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Stock Advisory for Today - Buy Stock of Bank of Baroda
 

Stock Advisory for Today - Buy Stock of Bank of Baroda

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Narnolia Securities Limited believe Bank of Baroda would rally more because of trading at lower side despite of index is running at all time high. But with this fundamental Bank of Baroda would trade ...

Narnolia Securities Limited believe Bank of Baroda would rally more because of trading at lower side despite of index is running at all time high. But with this fundamental Bank of Baroda would trade in range of Rs.625 to Rs.700 depending upon sentiment as per our view.

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    Stock Advisory for Today - Buy Stock of Bank of Baroda Stock Advisory for Today - Buy Stock of Bank of Baroda Document Transcript

    • Hindustan Zinc LTD : Good gains ahead "BUY" 6th Mar 2014 Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. ....................................................... ( Page : 21-23) Voltas Ltd : Downgrade to "Neutral" "NEUTRAL" IEA-Equity Strategy 11th Mar, 2014 Edition : 222 The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2 times of its FY15E book value. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120. ................................................................ ( Page : 24-25) BANKBARODA "BUY" 11th Mar 2014 On fundamental wise, we are not very impressed with bank but in recent market rally, PSB as well as private banks participated more than any sector likely due to outcome of exit poll for the coming election. We believe bank would rally more because of trading at lower side despite of index is running at all time high. But with this fundamental Bank of Baroda would trade in range of Rs.635 to Rs.700 depending upon sentiment as per our view. .................................................................... ( Page : 2- 4) CAN FIN HOME "BUY" 7th Mar 2014 We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving operating leverage and aggressive branch expansion. ................................................... ( Page :12-18) 6th Mar 2014 DB CORP : "Waging war on Print media" "NEUTRAL" 7th Mar 2014 The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This judgment will work as a dampener for newspaper industry as well as DB CORP. Company’s EBITDA margin will be effected very negatively not only in FY15E but also next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’ ........................................................................ ( Page : 19-20) Dabur India Ltd: "Confident tone for growth" "BUY" 7th Mar 2014 Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street. Considering its expected expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our positive stance on the stock. ............................................................. ( Page : 7-11) Prestige Estates Projects: "Downgrade to Hold" "HOLD" 10th Mar 2014 The Prestige Estate has moved up form starting of CY12, peaked in May13, then went down gradulally. The stories behind the current price diving are the concern of price war, staggered economics, and non softening of interest rates. However given the limited upside in counter in near term, we revise our rating on PEPL to “Hold” with a revised price target of Rs. 190. Regarding the stock's future course, our “Hold” rating indicates that we do not recommend additional investment in this stock despite its gains in the current period. ..................................................................................... ( Page : 5-6) Narnolia Securities Ltd, India Equity Analytics Daily Fundamental Report on Indian Equities
    • BANKBARODA 651 700 624 8 12 1M 1yr YTD Absolute 16.6 -8.3 -8.3 Rel.to Nifty 8.7 -21.4 -21.4 Current 4QFY13 3QFY1 3Promoters 55.4 55.4 55.4 FII 15.5 15.5 15.3 DII 19.6 19.6 19.0 Others 9.5 9.5 10.3 Financials Rs, Cr 2011 2012 2013 2014E 2015E NII 8802 10317 11315 12218 14122 Total Income 11611 13739 14946 16400 18304 PPP 6982 8581 8999 9206 10067 Net Profit 4242 5007 4481 4444 4819 EPS 108.3 121.8 106.4 105.5 114.4 2 Profit inflated due to lower provisions led by reversal of investment depreciation Advance growth led by SME and retail Average Daily Volume At the current price of Rs.651/share stock is trading at 0.77 times of FY14E book value which is now premium over its peer group. We value bank at the range of Rs.634 to Rs.790 implying valuation multiple of 0.75 to 0.9 times of one year forward book. But upper side of book value multiple would be possible only if the improvement of asset quality along with improving sign of fundamentals. But in its quarterly result, bank’s performance was muted all around except healthy loan and deposits growth. CASA growth was remained muted in compare to SBI and PNB. So cost of deposits is unlikely to soften in near term while asset quality was deteriorated higher in percentage as compare to PNB and SBI. In the following section we will discuss the fundamental improvement of bank during quarter. NII growth on the back of loan growth and margin expansion Bank’s NII grew by 7.6% YoY largely due to healthy loan growth and sequentially margin improvement of 5 bps. Margin improve came from domestic push from 2.85% to 2.95 while international NIM remained stable at 1.18%. Cost of fund declined by 14 bps quarterly due to lower borrowings as a percentage of percentage of NDTL. Advances grew by 18% YoY largely came from SME and retail sector which grew by 39% and 21% YoY respectively. Bank continued to be cautions while expanding its exposure towards large corporate owing to economy recession. Deposits grew by 21.5% YoY, added by foreign currency non- resident deposits but CASA franchise remained flat at 26%. So in CASA front we are not impressed and going forward cost of fund is unlike to be soften in our view. Market Data Upside 773/429 BSE Code 532134 NSE Symbol BANKBARODA Result update ADD CMP ANNUAL REPORT UPDATE Target Price Previous Target Price Mkt Capital (Rs Cr) Please refer to the Disclaimers at the end of this Report. (Source: Company/Eastwind) Stock Performance 52wk Range H/L 21627 Provisions were lower by 11.5% YoY on account of reversal of investment depreciation to the tune of Rs.120 cr offset additional provision towards non- performing assets. But bank’s stress loan (slippage + Restructure) loans were Rs.1275 cr which was almost in previous quarter. Lower provisions made 17% up PBT but at operating profit level, it was down by 2.6% YoY. Tax rate was higher due to creation of DTL as per advice by RBI. View & Valuation On fundamental wise, we are not very impressed with bank but in recent market rally, PSB as well as private banks participated more than any sector likely due to outcome of exit poll for the coming election. We believe bank would rally more because of trading at lower side despite of index is running at all time high. But with this fundamental Bank of Baroda would trade in range of Rs.625 to Rs.700 depending upon sentiment as per our view. Change from Previous BANKBARODA Vs Nifty Share Holding Pattern-% 18.25 Cr Nifty 6537 "ADD" 11h March. 2014 Narnolia Securities Ltd,
    • 3 BANKBARODA Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd, Quarterly Result (Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Interest/discount on advances / bills 7061 6832 6485 8.9 3.3 7173 Income on investments 2175 2220 1898 14.6 -2.0 2350 Interest on balances with Reserve Bank of India 245 281 403 -39.2 -12.8 397 Others 209 140 58 258.2 50.1 173 Total Interest Income 9691 9473 8845 9.6 2.3 10092 Others Income 932 974 841 10.9 -4.3 1102 Total Income 10623 10447 9686 9.7 1.7 11194 Interest Expended 6634 6579 6004 10.5 0.8 6792 NII 3057 2895 2841 7.6 5.6 3300 Other Income 932 974 841 10.9 -4.3 1102 Total Income 3989 3869 3681 8.4 3.1 4402 Employee 1056 1030 798 32.3 2.5 1189 Other Expenses 736 714 627 17.3 3.1 792 Operating Expenses 1792 1744 1426 25.7 2.7 1981 PPP( Rs Cr) 2197 2125 2256 -2.6 3.4 2421 Provisions 762 861 1029 -26.0 -11.5 897 Exceptional Items 16 16 12 25.0 0.0 0 PBT 1436 1264 1227 17.0 13.6 1524 Tax 372 80 203 83.7 364.7 457 Net Profit 1048 1168 1012 3.6 -10.3 1067 Balance Sheet Date( Rs Cr) Equity Capital 423 423 412 2.5 0.0 Reserve & Surplus 35232 35127 30966 13.8 0.3 Net Worth 35654 35549 31379 13.6 0.3 Total Deposits 503772 484931 414733 21.5 3.9 Borrowings 29304 28558 27899 5.0 2.6 Other liabilities and provisions 18638 13995 14552 28.1 33.2 Total Liability 587368 563033 488563 20.2 4.3 Cash in hand 16742 15681 17147 -2.4 6.8 Cash and balances with RBI 87599 79980 58295 50.3 9.5 Total Investment 115210 111840 101848 13.1 3.0 Advances 352446 339855 299318 17.7 3.7 Fixed Assets 2562 2498 2399 6.8 2.6 Others Assets 12809 13179 9557 34.0 -2.8 Total Assets 587368 563033 488563 20.2 4.3 Asset Quality GNPA( Rs Cr) 11926 10888 7321 NPA(Rs Cr) 6624 6316 3363 % GNPA 3.4 3.2 2.4 % NPA 1.9 1.9 1.1 % PCR (without technical writeoff) 44.5 42.0 54.1
    • 4 BANKBARODA Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd, Income Statement 2011 2012 2013 2014E 2015E Interest Income 21886 29674 35197 39065 45206 Interest Expense 13084 19357 23881 26847 31084 NII 8802 10317 11315 12218 14122 Change (%) 48.2 17.2 9.7 8.0 15.6 Non Interest Income 2809 3422 3631 4182 4182 Total Income 11611 13739 14946 16400 18304 Change (%) 32.8 18.3 8.8 9.7 11.6 Operating Expenses 4630 5159 5947 7194 8237 Pre Provision Profits 6982 8581 8999 9206 10067 Change (%) 41.5 22.9 4.9 2.3 9.4 Provisions 1331 2555 4168 3559 4043 PBT 5650 6026 4831 5647 6024 PAT 4242 5007 4481 4444 4819 Change (%) 38.7 18.0 -10.5 -0.8 8.4 Balance Sheet Deposits( Rs Cr) 305439 384871 473883 521272 573399 Change (%) 27 26 23 10 10 of which CASA Dep 87589 103524 119981 135531 149084 Change (%) 23 18 16 13 10 Borrowings( Rs Cr) 22308 23573 26579 33273 36600 Investments( Rs Cr) 71261 83209 121394 122000 134200 Loans( Rs Cr) 228676 287377 328186 367568 404325 Change (%) 31 26 14 12 10 Ratio Avg. Yield on loans 8.0 8.7 8.4 8.6 9.3 Avg. Yield on Investments 7.0 7.8 6.4 7.3 8 Avg. Cost of Deposit 4.3 5.1 5.2 5.2 5.4 Avg. Cost of Borrowings 5.5 6.7 5.4 5.5 5.5 Valuation Book Value 536 668 759 846 929 CMP 963 794 652 513 513 P/BV 1.8 1.2 0.9 0.61 0.6
    • V- Prestige Estates Projects Ltd. Key Points CMP 169 Target Price 190 165 Upside 12% 15% BSE Code 533274 NSE Symbol 5,717 161,912 Nifty 6,401 1M 1yr YTD Absolute 15.6 0.4 0.4 Rel. to Nifty 9.3 (11.5) (12.2) 3QFY14 2QFY14 1QFY14 Promoters 75.0 75.0 75.0 FII 17.4 17.4 17.2 DII 6.3 6.3 6.1 Others 1.3 1.3 1.7 Valuation: 5 Please refer to the Disclaimers at the end of this Report. Change from Previous Previous Target Price 1 yr Forward P/B Share Holding Pattern-% Stock Performance-% Market Data Average Daily Volume • The Prestige Estate has moved up form starting of CY12, peaked in May13, then went down gradulally. The stories behind the current price diving are the concern of price war, staggered economics, and non softening of interest rates. The heat wave in economy have affected complete sector, this hurt the real estate companies' revenue and the revival which were expected by us in previous year cannot be seen in the manner in which we expect. • Earlier in our 3QFY14 result update we had given a buy rating on stock when the price was Rs. 145, with the next 5-6 month price target of Rs. 165. However seeing the current rally in stock post 3QFY14 result and on back of guidance for FY14 at Rs. 4300 crore sales booking as the management commentary on the result call regarding launches in Q3FY14 as well as through the year remained extremely positive. However given the limited upside in counter in near term, we revise our rating on PEPL to “Hold” with a revised price target of Rs. 190. • Regarding the stock's future course, our “Hold” rating indicates that we do not recommend additional investment in this stock despite its gains in the current period. Mkt Capital (Rs Crores) 52wk Range H/L At the current CMP of Rs. 165, the stock is trading at a PE of 16.0x FY14E & 13.6x FY15E . The company can post EPS of Rs. 10.3 & Rs. 12.1 in FY14E & FY15E and RoE of 11.3% & 12.0%. Prestige Estates Projects said it sold 1,204 residential units and 0.026 million square feet (Mnsft) of commercial space, aggregating to 2.075 Mnsft, amounting to Rs 1262 crore of sales in Q3 December 2013. Of the above, Prestige share is 904 units -1.55 Mnsft amounting to Rs 940.20 crore of sales, up by 24.69% from that of Q3 December 2012.In Q3 December 2012, the company had sold 682 units aggregating 1.44 Mnsft of residential and commercial space, amounting to Rs 754 crore of sales - Prestige share. (Overall sales of 1.69 Mnsft of area amounting to Rs 873.90 crore). Collections rose 16.69% to Rs 592.30 crore in Q3 December 2013 over Q3 December 2012 - Prestige share. (Overall collections for the Q3 December 2013 - Rs 713.30 crore). In Q3 December 2013, the company launched the first phase of its largest residential project- Prestige Lakeside Habitat in Bangalore aggregating to 2.79 million square feet of total developable area. The project is spread across 102 acres in area and consists of apartments and villas with total developable area of 8.40 Mnsft. Management Guidence FY14E Company will exceed its presales guidance. Company has already done sales to the extent of Rs 1,200 crore plus and now it is just a question of production and these numbers getting recognised because company need to touch the trigger of 30 percent to recognise these numbers. During the year, company has made Rs 3,700 crore and guidance was Rs 4,300 crore. On his outlook for the company's business, Prestige Estates Projects, says there is no slowdown in the Bangalore market and aims to concentrate on the phase 2 and 3 of its Lakeside Habitat project newt quarter Result Highlights 3QFY14 "Downgrade to Hold………..." Hold 102/195 Result update PRESTIGE "Hold" 10th Mar' 14 Narnolia Securities Ltd,
    • 6 Please refer to the Disclaimers at the end of this Report. (Ammount in crore) (Source: Company/Eastwind) Prestige Estates Projects Ltd. Key financials : (Source: Eastwind Research) (Figures in crore) Narnolia Securities Ltd, PARTICULAR 2011A 2012A 2013A 2014E 2015E Performance Revenue 1543 1052 1948 2532 3038 Other Income 68 34 64 64 64 Total Income 1611 1086 2011 2595 3102 EBITDA 442 331 579 696 805 EBIT 381 270 511 621 722 DEPRICIATION 61 61 68 75 83 INTREST COST 123 119 149 163 163 PBT 326 185 426 522 623 TAX 91 63 131 161 199 Reported PAT 235 122 294 361 423 Dividend 39 39 39 39 39 EPS 7.2 3.7 8.4 10.3 12.1 DPS 1.2 1.2 1.1 1.1 1.1 Yeild % EBITDA % 28.6% 31.4% 29.7% 27.5% 26.5% NPM % 14.6% 11.3% 14.6% 13.9% 13.7% Earning Yeild % 5.7% 3.7% 5.2% 6.2% 7.3% Dividend Yeild % 1.0% 1.2% 0.7% 0.7% 0.7% ROE % 11.1% 5.7% 10.7% 11.8% 12.0% ROCE% 6.5% 3.0% 5.7% 6.6% 7.4% Position Net Worth 2114 2151 2743 3065 3531 Total Debt 1505 1864 2420 2420 2200 Capital Employed 3619 4015 5163 5485 5731 No of Share 33 33 35 35 35 CMP 125 100 163 165 165 Valuation Book Value 64.4 65.6 78.4 87.6 100.9 P/B 1.9 1.5 2.1 1.9 1.6 Int/Coverage 3.1 2.3 3.4 3.8 4.4 P/E 17.5 26.8 19.4 16.0 13.6
    • Dabur India Ltd. BUY Expecting for bottomed up sign on volume growth: 1M 1yr YTD Absolute 0.3% 30% 33.9% Rel. to Nifty -6.03% 19% 22.0% Current 2QFY14 1QFY14 Promoters 68.64 68.66 68.66 Aggression on expending distribution reach: FII 19.94 20.71 20.4 DII 4.47 3.96 3.97 Others 6.95 6.7 7 View and Valuation: 3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-% 1904.28 1748.81 8.9 1635.98 16.4 297.59 329.24 (9.6) 274.51 8.4 243.5 249.83 (2.5) 209.87 16.0 15.6% 18.8% 220bps 16.8% 120bps 12.8% 14.3% 150bps 12.8% - 7 P/BV(x)-1year forward Rs, Crore (Source: Company/Eastwind) Please refer to the Disclaimers at the end of this Report. Despite signs of weak discretionary demand and increased competitive intensity in the market, Dabur India has reported comparatively better volume growth in its key categories. On all operating parameters, its performance was satisfactory. Still, management is cautious for margin ramp up due to high inflation in India. "Confident tone for growth" Company update CMP 173 Target Price 206 Analysis on recent management interview to media : Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street.Previous Target Price - Upside 19% Change from Previous - A mature segment like Hair Oil remains a concern because of competitive intensity, likely to grow slower than healthcare and home segments. Consistently, Dabur is aggresively working on innovation activities to launch new product as well as product development activities. Recently new launches would come to the people like Vatika Enriched Coconut Oil with hibiscus, Vatika Olive Enriched Hair Oil. Considering its expected expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our positive stance on the stock. Post earning, management of the company expressed hypothetically its view regarding bottoming out of urban demand. The management of other FMCG bellwether like Marico had also stated that the trend of volume decline has bottomed out based on hypothesis. Recent Consumer Confidence Index indicates some upward movement than previous quarters. At a same point, recent softening in CPI and Food Inflation Index (graph on 3rd page of this company's report) hint to improve consumer discretionary demand from rural and urban area. Market Data BSE Code 500096 Stock Performance Nifty 6401 The strong momentum in relatively low competition in the core categories with diversified portfolio, Dabur gets a better place than other peers and its rural distribution expansion should boost sales volumes. We retain our “Buy” view on the stock with a target price of Rs206. At a CMP of Rs 173 stock trades at 9x FY15E P/BV. Share Holding Pattern-% NSE Symbol DABUR 30246 Average Daily Volume 908049 52wk Range H/L 185/128 Mkt Capital (Rs Cr) Dabur is working on chemist channel to drive growth of its health care and Personal care portfolio, and they are planning to distribute personal products through this channel. Dabur had direct coverage of 55,000 chemist stores, which has now increased to 75,000; plans to take it to 125,000 by FY15E. PAT Margin Financials Revenue EBITDA PAT EBITDA Margin "BUY" 7th Mar' 14 Narnolia Securities Ltd,
    • Vatika hair oil Honitus 8 Please refer to the Disclaimers at the end of this Report. Segment-wise snapshot Dabur New Launches: Ratnaprash (Source: Company/Eastwind) Fem with no ammonia Odonil Variants (Source: Company/Eastwind) Vatika Shampoo Dabur India Ltd. Narnolia Securities Ltd, Segments Growth (YoY)-% Key takeaways (3QFY14) Domestic Business 24% -Launched Vatika Enriched Olive Hair Oil, -Shampoo grew by 25%(YOY), -Perfumed hair oils posted 8% YoY growth, -Dabur Chyawanprash reported healthy growth with a range of 17-18% YoY, -Launched premium health supplement – Dabur Ratnaprash, -Dabur Honey performing well on the back of higher demand, -Toothpastes grew by 14% with premium offerings/added market share, -Flattish growh in Red Toothpaste, -Meswak on new packaging launched , -Honitus: Honey & Tulsi variant launched, -Ethicals portfolio grew by 15.5% YoY, -Hajmola performed well with positve response from Anadana variants, -Recently launched Pudin Hara Lemon Fizz has received emense response, -Odonil 1 Touch Freshener launched in South India, -Odonil and Sanifresh performed well during the quarter, -Gulabari performed well during the quarter, -Launch of Fem Fairness Naturals with No Added Ammonia, -Fem witnessed double digit growth led by good take from Bleaches, -Real Fruit Juice reported double digit growth, -Real in a new Diwali Gift packaging launched, -Organic International Business grew by 29% with 14% constant currency(CC) growth driven by strong growth in GCC, Egypt & Nigeria, -Namaste business registered double digit growth in CC term, 6.9%Hair Care 17.7% 13.2%OTC & Ethicals Digestives 16.0%Home Care Health Supplements 19.5% Oral Care 10.4% Skin Care 13.4% Foods 18.0% International Business 26.0% Ratnaprash Odonil Variant Beverage variants Vatika Shampoo variant Vatika hair oil Fem portfolio with no ammonia Pudin Hara Lemon Fizz Vatika Hair Oi l with Hibiscus OxyLi fe Men Odoni l re-launched with 2x perfume content Test launched Real Mi lk Shakes in Delhi and Punjab Oxy life Aloe Vera Gel Bleach Real Activ Drinking Yoghurts in mango and strawberry flavours Hajmola Anardana Super Babool + Salt Power New Ethnic flavour "Kokam" under Real Burrst Fem brand was introduced in Turkey Odoni l Gel Dabur's New Launches 3QFY14 Q2FY14 Q1FY14 4QFY13
    • Slowdown in Hair Oils segment remains for long term? How chemist channel would play a role to opportune the gain of market share? 9 Please refer to the Disclaimers at the end of this Report. Dabur India Ltd. Pace of innovation continues ‐ Vatika Enriched Olive Hair Oil launched during the quarter Key Takeaways: On 3QFY14, Hair Oils segment witnessed decline across categories. Marico reported only 2% YoY volume growth in parachute rigid packs and 8% YoY in value-added hair oils, Bajaj Corp and Navratna oil clocked 1% YoY volume growth. While, Coconut oil segment reported 3-4% YoY volume decline. Importantly, Hair Oil segment is adversely impacted by high input cost pressure leading to frequent price hike. We believe, slowdown in Hair Oil segments could be a short-term jerk. Dabur management believes that there is some structural change in Coconut Hair Oil because of consumption shifting from Coconut Hair Oil to Light Hair Oil. Dabur is carrying small exposures in Coconut Oil; still there is room to report value and volume growth because of support from new launches. Company is likely to be better placed with value- added offerings Vatika enriched coconut oil with Hibiscus and Vatika Olive Enriched Hair Oil. We expect that the volume growth in Hair Oil segment has bottomed out and coming quarter and next spell of growth would come largely from increasing per capita income. Innovation combined with optimum pricing strategy to maintain market share will be key growth driver of this category. Considering the weak consumer sentiment in urban area, there was less opportunity to invest in urban growth in the past 2 years. Now, as green shoots are visible and consumer sentiment is improving, the company is beginning to invest in urban growth with Project CORE—chemist outlet and range expansion. However, there could be a few quarters of transitory period. As part of this project, Dabur has recruited 350 people in the front end and will incur Rs15cr for the first phase. Project CORE’s primary focus will be the health care portfolio(Chyawanprash, Honey, Glucose), OTC products (Honitus, Lal Tel) and personal care portfolio which are more relevant to the chemist channel than to general trade. At present, it increased its coverage to 75000 from 55000-chemist store and, plans to take it to 125,000 by FY15E. We expect that project CORE will be favorable to improve margin picture as well as revenue builder. Chemist Shope in India (Source: Company/Eastwind) Narnolia Securities Ltd,
    • 21% 16% 16% GCC EGYPT NIGERIA 10 Skin Care The company expects to see growth in mid-teens helped by the pickup in winter in Q4FY14. For 3QFY14, The International Business (contributes around one third of consolidated sales) grew by 26%. Organic business grew by 29% with 14% constant currency growth rate led by strong performance in GCC, Egypt and Nigeria. The GCC business reported a 21% growth, while sales in Egypt and Nigeria both grew by 16%. Bangladesh remains an important geography for the company, which was impacted by political instability and economic uncertainty resulting in slow growth of 10% YoY. Dabur has organized a strong team and product portfolio for this geography. Dabur will expand its footprint only in adjacent geographies of its current markets like in Iran, Iraq and Africa. It believes that Bangladesh and Pakistan together have the potential to become Rs500cr market each over the long term. Intl‐Business – New Launches Oral Care: Key Growth Markets –Q3FY14(%) -Dabur does not believe that launching sensitive toothpaste now will drive growth of this portfolio as big players are already present in this segment. Please refer to the Disclaimers at the end of this Report. Dermoviva Face Wash Fem Gold Hair Removal Cream Dabur India Ltd. Conference Call (Q3FY14 ): Key Facts at a glance -Dabur expects to achieve volume growth in the range of 8-12% in FY15%E, and if urban growth revives, volume growth could be in the range of double digit growth. Volume Growth -Dabur expects to improve gross margin in FY15E, its inventory that includes the high cost raw materials (increased due to high-cost petroleum derivatives) will exist until February 2014. Dabur expects gross margin to improve by 100bps if the inflation scenario remains benign. Margin Growth Dermoviva Hand Wash (Source: Company) International business Hair Care -Dabur expects to maintain growth of high single-digit in this segment. Health Care -Dabur expects that there is huge opportunities for growth in this segment and Project CORE will help to drive growth for the same. Pricing Growth Innovation and new launches -The company expects to continue with the new launches and innovations, but spread over the year and not cluttered in one quarter. Dabur could launch a range of summer products in beverages and health supplements. Ad spend -Ad expenses to be maintain within the range of 13-15% at the consolidated level for FY15E. -For 4QFY14E, price increase could be at a range of by 1-2% YoY. The company may hike prices by 4-5% in FY15E and focus will be on pursuing an aggressive and profitable growth strategy. Urban and Rural Growth -Its rural growth has been faster than urban growth since the past few quarters but now this gap has reduced. Now, Dabur believes that growth will be driven by the urban areas, which is witnessing an uptick. The company will be shifting its focus to the urban area, which will drive premiumization. Narnolia Securities Ltd,
    • 11 Please refer to the Disclaimers at the end of this Report. (Source: Company/Eastwind) Dabur India Ltd. Financials Narnolia Securities Ltd, Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E Sales 3391.4 4104.5 5305.4 6178.9 7070.30 8203.32 RM Cost 811.0 1806.8 2278.8 2422.1 2757.42 3240.31 Purchases of stock-in-trade 750 252 509 599 742.38 820.33 WIP (10) (122) (103) (2) (71) (41) Employee Cost 285 309 387 471 608.05 738.30 Ad Spend 493.5 534.6 659.5 837.0 996.91 1132.06 Other expenses 438.4 524.1 683.1 819.10 908.53 1066.43 Total expenses 2767.3 3304.8 4415.2 5146.6 5942.59 6956.42 EBITDA 624.1 799.7 890.2 1032.2 1127.71 1246.90 Depreciation and Amortisation 50.0 95.2 103.4 112.7 111.09 133.15 Other Income 39.4 32.2 57.4 92.0 141.41 164.07 EBIT 613.5 736.6 844.2 1011.5 1158.03 1277.82 Interest 12.3 29.1 53.8 58.9 54.69 51.95 PBT 601.2 707.5 790.4 952.6 1103.34 1225.87 Tax Exp 100.5 139.0 146.4 182.62 212.39 232.91 PAT 500.7 568.5 644.0 770.0 890.95 992.95 Volume 9.5% 10.5% Pricing 4.5% 5.0% Sales 20.9% 21.0% 29.3% 16.5% 14.4% 16.0% EBITDA 33.9% 28.1% 11.3% 16.0% 9.3% 10.6% PAT 28.1% 13.5% 13.3% 19.6% 15.7% 11.4% RM Cost 23.9% 44.0% 43.0% 39.2% 39.0% 39.5% Ad Spend 14.6% 13.0% 12.4% 13.5% 14.1% 13.8% Employee Cost 8.4% 7.5% 7.3% 7.6% 8.6% 9.0% Other expenses 12.9% 12.8% 12.9% 13.3% 12.9% 13.0% Tax rate 16.7% 19.6% 18.5% 19.2% 19.3% 19.0% EBITDA 18.4% 19.5% 16.8% 16.7% 16.0% 15.2% EBIT 18.1% 17.9% 15.9% 16.4% 16.4% 15.6% PAT 14.8% 13.9% 12.1% 12.5% 12.6% 12.1% CMP 158.6 96.1 103.2 131 173.00 173.00 No of Share 86.8 174.1 174.2 174.3 174.30 174.30 NW 935.4 1391.1 1716.9 2124.38 2689.06 3335.36 EPS 5.8 3.3 3.7 4.4 5.11 5.70 BVPS 10.8 8.0 9.9 12.19 15.43 19.14 RoE-% 53.5% 40.9% 37.5% 36.2% 33.1% 29.8% P/BV 14.7 12.0 10.5 10.75 11.21 9.04 P/E 27.5 29.4 27.9 29.7 33.84 30.37 Valuation: Margin-% Expenses on Sales-% Growth-% (YoY)
    • 189 220 - 16 - 1M 1yr YTD Absolute 8.7 26.9 26.9 Rel.to Nifty 3.1 15.0 15.0 Current 4QFY13 3QFY1 3Promoters 42.4 42.4 42.4 FII 0.6 0.6 0.6 DII 0.5 0.5 0.5 Others 56.5 56.5 56.5 Financials Rs, Cr 2010 2011 2012 2013 2014E NII 63 72 84 96 162 Total Income 71 77 91 110 162 PPP 54 60 68 74 114 Net Profit 39 42 44 54 80 EPS 19.1 20.5 21.4 26.4 39.3 12 Change from Previous CANFINHOME Vs Nifty Share Holding Pattern-% 15.59 Lakh Nifty 6401 Please refer to the Disclaimers at the end of this Report. (Source: Company/Eastwind) Stock Performance 52wk Range H/L Funding composition of the company continued to be rate MAA+ by ICRA indicating high credit quality and carried low risk. The composition comprises 50% from NHB and 45% from banks, altogether account for 95% of total funding while remaining come from deposits. Average tenure of funding is 7-10 years due to its loan tenure portfolio of 10-15 years. From year FY12 to FY13, source of funding composition saw dramatically changed as share of NHB increased to 50% from previous year of 23% while loan from related party declined to 45% from 70% in FY12. The benefit was also come at effect as blended borrowing cost came down to 9.2% in FY13 from 9.8% in FY12. At the end of 3QFY14, borrowing cost stood at 9.3% from 9.4% in last quarter. Funding compositions have high credit quality and carried low risk CANFINHOME Company UPDATE BUY Mkt Capital (Rs Cr) Loan book grew by 49.1% YoY led by strong disbursement in retail segment. The company’s exposure to non house loan was about 7% of total loan which grew from Rs.138 cr in 3QFY13 to Rs.400 cr in 3QFY14. The company remains focus on salaried segment which account about 90% of loans. Average ticket size loan is Rs. 16 lakhs. Concentration of individual loan segment declined to 92% of total loan from 94% in March 2013 and this segment shifted towards non housing. Although revenue contribution from this segment is very low but spread is relatively thicker than housing segment. CAN FIN HOME Average Daily Volume 389 Previous Target Price Market Data Upside 196/113 BSE Code 511196 NSE Symbol CMP Target Price We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving operating leverage and aggressive branch expansion. Healthy NII growth on the back of robust loan growth The company’s NII grew by 39% YoY to Rs.40.2 Cr which came from impressive loan growth of 49% YoY. Margin of the company was however declined by 13 bps sequentially on account of higher cost of fund. Yield on loan remained same sequentially which restricted NII growth below than previous quarter (49% YoY). CanFin Home has about 16-17% of exposure in rural area where spread is lower. From last two quarters, yield on loan remained same while cost of borrowing increased by 10 bps which made margin lower sequentially. Loan book continued to be healthy on account of higher non housing loan growth "BUY" 7th March 2014 Narnolia Securities Ltd,
    • 13 CAN FIN HOME Source:Company/Eastwind Please refer to the Disclaimers at the end of this Report. Aggressive branch expansion drives incremental business growth The company has opened almost 40 branches from last two years and it became double to 81 from 41 in March 2011. The company has planned to open 85 braches at the end of FY14. The incremental business came from additional branches as we got evidence from revenue growth. The company revenue was Rs.72 cr in FY11 which increased to Rs.96 cr in FY13 and in 9MFY14, it reached to Rs.115 cr while cost to income ratio was remained flat at 30% level. The company is planning to open other 25 branches by 2015 in north area which would cater for incremental loan growth outside of southern state. Being presence in Bangalore would help to get benefit naturally in realty boom The reality volume in Bangalore is higher than Mumbai, Pune and Delhi-NCR region according to our real estate analyst as we got evidence from recent result publish. Can Fin Home’s 16% total branches are in Bangalore region, so it will be natural beneficiary of this realty boom in Bangalore. At present 4 southern states constitute about 70% of loan book. Strong profit growth due to healthy NII growth and improvement in operating leverage During quarter, the company reported healthy net profit growth of 60% YoY on the back of robust loan growth of 50% YoY and declined cost income which led by improvement in operating leverage. With the improvement in operating leverage, the company’s return ratio ROE improved from 12.6% in FY12 to 18% in 3QFY14. As discuss above, the company is more aggressive in branch expansion which would increase incremental business and profitability and hence return ratio. Asset quality continues to be healthy. On asset quality front, the company continues to remain healthy with gross NPA level came down to 0.3 during quarter from 1.6 in FY07. With the strong recovery and high coverage ratio, net NPA level has been 0% since FY11. During quarter, Can Fin’s GNPA was declined to 0.32% from 0.34% in previous quarter whereas net NPA level was at 0% led by almost 100% provision provided by the company. Asset quality is expected to remain healthy going forward on the back of strict lending practice and 90%+ exposure to salaried personal where chances of slippage is relatively low. Narnolia Securities Ltd,
    • 14 CAN FIN HOME Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. About the company Can Fin Homes Ltd was promoted in 1987 by Canara Bank in association with reputed financial institutions including HDFC and UTI. Canara Bank holds 42.4% stake in CFHL. Today, CFHL offers a range of products on housing, such as loans for home purchase, home construction, home improvement/extension and site purchase as well as non- housing finance. The company has 81 branches at present with a large presence in South India. Concern Any sharp increase in the interest rate would discourage consumers to purchase home and thus demand could be impacted. Around 45% of funding source come from banking and any adverse regulation like hike of interest rate could impact borrowing cost. This would impact company’s NII, NIM and profitability. View & Valuation We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving operating leverage and aggressive branch expansion. Narnolia Securities Ltd,
    • 15 CHART FOCUS CAN FIN HOME Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd,
    • 16 Valuation BaND CAN FIN HOME Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd,
    • 17 CAN FIN HOME Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd, Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr Interest Earned 151.7 137.9 102.8 47.5 10.0 Interest Expenses 111.5 99.8 73.9 51.0 11.8 NII 40.2 38.1 29.0 38.7 5.4 Other Income 0.1 0.0 0.1 36.4 144.2 Total Income 40.3 38.2 29.0 38.7 5.5 Operating Expenses 11.4 12.4 11.3 1.3 -8.3 PPP 28.9 25.7 17.8 62.4 12.2 Provisions 0.0 0.0 0.0 PBT 28.9 25.7 17.8 62.4 12.2 Tax Expenses 8.5 7.0 5.1 66.1 22.0 PAT 20.3 18.7 12.6 60.9 8.6 Balance Sheet Capital 20 20 20 0.0 0.0 Reserves and surplus 428 407 366 17.0 5.2 Net Worth 448 427 386 16.1 4.9 Borrowings 4817 4315 3144 53.2 11.6 TOTAL LIABILITIES 5265 4742 3530 49.2 11.0 Loans 5355 4864 3592 49.1 10.1 TOTAL ASSETS 5355 4864 3592 49.1 10.1 Spread Analysis Yield On Advances 11.3 11.3 11.5 Cost of Borrowings 9.3 9.2 9.4 Spread 2.1 2.1 2.1 NIM 3.0 3.1 3.2 ROE% Break-Up ROA 1.5 1.5 1.5 Total Assets/ Total Equity 12.2 11.6 10.3 ROE(%) 18.2 17.6 15.9
    • 18 CAN FIN HOME Financials & Assumption Source: Eastwind/Company Please refer to the Disclaimers at the end of this Report. Narnolia Securities Ltd, PROFIT &LOSS ACCOUNT(RsCr) 2010 2011 2012 2013 2014E InterestEarned 208 226 279 379 586 InterestExpenses 145 154 196 283 424 NII 63 72 84 96 162 Other Income 9 5 8 14 0 Total Income 71 77 91 110 162 Operating Expenses 17 17 23 36 48 PPP 54 60 68 74 114 Provisions -1 1 7 -1 0 PBT 55 58 61 75 114 Tax Expenses 16 16 17 21 34 PAT 39 42 44 54 80 BALANCESHEET ITEMS(RsCr) NetWorth 275 311 348 392 463 Borrowings 1865 1904 1982 3073 5309 Loans 2167 2250 2673 4012 6600 SPREAD ANALYSIS(%) YieldOnAdvances 10.7 10.5 10.7 9.8 11.3 Costof Borrowings 9.9 8.1 9.9 9.2 9.3 Spread 0.8 2.4 0.8 0.6 2.0 NIM 3.1 3.2 3.1 2.4 3.0 EFFICENCY RATIO(%) Operating Expenses toTotal Income ( CI Ratio) 24.4 22.3 25.2 32.8 30.0 NII toLoanfund 2.9 3.2 3.1 2.4 0.8 Loantoborrowings 116.2 118.2 134.8 130.6 111.2 VALUATION Book Value(Rs) 134 152 170 191 226 P/B(x) 0.6 0.7 0.7 0.7 0.8 P/E(x) 4.2 5.2 5.2 5.2 4.8
    • DB CORP 1M 1yr YTD Absolute -6 22 0 Rel. to Nifty -7.32 11.3 -0.002 Current 2QFY14 1QFY14 Promoters 74.96 74.97 74.98 FII 17.73 16.46 14.66 DII 2.95 4.00 5.34 Others 4.36 4.57 5.02 Financials 3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-% Revenue 518.2 438 18.3 438.9 18.1 EBITDA 153.8 112.5 36.7 122.8 25.2 PAT 93.57 63.2 48.0 73.2 27.9 EBITDA Margin 29.7% 25.7% 400bps 28.0% 170bps PAT Margin 18.1% 14.4% 370bps 16.7% 140bps 19 This judgment will work as a dampener for newspaper industry as well as DB CORP. Company’s EBITDA margin will be effected very negatively not only in FY15E but also next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’ 6261.65 Stock Performance During the quarter, company has seen 18.2% revenue growth from its advertisement, 14% from circulation and 25% from Radio business on YoY basis. Management expressed its interest regarding inorganic expansion in near future to maintain its healthy growth across all segments. Average Daily Volume 25750 Share Holding Pattern-% Nifty 3QFY14E Earning Performance: Stock Performace with Nifty Rs, Crore (Source: Company/Eastwind) Please refer to the Disclaimers at the end of this Report. Management Commentary: According to management, Company will maintain a pragmatic approach towards operational controls and higher efficiency. DBCORP will continue to capitalize its consumption potential of Tier 2 and 3 cities. And they are studying on marketing strategies of niche brands in Tier 2 and 3 cities. Company is expected to launch its Bihar edition on 19 Jan, 2014, and we expect to see some part of additional revenue from Bihar edition by 4QFY14E and also expect to see breakeven in 3 to 4 years. View and Valuation: In view of upcoming general election, we expect government ad spending to go up substantially. Provision of TRAI’s 12 minutes ad cap would provide revenue visibility to print media players, being one of the largest players DB Corp will be strong beneficiary in near future. But Considering latest update regarding directing implementation of the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies, earning visibility could not be promising. Wages hike and payment of arrers will create huge burden to the profit and loss A/C of the company as well as margin shape. And it may hamper company's plan for investing in regional market in future because it needs internal cash flow. Therefore we are downgrading this stock from`BUY' to `Neutral'. This would create huge financial burden to a industry already facing problems of rising raw material prices. One the other hand most of newspaper venturing into reginal market in search for better sales volume and margin. Previous Target Price 340 Upside - Latest update Neutral "Waging war on Print media" The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This will act as a huge negative for newspaper industry. They have to pay all arrears up to March 2014.It will be paid in four equal installments within one year from November 11, 2011. CMP 301 Target Price Change from Previous 52wk Range H/L 321.50/210 5521Mkt Capital (Rs Crores) Market Data BSE Code 533151 NSE Symbol DBCORP "Neutral" 7th March' 14 Narnolia Securities Ltd,
    • 20 DB CORP Revenue Geography-wise Revenue Segments Please refer to the Disclaimers at the end of this Report. (Source: Company/Eastwind) Financials; Narnolia Securities Ltd, Rs,cr FY10 FY11 FY12 FY13 FY14E FY15E Sales 1062.1 1265.18 1451.51 1592.32 1861.91 2176.94 RM Cost 327.87 383.91 508.04 544.54 623.74 740.16 WIP -0.0016 -0.06 -0.04 0.03 -1.86 -2.18 Employee Cost 131.81 184.56 242.93 279.5 307.21 380.97 Ad Spend 12.98 12.52 15.04 17.21 22.34 23.95 Other expenses 161.24 185.2 216.06 234.07 260.67 315.66 Total expenses 720.03 862.13 1105.03 1210.25 1371.5 1656.7 EBITDA 342.07 403.05 346.48 382.07 490.5 520.3 Depreciation and Amortisation 37.83 43.28 50.57 58.06 64.5 75.4 Other Income 11.15 14.18 24.02 21.34 27.9 28.3 EBIT 304.24 359.77 295.91 324.01 426.0 444.9 Interest 35.69 15.3 9.23 7.99 8.0 5.1 PBT 279.70 358.65 310.7 337.36 445.9 468.1 Tax Exp 105.72 99.97 98.32 113.18 156.1 163.8 PAT 173.98 258.68 212.38 224.18 289.8 304.3 Growth-% (YoY) Sales 10.5% 19.1% 14.7% 9.7% 16.9% 16.9% EBITDA 132.2% 17.8% -14.0% 10.3% 28.4% 6.1% PAT 265.4% 48.7% -17.9% 5.6% 29.3% 5.0% Expenses on Sales-% RM Cost 30.9% 30.3% 35.0% 34.2% 32.0% 34.3% Employee Cost 12.4% 14.6% 16.7% 17.6% 16.6% 17.0% Ad Spend 1.2% 1.0% 1.0% 1.1% 1.2% 1.1% Event Expenses 1.1% 1.3% 1.0% 0.8% 0.8% 1.0% consumption of store & spare 4.8% 4.6% 5.8% 6.0% 6.0% 6.2% Distribution expenses 2.1% 1.7% 1.7% 1.8% 1.8% 1.9% Other expenses 15.2% 14.6% 14.9% 14.7% 14.0% 14.5% Tax rate 10.0% 7.9% 6.8% 7.1% 8.4% 7.5% Margin-% EBITDA 32.2% 31.9% 23.9% 24.0% 26.3% 23.9% EBIT 28.6% 28.4% 20.4% 20.3% 22.9% 20.4% PAT 16.4% 20.4% 14.6% 14.1% 15.6% 14.0% Valuation: CMP 239 246 219 212.1 301 301 No of Share 18 18 18 18.33 18.33 18.33 NW 649 829 927 1029 1180 1344 EPS 9.6 14.1 11.6 12.2 15.8 16.6 BVPS 36 45 51 56 64 73 RoE-% 27% 31% 23% 22% 25% 23% P/BV 6.7 5.4 4.3 3.8 4.7 4.1 P/E 24.9 17.4 18.9 17.3 19.0 18.1
    • Hindustan Zinc LTD. 123 148 148 20% 0% 500188 51929 5192 6329 Robust Q3FY14 Performance : 1M 1yr YTD Absolute 4.3 -1.7 -3.4 Rel. to Nifty 0.0 9.2 11.3 3QFY14 2QFY14 1QFY14 Promoters 64.9 64.9 64.9 FII 1.8 1.8 1.5 DII 31.4 31.4 31.5 Others 1.8 1.8 2.1 Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14 Net Revenue 3450 8.6 -9.8 3178 3826 EBITDA 1824 22.1 -3.1 1494 1883 Depriciation 210 18.6 12.9 177 186 Tax 305 50.2 20.1 203 254 PAT 1723 6.8 5.1 1613 1640 (In Crs) 21 Good gains ahead Previous Target Price Please refer to the Disclaimers at the end of this Report. Stock Performance-% Share Holding Pattern-% 1 yr Forward P/B Source - Comapany/EastWind Research Nifty BUY Market Data Average Daily Volume (Nos.) BSE Code Result Update 52wk Range H/L CMP Target Price NSE Symbol Mkt Capital (Rs Crores) 142/94 Upside Change from Previous Hindustan Zinc’s (HZL) Q3FY14 performance was inline to our estimates on the back of healthy zinc sales volumes and higher metal premiums. Total operating income for Q3FY14 stood at Rs. 3450.1 crore higher by 8.6% YoY but lower by 3.1% QoQ. Total zinc sales in Q3FY14 came in at 196,000 tonne, up 17% YoY and 2% QoQ . The company realised premium on metal sales amounting to $241/tonne for zinc (Zn) & $305/tonne for lead (Pb) . Lead sales volume for the quarter stood at 23500 tonnes (lower by 24% QoQ and 22% YoY), while silver sales volumes stood at 78500 kg (lower by 31% YoY and 14% QoQ) . EBITDA came in at Rs.1823.8 crore and inline to our estimate of Rs. 1829.6 crore. Subsequently, net profit stood at Rs. 1722.7 crore . HINDZINC Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. Zinc market was bearish during last consecutive years having surplus in inventory, but now sentiment is slowly turning positive showing some uptrends in Zinc LME prices. Visible inventories on the London Metals Exchange, as well as on the Shanghai Futures Exchange, are down about 30% over the last year. And zinc demand is increasing steadily. We believe Zinc price will be the core fundamental behind the Hindustan zinc’s bull story in the coming years. We see a improving volume of production through FY15.More So Govt. The attorney-general’s clearance for the Centre’s proposal to divest its residual stake in Hindustan Zinc Ltd (HZL) lifted the Street’s mood. Again the board delayed this process and guided investors that disinvestment of government's remaining stake in Hindustan Zinc will happen next fiscal year. Stake sale in HZL again seems to be back burner now. We also see gradual and sustainable recovery in global macro Scenario which supports a positive cycle in industrial metals. So, we believe there exists a strong case for significant earnings estimate for Hind Zinc in coming months. Valuation & Recommendation "BUY" 6th March' 14 Narnolia Securities Ltd, 0 50 100 150 200 250 300 350 400 450 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14
    • Lower Production Guideline LME Price/Ton Key Concerns A. B. C. LME Price/Ton D. E. Key Triggers for Growth A. Company is tracking on 95% capacity utilization. B. C. D. LME Price/Ton E. F. G. H. Zinc premium reaches six year high as inventories shrink I. Fees that zinc smelter charge to refine the metat that probably to increase 5%. 22 Hindustan Zinc LTD. Volatile Desel Price and high Sulphuric acid price affecting the company,s PAT adversly. A reason to wait and watch , is since the government is looking at auction, how much will Vedanta be able to garner and what price it is willing to pay is not known. Source - Comapany/EastWind Research Source - Comapany/EastWind Research HZL has marginally downward revised its mined metal production guidance for FY14 from 950,000 tonnes earlier to 900,000 tonnes. This reflects slower-than-expected ramp up of underground mining projects and some changes in mining sequence wherein preference has been given to primary mine development during this period. HZL’s revenues are directly linked with the global market for products essentially, Zinc and Lead which are priced with reference to LME prices and Silver to LBMA (London Bullion Metal Association) prices. Lower than expected demand by galvanizing industries for zinc and industrial batteries, car batteries industries for lead would affect the company estimates. Disruptions in mining due to equipment failures, unexpected maintenance problems , non-availability of raw materials of appropriate price, quantity and quality for energy requirements, disruptions to or increased cost of transport services or strikes and industrial actions or disputes. Captive plants enjoy the lower Tax rate and company enjoys zero tax from tax free geographycal areas. The Rampura Agucha underground mine project is operational via ramps (tunnel driven downward from the surface) and commercial production already ramp up in Q3 and will in Q4 of FY14 . The Kayad mine project will also commence commercial production in the current fiscal year. A cash-rich balance sheet, low cost of production and inexpensive valuations make HZL an attractive bet at the current price levels. Disinvestment of government's remaining stake in Hindustan Zinc and Bharat Aluminium (Balco) will happen next fiscal year . In the past Vedanta Group has said it wanted majority control when Vedanta had earlier offered Rs 149 a share . If this is any benchmark,then investors will stand to gain. Smelting Plants are improvised and management is confident that the smelting plants will maintain their stance for the coming quarters also. Source - Comapany/EastWind Research Narnolia Securities Ltd, 0 200 400 600 800 1000 1200 1400 1600 1800 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Silver(rs/ounce) 0 20000 40000 60000 80000 100000 120000 140000 160000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Lead 90000 95000 100000 105000 110000 115000 120000 125000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Zinc
    • FY11 FY12 FY13 FY14E 9912 11405 12700 13577 979 1543 2032 1787 10891 12948 14732 15364 1023 1228 1070 1291 492 568 696 707 4417 5336 6218 6484 5496 6069 6482 7093 475 611 647 718 19 14 29 37 1059 1419 921 1097 4900 5526 6899 6967 22.0 21.0 21.0 19.0 FY10 FY11 FY12 FY13 423 845 845 845 17701 21688 26036 31431 18124 22533 26881 32276 478 475 410 484 340 567 504 825 20238 25053 29485 35465 109 109 47 10 6071 7145 8466 8474 1113 875 445 1082 361 594 876 1898 452 762 798 1111 152 209 332 403 928 5633 5255 6942 96 158 233 373 20238 25053 29485 35465 FY10 FY11 FY12 FY13 3.2 2.2 2.1 1.7 95.6 11.6 13.1 16.3 1.9 2.1 2.9 3.2 6.0 4.8 3.6 3.8 0.6 0.8 0.7 0.9 FY10 FY11 FY12 FY13 4001 4483 4553 4935 77 -212 -61 -183 4077 4272 4492 4752 -3881 -3658 -3499 -3234 -187 -363 -1242 -1257 8 250 -248 262 23 Short-term loans and advances Total Assets P/B EPS RATIOS Source - Comapany/EastWind Research EBIDTA & Margin : Inventories Trade receivables Cash and bank balances Source - Comapany/EastWind Research CASH FLOWS Debtor to Turnover% Cash From Investment Cash from Finance Net Cash Flow during year Creditors to Turnover% Inventories to Turnover% Cash from Operation Changes In Working Capital Net Cash From Operation Total liabilities Intangibles Tangible assets Capital work-in-progress Long-term loans and advances ZinC Productions: Expenditure Trade payables Short-term provisions B/S PERFORMANCE Share capital Depriciation PAT ROE% Hindustan Zinc LTD. Reserve & Surplus Total equity Source - Comapany/EastWind Research Interest Cost Net tax expense / (benefit) Repairs EBITDA P/L PERFORMANCE Net Revenue from Operation Other Income Total Income Power, fuel & water Narnolia Securities Ltd, 43 43 41 49 42 49 47 0 10 20 30 40 50 60 0 500 1000 1500 2000 2500 EBIDTA EBIDTA % 0 50000 100000 150000 200000 250000 Zinc Production (tons) -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 0 500 1000 1500 2000 2500 3000 3500 4000 4500 Net Revenue from Operatio n Revenue Growth
    • Voltas Ltd. CMP 139 Target Price 125 Previous Target Price 95 Upside -10% Change from Previous 32% BSE Code 500575 NSE Symbol VOLTAS 52wk Range H/L 65/143 Mkt Capital (Rs Crores) 4,609 Nifty 6,329 1M 1yr YTD Absolute 28.5 75.2 84.2 Rel. to Nifty 23.1 64.0 72.9 3QFY14 2QFY13 1QFY14 Promoters 30.3 30.2 30.2 FII 15.2 14.5 18.1 DII 29.8 29.8 25.6 Others 24.8 25.6 26.1 24 Management comment on above JV : Downgrade to "Neutral"……. What New...??? Market Data Company update Neutral Voltas Ltd has proposed to form a new joint venture (JV) company named –“ Voltas Water Solutions” which will have equal capital contribution from “Voltas” and “Dow Chemical Pacific” (Singapore) Pte (Dow). This JV company will market and distribute standard packaged Water Treatment Systems and Waste Water Treatment Systems of capacity up to 20 m 3/hour, to residential and commercial complexes and light industrial markets in the Indian subcontinent. The entity's operations would include designing, procuring, testing, marketing, selling and servicing of such standard water treatment systems and waste water treatment systems. Please refer to the Disclaimers at the end of this Report. 1 yr Forward P/B Stock Performance-% Share Holding Pattern-% About Dow Group : Dow Chemical Pacific (Singapore) Pte Ltd was established in 1992. Catering to customers in Asia Pacific, particularly South East Asia, Dow Group combines the power of science and technology to passionately innovate what is essential to human progress. The company is driving innovations that extract value from the Intersection of chemical, physical and biological sciences to help address many of the world's most challenging problems such as the need for clean water, clean energy generation and conservation, and increasing agricultural productivity. The company's integrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in high growth sectors such as packaging, electronics, water, coatings and agriculture. Valuation : The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2 times of its FY15E book value. We estimate that at the lower end of management's guidance this translates into a 12.1%/12.7% RoE forFY14/15E. We believe management is attempting to be conservative regarding the guidance for FY14 & FY15, but even with a 60/90 bps improvement in the operating margin the RoE would be approximately 12.1%/12.7% for FY14/15E , which we believes would translate into a P/B multiple of approximately 2.0x – to 2.2x. This translates to a 12 month price target of approximately Rs. 120 based on our FY14E BVPS of Rs. 59. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120.” Water has been identified as a key focus area for the Tata group. With its unrivalled know-how and technological leadership in the water treatment space, the partnership, will help Voltas Water Solutions cater to the growing water treatment requirements of the Indian subcontinent. They further believe that partnership will simultaneously leverage the brand and distribution strength of Voltas, along with the technology prowess of the water and process solutions division of the Dow Group. Our View on said JV : In today scenario major Water and Waste Water Treatment market is mostly and largely catered by unorganized players. And the market which is targeted by this new joint venture will provide a branded and differentiated product line in the sector, with a focus on quality and service delivery. Average Daily Vol. (Nos.) 624,126 "Neutral" 6th Mar' 14 Narnolia Securities Ltd,
    • 25 Please refer to the Disclaimers at the end of this Report. Ammount in crore INR in crores (Source: Company/Eastwind) Voltas Ltd. Key financials : (Source: Company/Eastwind) Ammount in crores (Source: Company/Eastwind) Ammount in crores (Source: Company/Eastwind) Narnolia Securities Ltd, PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E Performance Revenue 4326 4757 5191 5186 5531 5320 5852 Other Income 94 78 58 98 90 84 100 Total Income 4420 4836 5250 5284 5621 5404 5952 EBITDA 283 460 463 336 245 261 296 EBIT 262 438 442 303 217 237 268 DEPRICIATION 21 21 21 34 28 24 28 INTREST COST 11 10 17 31 40 35 42 PBT 372 532 524 219 280 286 326 TAX 117 147 172 57 73 74 85 Extra Oridiniary Items 26 25 40 -150 12 0 0 Reported PAT 255 385 352 162 207 211 241 Dividend (INR) 73 73 73 73 73 54 54 DPS 2.2 2.2 2.2 2.2 2.2 61.5 61.5 EPS 7.7 11.6 10.6 4.9 6.3 6.4 7.3 Yeild % EBITDA % 6.5% 9.7% 8.9% 6.5% 4.4% 4.9% 5.1% NPM % 5.8% 8.0% 6.7% 3.1% 3.7% 3.9% 4.0% Earning Yeild % 16.2% 6.5% 6.2% 4.4% 8.3% 4.4% 5.0% Dividend Yeild % 4.7% 1.2% 1.3% 2.0% 2.9% 42.4% 42.4% ROE % 32.2% 35.4% 25.8% 11.0% 12.7% 11.9% 12.3% ROCE% 27.3% 35.2% 24.6% 11.4% 13.1% 12.3% 13.0% Position Net Worth 790 1085 1362 1478 1626 1775 1955 Total Debt 181 35 137 223 261 225 225 Capital Employed 971 1120 1498 1701 1887 2000 2180 No of Share (Adj) 33 33 33 33 33 33 33 CMP 48 178 172 112 75 145 145 Valuation Book Value 23.9 32.8 41.2 44.7 49.1 53.7 59.1 P/B 2.0 5.4 4.2 2.5 1.5 2.7 2.5 Int/Coverage 23.8 44.5 26.7 9.6 5.5 6.8 6.4 P/E 6.2 15.3 16.1 22.9 12.1 22.7 19.9
    • 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 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.