Book Profit on HDFC LTD and Buy Kajaria Ceremics, Zensar Tech Stocks Today

IEA-Equity
Strategy

India Equity Analytics

23th Jan, 2014

Daliy Fundamental Report on Indian Equities

HDFC LTD :

"NEUTRAL"

Edition : 190
23th Jan 2014

HDFC profit growth of 12.1% YoY was inline with street expectation. NBFC reported stable asset quality on sequential basis as well as registered
healthy loan growth. HDFC ltd has well above CAR which would support growth going forward. At the current price of Rs.840, stock is trading at
4.3 tines one year forward book and 26 times of FY14E’s earnings. We value HDFC at Rs.875/ share which is 4.5 times of FY14E’s book and P/E
multiple of 27 times of full year EPS. .......................................................... ( Page :2-4)

Zensar Tech : "Better growth trajectory ahead"

"BUY"

23th Jan 2014

Earning numbers below expectation, management confident for growth ahead:For 3QFY14, Zensar Tech reported lower growth than
expectations, Sales declined by 1%(QoQ) because of seasonal and furloughs impacts.Considering healthy order pipeline and its earning visibility
in near future, we maintain “BUY” view on the stock with a target price of Rs 440. At a CMP of Rs 386, stock trades at 5.6x FY15E EPS
................................................................... ( Page : 5-7)

Kajaria Ceremics :"Capacity expansion & sustained realisation to drive
growth…"

"BUY"

23th Jan 2014

At the current CMP of Rs. 311, the stock is trading at a PE of 19x and 14x of FY14E and FY15E. The company can post RoE of 29.2% and 30.0% &
EPS of Rs. 18.3 and Rs. 24.9 FY14E and FY15E. We believe that the current level is also good to enter. We expect Kajaria’s strong earnings growth
and rising market share will trigger re-rating and hence upgrade our price target to Rs 370. We advice those who have already bought into the
counter to hold on for further gains and those wishing to get in can do so with a revised price target of Rs. 350 in mind (12% return) over the
next couple of quarter. ..................................................................... ( Page : 8-10)

RELIANCE :

"BUY"

22th Jan 2014

The company for 3QFY14 reported turnover of Rs 103521 Cr up by 10.5% YoY. Refining revenues during the quarter increased to Rs 95432 Cr
up 10.1%YoY however it has witness sequential decline on account lower crude throughput of 17mmt due to maintenance turnaround. The
Capacity utilization stood at 110%.. .................................................. ( Page :11-12)

KOTAK BANK

"NEUTRAL"

22th Jan 2014

At the current price of Rs.708, bank is trading at 4.5 times of one year forward book and 37.5 times of one year forward earnings which
premium over its peers under our coverage. Bank reported slightly deterioration in asset quality and negative earnings due to muted operating
and financials metrics. We lower our target price to Rs.714 from earlier of Rs.782. We have neutral view on the stock.
...................................................................... ( Page : 13- 17)

Emami Ltd :

"BUY"

22th Jan 2014

Witnessed below sales numbers and beats on profitability and Margin expansion;Emami Ltd reported 6.6% (YoY) sales growth, Adversely
impacted by unfavorable season and moderation in the growth of FMCG sector. Overall volume grew by 6%. We retain “Buy” view on the stock
with a target price of Rs 635. At a CMP of Rs 448 , the stock is trading at P/BV of 7.3x on FY15E, respectively.
................................................................................... ( Page : 18-20)

Hindustan Zinc LTD : Good gains ahead

"BUY"

21th Jan 2014

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 . Being an integrated & dominant player in the domestic industry with low cost of production, the
company is poised to benefit in the long run. We reaffirm our positive stance on HZL and assign a BUY rating to the stock with a target price of
Rs. 148/-. .................................................. ( Page : 21- 23)
Narnolia Securities Ltd,

HDFC LTD
Result Updated
CMP
Target Price
Previous Target Price
Upside
Change from Previous

NEUTRAL
840.5
875
4
-

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty

500010
HDFC
931/632
131340
1.16
6338

Stock Performance
1M
Absolute
6.6
Rel.to Nifty
5.7

1yr
2.4
-2.1

YTD
2.4
-2.1

Share Holding Pattern-%
Current 4QFY13 3QFY1
Promoters - 3
FII
74.3
73.1
73.6
DII
12.9
13.8
13.0
Others
12.9
13.1
13.3

"NEUTRAL "
23th Jan, 2014

HDFC's profit growth of 12.1% YoY was inline with street expectation. NBFC
reported stable asset quality on sequential basis as well as registered healthy
loan growth. HDFC ltd has well above CAR against requirement which would
support growth going forward. At the current price of Rs.840, stock is trading
at 4.3 tines one year forward book and 26 times of FY14E’s earnings. We value
HDFC at Rs.875/ share which is 4.5 times of FY14E’s book and P/E multiple of
27 times of full year EPS.
Profit growth in line with street expectation
HDFC Ltd’s 3QFY14 result was in line with street expectation as profit grew by 12%
YoY to Rs.1278 cr on standalone basis. Profit of the NBFC grew by 13.4% YoY on
consolidated basis to Rs.1935 cr versus Rs.1706 cr in last quarter. NII grew by
12.8% YoY to Rs.1940 with inclusion of investment sale. Adjusted the same, NII
grew by 17% YoY to Rs.1905 cr versus Rs.1624 cr last quarter corresponding year.
Stable operating cost led operating growth at 12.5% YoY
Other income was Rs.46 cr versus Rs.105 cr in last quarter and Rs.95 cr in previous
quarter. Due to lower support from other income, total revenue grew by 13% YoY to
Rs.1951 cr. Operating expenses increased to Rs.168 cr ( Up by 17% YoY) led
operating profit growth of 12.5% YoY to Rs.1783 cr.
Stable asset quality and balance sheet keep growing
On asset quality side, NBFC’s gross non performing asset stood at 0.77% of loan of
loan portfolio versus 0.79% in previous quarter and in absolute term in amounted to
Rs.1478 cr. Loan book of the company corpus increased by 19.2% YoY to
Rs.192266 cr as on December 2013. The total assets increased to Rs 218286 cr as

HDFC Vs Nifty

against Rs 183770 cr as at December, 2012 registering an increase of 19 per cent.
Margin compression, spread would declined going forward
Net interest margin for the quarter stood at 4% despite of 25 bps reduced home loan
for retail customers during the quarter as against 4.06% in 2QFY14. Spread which is
the difference of interest income and interest expenses, maintained at 2.25%. Going
forward, there would be some pressure in spread as NBFC’s balance sheet keeps
increasing with the support of borrow fund. In rising interest rate and inflationary
pressure era, we expect to come down to 2% in next couple of quarters.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
4483
5558
3890
3535
24.1


2012
5212
6198
5746
4123
27.9

Rs, Cr
2013
2014E
2015E
6179
7053
8193
7257
8131
9271
6718
7562
8530
4848
5438
6194
31.4
35.2
40.1
(Source: Company/Eastwind)
2

HDFC LTD
Quarterly Result

NII grew on the back of healthy loan growth
and stable spread

Operating cost stable led PPP growth at 12.5%
YoY

Net profit of Rs.1278 cr was in line with
expectation.

Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.

3

HDFC LTD
HDFC Performance vs Nifty with base re-adjustment

Quarterly Performance

Rs Cr
Income from Operations
Profit on Sale of Investments
Total Income
Interest and Other Charges
Staff Expenses
Provision for Contingencies
Other Expenses
Depreciation
Total Expenditure
Profit from Operations before Other Income
Other Income
Profit Before Tax
Tax Expense
Net Profit After Tax

3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr
5985
5859
5146
16.3
2.2
35
87
96
-64.1
-60.1
6020
5946
5242
14.8
1.2
4080
4046
3521
15.9
0.8
71
67
64
10.3
5.4
25
15
40
-37.5
66.7
89
95
74
21.1
-6.3
8
9
6
41.8
-12.0
4273
4233
3705
15.3
1.0
1747
1713
1537
13.7
1.9
11
8
8
32.8
38.4
1758
1721
1545
13.8
2.1
480
455
405
18.5
5.5
1278
1266
1140
12.1
0.9
Source: Eastwind/Company

4

Zensar Tech

"BUY"
23rd Jan' 14

"Better growth trajectory ahead"
Result update

Buy

CMP
Target Price
Upside

386
440
400
14%
10%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Nifty

504067
ZENSARTECH
430/181
1691
20884
6339

Stock Performance
1M
13
12

Absolute
Rel. to Nifty

1yr
32.6
28.4

YTD
16.5
12.8

Current

Promoters
FII
DII
Others

1QFY14

48.27
11.99
0.96
38.78

48.35
11.68
1.26
38.71

1 year forward P/E

4QFY13

48.36
10.75
1.28
39.61

Earning numbers below expectation, management confident for growth ahead:
For 3QFY14, Zensar Tech reported lower growth than expectations, Sales declined by
1%(QoQ) because of seasonal and furloughs impacts. PAT was down by 28%(QoQ),
the profit growth has been impacted due to currency fluctuations during the period to
the extent of Rs 19.06 Cr on a YoY basis and Rs 23.02 Cr on a QoQ basis.
Management expects good growth starting from 4QFY14E with its Infrastructure
Management (IM) business gaining momentum. The deal booking and pipeline is good
and expects to perform well going forward. It expects double-digit growth in the
Enterprise Services business for the FY15 on the back of healthy pipeline. In addition, it
anticipates good growth from the IMS for the FY'15.
On Margin front; During the Quarter, its EBITDA margin declined by 240bps to
14.7%and PAT margin down by 320bps to 8.6%. Post earning, management has
expressed its margin at a range of 16-17% and PAT margin could be seen at a double
figure for only organic business.
On segmental growth; The Infrastructure Management(IM) business of the company,
which has been restructured over the last few quarters, has shown a sharp increase in
dollar revenues of over 12% on a sequential quarter basis. The company reported 12
new customer wins in the quarter including over USD27 mn of new business in IM. In
INR term, Application Management Services (contributes 65% of Sales) declined by
4.5%(QoQ) and IM grew by 0.5% (QoQ). While, Products and License business jumped
from Rs50cr (2QFY14) to 70cr.
Mix geographical footing: During the quarter, revenue growth from Europe region was
impressive with 10%(QoQ), while USA and ROW, both were down by 1% impacted by
seasonal impact.Given the order book Enterprise, business expects to grow robustly
going forward.
Healthy order Pipeline: The Quarter has been upbeat with several new client additions,
with the company’s focus on cloud, security and multi-vendor services reaping results.
Recent Management comments also revealed favourable scenario of order booking.
View and Valuation: The deal booking and pipeline is good and expects to perform well
going forward. It expects double digit growth in the Enterprise Services business for the
FY15E on the back of healthy pipeline. Also, it anticipates good growth from the IMS for
the FY'15E.
Order pipeline continues to be stable at $ 200 mn mainly on the back of good demand
seen in Mobility, Cloud Computing and social networking side. Considering healthy
order pipeline and its earning visibility in near future, we maintain “BUY” view on the
stock with a target price of Rs 440. At a CMP of Rs 386, stock trades at 5.6x FY15E EPS.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
592.01
87.26
50.8
14.7%
8.6%

2QFY14
599.7
102.54
70.6
17.1%
11.8%

(QoQ)-%
(1.3)
(14.9)
(28.0)
(240bps)
(320bps)

3QFY13
525.5
70.1
48.7
13.3%
9.3%

Rs, Crore
(YoY)-%
12.7
24.5
4.3
140bps
(70bps)



5

Zensar Tech
Sales and Sales Growth-%


Margin-%


Sales and Sales Growth-%
Revenue Mix-Geographies
USA
Europe
Africa
Row

1QFY13
72%
9%
8%
11%

2QFY13
71%
9%
9%
11%

3QFY13
72%
9%
9%
10%

4QFY13
74%
9%
9%
8%

1QFY14
76%
8%
9%
7%

2QFY14
75%
9%
10%
6%

3QFY142
75%
10%
9%
6%

64%
21%
15%

66%
22%
12%

68%
21%
11%

64%
24%
12%

65%
23%
12%

68%
23%
9%

65%
23%
12%

33%
35%
17%
15%

30%
31%
34%
40%
40%
36%
18%
17%
18%
12%
12%
12%

37%
33%
18%
12%

37%
36%
18%
9%

35%
36%
17%
12%

52%
20%
7%
21%

53%
21%
11%
15%

61%
20%
2%
15%

63%
20%
2%
17%

61%
21%
2%
16%

Revenue Mix-Service Type

Application Management Services
Infrastructure Magt Services
Products and License
Revenue Mix-Project Type

Fixed Price
Time & Materials
Support Services
Product Sales
Revenue Mix-Vertical

Manufacturing , Retail & Distribution
Insurance, Banking & Finance
Govt , healthcare & Utilities *
Alliance & Others

54%
20%
11%
15%

54%
19%
10%
17%



6

Zensar Tech
Clients/Headcounts Metrics;
Revenue Mix-Geographies

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY142

47
6
1
1

43
7
2
1

41
7
2
1

40
8
2
1

49
6
1
1

47
6
1
1

49
6
2
1

35%
40%
69

35%
42%
59

35%
42%
56

35%
43%
55

37%
43%
66

39%
46%
61

36%
43%
59

69%
31%
81%
7286

72%
28%
82%
6825

70%
30%
83%
6504

69%
31%
82%
6508

68%
32%
81%
6519

67%
33%
80%
6657

69%
31%
79%
6741

Number of million dollar

$1mn+
$5mn+
$10mn+
$20mn+
Client Contribution to Business

top 5 clients
top 10 clients
DSO
Effort & Utilization

Onsite
Offshore
Utilization (Including Trainees)
Headcount

Financials;
Rs, Cr
Net Sales
Other Operating Income
Total income from operations (net)
Purchases of stock-in-trade
Employee Cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
Extra Ordinery Items
EBIT
Interest Cost
PBT
Tax
PAT
Growth-%
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Other expenses
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout ratio
P/BV
P/E

FY10
497.08
0.00
497.08
0.00
393.17
0.00
393.17
103.91
24.92
8.15
0.00
78.99
0.55
86.59
2.43
84.16

FY11
562.56
15.03
577.59
0.00
343.12
135.71
478.83
98.76
25.88
14.20
0.00
72.88
0.85
86.23
-2.24
88.47

FY12
700.15
12.57
712.72
0.00
411.36
165.98
577.34
135.38
25.05
27.91
0.00
110.33
1.03
137.21
42.67
94.54

FY13
2114.52
13.95
2128.47
236.86
1177.83
418.73
1833.42
295.05
33.16
8.66
0.00
261.89
9.95
260.60
86.07
174.53

FY14E
2330.91
18.65
2349.56
223.21
1268.76
505.16
1997.13
352.43
39.67
46.99
0.00
312.76
10.81
348.94
118.64
230.30

FY15E
3014.78
24.12
3038.90
303.89
1641.01
653.36
2598.26
440.64
51.31
75.97
0.00
389.33
8.65
456.65
155.26
301.39

17.8%
28.7%
38.9%

13.2%
-5.0%
5.1%

24.5%
37.1%
6.9%

202.0%
117.9%
84.6%

10.2%
19.4%
32.0%

29.3%
25.0%
30.9%

20.9%
15.9%
16.9%

17.6%
13.0%
15.7%

19.3%
15.8%
13.5%

14.0%
12.4%
8.3%

15.1%
13.4%
9.9%

14.6%
12.9%
10.0%

79.1%
0.0%
2.8%

59.4%
23.5%
-2.6%

57.7%
23.3%
31.1%

55.3%
19.7%
33.0%

54.4%
9.6%
34.0%

54.4%
10.1%
34.0%

272.10
2.16
293.93
38.96
136.08
28.6%
16.4%
2.00
6.98

157.85
4.34
366.96
20.38
84.55
24.1%
19.9%
1.87
7.74

180.00
4.34
417.42
21.78
96.18
22.6%
37.3%
1.87
8.26

248.58
4.36
751.69
40.03
172.41
23.2%
21.9%
1.44
6.21

386.00
386.00
4.37
4.37
938.54
1193.91
52.70
68.97
214.77
273.21
24.5%
25.2%
18.9%
15.3%
1.80
1.41
7.32
5.60


7

Kajaria Ceremics Ltd.

"Buy"
23rd Jan' 14

"Capacity expansion & sustained realisation to drive growth…"
Result update

Buy

CMP
Target Price
Upside

312
350
285
12%
19%

Market Data
BSE Code
NSE Symbol
52wk Range
H/L Capital
Mkt
(Rs Crores)
Average Daily
Volume (Nos.)
Nifty

500233
KAJARIACER
174/320
2,356
63,000
6,322

Stock
1M
6.3
5.3

Absolute
Rel. to Nifty

1yr
35.4
29.8

YTD
61.8
50.4

Share
Promoters
FII
DII
Others

2QFY14
52.1
25.6
3.8
18.5

1 yr Forward P/B

1QFY14 4QFY13
53.5
53.5
18.4
15.6
3.1
3.2
25.0
27.6

Despite the slowdown in the overall industrial space, company performed well in 3QFY14
numbers. Company's consolidated revenues increased by 5.4 per cent to Rs 440.4 crore while
net profit witnessed a growth by 17.6 per cent to Rs 30.0 crore on yoy basis for the December
quarter. Company's EBITDA has gone up by 9.5% to Rs 66.4 crore against Rs 60.6 crore in
Q3FY13. The EBITDA margin of the company too has improved by 56 bps and stands at 15.1%
in current quarter. On the basis of the company current quarter sales have been adversely
affected due to production shut down at Gujarat which impact the company revenue by Rs. 2025 crore. Kajaria’s thrust on capacity expansion and gaining market share is helping it to post
strong topline growth. Further, KCL has plans to do a capital expenditure of about Rs 425 crore
over the financial year FY13 to FY16. This investment will help company to have revenue of
over Rs 2500 crore by FY16. We are remain bullish on the counter and continue to maintain
our buy rating on stock with an upgraded price target of Rs 350.

Growth story :
The company had taken a price hike in October'13, further recent developments in Morbi are
structural positives Near-term demand trends look reasonable and this category has been
relatively resilient to the general slowdown witnessed in consumption. If recent price increases
stick, margins could expand significantly in the next few quarters. Further, Next year, company
looking at selling almost about 60 million square meters of tiles.
Capacity expansion :
KCL has plans to do a capital expenditure of about Rs 425 crore over the financial year FY13 to
FY16. This investment will help company to have revenue of over Rs 2500 crore by FY16. In
addition, the Joint Ventures of KCL with the private firms - Jaxx Vitrified and Cosa Ceramics,
having annual capacity of 5.7 million square meters (MSM) and 2.7 MSM respectively, will
increase the KCL's production capacity. Hence, with the increased capacities of its vitrified tiles
and strong demand in the market, we expect KCL to deliver strong growth over the medium
term.
Valuation :
At the current CMP of Rs. 311, the stock is trading at a PE of 19x and 14x of FY14E and FY15E. The
company can post RoE of 29.2% and 30.0% & EPS of Rs. 18.3 and Rs. 24.9 FY14E and FY15E. We
believe that the current level is also good to enter. We expect Kajaria’s strong earnings growth
and rising market share will trigger re-rating and hence upgrade our price target to Rs 370. We
advice those who have already bought into the counter to hold on for further gains and those
wishing to get in can do so with a revised price target of Rs. 350 in mind (12% return) over the
next couple of quarter.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
440.4
66.5
30.0
15.1%
6.8%

2QFY14
478.4
65.6
29.2
13.7%
6.1%

(Source: Company/ Eastwind Research)


(QoQ)-%
-7.9
1.4
3.0
140 bps
70 bps

3QFY13
418.0
60.7
25.0
14.5%
6.0%

Rs, Crore
(YoY)-%
5.4
9.6
20.4
60 bps
80 bps
(Consolidated)
8

Sales Volume

Management Guidence FY15:

Sales Value

Expect 18-20% Revenue growth in FY15 out of
which a volume growth of about 14 percent
and price and value both should add about 4-5
percent.
EBITDA margin to be somewhere around 16%
in FY15, Expecting a growth somewhere
between 50bps to 100bps.
Mn sft

Crore

(Source: Company/Eastwind Research )


Sales Q-o-Q


Margin % (Q-o-Q)



9

Key Financials
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

664.9

736.4

952.3

1313.0

1612.0

1934.4

2321.3

Performance

Revenue
Other Income

1.0

0.0

1.1

1.5

3.0

3.0

3.0

953.4

1314.5

1615.0

1937.4

2324.3

665.9

736.4

EBITDA

94.9

115.7

147.9

206.8

244.5

285.3

359.8

EBIT

70.0

89.0

118.2

167.5

199.9

238.3

304.8

DEPRICIATION

24.9

26.7

29.7

39.3

44.6

47.0

55.0

INTREST COST

58.2

37.5

30.1

48.5

45.4

44.1

40.0

PBT

12.7

51.4

89.2

120.5

157.6

197.2

267.8

TAX

3.8

15.6

28.5

38.1

49.9

62.4

84.8

Extra Oridiniary Items
Reported PAT

NA

NA

NA

NA

NA

NA

NA

8.9

35.8

60.7

82.5

107.7

134.8

183.1

Dividend (INR)

1.7

8.6

17.1

21.4

25.7

29.9

34.2

DPS

0.2

1.2

2.3

2.9

3.5

4.1

4.6

EPS

1.2

4.9

8.2

11.2

14.6

18.3

24.9

EBITDA %

14.3%

15.7%

15.5%

15.7%

15.2%

14.8%

15.5%

NPM %

1.3%

4.9%

6.4%

6.3%

6.7%

7.0%

7.9%

Earning Yeild %

4.4%

7.9%

10.9%

6.6%

7.6%

5.9%

8.0%

Dividend Yeild %

0.9%

1.9%

3.1%

1.7%

1.8%

1.3%

1.5%

ROE %

5.5%

18.9%

27.3%

29.2%

30.2%

29.2%

30.0%

ROCE%

1.8%

7.9%

11.9%

18.1%

20.4%

19.8%

22.0%

Net Worth

162

189

223

282

357

462

611

Total Debt

325

263

288

175

170

220

220

Capital Employed

487

452

510

457

527

682

831

No of Share (Adj)

7

7

7

7

7

7

7

27

62

76

170

192

311

311

Total Income

Yeild %

Position

CMP
Valuation
Book Value

22.0

25.7

30.2

38.3

48.5

62.7

83.0

P/B

1.2

2.4

2.5

4.4

4.0

4.9

3.7

Int/Coverage

1.2

2.4

3.9

3.5

4.4

5.4

7.6

P/E

23

13

9

15

13

17

12



10

RELIANCE

"BUY"
22th Jan' 14

Good Growth Ahead
Result Update

BUY

CMP
Target Price
Upside

862
1040
21%
-

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs, Cr)
Nifty

500325
RELIANCE
954/765
279218
52019
6313

Result Highlights :
Better-than-expected performance of the refining segment.
Higher Other Income.
The company for 3QFY14 reported turnover of Rs 103521 Cr up by 10.5% YoY. Refining
revenues during the quarter increased to Rs95432 Cr up 10.1%YoY however it has witness
sequential decline on account lower crude throughput of 17mmt due to maintenance
turnaround. The Capacity utilization stood at 110%.The Petrochemical revenues for the
quarter increased by 14.6% YoY to Rs25280 Cr driven by higher prices during the quarter.
The Oil and Gas segment revenue witnessed a fall of 9.8% YoY to Rs1733 Cr on account of
falling gas production from KG- D6.
Company’s Q3FY14 EBITDA witnessed a sequential decline of 2.9% to Rs 7622 Cr mainly
on account of fall in petrochemical margin and lower crude throughput at RIL’s refineries.
Petrochemical EBIT for the quarter decreased by 15.2% sequentially to Rs2124 Cr due to
lower volumes in polymers and polyester segments. The refining EBIT for the 3QFY14
came at Rs 3141 Cr down by 13 % YoY while Oil and gas EBIT came at Rs 540 Cr.

Stock Performance-%
Absolute
Rel. to Nifty

1M
-3
-4

1yr
-4
-8

YTD
9
-7

Promoters
FII
DII
Others

4
45.3
45.3
45.3
18.3
17.7
17.4
11.5
11.8
11.6
25.0
25.2
25.7

1 Yr Price Movement Vs Nifty

RIL’s GRM at US$7.6/bbl was relatively superior to Singapore-Dubai GRM (which has
weakened to US$4.3/bbl in 3QFY14 vs US$5.4/bbl in 2QFY14 and US$6.6/bbl in 3QFY13)
due to the strength in gasoil cracks and the widening light-heavy crude spread.
Other Highlights:
Shale gas: RIL has incurred a cumulative investment of USD6.8bn till date across its three
shale gas JVs in the US. RIL’s share of revenue and EBITDA from the shale gas JVs during
3QFY14 amounted to USD221.3 Mn up 29% YoY and USD174 Mn,respectively.The Shale
Business during 9MFY14 registered turnover USD 627Mn up 47% YoY and EBITDA for the
period stand was USD 462Mn up 40% YoY.
Retail business: Revenues grew to Rs3927Cr in the third quarter compared to Rs 2839 Cr
for the same period last fiscal translating growth of 38% YoY. The Retail business reported
an EBITDA of Rs1bn during the quarter. The company added 27 new stores in 3QFY14,
taking the total number of stores to 1,577.
The company’s outstanding cash on the standalone balance sheet as at end-3QFY14 was
at USD14.4bn and outstanding debt was at USD13.2bn
View and Valuation:
The stock is trading at Rs 862 and in light of 3QFY14 performance, business outlook and
management commentary we maintain our previous recommendation BUY for the stock
with Target Price Rs 1040.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
103521
7622
5511
7.4%
5.3%

2QFY14
103758
9909
5490
9.6%
5.3%

(QoQ)-%
(0.2)
(23.1)
0.4
(220bps)
(10bps)

3QFY13
93886
8373
5502
8.9%
5.9%

Rs, Crore
(YoY)-%
10.3
-9.0
0.2
(160bps)
(50bps)



11

RELIANCE
Sales Trend (Rs/Bn)

Sales was flat on sequential basis.


EBITDA & OPM %

Yearly

decline in EBITDA reflects lower

refining margin and lower crude throughput


PAT & NPM %

Growth in PAT due to strong financial
performance of the refining segment and
higher-thanexpected other income



12

KOTAK BANK
Result update
CMP
Target Price
Upside

NEUTRAL
702
714
782
2
-9

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

500247
KOTAKBANK
804/588
54341
1.12 lakhs
6314

"NEUTRAL"
22th Jan, 2014

At the current price of Rs.708, bank is trading at 4.5 times of one year forward
book and 37.5 times of one year forward earnings which premium over its
peers under our coverage. Bank reported slightly deterioration in asset quality
and negative earnings due to muted operating and financials metrics. We
lower our target price to Rs.714 from earlier of Rs.782. We have neutral view
on the stock.
Muted revenue growth driven moderate NII growth negative non Interest
Income
Kotak Mahindra Bank reported moderate growth in core banking business with NII
grew by 10.9% YoY to Rs.913 cr. Muted revenue growth was driven by lower loan
growth, flat to negative non interest income, declined credit deposits ratio and NIM
compression. Non- interest income reported flat to negative numbers to Rs.300 cr
from Rs.305 cr in 3QFY13. Fee income registered growth of 6% YoY to Rs.226 cr

Stock Performance
1M
Absolute
-3.6
Rel.to Nifty
-4.1

from Rs.213 cr in corresponding quarter last year and treasury income reported
1yr
12.4
7.8

YTD
12.4
7.8

3
Promoters
43.7
43.7
43.8
FII
31.8
31.1
31.2
DII
Others

1.7
22.9

KOTAK Bank Vs Nifty

2.3
22.9

2.2
22.9

128% YoY growth to Rs.144 cr versus Rs.63 cr in 3QFY13.
Cost Income ratio increased led flat growth in operating profit
Operating expenses increased by 13.1% to Rs.628 cr from Rs.555 cr in last year
same quarter in which employee cost decreased by 5% YoY while other operating
cost increased by 33% YoY. Operating profit reported growth of 2.1% YoY to Rs.585
cr largely due to lower other income. Cost income increased to 51.8% in 3QFY14
versus 49.2% in 3QFY13 and 50.3% in 2QFY14.
Sequentially asset quality deteriorated
In 3QFY14, bank’s asset quality deteriorated by 7% on sequential basis in absolute
term while as a percentage to gross advance, it stood at 2% (slightly deteriorated by
4 bps). During quarter bank had made provisions of Rs.70 cr versus Rs.72 cr in
previous year in which loan loss provisions were Rs. 25.44 cr and investment
provisions to the tune of Rs. 43.3cr. As the result, net NPA increased by 20% QoQ
while as a percentage to net advance, this ratio stood at 1.1% versus 1% in previous
quarter. Provisions coverage ratio (without technical write off) declined by 590 bps on
sequential basis to 45.7%.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
2098
781
1325
818
11.1

2012
2512
977
1655
1085
14.6


Rs, Cr
2013
2014E
2015E
3206
3682
3762
1161
1412
1412
2157
2585
2536
1361
1450
1601
17.7
18.9
20.8
13

KOTAK BANK
Profit declined due to lower NII Growth, flat to negative other income growth along
with muted performance in operating and financials metrics
Kotak bank reported net profit de-growth of 6% YoY to Rs.340 cr largely due to lower
loan growth, declined in credit deposits ratio, moderate NII growth , lower other income
along with higher cost income ratio. Consequently ROA declined to 1.6% from 1.8% in
3QFY14 and ROE declined to 11.4% from 16.1%. On consolidated level, bank’s profit
grew by 2.4% YoY to Rs.591.25 cr. Consolidated profit come from Kotak Mahindra Prime,
Kotak Securities, Kotak Mahindra Capital, Kotak Mahindra Old Mutual Life Insurance and
other businesses.
Loan & deposits growth muted on YoY basis, saving deposits grew on the back of
lucrative interest rate
Loan increased by 5.8% YoY to Rs.53149 cr from Rs.50245 cr in corresponding quarter
last year led by retail and corporate loan growth of 6% and 5% respectively. Deposits
grew by 6% YoY led by saving deposits growth of 37.6% YoY largely due to bank’s
lucrative interest rate on saving deposits. Demand deposits and term deposits registered
growth of 6.1% and 0.6% respectively. CASA ratio, in absolute term grew by 22% YoY
while in percentage to total deposits, it stood at 29.7% versus 25.9% in last quarter.
Valuation &view
At the current price of Rs.708, bank is trading at 4.5 times of one year forward book and
37.5 times of one year forward earnings which premium over its peers under our
coverage. Bank reported slightly deterioration in asset quality and negative earnings due
to muted operating and financials metrics. We lower our target price to Rs.714 from
earlier of Rs.782. We have neutral view on the stock.
Valuation Band


14

KOTAK BANK
Fundamental through graph

Muted growth in NII was on account of
moderate growth in operating as well as
financials metrics

Lower non interest income and higher
operating cost led operating growth of 2.1%
YoY

Profit declined by 6% YoY due to lower NII
growth, flat non interest income, higher
operating cost and higher provsions on yealry
basis.


15

KOTAK BANK
Quarterly Performance

Quarterly Result( Rs Cr)
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit

3QFY14
1702
484
6
0
2192
300
2492
1280
913
300
1212
277
350
628
585
70
515
175
340

2QFY13
1644
510
7
11
2172
297
2469
1248
924
297
1221
265
350
615
607
72
534
182
353

3QFY13 % YoY Gr % QoQ Gr
1597
6.5
3.5
492
-1.6
-5.0
5
21.3
-11.7
0
82.6
-96.3
2095
4.7
0.9
305
-1.7
0.9
2399
3.9
0.9
1272
0.6
2.5
823
10.9
-1.2
305
-1.7
0.9
1128
7.5
-0.7
292
-4.9
4.8
264
32.9
0.1
555
13.1
2.1
573
2.1
-3.6
42
64.6
-3.5
530
-2.9
-3.6
169
3.8
-3.7
362
-6.0
-3.6

Balalce Sheet( Rs Cr)
Net Worth
Deposits
Borrowings
Total Liabilities
Investment
Advances
Total Assets

11896
54671
13673
84297
23615
53149
84297

11569
52642
14523
82185
22528
50609
82185

8992
51524
18566
82428
26587
50245
82428

Asset Quality
GNPA
NPA
GNPA
NPA
PCR(w/o technical write-off)

1076.2
584.5
2.02
1.10
46

1005.9
486.9
1.99
0.96
52

740.0
322.7
1.47
0.64
56

32.3

2.8

6.1

3.9

-26.4

-5.9

2.3

2.6

-11.2

4.8

5.8

5.0

2.3

2.6

Source: Eastwind/ Company

16

KOTAK BANK
Financials & Assumption
Rs Cr
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit

2011

2012

2013

2014E

2015E

3214
957
17
1
4190
781
4970
1498
349
246
2092
2098
781
2878
784
769
1553
1325
507
818

4867
1306
4
2
6180
977
7158
2504
775
389
3668
2512
977
3490
902
932
1835
1655
570
1085

6146
1870
24
2
8042
1161
9203
3346
1055
435
4837
3206
1161
4366
1075
1135
2210
2157
796
1361

6751
2079
27
20
8877
1412
10290
3926
0
1071
5195
3682
1412
5095
1129
1380
2509
2585
389
1450

8141
2006
7
20
10173
1412
11586
4515
0
2583
6411
3762
1412
5175
1188
1451
2639
2536
249
1601

Deposits
Deposits Growth(%)
Borrowings
Borrowings Growth(%)
Loan
Loan Growth(%)
Investment
Investment Growth(%)

29261
22.5
11724
90.9
29329
41.2
17121
36.8

38537
31.7
16596
41.6
39079
33.2
21567
26.0

51029
32.4
20411
23.0
48469
24.0
28873
33.9

58683
15.0
14671
-28.1
55739
15.0
25718
-10.9

67486
15.0
35387
141.2
64100
15.0
30862
20.0

11.0
5.6
8.6
5.1
5.1
5.1

12.5
6.1
9.8
6.5
7.0
6.7

12.7
6.5
9.9
6.6
7.3
6.8

12.7
8.1
4.5
6.7
7.3
7.1

12.7
6.5
4.0
9.5
7.3
6.2

93
4.9
41.2

108
5.0
37.0

Eastwind Calculation
Yield on Advances
Yield on Investments
Yield on Funds
Cost of deposits
Cost of Borrowings
Cost of fund

Valuation
Book Value
P/BV
P/E

123
159
179
5.3
4.5
4.0
36.9
37.5
34.0
Source: Eastwind/ Company


17

Emami Ltd

"BUY"
22nd Jan' 14

"The niche advantage."
Results update

BUY

Witnessed below sales numbers and beats on profitability and Margin expansion;

CMP
Target Price
Upside

448
635
500
42%
27%

For 3QFY14, Emami Ltd reported 6.6% (YoY) sales growth, Adversely impacted by
unfavorable season and moderation in the growth of FMCG sector. Overall volume
grew by 6%. International Business has performed well with 37% sales growth led by
aggressive growth in GCC and SAARC. PAT up by 31%(YoY) due to judicious mix of
benign RM cost and price hike on some selective brands. its market share increased
across all brands during the quarter.
We expect revenue growth could be seen better in 4QFY14 as the weather related
headwinds for cooling oils is behind us and pricing on balms stabilize.
As the company has already forward contracted menthol for the year, menthol prices
continue to trend lower and price hikes for the year have been taken place. Margin
expansion visibility remains high going forward.
Margin Picked up: The OPM has increased by 520 bps to 30.2 % due to fall in RM cost by
60 bps to 28.1%, purchases of finished goods by 400bps to 4.6% and ASP cost by 160 bps
to 15% of adjusted net sales. The mgmt said that the prices are likely to remain stable
for the remainder of the fiscal year. The company has covered the Menthol prices for
the whole year.
Volume and Value growth: The volume of Navratna oil grew by 1%, Fair and Handsome
was 2% and Balm volume grew by 4%. While, Boroplus volume decline by 4% on YoY
basis impacted by unfavourable winter season. The value growth for , Fair and
Handsome was 12%, Navratna oil was 6% while Balm was at 3%. While, Boroplus
decline by 3% on YoY basis.
Distribution Reach: Although rural continues to grow ahead of urban markets, the
growth for Emami from rural area was at 13% and urban growth was flat on YoY basis.
The company, which gets majority of its rural revenues from Uttar Pradesh, Bihar and
West Bengal, is looking beyond these markets for its future growth. The company's
direct outlet reach is 6 lakh. The company has added 20000 outlets in Q2 and expects to
add 75000 – 100000 in FY14E.
Product expansion: The company has launched Boroplus face-wash last month and
there will be new launches in Q4 also. The mgmt said that for next 2 – 3 years it has
strong pipeline of products to be launch.
View and Valuation: Considering Emami’s focus on increasing rural penetration,
effective cost management, continuous strengthening of its brand equity and new
product funnel strongly in next 2- 3 years. The company's efforts are continue to
strengthen its market share in most of the categories it is present, we are positive on
the stock. We retain “Buy” view on the stock with a target price of Rs 635. At a CMP of
Rs 448 , the stock is trading at P/BV of 7.3x on FY15E, respectively.

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Nifty

531162
EMAMI
539/368
10275
37072
6314

Stock Performance
1M
-3.3
-3.9

Absolute
Rel. to Nifty

1yr
15.2
11.1

YTD
15.3
10.8

Promoters
FII
DII
Others

72.74
72.74
72.74
16.69
16.68
15.46
2.02
2.18
3.27
8.55
8.4
8.53

1 yr Forward P/B

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
584.7
176.8
150.7
30.2%
25.8%

2QFY14
406.7
87.4
80
21.5%
19.7%

(QoQ)-%
43.8%
102.3%
88.4%
870bps
610bps

3QFY13
548.65
136.9
114.9
25.0%
20.9%

Rs, Cr
(YoY)-%
6.6%
29.1%
31.2%
520bps
490bps


18

Emami Ltd
Sales and Sales Growth(%)

Sales for3QFY14E increased by 6.6%(YoY).
Overall volume grew by 5%. However, the
company continues to successfully
strengthen its market share in most of the
categories it is present.


Margin-%

The OPM has increased by 520 bps to 30.2 %
due to fall in RM cost by 60 bps to 28.1%,

Expenses on Sales

Management is focussed to reduce its Ad
revenue as before.


Ad spends: The ad spends in 3QFY14 have declined by 360bps YoY to 15% as a percentage
of sales. The ad spends, as a percentage of sales, are expected to be in the range of 1718% in 4QFY14 and FY15.
Tax: The effective tax rate was flat at 17% on YoY basis.and Company expects to see
samr range of tax rate for FY15E

19

Emami Ltd
Key facts from Conference Call (Attended on 21st Jan 2013)
▪ The management expects sales growth of 15%, consolidated with 3.4% growth from
new launches and 12% from existing brands while PAT guidance also continues to stand at
15% aided by strong gross margin expansion on the back of lower Mentha Oil prices.
▪ The mgmt has guided for a capex of Rs 70 – 75 crore each during FY14 and FY15. ASP for
FY14 will be 16% - 17%. And 18% for FY15%.
▪ The management expects 25% growth from International business considering political
uncertianty in Bangladesh for FY15E.
▪ The company has already taken price hikes and no further hikes are expected in FY14E.
Total annualized price hike for FY14 is 4% YoY.
▪ Emami has a good cash balance of Rs5bn which it expects to utilize for acquisition.

Financials
Rs in Cr,
Sales
Raw Materials Cost
Purchases of stock-in-trade
WIP
Employee Cost
Advertisement and Publicity
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
Exceptional Items
EBIT
Interest
PBT
Tax Exp
PAT
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
RM Cost
Ad Spend
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividend payout-%
P/BV
P/E

FY10
1037.98
380.53
0
0
57.91
194.42
158.66
791.52
246.46
117.52
7
89.97
128.94
20.98
204.93
35.21
169.72

FY11
1247.08
346.76
204.9
-28.48
72.87
219.41
178.17
993.63
253.45
116.09
33.1
113.9
137.36
15.23
269.13
40.41
228.72

FY12
1453.51
415.12
189.13
22.17
92.31
228.99
209.02
1156.74
296.77
120.89
54.12
84.15
175.88
15.21
298.94
40.12
258.82

FY13
1699.09
539.83
182.14
-6.52
115.55
279
241.82
1351.82
347.27
124
56
96
223.2
6.6
368.69
54
314.68

FY14E
1886.97
566.09
141.52
22.64
141.52
311.35
283.05
1466.18
420.79
103.61
56.61
94.35
317.18
6.86
461.28
76.11
385.17

FY15E
2177.55
675.04
174.20
21.78
174.20
348.41
332.08
1725.71
451.84
119.57
65.33
119.77
332.28
5.14
512.22
87.08
425.15

35.5%
91.0%
85.0%

20.1%
2.8%
34.8%

16.6%
17.1%
13.2%

16.9%
17.0%
21.6%

11.1%
21.2%
22.4%

15.4%
7.4%
10.4%

36.7%
18.7%
5.6%
15.3%
17.2%

27.8%
17.6%
5.8%
14.3%
15.0%

28.6%
15.8%
6.4%
14.4%
13.4%

31.8%
16.4%
6.8%
14.2%
14.6%

30.0%
16.5%
7.5%
15.0%
16.5%

31.0%
16.0%
8.0%
15.3%
17.0%

23.7%
12.4%
16.4%

20.3%
11.0%
18.3%

20.4%
12.1%
17.8%

20.4%
13.1%
18.5%

22.3%
16.8%
20.4%

20.8%
15.3%
19.5%

197.70
15.13
625.42
11.22
41.34
27.1%
23.4%
4.78
17.62

249.40
15.13
689.85
15.12
45.59
33.2%
23.2%
5.47
16.50

260.80
15.13
706.63
17.11
46.70
36.6%
23.8%
5.58
15.25

397.40
15.13
777.47
20.80
51.39
40.5%
44.6%
7.73
19.11

448.00
22.70
1069.71
16.97
47.13
36.0%
24.1%
9.51
26.40

448.00
22.70
1388.64
18.73
61.18
30.6%
25.0%
7.32
23.92


20

Hindustan Zinc LTD.

"BUY"
21st Jan' 14

Good gains ahead
Result Update

BUY

CMP
Target Price
Upside

135
148
143
10%
3%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Average Daily Volume (Nos.)
Nifty

500188
HINDZINC
143/94
56133
5613
6291

Stock Performance-%
1M
4.3
0.0

Absolute
Rel. to Nifty

1yr
-1.7
9.2

YTD
-3.4
11.3

3QFY14
64.9
1.8
31.4
1.8

Promoters
FII
DII
Others

2QFY14 1QFY14
64.9
64.9
1.8
1.5
31.4
31.5
1.8
2.1

1 yr Forward P/B
450

400
350
300
250
200

150
100
50

Jul-13

Jan-14

Jul-12

Jan-13

Jul-11

Jan-12

Jul-10

Jan-11

Jul-09

Jan-10

Jul-08

Jan-09

Jul-07

Jan-08

Jan-07

0

Source - Comapany/EastWind Research

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. As the government holds 29.5 per cent
(minority) stake in HZL, the attorney-general said HZL was no longer a public sector
company. With the majority 64.92 per cent stake with Vedanta, the group will be eyeing
the government’s stake as well as the remaining 5.58 per cent owned by others.
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. In the past it
has said it wanted majority control when Vedanta had earlier offered Rs 149 a share (13.7
per cent more than the current price). If this is any benchmark, investors stand to gain.
Q3FY14 Performance :
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 ~US$241/tonne for zinc (Zn) &
~US$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 . Being an integrated
& dominant player in the domestic industry with low cost of production, the company is
poised to benefit in the long run. We reaffirm our positive stance on HZL and assign a
BUY rating to the stock with a target price of Rs. 148/-.

Investment Concern
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.
Disruptions in mining due to equipment failures, unexpected maintenance problems ,
non-availability of raw materials of appropriate price, quantity and quality for our energy
requirements, disruptions to or increased cost of transport services or strikes and
industrial actions or disputes.Lower than expected demand by galvanizing industries for
zinc and industrial batteries, car batteries industries for lead would affect the company
estimates.
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
1883
1494
Depriciation
210
18.6
12.9
186
177
Tax
305
50.2
20.1
254
203
PAT
1723
6.8
5.1
1640
1613
(In Crs)


21

Hindustan Zinc LTD.
Silver(rs/ounce)

Nov-13

Dec-13

Nov-13

Dec-13

Nov-13

Dec-13

Oct-13

Sep-13

Jul-13

Aug-13

Jun-13

Apr-13

May-13

Feb-13

Mar-13

1800
1600
1400
1200
1000
800
600
400
200
0
Jan-13

LME Price/Ton
Lead

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Mar-13

160000
140000
120000
100000
80000
60000
40000
20000
0

Feb-13

From the Management Corner :
Volatile Desel Price and high Sulphuric acid price affecting the company,s PAT
adversly.Company is tracking on 95% capacity utilization.Captive plants enjoy the lower
Tax rate and company enjoys zero tax from tax free geographycal areas. Smelting Plants
are improvised and management is confident that the smelting plants will maintain
their stance for the coming quarters also.
Outlook and valuation:
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.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.HZL’s integrated business model ensures steady
cash flow, which reiterates our positive stance on the company.we Valuing the stock at
this level, we recommend BUY rating on HZL with a target price of Rs.143-148 for FY14.

LME Price/Ton

Jan-13

Lower Production Guideline
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.


LME Price/Ton
Zinc


Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

125000
120000
115000
110000
105000
100000
95000
90000

May-13

FY14E
13577
1787
15364
1291
707
6484
7093
718
37
1097
6967
19.0

Apr-13

FY13
12700
2032
14732
1070
696
6218
6482
647
29
921
6899
21.0

Mar-13

FY12
11405
1543
12948
1228
568
5336
6069
611
14
1419
5526
21.0

Feb-13

FY11
9912
979
10891
1023
492
4417
5496
475
19
1059
4900
22.0

Jan-13

P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Power, fuel & water
Repairs
Expenditure
EBITDA
Depriciation
Interest Cost
Net tax expense / (benefit)
PAT
ROE%


22

Hindustan Zinc LTD.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Total Assets
RATIOS
P/B
EPS
Debtor to Turnover%
Creditors to Turnover%
Inventories to Turnover%

FY10
423
17701
18124
0
60
0
478
340
20238
109
6071
1113
361
452
152
928
96
20238
FY10
3.2
95.6
1.9
6.0
0.6

FY11
845
21688
22533
0
0
0
475
567
25053
109
7145
875
594
762
209
5633
158
25053
FY11
2.2
11.6
2.1
4.8
0.8

FY12
845
26036
26881
0
0
0
410
504
29485
47
8466
445
876
798
332
5255
233
29485
FY12
2.1
13.1
2.9
3.6
0.7

FY13
845
31431
32276
0
0
0
484
825
35465
10
8474
1082
1898
1111
403
6942
373
35465
FY13
1.7
16.3
3.2
3.8
0.9

CASH FLOWS
Cash from Operation
Changes In Working Capital
Net Cash From Operation
Cash From Investment
Cash from Finance
Net Cash Flow during year

FY10
4001
77
4077
-3881
-187
8

FY11
4483
-212
4272
-3658
-363
250

FY12
4553
-61
4492
-3499
-1242
-248

FY13
4935
-183
4752
-3234
-1257
262

Net
Revenue
from
Operatio
n

4000
3500
3000
2500

30.0

Revenue
Growth

4500

15.0

25.0
20.0

2000

10.0

1500

5.0

1000
0.0

500
0

-5.0

ZinC Productions:
250000

Zinc Production
(tons)

200000
150000
100000

50000
0


2500

EBIDTA %

2000

49

49

50

47
43

1500

60

EBIDTA

43

41

40

42

30

Trading At :
7000

EBIDTA & Margin :

1000

NIFTY

HINDZINC

20

160

6000

140

5000

120

500

10

100

4000

80

3000

60

2000

0

40

1000

0

20

0

0



23

N arnolia Securities Ltd
402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph
033-32011233 Toll Free no : 1-800-345-4000
em ail: research@narnolia.com ,
w ebsite : w w w .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.

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