for December quarter. We believe that current level is attractive entry point for the investor with time horizon more
than one year with price target of Rs.235.................................... ( Page : 13- 15)

TCS : "Positive commentary"                                                      "BUY"          18th Dec 2013

TCS on its management Interview to Media highlighted that; For earning and demand prospect, FY15 will be better than the ongoing fiscal on
account of uptick in client spending in the US and Europe and growth in demand for technologies like cloud, mobility and Big Data.We maintain"
BUY" view on the stock with a target price of Rs 2550. Taking the INR/USD (average value) at Rs60 for FY14E and Rs59.5 for FY15E, We upgrade
EPS from Rs87.4 to Rs90.7 for FY14E and from Rs99.3 to Rs 102.4 for FY15E........................ ( Page : 16-17)


UCO BANK :                                                                                   "BUY"          17th Dec 2013
We have the reduce the target price of UCO bank from Rs.94 to Rs. 84 on account of bank’s unlikely to get benefit of western sanction against
Iran. Late last month US and six other major powers have imposed sanction against Iran for its nuclear deal. In order to quality for waiver
sanction against Iran, India has cut back sharply on purchase of oil from Iran. UCO was the major beneficiary of current account deposits of
India-Iran oil facilities. In our banking sector coverage universe, UCO bank’s cost of deposits were lowest at 6.1% whereas yield on loan was
10.1% at the end of 2QFY14. After this development, bank’s margin would be impacted and accordingly UCO bank loses the valuation premium.
Although bank’s management is focusing on other area of growth like branch expansion and customer acquisition. We slightly tweak our
earnings and reduce our book value estimate from Rs.175.5 to Rs.168.8. Now our revised price target for the stock would be Rs.84 which is 0.5
times of FY14E book value................ ( Page :18-22)
                                                                 Narnolia Securities Ltd,
                                   402, 4th floor 7/1, Lords Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000
                                                         email: research@narnolia.com, website : www.narnolia.com
                                         CMC                                                                                 "BUY"
                                                                                                                           20th Dec' 13
                                                                       "On track to deliver"

Company update                            Buy    We believe, CMC will continue with its efforts to enhance revenue contribution of high
CMP                                       1510   margin System Integration and ITES segments. Further, its high focus on education
Target Price                              1690   space will also add margin in near term.
Previous Target Price                     1490   Considering recent healthy demand environment across the IT space with favorable
Upside                                     12%   supply side scenario, we remain confident on the stock for better earning visibility and
Change from Previous                     13.4%   stable margin picture. Still, we reiterate our positive stance on the long-term story of
                                                 CMC due to its focus on high margin SI and ITES businesses.
Market Data
BSE Code                               517326
NSE Symbol                               CMC     For 2QFY14E earnings, CMC witnessed better Sales and PAT growth with 15% sales
52wk Range H/L                      1560/1107    growth driven by the strong growth from the System Integration (29%) coupled with the
Mkt Capital (Rs Crores)                  4575    good growth from the System Integration (24%) and ITES business (16%) sequentially.
Average Daily Volume                    20884    PAT grew by 27%(QoQ) because lower effective tax rate (from 34%, 1QFY14) to 20% of
Nifty                                    6167    earning before tax) .
                                                 Steady Margin: During the quarter, EBITDA margin was almost unchanged at 15.8% due
Stock Performance                                to wage hikes (70 bps), but also has positive impact from currency gain (170 bps) which
                         1M        1yr    YTD    were reinvested into the business. However, Management is still confident to maintain
Absolute                15.0      29.2    54.5   the margin in a range of 15-16%.
Rel. to Nifty           15.4      24.6    37.1   Deal pipeline: The deal pipeline is in line with the last year. It indicated that pursuing
                                                 good number of deals in the Developed and as well emerging markets. Considering
Share Holding Pattern-%                          current sound demand environment across geographies (like US and Europe) and
                 Current       4QFY13 3QFY13     verticals Company is more optimistic for clients acquisition and deal executions ahead.
Promoters         51.12         51.12   51.12
FII               23.32         21.84   19.87    Now, CMC is focusing on new emerging segments like IMS (Infrastructure
DII               17.83         19.05   20.46    Management Services), Cloud, Big data, Mobility and Analytics. Considering its
Others             7.73          7.99    8.55    impressive client as well as market response, company is expecting to quantify into
                                                 revenue. Its new and emerging projects like Mining Management System, GPS System
1 year forward P/E                               and Port & Cargo Management System would play a major role for generating
                                                 revenue.
                                                 View and Valuation: CMC expects the growth momentum to improve in the quarters
                                                 ahead and the revenue growth to be higher than the NASSCOM guidance in FY14. The
                                                 Company remains a strong with excellent earning visibility led by joint effort of market
                                                 strategy by TCS (contributes 59% of sales) in its product and solutions. For a long-term
                                                 prospect, we remain positive on the stock, taking its earning visibility and healthy
                                                 earnings among the mid-cap IT space (over 25% CAGR in earnings over FY2013-15E). At
                                                 a CMP of Rs 1510, stock trades at 14.9X FY14E earnings. We have "BUY" view on the
                                                 stock and we revise our target price from Rs1490 to Rs1690.


                                                 Financials                                                                             Rs, Crore
                                                                               2QFY14             1QFY14      (QoQ)-%    2QFY13       (YoY)-%
                                                 Revenue                       560.75             486.61        15.2     458.64          22.3
                                                 EBITDA                         88.41              77.04        14.8      76.59          15.4
                                                 PAT                             67.3              53.12        26.7       49.4          36.2
                                                 EBITDA Margin                  15.8%              15.8%          -       16.7%       (90bps)
                                                 PAT Margin                     12.0%              10.9%       110bps     10.8%       (120bps)
                                                                                                                        (Source: Company/Eastwind)

                                                                  Narnolia Securities Ltd,                                                      2

                                                 Please refer to the Disclaimers at the end of this Report.
                              CMC
Key facts from recent Concall
►CMC continues to target growth ahead of the overall IT industry; the company expects
to grow faster than that in the current financial year
►Expects operating Profit margin between 15 percent and 16 percent for FY14E,
►The Capex expected to be Rs 190 crore (planned is around Rs 230 crore) for FY'14.The
capex will be financed by internal accruals.
►Company’s hiring Plan; a net addition of 400-500 this year
► Notably, it targets revenues of Rs 250-300 crore from Education and Training business
in next two 3-4 years timeline.

Financials;
Rs, Cr                                                FY10              FY11                FY12                 FY13      FY14E        FY15E
Net Sales                                            870.73            1084.40             1469.34              1927.87   2239.31      2600.41
Purchases of stock-in-trade                           99.35             99.28              145.40               188.56    201.54       234.04
Employee Cost                                        276.16            345.13              440.22               521.65    593.42       702.11
Subcontracting and outsourcing cost                  173.56            262.35              446.11               679.73    794.96       923.15
Other expenses                                       159.94            170.17              213.63               222.88    235.13       273.04
Total Expenses                                       709.01            876.93              1245.36              1612.82   1825.04      2132.34
EBITDA                                               161.72            207.47              223.98               315.05    414.27       468.07
Depreciation                                          9.85              10.46               21.37                23.20     41.95        60.69
Other Income                                          18.75             11.80               17.46                13.17     22.39        26.00
EBIT                                                 151.87            197.01              202.61               291.85    372.33       407.38
Interest Cost                                         3.17              0.22                0.02                 0.18       0.2          0.25
PBT                                                  167.45            208.59              220.05               304.84    394.52       433.14
Tax                                                   24.23             32.42               68.59                76.76     86.79        99.62
PAT                                                  143.22            176.17              151.46               228.08    307.73       333.52
Growth-%
Sales                                                -7.4%               24.5%              35.5%               31.2%     16.2%          16.1%
EBITDA                                               27.7%               28.3%               8.0%               40.7%     31.5%          13.0%
PAT                                                  23.3%               23.0%              -14.0%              50.6%     34.9%          8.4%
Margin -%
EBITDA                                               18.6%               19.1%               15.2%              16.3%     18.5%          18.0%
EBIT                                                 17.4%               18.2%               13.8%              15.1%     16.6%          15.7%
PAT                                                  16.4%               16.2%               10.3%              11.8%     13.7%          12.8%
Expenses on Sales-%
Employee Cost                                        31.7%               31.8%               30.0%              27.1%     26.5%          27.0%
Subcontracting Cost                                  19.9%               24.2%               30.4%              35.3%     35.5%          35.5%
Tax rate                                             14.5%               15.5%               31.2%              25.2%     22.0%          23.0%
Valuation
CMP                                                  1340.0             2079.6               994.8              1410.0     1510         1510
No of Share                                           1.50               1.50                3.00                3.03       3.03         3.03
NW                                                   510.68             654.02              772.19              946.26    1192.11      1454.91
EPS                                                   95.48             117.45               50.49               75.27    101.56       110.07
BVPS                                                 340.45             436.01              257.40              312.30    393.44       480.17
RoE-%                                                28.0%              26.9%               19.6%               24.1%      25.8%        22.9%
Dividen Payout ratio                                 18.6%              19.9%               23.2%               19.4%      20.1%        21.2%
P/BV                                                  3.94               4.77                3.86                4.51       3.84         2.78
P/E                                                   14.03              17.71               19.70               18.73     14.87        13.72
                                                                                                                          (Source: Company/Eastwind)

                                                           Narnolia Securities Ltd,                                                               3

                                                   Please refer to the Disclaimers at the end of this Report.
                                              DIVISLAB                                                                       "BUY"
                                                                                                                           19th Dec' 13
                                                                                            Good Growth Ahead

Result Update                        BUY      About The Company :
CMP                                   1186    Divi’s Laboratories Limited is an India-based manufacturer of Active Pharmaceutical
Target Price                          1350    Ingredients (APIs) and Intermediates. Divi is engaged in manufacture of generic APIs,
Previous Target Price                    -    custom synthesis of active ingredients for innovator companies and other specialty
                                              chemicals like peptides and nutraceuticals.
Upside                                14%
Change from Previous                     -    Investment Rationale :
                                              Company is one of the few CRAMS (Contract Research and Manufacturing Services)
Market Data                                   players with a superior business mix comprising high-margin custom synthesis of APIs
BSE Code                           532488     (Active Pharma Ingredients) and intermediates for innovator companies. The company
                                              collaborates with innovators throughout the product development cycle. Post
NSE Symbol                      DIVISLAB
                                              commercialization, company is usually the key supplier of APIs and intermediates for these
52wk Range H/L                   1189/905     products to the innovators. In 2012-13, the company added six products to its custom
Mkt Capital (Rs, Cr)                15631     synthesis portfolio.
Average Daily Volume                 5.43     The CRAMS business which contributes nearly 45%- 50% of the total revenues have from
Nifty                                6217     Rs 560 Cr in 2009 to Rs 1000 Cr translating CAGR of 15 %.The Generic API business
                                              which contributes another 45-50 % to the total revenues is also well track after witness
                                              some pressure in FY10.As on FY13 this segment contributed Rs 1029 Cr to the total
Stock Performance-%                           revenues and this segment to more revenues to the company in the light of upcoming
                 1M         1yr      YTD      patent cliff of US and new launches .
Absolute              2.8      4.4      1.4
Rel. to Nifty         0.1     -1.3    -14.6   The company have one more business segment ‘Nutraceuticals’ relatively smaller and
                                              newer as compared to other business segment can act as growth driver going forward. The
                                              management of the company is quite optimistic for this business segment and has guided
Share Holding Pattern-%
                                              that this business at 40-50% CAGR (albeit on a low base) over the next 2-3 years.
                Current 1QFY14 4QFY1
Promoters        52.1    52.2    3
                                52.2
FII              15.8    14.9   14.0          2QFY14 Results Update.
DII              12.5    12.5   13.3          The company posted strong 2QFY4 results with net sales growing to Rs 566 Cr up by
Others           19.5    20.5   20.5          19.7% YoY on the back of good growth coming from all business segments. The generic
                                              API grew by 18% YoY to Rs 261 Cr for the quarter and CRAMS business segment grew by
                                              20% YoY to Rs 271 Cr. The company derives almost 45-50% of revenues each from
One Year Price vs Nifty                       CRAMS and generic API business while rest comes from ‘Nutraceuticals’.

                                              The operating EBITDA for the quarter came at Rs 250 Cr and OPM at 43.9 %. Company’s
                                              2QFY14 EBITDA margins were higher than 34.8% reported in Q2FY13 on account of
                                              higher gross margins, lower power cost and forex loss in Q2FY13.The RM cost as % of net
                                              sales stands at 50% for the 2QFY14 while employee cost as % of net sales was 10 %.


                                                Financials                                                                           Rs, Crore
                                                                            2QFY14             1QFY14       (QoQ)-%   2QFY13        (YoY)-%
                                               Revenue                        567                517           9.7      474            19.6
                                               EBITDA                         249                197          26.4      165            50.9
                                               PAT                            205                174          17.8      117            75.2
                                               EBITDA Margin                 43.9%              38.1%        580bps    34.8%        910bps
                                               PAT Margin                    36.2%              33.7%        250bps    24.7%        1150bps
                                                                                                                      (Source: Company/Eastwind)

                                                                Narnolia Securities Ltd,                                                      4

                                               Please refer to the Disclaimers at the end of this Report.
                           DIVISLAB
Continued…
The net profits for the 2QFY14 came at Rs 205 Cr and NPM came at 36.2%.The net profits
also include forex gain of Rs 31 Cr. The company reports its forex gain under other
income headings and forex loss under its other expenditure head. The tax rate for the
quarter stands at 22%.

Company has capitalized Fixed assets to the tune of Rs120 Cr for H1 FY14. The company
will commercialize DSN SEZ by the end of the year and the FDA inspection post that. The
new DSN SEZ contribution will start in Q1 FY15E and full benefits will fructify only from Q2
FY15E.The existing DSN blocks contributed Rs125 Cr revenues in Q2 FY14 as against
Rs70.8 Cr in Q1 FY14.

Management Guidance
The management of the company after strong 2QFY14results expects that revenue to
grow by 15-20 % (15% guided earlier), with FY15E growth expected above 20%. The
management further indicated that this high level of OPM is not sustainable but reiterated
that 38% levels OPM is quite reachable . On Power shortage ,which declined the OPM in
1QFY14 has been solved and will aid margin expansion going forward. The capex
guidance stands at INR500-600m (apart from INR2b addition from CWIP) and tax rate
guidance remains between 23-24%.

View & Valuation
The company is not only the most profitable company in the CRAMS space, but also
features among the most profitable companies in the Indian healthcare sector with EBIDTA
margin of 35-40% backed by its strong chemistry skills and custom synthesis presence.The
stock is currently trading at CMP of Rs 1186, strong 2QFY14 results ,optimistic
management guidance and better business model in comparison to its peers makes us
confident for the stock. We are positive for the stock and recommend BUY with
target price of Rs 1350.
Graphical Depiction

Revenue Break Up: 2QFY14




                                                                      (Source: Company/Eastwind)



                                                              Narnolia Securities Ltd,                             5

                                                      Please refer to the Disclaimers at the end of this Report.
                           DIVISLAB
Sales and PAT Trend (Rs)




                                                                                              Net sales growing to Rs 566 Cr up by 19.7%
                                                                                              YoY on the back of good growth coming from
                                                                                              all business segments.




                                                      (Source: Company/Eastwind)

OPM %


                                                                                              2QFY14 EBITDA margins were higher than
                                                                                              34.8% reported in Q2FY13 on account of
                                                                                              higher gross margins, lower power cost and
                                                                                              forex loss in Q2FY13.




                                                      (Source: Company/Eastwind)

NPM %


                                                                                              The 2QFY14 PAT also include forex gain of Rs
                                                                                              31 Cr. The company reports its forex gain
                                                                                              under other income headings and forex loss
                                                                                              under its other expenditure head.




                                                      (Source: Company/Eastwind)

                                              Narnolia Securities Ltd,                                                                  6

                                      Please refer to the Disclaimers at the end of this Report.
                                AXIS BANK                                                           "NEUTRAL "
                                                                                                     19th Dec, 2013




Company Update             NEUTRAL      Axis bank is trading at 1.6 times of one year forward book which we believe
CMP                            1286     that it is higher side of our bear case valuation band. We have neither seen
Target Price                   1325     valuation band expansion nor did earnings lead price performance. Axis bank
Previous Target Price          1247     has significant exposure in infrastructure and power (12.64% in 2QFY14) as
Upside                             3
                                        compare to its peer group. Asset quality pressure may persists in coming
Change from Previous             6.3
                                        quarters which restrict bank’s valuation multiple in the range of 1.4 to 1.6
                                        times of book in our view. We advice our investors to book part profit at the
                                        current level. Our valuation multiples are based upon bank’s present growth
Market Data                             parameters, better than expected performance and visibility of ROE
BSE Code                      532215    improvement will expand valuation and multiples.
NSE Symbol                 AXISBANK     Healthy NII growth on the back of margin improvement and loan growth
52wk Range H/L              1549/763    During 2QFY14, Axis bank reported NII growth of 26.2% YoY largely due to 50 bps
Mkt Capital (Rs Cr)            39764    YoY improvement of margin and 577 bps YoY increased of credit deposits ratio and
Average Daily Volume         2066127
                                        17% increased in loan growth. Axis bank’s interest earnings assets increased by
Nifty                           6217
                                        20% YoY whereas interest bearing liabilities increased by 13% YoY. Total revenue
Stock Performance                       of the bank grew by 21.3% YoY to Rs.4703 cr. Non- interest income registered
              1M         1yr    YTD     growth of 14% YoY to Rs.1766 cr.
Absolute     12.9        -5.2    -5.2
Rel.to Nifty 12.6       -10.9   -10.9   Declined in cost income ratio led robust growth in operating profit
                                        Operating expenses increased by 12.1% YoY to Rs.1953 cr in which employee cost
Share Holding Pattern-%                 and other operating cost increased by 11.4% and 12.5% respectively. Cost income
           Current 4QFY13 3QFY1         ratio declined by 440 bps to 41.5% from 44.9% in 2QFY13. Employee cost and other
Promoters       33.9    33.9 3
                             33.5       operating cost as a percentage of total assets remain flat at 0.2% and 0.4%
FII             40.7 4094.0  39.6       respectively. With the support of healthy NII, fee income and improvement of cost
DII              8.8     8.5 10.0       income, operating profit grew by 29% YoY and -3.3% in QoQ to Rs.2750 cr.
Others          16.6    16.6 17.0       Sequential declined of operating profit was due to gain of treasury income in
                                        1QFY14 which was absent in 2QFY14.
Axis Bank Vs Nifty
                                        Sequentially stable asset quality help to make lower provision
                                        On asset quality front, Axis bank reported 10 bps deterioration in GNPA on
                                        sequential basis to 1.4%. In absolute term GNPA increased by 10% QoQ and
                                        provision increased by 12% QoQ. This led net NPA increased by 6% sequentially. In
                                        percentage term NPA stood at 0.4%, flat on QoQ basis. Provision coverage ratio
                                        (without technical write off) was improved by 100 bps to 69.3% and PCR at technical
                                        write off was 89%. During quarter bank made loan loss provision of Rs.687 cr versus
                                        Rs.712 cr in 1QFY14 and Rs.509 cr in 2QFY13. On sequential basis risky sector
                                        like power and infrastructure exposure remain flat at 12.64% from 12.67% in
                                        1QFY14.
                                        Financials                                                               Rs, Cr
                                                                 2011         2012       2013         2014E        2015E
                                        NII                      6566         8026       9666         12620        14710
                                        Total Income            11238        13513      16217         19715        21804
                                        PPP                      6377         7413       9303         11238        12429
                                        Net Profit               3340         4224       5179          6343         6977
                                        EPS                      81.4        102.2      110.7         135.2        149.1
                                                                                          (Source: Company/Eastwind)
                                                    Narnolia Securities Ltd,                                              7
                        AXIS BANK
Healthy NII growth and controlled CI ratio along with stable margin help to boost
up profit
With the support of healthy NII growth and controlled operating expenses led net profit of

26% YoY to Rs.1362 cr from Rs.1081 cr. Consequently ROA improved by 12 bps to 1.6%

and ROE declined to 15.3% from 17.5% in 2QFY13 largely due to operating leveraging.

Modest deposits growth and strong traction in loan growth
On business growth parameters, bank’s total business grew by 12% YoY to Rs.4567 bn
as against Rs.4077 bn. Deposits grew by moderate pace with 8% YoY while current
deposits and saving deposits grew by 9% and 18% respectively taking overall CASA ratio
to 42.9%. Bank’s strategy to focus on retail deposits seem well is shaping as share of
retail deposits in term deposits increased continuously to 45.2% from 40.3% in21QFY13.
Loan grew by 17% YoY to Rs.20130 bn. Incremental loan growth came from retail
advance and SME segment. Share of retail loan increased to 30.2% of overall loan from
25.7% in 2QFY13. Bank’s has decreased in share of risky sector (Power & Infrastructure)
exposure to 12.64% from 13.63% in 2QFY13. Credit deposits ratio improved by 577 bps
YoY to 78.8% implying best utilization of excess liquidity in balance sheet.

Sequential declined of margin owing to flat loan yield
During quarter bank reported 7 bps QoQ declined in NIM to 3.79% led by 500 bps
sequentially declined of credit deposits ratio and almost flat of loan yield on QoQ basis.
Loan yield during the quarter was 10.5% and cost of deposits declined from 7.4% to
7.1% sequentially.

Valuation & View
Axis bank delivered good set of numbers during quarter but exposure to stress sector
remain at 12%+ level. Moreover Axis bank has higher exposure in small, medium
enterprises and infra segment in comparison to peers. In challenging macro environment
and tight liquidity situation, Axis bank is more vulnerable among peers. At the current
price of Rs.1286, stock is trading at 1.6 times of one year forward book which is upper
side of bear case valuation band. We advice book part profit at current level. We value
bank at multiple of 1.4 to 1.6 times of one year forward book which implies Rs. price
range of Rs.1247 to Rs.1325.




                                                           Narnolia Securities Ltd,                              8

                                                    Please refer to the Disclaimers at the end of this Report.
                              AXIS BANK
Quarterly Result                                  2QFY14    1QFY14       2QFY13 % YoY Gr % QoQ Gr
Interest/discount on advances / bills               5394      5189         4736        13.9     4.0
Income on investments                               2143      2015         1897        13.0     6.3
Interest on balances with Reserve Bank of India       35        34           22        58.9     2.6
Others                                                37        39           32        14.9    -5.5
Total Interest Income                               7609      7278         6687        13.8     4.6
Fee Income                                          1432      1317         1343         6.6     8.7
Trading Income                                         5       440          207       -97.6   -98.9
Miscellaneous Income                                 329        24            0     -        1270.2
Others Income                                       1766      1781         1551        13.9    -0.9
Total Income                                        9375      9059         8238        13.8     3.5
Interest Expended                                   4672      4413         4360         7.2     5.9
NII                                                 2937      2865         2327        26.2     2.5
Other Income                                        1766      1781         1551        13.9    -0.9
Total Income                                        4703      4647         3877        21.3     1.2
Employee                                             644       643          578        11.4     0.1
Other Expenses                                      1309      1160         1164        12.5    12.9
Operating Expenses                                  1953      1803         1742        12.1     8.3
PPP( Rs Cr)                                         2750      2844         2136        28.8    -3.3
Provisions                                           687       712          509        35.0    -3.5
PBT                                                 2062      2131         1626        26.8    -3.2
Tax                                                  700       722          545        28.4    -3.1
Net Profit                                          1362      1409         1081        26.0    -3.3


Balance Sheet Date ( Rs Bn)
Net Worth                                            362        349          252           43.6           3.7
Deposits                                            2554       2384         2356            8.4           7.1
Loan                                                2013       1982         1721           16.9           1.6


Asset qualtiy( Rs Cr)
GNPA                                                2734       2490         2191           24.8           9.8
NPA                                                  838        790          654           28.1           6.1
%GNPA                                                1.4        1.3          1.3
%NPA                                                 0.4        0.4          0.4

                                                                      Source: Eastwind/Company


                                                             Narnolia Securities Ltd,                              9

                                                      Please refer to the Disclaimers at the end of this Report.
                        AXIS BANK
FINANCIALS & ASSUPTION
Income Statement            2011     2012          2013            2014E            2015E
Interest Income            15155    21995          27183            33243            38426
Interest Expense            8589    13969          17516            20622            23716
NII                         6566     8026           9666            12620            14710
Change (%)                  31.2     22.2           20.4             30.6             16.6
Non Interest Income         4671     5487           6551             7095             7095
Total Income               11238    13513          16217            19715            21804
Change (%)                  25.3     20.2           20.0             21.6             10.6
Operating Expenses          4860     6100           6914             8478             9376
Pre Provision Profits       6377     7413           9303            11238            12429
Change (%)                  22.4     16.2           25.5             20.8             10.6
Provisions                  3033     3189           4124             2176             2461
PBT                         3345     4224           5179             9062             9967
PAT                         3340     4224           5179             6343             6977
Change (%)                  34.8     26.5           22.6             22.5             10.0



Balance Sheet
Deposits( Rs Cr)           189166   219988       252614           290506            334081
Change (%)                     34       16           15               15                15
of which CASA Dep           77758    91412       112100           124917            143655
Change (%)                     18       18           23               11                15
Borrowings( Rs Cr)          26268    34072        43951            51266             58956
Investments( Rs Cr)         71788    92921       113738           129873            149354
Loans( Rs Cr)              142408   169760       196966           228481            265037
Change (%)                     36       19           16               16                16



Valuation
Book Value                   460      549            708               828              957
CMP                         1404     1146           1304              1288             1288
P/BV                         3.1      2.1            1.8               1.6              1.3

                                                        Source: Eastwind/Company


                                               Narnolia Securities Ltd,                              10

                                        Please refer to the Disclaimers at the end of this Report.
                                 Godrej Consumer Product                                                         "BUY"
                                                                                                                19th Dec' 13
                                                                                         " Strategy Shining"

Company update                     BUY    Key facts from recent Management Comments:
CMP                                840    ▪ Godrej Consumer's management is hopeful of seeing an uptick in the urban demand
Target Price                       960    and the rural demand is expected to be strong due to good harvest. We expect 20-22%
Previous Target Price              725    (YoY) sales growth for 3QFY14.
Upside                             14%    ▪ The company does not see company’s margins coming under pressure going ahead,
Change from Previous               32%    due to heavy investments it has made in advertisements. We expect 15-15.5% EBITDA
                                          margin for FY14E and 15.5-16% for FY15E.
Market Data                               ▪ On International revenue front, Godrej Consumer could see some threads in certain
BSE Code                         532424   areas especially Indonesia (18% of sales) and Nigeria (13% of sales), Indonesia is going
NSE Symbol                     GODREJCP   into election next year and in Nigeria, there have been wage hikes.
52wk Range H/L                  977/693   ▪ Godrej Consumer aims to grow 10 times in the next 10 years.
Mkt Capital (Rs Cr)               28593   Key updates;
Average Daily Volume             120012   Demand Pickup scenario: On demand side scenario, we expect that the strong
Nifty                              6217   agricultural season leading to strong rural GDP growth would support to improve
                                          demand environment very soon. Considering recent GDP growth and Current Account
Stock Performance                         Deficit (CAD) numbers, we are expecting that the economy is moving to track and urban
               1M       1yr        YTD    demand will see some picking up.
Absolute       -2.1     17.6       27.0   Strong focus on driving growth with 10x10 strategy: Its strong focus on driving growth
Rel. to Nifty  -4.8     11.5        8.8   in the domestic and international market by expansion of products and distribution
                                          reach, we expect strong earning in near future. With launching new products in
Share Holding Pattern-%                   domestic as well as international mkt, Godrej CP will explore organic & inorganic growth.
                Current 1QFY14 4QFY13     Along with its 3x3 strategy, it has 10x10 strategy also, which refers to 10x growth in 10
Promoters          63.3    63.3   63.5    yrs.
FII                28.7    28.3   28.2    Products strategy: The company continues to gain and enjoy market leader ship position
DII                 1.2     1.2    1.2    across all three formats. The company is driving increase in penetration with launch of
Others              6.8     7.2    7.1    "Goodknight Advanced colour play". The company has launched Goodknight aerosol and
                                          coil in Nigeria.
1 yr Forward P/B                          Recent developments: The Company has entered into an agreement on Oct 7, 2013, to
                                          acquire a 30% stake in Bhabani Blunt Hair Dressing Pvt Ltd, a premier hair salon
                                          company with one of the strongest consumer franchises in this space.
                                          View and Valuations: Its strong 20%+ growth in the domestic household insecticides
                                          business is the key growth driver. We expect strong momentum to continue in its
                                          international business led by Megasari and consolidation of Darling business. Despite
                                          some concerns related to higher leverage, lost domestic focus and currency risk, we
                                          remain confident of achieving the 20%+ sales growth with strong PAT growth for FY14E
                                          & beyond. At a CMP of Rs840, stock trades at 5.7x FY15E P/BV. We retain BUY with a
                                          price target of Rs 960.
                                          Financials                                                                          Rs, Cr
                                                                2QFY14         1QFY14      (QoQ)-%          2QFY13        (YoY)-%
                                          Revenue                1961.7        1724.9       13.7%           1600.32        22.6%
                                          EBITDA                  299.8         225.4       33.0%           248.96         20.4%
                                          PAT                      195           133        46.6%           159.31         22.4%
                                          EBITDA Margin           15.3%         13.1%       210bps           15.6%        (30bps)
                                          PAT Margin               9.9%          7.7%       220bps           10.0%        (10bps)
                                                                                                      (Source: Company/Eastwind)
                                                           Narnolia Securities Ltd,                                              11
                                          Please refer to the Disclaimers at the end of this Report.
     Godrej Consumer Product
Quaterly snapshot:
-1
Qtrly,               2QFY12     3QFY12    4QFY12        1QFY13            2QFY13            3QFY13        4QFY13        1QFY14       2QFY14
Sales Gr(YoY)          23%        36%       31%           39%               35%               26%           30%          23.9%        22.6%
PAT Gr(YoY)           -2.6%      68.3%     36.0%        -45.5%             24.7%             3.1%          58.7%         1.8%         22.4%
EBITDA Margin         18.0%      20.1%     18.9%         14.5%             15.6%             16.8%         16.2%         13.1%        15.3%
-2 Margin
PAT                   12.0%      13.9%     13.5%         12.1%             10.8%             11.3%         13.3%         9.0%         10.9%
Regionwise margin:
Regions              2QFY12     3QFY12    4QFY12        1QFY13            2QFY13            3QFY13        4QFY13        1QFY14       2QFY14
India                 18.9%      20.4%     20.2%         15.1%             17.6%             18%           16.7%         15.8%        18.9%
Indonesia             19.4%      20.6%     20.7%          18%               19%              20%            19%           15%          17%
Africa                26.0%       31%      19.3%          19%               16%              20%             7%           13%          14%
Latin America         7.4%         9%      16.3%           3%                4%               8%             9%            3%           7%
Europe                 11%         5%      10.5%          13%                9%               5%            13%            9%          10%
Financials and Valuation
Rs, in Cr                                  FY10            FY11                FY12                  FY13            FY14E           FY15E
Sales                                     2041.2         3693.6               4866.16               6390.79         7823.32         9198.58
Other Operating Income                      2.5           28.11                45.93                 16.58           20.30           23.86
Total income from operations              2043.7         3721.71              4912.09               6407.37         7843.62         9222.44
RM Cost                                   619.59         1458.28              2174.67               2640.31         3176.67         3781.20
Purchases of stock-in-trade               367.16         294.12               356.11                451.03          552.13          649.19
WIP                                       -40.45          -45.22              -212.26               -118.06         -183.50         -224.07
Employee Cost                             151.81         284.51               391.91                590.68          723.08          850.19
Ad Spend                                  132.8          352.85               449.86                660.35          902.02          1014.47
Other expenses                            402.98         695.96               850.47                1196.46         1459.0          1689.7
Total expenses                           1633.89         3040.5               4010.76               5420.77         6629.4          7760.7
EBITDA                                    409.81         681.21               901.33                 986.6          1214.2          1461.7
Depreciation and Amortisation              23.6           49.92                64.44                  77              94.3           102.1
Other Income                              44.81           24.13                 6.07                 67.78            47.8            56.2
Exceptional Item                             0            41.14               200.17                 96.12            78.4            92.2
EBIT                                      386.21         631.29               836.89                 909.6          1119.9          1359.6
Interest                                   11.1           43.64                65.84                 77.45            61.1            53.2
PBT                                       419.92         652.92               977.29                996.05          1185.1          1454.9
Tax Exp                                   80.33          138.21               226.05                179.18          225.17          290.98
PAT                                       339.59         514.71               751.24                816.87           959.9          1163.9
Growth-% (YoY)
Sales                                    46.3%            81.0%                 31.7%                31.3%           22.4%           17.6%
EBITDA                                   95.2%            66.2%                 32.3%                9.5%            23.1%           20.4%
PAT                                      97.0%            51.6%                 46.0%                8.7%            17.5%           21.3%
Expenses on Sales-%
RM Cost                                  30.3%            39.2%                 44.3%                41.2%           40.5%           41.0%
Ad Spend                                  6.5%            9.5%                  9.2%                 10.3%           11.5%           11.0%
Employee Cost                             7.4%            7.6%                  8.0%                 9.2%            9.2%            9.2%
Other expenses                           19.7%            18.7%                 17.3%                18.7%           18.6%           18.3%
Tax rate                                 19.1%            21.2%                 23.1%                18.0%           19.0%           20.0%
Margin-%
EBITDA                                   20.1%            18.3%                 18.3%                15.4%           15.5%           15.8%
EBIT                                     18.9%            17.0%                 17.0%                14.2%           14.3%           14.7%
PAT                                      16.6%            13.8%                 15.3%                12.7%           12.2%           12.6%
Valuation:
CMP                                      261.0             365.0                559.0                 836.0           840.0          840.0
No of Share                               30.8             32.4                 34.0                  34.0            34.0           34.0
NW                                       954.7            1725.2               2815.2                3313.0          4073.9         5038.8
EPS                                       11.0             15.9                 22.1                  24.0            28.2           34.2
BVPS                                      31.0             53.2                 82.8                  97.4            119.7          148.1
RoE-%                                    35.6%            29.8%                26.7%                 24.7%           23.6%          23.1%
Div- Payout-%                            30.6%            38.3%                22.6%                 23.0%           20.7%          17.1%
P/BV                                      8.4               6.9                  6.8                   8.6             7.0            5.7
P/E                                       23.7             23.0                 25.3                  34.8            29.8           24.6
                                                                                                              (Source: Company/Eastwind)
                                                                                                                                              12
                                                     Narnolia Securities Ltd,
                                             Please refer to the Disclaimers at the end of this Report.
                                BANK OF INDIA                                                               "BUY"
                                                                                                         18th Dec, 2013




Company Update                   BUY    Despite of improving fundamental from past two quarters, Bank of India is
CMP                               206   trading at 0.5 times of one year forward book which is the lowest level in our
Target Price                      235   valuation parameters. We believe that current level is attractive entry point for
Previous Target Price               -   the investor with time horizon more than one year. With the capital infusion of
Upside                             14   Rs.1000 cr by GoI and improving sign of asset quality would re-rate the stock
Change from Previous                -   in our view as it previously witnessed i.e. 0.8 to 1.2 times of book. The
                                        management has guided fresh slippage of about Rs.1500 cr and restructures
Market Data                             to the tune of Rs.1000-1200 cr in 3QFY14 which is in line with 2QFY14. We
BSE Code                      532149    recommend buy with price target of Rs. 235
NSE Symbol                BANKINDIA     Shown Improving sign of asset quality with higher recovery and up-gradation
52wk Range H/L               393/126    rather than write-off
Mkt Capital (Rs Cr)            12260    Most of banks especially PSUs are beaten down by the market on account of slower
Average Daily Volume        2271804     economic growth and stress in asset quality. But Bank of India has witnessed
Nifty                           6139    improvement in asset quality in 2QFY14 as fresh slippages were down by 26%
                                        sequentially and 46% Year-on-year basis. Moreover bank reported reduction to the
Stock Performance                       tune of Rs.1009 cr versus Rs.1338 cr in 1QFY14. Most of reduction was due to
              1M         1yr    YTD     higher recovery and up-gradation rather than write-off. Write-off came down sharply
Absolute     -14.5      -32.2   -32.2   from Rs.598 cr 1QFY14 to Rs.120 cr in 2QFY14.
Rel.to Nifty -13.7      -37.1   -37.1   Inch up restructure guidance in 3QFY14
                                        As far as restructure loan are concern, bank’s total restructure loan was about 5% of
Share Holding Pattern-%                 total loan asset and bank’s management expects Rs.1000-1200 cr of restructure in
           Current 1QFY14 4QFY1         December quarter. In 2QFY14, bank sold about Rs.370 cr of bad loan to Asset
Promoters       64.1    64.1 3
                             64.1       Reconstruction Company (ARC) for recovery and during quarters its plan to sell
FII             13.2    13.6 13.5       about Rs.500 cr of bad loan to ARC.
DII             15.3    15.6 16.3       Sequentially improving PCR provide cushion on stress asset
Others           7.4     6.7  6.0        Despite of stable asset quality and lower slippage, Bank of India provided 24% more
                                        provision in sequential basis which improved its provision coverage ratio(Without
BANKINDIA Vs Nifty
                                        technical write off) to 63.3% from 61% in preceding quarter same year. Higher

                                        provision would provide cushion on stress asset without hurting profit going further.
                                        Capital infusion by GoI raise CAR ratio to 8.1% from 7.75%
                                        Bank has lower CAR to 7.75% at the end of 2QFY14 according to Basel 3 norm.
                                        Now Bank of India has approved to initiate process to raise further capital for issue
                                        of 4.63cr Equity Shares to GoI on Preferential basis at a price of Rs. 215.70 per
                                        share. This capital infusion is taking CAR ratio to 8.1% and government holding rise
                                        to 66.7% from 64.1%. Capital infusion to the tune of Rs.1000 cr diluting our FY14E’s
                                        book value by 40 bps.
                                        Financials                                                                  Rs, Cr
                                                                2011          2012        2013         2014E          2015E
                                        NII                     7878          8313        9024         12110          11804
                                        Total Income           10519         11635       12790         16672          16366
                                        PPP                     5398          6694        7458          9670           9492
                                        Net Profit              2542          2678        2749          3533           3269
                                        EPS                     46.5          46.7        47.9          61.6           57.0
                                                                                           (Source: Company/Eastwind)
                                                   Narnolia Securities Ltd,                                                   13

                                        Please refer to the Disclaimers at the end of this Report.
                        BANK OF INDIA
Quarterly Result                                  2QFY14      1QFY14         2QFY13 % YoY Gr % QoQ Gr
Interest/discount on advances / bills               6631        6190           5881       12.8     7.1
Income on investments                               2129        1885           1835       16.0    12.9
Interest on balances with Reserve Bank of India      479         465            289       65.6     2.9
Others                                                 0           0              0       42.9    36.4
Total Interest Income                               9239        8541           8005       15.4     8.2
Others Income                                       1100        1181            894       23.1    -6.8
Total Income                                       10340        9722           8900       16.2     6.4
Interest on deposits                                5966        5401           5154       15.8    10.5
Interest on RBI/Inter bank borrowings                414         296            536      -22.8    40.0
Others                                               333         308            119      179.8     8.2
Interest Expended                                   6712        6004           5810       15.5    11.8
NII                                                 2527        2537           2196       15.1    -0.4
Other Income                                        1100        1181            894       23.1    -6.8
Total Income                                        3627        3718           3090       17.4    -2.4
Employee                                             897         963            700       28.2    -6.8
Other Expenses                                       628         575            536       17.1     9.3
Operating Expenses                                  1525        1537           1236       23.4    -0.8
PPP( Rs Cr)                                         2102        2180           1854       13.4    -3.6
Provisions                                          1232         695           1552      -20.6    77.4
Net Profit                                           622         964            302      106.0   -35.5


Balance Sheet Data
Equity Capital                                        597         575            575           3.9         3.9
Reserve & Surplus                                  25,686      21,774         21,774          18.0        18.0
Deposits                                          432,282     332,695        332,695          29.9        29.9
Borrowings                                         41,751      29,434         29,434          41.8        41.8
Other liabilities and provisions                   12,727      11,262         11,262          13.0        13.0
Total Liability                                   513,042     395,739        395,739          29.6        29.6
Cash in hand                                       24,621      17,080         17,080          44.2        44.2
Cash and balances with reserve bank of india       34,658      19,198         19,198          80.5        80.5
Investment                                        107,413      90,147         90,147          19.2        19.2
Advance                                           332,190     256,148        256,148          29.7        29.7
Fixed Assets                                        2,957       2,839          2,839           4.2         4.2
Others Assets                                      11,203      10,327         10,327           8.5         8.5
Total Assets                                      513,042     395,739        395,739          29.6        29.6



Asset Quality
GNPA                                                9873         8765           8898          11.0        12.6
NPA                                                 6156       5947.3           5,228         17.7         3.5
GNPA(%)                                              3.0          3.0             3.4
NPA(%)                                               1.9          2.0             2.0
PCR(%) Without technical write off                  37.6         32.1            41.2

                                                                Narnolia Securities Ltd,                             14

                                                        Please refer to the Disclaimers at the end of this Report.
                       BANK OF INDIA
Financials & Assuption                            2011        2012         2013        2014E         2015E
Interest/discount on advances / bills             15570       20241        23139         29515        31171
Income on investments                              5195        7142         7261          8828        10152
Interest on balances with Reserve Bank of India     798         834         1257          1889         1889
Others                                              295         264          251             1             1
Total Interest Income                             21858       28481        31909         40233        43213
Others Income                                      2642        3321         3766          4562         4562
Total Income                                      24500       31802        35675         44795        47775
Interest on deposits                              12218       17957        20238         25422        28709
Interest on RBI/Inter bank borrowings               813        1145         1489          1419         1419
Others                                              950        1065         1158          1281         1281
Interest Expended                                 13981       20167        22885         28123        31410
NII                                                7878        8313         9024         12110        11804
Other Income                                       2642        3321         3766          4562         4562
Total Income                                      10519       11635        12790         16672        16366
Employee                                           3492        3069         3131          4131         4055
Other Expenses                                     1629        1871         2201          3965         3892
Operating Expenses                                 5121        4941         5332          7002         6874
PPP( Rs Cr)                                        5398        6694         7458          9670         9492
Provisions                                         2909        4016         4709          5254         5406
Net Profit                                         2542        2678         2749          3533         3269
                                                   46.0         5.3          2.7          28.5          -7.5
Key Balance Sheet Data
Deposits                                          299559     318216       381840        434075       503527
Deposits Growth(%)                                    30          6           20            14           16
Borrowings                                         22021      32114        35368         36854        37953
Borrowings Growth(%)                                  -2         46           10             4            3
Loan                                              213708     248833       289367        347241       366720
Loan Growth(%)                                        26         16           16            20            6
Investment                                         86677      86754        94613        110351       126904
Investment Growth(%)                                  27          0            9            17           15
Eastwind Calculation
Yield on Advances                                    7.3         8.1           8.0          8.5           8.5
Yield on Investments                                 6.3         8.7           7.1          8.0           8.0
Yield on Funds                                       6.5         7.8           7.7          8.4           8.4
Cost of deposits                                     4.1         5.6           5.2          5.7           5.6
Cost of Borrowings                                   8.0         6.9           6.8          7.5           7.5
Cost of fund                                         4.3         5.8           5.3          6.5           6.2
Valuation
Book Value                                         322.7       365.3        416.9         469.4        510.4
P/BV                                                 1.5         1.0          0.7           0.4          0.4
P/E                                                 10.3         7.7          6.3           3.8          4.1

                                                                       Source: Eastwind/Company

                                                              Narnolia Securities Ltd,                              15

                                                       Please refer to the Disclaimers at the end of this Report.
                                         TCS                                                                              "BUY"
                                                                                                                         18th Dec' 13
                                                                     "Positive commentary"

Company update                            Buy    TCS on its management Interview to Media highlighted that
CMP                                      2047    ▪ For earning and demand prospect, FY15 will be better than the ongoing fiscal on
Target Price                             2550    account of uptick in client spending in the US and Europe and growth in demand for
Previous Target Price                    2160    technologies like cloud, mobility and Big Data.
Upside                                    25%    ▪ For next 3-5 years, momentum picking for social, mobile, analytics and cloud (SMAC)
Change from Previous                      18%    technologies could offer a "multi-billion dollar opportunity" in revenues for the
                                                 company.
Market Data                                      ▪ On the hiring front, TCS will hire about 25,000 college graduates who will join the
BSE Code                               532540    firm in the next fiscal. Besides, the firm will also be hiring across geographies like the
NSE Symbol                                TCS    US and Europe to keep up with demand for services. During current fiscal year, TCS has
52wk Range H/L                      2258/1198    recruited 45000 head counts so far.
Mkt Capital (Rs Crores)                400775    TCS Q3 analyst briefing key takeaways; Adversely impacted by seasonality but
Average Daily Volume                  1011877    nothing unexpected,
Nifty                                    6139    Marginal Revenue growth impacted by seasonality: TCS management has indicated
                                                        rd
                                                 that 3 quarter, FY14E will be slightly impacted by broad bases furloughs across
Stock Performance                                Industries and thin project based services. Revenue will be impacted mainly in
                         1M        1yr    YTD    developed market like US and Europe region. We expect that revenue growth could be
Absolute                16.6      71.8      72   seen at 3-3.5% for 3QFY14E.
Rel. to Nifty           12.3      64.7    64.3   Persistent Margin picture: The Company expects margins could be broadly stable. The
                                                 company would take a decision on reinvestment only after the Rupee stabilizes. We
Share Holding Pattern-%                          expect that company could maintain EBITDA margin at 30-31% during the 3rd quarter.
                 Current       1QFY14 4QFY13
Promoters         73.96         73.96  73.96     Confident on IT spending: Despite furloughs impact, it remains confident of growth in
FII               16.14         16.14  14.96     the medium term as clients were heading into their CY2014E budgeting cycle in a more
DII                5.44          5.44   6.45     confident position than in the past 2-3 yrs. Broadly US and Europe region will play a key
Others             4.46          4.46   4.63     role for better demand enviromnment ahead, however domestic market could be out of
                                                 race due to upcoming election.
1 year forward P/E                               We continue to believe that TCS will be star performer in growth sense than other
                                                 peers. Hence, we are maintaining 17% revenue growth in dollar term for FY14E
                                                 because of improved demand environment, while NASSCOM expects 12-14% for the
                                                 Industry. We continue to be positive on demand prospect for TCS.
                                                 View and Valuation: We continue to remain positive on demand outlook and margin
                                                 profile. We continue to be positive on demand environment and company’s strength of
                                                 efficient deal execution. We advise that TCS now seem to be trading ahead of
                                                 fundamentals; At a price of Rs 2047, it is trading at 22.6x FY14E earnings, We maintain"
                                                 BUY" view on the stock with a target price of Rs 2550. Taking the INR/USD (average
                                                 value) at Rs60 for FY14E and Rs59.5 for FY15E, We upgrade EPS from Rs87.4 to Rs90.7
                                                 for FY14E and from Rs99.3 to Rs 102.4 for FY15E. For FY14E and FY15E, we expect 17%
                                                 and 20% revenue growth in USD term and retain positive stance as outperformance
                                                 continues.
                                                 Financials                                                                           Rs, Crore
                                                                               2QFY14             1QFY14      (QoQ)-%    2QFY13     (YoY)-%
                                                 Revenue                      20977.24           17987.07        16.6   15621.03        34.3
                                                 EBITDA                        6632.95            5144.12        28.9    4438.39        49.4
                                                 PAT                           4633.33             3839.5        20.7    3434.65        34.9
                                                 EBITDA Margin                  31.6%              28.6%       300bps     28.4%       320bps
                                                 PAT Margin                     22.1%              21.3%        80bps     22.0%        10bps
                                                                  Narnolia Securities Ltd,                                                   16
                                                 Please refer to the Disclaimers at the end of this Report.
                             TCS.
Quarterly snapshot
Qtrly,                      2QFY12     3QFY12      4QFY12          1QFY13           2QFY13          3QFY13   4QFY13       1QFY14       2QFY14
Volume Growth                6.3%       3.2%        3.3%            5.3%             5.0%            1.3%     4.4%         6.1%         7.30%
Sales Growth, USD Term       4.7%       2.4%        2.4%            3.0%             4.6%            3.3%     3.1%         4.1%         5.4%
Sales Growth, INR Term       7.7%       13.5%       0.4%            12.1%            5.1%            2.9%     2.2%         9.5%         16.6%
PAT Growth, INR Term          -5%        36%         -7%             14%              4%              3%       2%           6%           21%
EBITDA Margin                29.1%      31.0%       29.6%           29.1%            28.4%           29.0%    28.1%        28.6%        31.6%
PAT Margin                   19.8%      23.8%       22.0%           22.3%            22.0%           22.1%    22.0%        21.3%        22.1%
Financials
Rs, Cr                                                            FY10             FY11              FY12      FY13        FY14E        FY15E
Net Sales-USD                                                     6339             8187             10171     11569      13507.44     16202.45
Net Sales                                                        30029.0          37325.1          48894.3   62989.5     81044.64     96404.56
Employee Cost                                                    10879.6          13850.5          18571.9   24040.0     30796.96     37115.76
Overseas business expenses                                       4570.1           5497.7           6800.5    8701.9      10941.03     13978.66
Services rendered by business associates and others              1262.0           1743.7           2391.3    3763.7       4862.68      6748.32
Operation and other expenses                                     4622.8           5054.3           6694.8    8443.9      10130.58     12532.59
Total Expenses                                                   21334.4          26146.2          34458.5   44949.6     56731.25     70375.33
EBITDA                                                           8694.6           11178.9          14435.8   18040.0     24313.39     26029.23
Depreciation                                                      601.8            686.2            860.9    1016.3       1268.47      1508.88
Amortisation                                                      59.1             49.1              57.1      63.7        57.54        76.73
Other Income                                                      272.0            604.0            428.2    1178.2       405.22       1928.09
EBIT                                                             8033.7           10443.6          13517.9   16960.1     23044.92     24520.35
Interest Cost                                                     16.1             26.5              22.2      48.5        48.53        48.53
PBT                                                              8289.6           11021.2          13923.8   18089.8     23401.61     26399.91
Tax                                                              1197.0           1830.8           3399.9    4014.0       5616.4       6336.0
PAT                                                              7092.7           9190.3           10524.0   14075.7      17785.2      20063.9
PAT ((Reported PAT))                                             7000.6           9068.6           10414.0   13917.4      17785.2      20063.9
Growth-%
Sales-USD                                                                           29.2%            24.2%   13.7%         16.8%        20.0%
Sales                                                              8.0%             24.3%            31.0%   28.8%         28.7%        19.0%
EBITDA                                                             21.3%            28.6%            29.1%   25.0%         34.8%        7.1%
PAT                                                                31.8%            29.6%            14.5%   33.7%         26.4%        12.8%
Margin -%
EBITDA                                                             29.0%            30.0%            29.5%   28.6%         30.0%        27.0%
EBIT                                                               26.8%            28.0%            27.6%   26.9%         28.4%        25.4%
PAT                                                                23.6%            24.6%            21.5%   22.3%         21.9%        20.8%
Expenses on Sales-%
Employee Cost                                                      36.2%            37.1%            38.0%   38.2%         38.0%        38.5%
Overseas business expenses                                         15.2%            14.7%            13.9%   13.8%         13.5%        14.5%
Services rendered by business associates and others                4.2%             4.7%             4.9%    6.0%          6.0%         7.0%
Operation and other expenses                                       15.4%            13.5%            13.7%   13.4%         12.5%        13.0%
Tax rate                                                           14.4%            16.6%            24.4%   22.2%         24.0%        24.0%
Valuation
CMP                                                               780.8           1182.5           1322.0    1563.0       2047.0       2047.0
No of Share                                                       195.7            195.7            195.7     196.0        196.0        196.0
NW                                                               18466.7          24504.8          29579.2   38645.7      49103.5      60901.0
EPS                                                                36.2             47.0             53.8      71.8         90.7        102.4
BVPS                                                               94.4            125.2            151.1     197.2        250.5        310.7
RoE-%                                                             38.4%            37.5%            35.6%     36.4%        36.2%        32.9%
Dividen Payout ratio                                              28.1%            50.8%            37.5%     41.2%        41.2%        41.2%
P/BV                                                                8.3              9.4              8.7       7.9          8.2          6.6
P/E                                                                21.5             25.2             24.6      21.8         22.6         20.0
                                                                                                                       (Source: Company/Eastwind)
                                                        Narnolia Securities Ltd,                                                              17
                                                Please refer to the Disclaimers at the end of this Report.
                                           UCO BANK                                                                "BUY"
                                                                                                                 17th Dec, 2013




Company Update                 BUY     We have the reduce the target price of UCO bank from Rs.94 to Rs. 84 on
CMP                             74     account of bank’s unlikely to get benefit of western sanction against Iran. Late
Target Price                    84     last month US and six other major powers have imposed sanction against Iran
Previous Target Price             -    for its nuclear deal. In order to quality for waiver sanction against Iran, India
Upside                          14     has cut back sharply on purchase of oil from Iran. UCO was the major
Change from Previous                   beneficiary of current account deposits of India-Iran oil facilities. In our
                                       banking sector coverage universe, UCO bank’s cost of deposits were lowest
                                       at 6.1% whereas yield on loan was 10.1% at the end of 2QFY14. After this
Market Data                            development, bank’s margin would be impacted and accordingly UCO bank
BSE Code                     532205    loses the valuation premium. Although bank’s management is focusing on
NSE Symbol                 UCOBANK     other area of growth like branch expansion and customer acquisition. We
52wk Range H/L              86.65/46   slightly tweak our earnings and reduce our book value estimate from Rs.175.5
Mkt Capital (Rs Cr)             5561   to Rs.168.8. Now our revised price target for the stock would be Rs.84 which is
Average Daily Volume        2960821    0.5 times of FY14E book value.
Nifty                           6154
                                       Strong performance in NII on account of lower cost of deposits
Stock Performance                      During quarter UCO bank’s performance was better than expectation as bank’s NII
              1M        1yr    YTD     grew by 55% YoY to Rs.1569 Cr aided by interest income growth of 5.92% and
Absolute     16.3        0.6   0.6     interest expenses de-growth of 9.68%. On yearly basis credit deposits ratio declined
Rel.to Nifty 14.1       -7.0   -7.0    to 71.6% from 72.6% but loan and deposits growth of 15% and 16% supported
                                       overall business growth and hence margin expansion. Other income de-grew by
Share Holding Pattern-%                1.6% YoY to Rs.209 cr largely due to lower treasury gain. Total income registered
           Current 1QFY14 4QFY1        growth of 45.1% YoY to 1779 cr.
Promoters       69.3    69.3 3
                             69.3
FII              4.2     3.9  3.2      Stable asset quality on sequentially
DII             12.4    12.5 13.0      In absolute term GNPA was flat on QoQ basis and registered mere deterioration of
Others          14.2    14.3 14.6      3% largely due to asset quality. During quarter bank’s reported fresh slippages were
                                       Rs.725 cr as against Rs.629 cr in 1QFY14. Out of Rs.725 cr, over Rs.400 cr
UCO Bank Vs Nifty                      slippages came from infra segment alone. In percentage term GNPA stood at 5.3%
                                       from 5.7% in 1QFY14. In absolute term provision increased by 6% QoQ taking net
                                       NPA increased to 7% QoQ. In absolute term NPA was 3.1% flat on sequential basis.
                                       Provision coverage ratio without technical write off stood at 46.6% as against 45.1%
                                       in 1QFY14 and 41.1% in 2QFY13.



                                       Financials                                                                         Rs, Cr
                                                                       2011               2012      2013        2014E       2015E
                                       NII                             3845               3902      4582         4721        5533
                                       Total Income                    4770               4868      5534         6063        6875
                                       PPP                             2695               2811      3357         4184        4744
                                       Net Profit                       907               1109       618         1573        1977
                                       EPS                             16.5               17.7       9.3         23.7        29.7
                                                                                                     (Source: Company/Eastwind)
                                                        Narnolia Securities Ltd,                                                  18

                                       Please refer to the Disclaimers at the end of this Report.
                        UCO BANK
Higher earnings on account of robust growth in NII, lower CI ratio and flat
provisions
Net profit during the quarter registered growth of 286% YoY to Rs.400 cr largely due to
higher NII growth, lower cost income ratio and lower provision on account of stable asset
quality. Consequentially ROE and ROA improved to 17.4% and 0.88% from 4.5% and
0.4% in 2QFY13 respectively.

Current deposits grew almost double led CASA improvement
On balance sheet growth front, bank’s deposits grew by 16% YoY to Rs.1888 bn
supported by current account deposits growth of 173% YoY and 12% rise in saving
deposits. CASA deposits registered the growth of 56% YoY to Rs.60096 cr. In
percentage of total advances, CASA stood at 31.8% from 23.7% in 2QFY13. Growth in
current deposits was on account of providing facilities to Indo Iran trade payments which
is presently covering 45% of oil imports from Iran and India export. Going forward 100%
of oil import from Iran is to be covered and further fertilizer import from Iran is also being
considered by Government. This facilities will generated almost about 17000-18000 cr as
per management. Loan grew by 15% YoY to Rs.1352 bn.

Margin improved due to higher declined of cost of deposits than loan yield

Net interest margin of the bank improved by 11 bps YoY to 2.84% from 2.73% in 1QFY14
due to 22% YoY declined cost of deposits to 6.09% from 7.44% in 2QFY13. Lower cost
was account of higher growth in low cost current deposits. Yield on loan (EW calculated)
for the quarter stood at 10.1% from 10.1% in 1QFY14 and 10.9% in 2QFY13.
Management expects NIM of 3% at the end of year end on the back of current deposits
support.

Valuation & View
We have the reduce the target price of UCO bank from Rs.94 to Rs. 84 on account of
bank’s unlikely to get benefit of western sanction against Iran. Late last month US and six
other major powers have imposed sanction against Iran for its nuclear deal. In order to
quality for waiver sanction against Iran, India has cut back sharply on purchase of oil from
Iran. UCO was the major beneficiary of current account deposits of India-Iran oil facilities.
In our banking sector coverage universe, UCO bank’s cost of deposits were lowest at
6.1% whereas yield on loan was 10.1% at the end of 2QFY14. After this development,
bank’s margin would be impacted and accordingly UCO bank loses the valuation
premium. Although bank’s management is focusing on other area of growth like branch
expansion and customer acquisition. We slightly tweak our earnings and reduce our book
value estimate from Rs.175.5 to Rs.168.8. Now our revised price target for the stock
would be Rs.84 which is 0.5 times of FY14E book value.



                                                             Narnolia Securities Ltd,                             19

                                                     Please refer to the Disclaimers at the end of this Report.
                   UCO BANK
Fundamental through graph




                                               Source:Eastwind/Company

                                      Narnolia Securities Ltd,                             20

                              Please refer to the Disclaimers at the end of this Report.
                            UCO BANK
Quarterly Result                                  2QFY14    1QFY14       2QFY13         % YoY        % QoQ
Interest/discount on advances / bills               3396      3152         3230             5.1           7.7
Income on investments                               1026       968          897            14.4           5.9
Interest on balances with Reserve Bank of India        8        37           32           -73.7         -77.3
Others                                                14        49           37           -61.9         -71.6
Total Interest Income                               4444      4207         4196             5.9           5.6
Others Income                                        209       462          213             -1.6        -54.7
Total Income                                        4653      4669         4409             5.6          -0.3
Interest Expended                                   2875      2843         3183             -9.7          1.1
NII                                                 1569      1364         1013            54.9          15.1
Other Income                                         209       462          213             -1.6        -54.7
Total Income                                        1779      1826         1226            45.1          -2.6
Employee                                             382       376          332            15.2           1.6
Other Expenses                                       230       185          180            27.7          24.2
Operating Expenses                                   612       562          512            19.6           9.1
PPP( Rs Cr)                                         1166      1264          714            63.4          -7.8
Provisions                                           759       741          597            27.1           2.3
PBT                                                  408       523          116           249.9         -22.1
Tax                                                    7        12           13           -42.5         -39.0
Net Profit                                           400       511          104           285.9         -21.7


Balance Sheet
Equity Capital                                      2576      2576         2488             3.5           0.0
Reserve & Surplus                                   8195      7719         6644            23.3           6.2
Net Worth                                          10770     10295         9132            17.9           4.6
Deposits                                          188779    177050       162567            16.1           6.6
Borrowings                                          6605      6462         6601             0.1           2.2
Other Liabilities & Provisions                      6262      6566         4773            31.2          -4.6
Total Liabilities                                 212416    200373       183073            16.0           6.0
Cash & Balance with Bank                            7081      7600         7585             -6.6         -6.8
Balance with bank & money at call                   8045      8218         1957           311.1          -2.1
Investments                                        55193     52999        49589            11.3           4.1
Advances                                          135233    125141       118045            14.6           8.1
Fixed Assets                                         977       926          815            19.9           5.5
Other Assets                                        5887      5489         5082            15.8           7.2
Total Assets                                      212416    200373       183073            16.0           6.0


Asset Quality
GNPA                                               7,376      7,178        5,888           25.3           2.8
NPA                                                4228       3939         3468            21.9           7.3
% GNPA                                               5.3        5.7          5.0
% NPA                                                3.1        3.1          2.9
% PCR(Without technical writeoff)                   46.6       45.1         41.1



                                                              Narnolia Securities Ltd,                             21

                                                      Please refer to the Disclaimers at the end of this Report.
                        UCO BANK
Income Statement            2011      2012           2013           2014E            2015E
Interest Income             11371    14632          16752            20313             24333
Interest Expense             7526    10730          12170            15592             18800
NII                          3845     3902           4582             4721              5533
Change (%)                    65.4     1.5            17.4             3.0              17.2
Non Interest Income            925     966             952            1342              1342
Total Income                 4770     4868           5534             6063              6875
Change (%)                    45.0     2.0            13.7             9.6              13.4
Operating Expenses           2075     2056           2177             1880              2131
Pre Provision Profits        2695     2811           3357             4184              4744
Change (%)                    58.0     4.3            19.4            24.6              13.4
Provisions                   1788     1661           2710             2596              2548
PBT                            907    1150             647            1588              2196
PAT                            907    1109             618            1573              1977
Change (%)                   -10.4    22.3           -44.2           154.5              25.6



Balance Sheet
Deposits( Rs Cr)            99071    115540       128283           153939            184727
Change (%)                               17           11               20                20
of which CASA Dep           32031     34403        55733            67707             81249
Change (%)                      6         7           62               21                20
Borrowings( Rs Cr)           5475     12901         9492            12315             14777
Investments( Rs Cr)         42927     45771        52245            62692             75231
Loans( Rs Cr)               99071    115540       128283           153939            184727
Change (%)                     20        17           11               20                20



Ratio
Avg. Yield on loans           8.6       9.9            10.0             10.0              10.0
Avg. Yield on Investments     6.6       7.1             7.1              7.5               7.5
Avg. Cost of Deposit          4.7       6.5             6.6              7.0               7.1
Avg. Cost of Borrowimgs      12.5       6.1             7.0              6.0               6.0



Valuation
Book Value                    135      137              146             169               183
CMP                           107       79             50.1           74.55             74.55
P/BV                          0.8      0.6              0.3             0.4               0.4
                                                         Source: Company/Eastwind

                                                 Narnolia Securities Ltd,                             22

                                         Please refer to the Disclaimers at the end of this Report.
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.
                                                                                                                                                                           23

								
To top