Infosys largely reported inline set of sales numbers. We retain our BUY view on the stock with a target price of target price of Rs 3910 as well as neutral view on the stock of Indusind bank. Also private Bank result preview 3QFY14 in this Pdf.

1. IEA-Equity
Strategy
India Equity Analytics
13th Jan, 2014
Daliy Fundamental Report on Indian Equities
Infosys : "On the way of excitement"
BUY
Edition : 182
13th Jan 2014
Infosys largely reported inline set of sales numbers and beats the street on margin front, In USD term, Sales grew by 1.65%(QoQ) and 0.5%(QoQ)
in INR term, led by 0.7% (QoQ) volume growth and 0.7%(QoQ) pricing growth. At a CMP of Rs 3549, it trades at 16.3x FY15E At a CMP of Rs
3549, it trades at 16.3x FY15E earnings. We retain our “BUY” view on the stock with a target price of target price of Rs 3910 (revised from 3620).
....................................... ( Page : 2-5)
INDUSIND BANK
"Neutral"
13th Jan 2014
Despite of reported higher than expected profit we have neutral view on the stock owing to shifting of loan mix from consumer finance to
corporate loan which will lead to margin compression and deterioration in asset quality as per our view. Corporate loans generally are big ticket
size in nature and with slowing of economy there are higher chances of these loan slip into NPA than other loan. Moreover retail loans are high
yield in nature than corporate loan. At current price, we have neutral view on the stock due to trading almost near to our valuation multiple and
anticipating margin compression and higher slippage. ........................ ( Page : 6-11)
Private Bank Result Preview 3QFY14 :
13th Jan 2014
Broadly banking indices outperform Nifty by 6% in third quarter and most of banking stocks are trading at attractive valuation. Despite of, we
have caution view on account of slowdown in economy, high interest rate and inflationary pressure. High inflation would be risk for the
economy going forward. Any rise in inflation would result of rise in interest rate by RBI in its third quarter monetary policy review on 28th
Jan.2014 which would be negative for banking industry. Most of banking stocks are expected to report moderate revenue and profit growth
owing to multiple headwinds. In private sector banking universe we like HDFC Bank, ICICI bank and DCB.............................................. ( Page :
12-14)
GAIL :
"Neutral"
10th Jan 2014
Company registered a turnover of Rs. 26902.25 Cr, up by 19% in H1FY14 compared to corresponding previous year period. There was fall of
10% in operating profits of the company to Rs 2971.72 Cr for H1FY14. The Other income was down 8% to Rs 279.6 Cr while Interest cost grew
99% to Rs 169.36 Cr. .......................................... ( Page : 15-17)
CMC :
"Reduced"
9th Jan 2014
We had initiated this stock at a CMP of Rs 1208 (5th June 2013) and now, it achieved its target of Rs1690, we advice to book profit on the stock
because of its premium valuation at current price. However, sentiment could take a knock in the short run, since investors may prefer paying a
premium for stock with better earnings visibility........................................ (Page : 18-19)
KPIT Tech: "On billion dollar journey"
"Reduced"
8th Jan 2014
We had initiated this stock at a CMP of Rs 115 (14 Jan 2013) and now, it achieved its target of Rs 177. Despite better expectation of growth and
attractive visibility of its expansion through inorganic initiative and focus into emerging verticals, we advice to book profit on the stock because
of its premium valuation. However, sentiment could take a knock in the short run, since investors may prefer paying a premium for stock with
better earnings visibility.......................................... ( Page : 20-21)
IT Industry: 3QFY14E results preview : "As usual flattish 3rd quarter"
7th Jan 2014
For 3QFY14E, Indian IT players would report muted earnings growth because of seasonal weakness like furloughs and holidays impacts, already
it is understood fact by consensus. Post result, earning guidance for FY15E and forward looking statement by most of companies would be
considered as an important fact. Considering recent demand environment scenario and healthy growth outlook of US and Europe, we are
expecting to see positive outlook on the sector for the year 2014................................. ( Page : 22-25)
;
Narnolia Securities Ltd,

2. Infosys
"BUY"
13th Jan' 14
"On the way of excitement"
Result update
BUY
Inline sales and beats the street on margin front, upgraded earning guidance;
CMP
Target Price
Previous Target Price
Upside
Change from Previous
3549
3910
3620
10%
8%
Infosys largely reported inline set of sales numbers and beats the street on margin
front, In USD term, Sales grew by 1.65%(QoQ) and 0.5%(QoQ) in INR term, led by 0.7%
(QoQ) volume growth and 0.7%(QoQ) pricing growth. However, the good news is that
the PAT grew by 21% because of cost rationalization, sequentially.
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
500209
INFY
35810/2190
203790
1240448
6171
Stock Performance
Absolute
Rel. to Nifty
1M
6.3
3.3
1yr
52.4
49.1
YTD
53.1
49.4
Share Holding Pattern-%
Promoters
FII
DII
Others
Current
15.94
39.93
16.16
27.97
1 year forward P/E
1QFY14 4QFY13
16.04
16.04
39.55
40.52
18.28
17.51
26.13
25.93
On an ongoing basis, Infosys will retain its revenue acceleration and margin expansion,
also operating metrics will turn into greenery from hay. Upgradation of earning
guidance by management hinted to join the party to enjoy with 12-14% earnings
growth for FY14E like its bellwether.
Considering the strategy to build clients relation, execution of growth oriented policy
and combination of reduced onsite costs and higher utilization would be an optimistic
growth story despite recent hiccups of top management exit.
Healthy Margin growth: During the quarter, its EBIT margin expanded by 310 bps (QoQ)
to 25%. The company's cost cutting measures are yielding the expected gains. This again
is in line with what the market was expecting. During the December quarter, Infosys
selling and marketing expenses declined by 13.3% compared to the second quarter.
Administrative expenses too have declined by 18.4% in dollar terms. Both these have
helped improve operating margins.
Steady volume growth: The volume growth in the quarter was weak, 0.7% (QoQ)
growth with stable pricing growth of 0.7%(QoQ), but it is also weak for the group and for
Infosys. we expect it to be improve in the coming quarters.
Healthy deal pipeline: Overall, the company continues to show signs of recovery at the
operational level. The company has added 54 new clients in the quarter and added 15
clients where the deal size is over $100 million. This implies that client confidence is
returning.
Earning Guidance: Infosys upgrades its earning guidance from 6-10% to 9-10% to 11.512% for FY14E, now nearest to NASSCOM guidance (12-14%). Management is very
confident to achieve the guidance figure and stated much focused on creating superior
financial performance ahead.
View and Valuation: Infosys seems to be on its way to rediscovering its past mojo with
revenue momentum kicking, and the NRN invisible hand in play. Further
announcement of strategic acquisitions, better utilization of cash balances, better deal
win, consistent client traction and revenue momentum would help the company to
bridge the gap with rivals such as TCS.
Considering the revised guidance by management and its growth priority than margin
inching up strategy, we upgraded our EPS from Rs 181/208 to Rs 188/218 for
FY14E/15E. At a CMP of Rs 3549, it trades at 16.3x FY15E At a CMP of Rs 3549, it trades
at 16.3x FY15E earnings. We retain our “BUY” view on the stock with a target price of
target price of Rs 3910 (revised from 3620).
Rs, Crore
Financials
3QFY14
2QFY14
3QFY13
(YoY)-%
(QoQ)-%
Revenue
13026
12965
10424
25.0
0.47
EBITDA
3258.9
2836.9
2677
21.7
14.88
PAT
2874.9
2406.9
2369
21.4
19.44
EBITDA Margin
25.0%
21.9%
310bps
25.7%
(70bps)
PAT Margin
22.1%
18.6%
350bps
22.7%
(60bps)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
2

3. Infosys.
Revenue growth in USD term-(QoQ)
In USD term, Sales grew by 1.65%(QoQ)
in USD term and 0.5%(QoQ) in INR term,
led by 0.7% volume growth and
0.7%(QoQ) pricing growth. Mgt revised
revenue growth to 11.5%-12% for FY14E.
(Source: Company/Eastwind)
Margin-%
EBIT margin expanded by 310 bps (QoQ)
to 25%. Mgt expects to see margin
growth in near term.
(Source: Company/Eastwind)
Segmental Performance:
On segmental front: Infosys has reported teen set of growth in all segments;
Sales Growth-%
Margin-%
Segments
Sales contribution-%
Margin-%
QoQ
YoY
QoQ
YoY
BFSI
33.5%
0.8%
24.2% 29.9%
340bps
80bps
Manufacturing
22.8%
-1.3%
31.3% 24.2%
340bps (50bps)
Energy&Utilities
19.1%
-0.1%
16.4% 28.8%
30bps (130bps)
Retail, Logis-&Life sc24.6%
2.1%
27.6% 27.52% 560bps (230bps)
On QoQ, Company’s margin improved in
entire segments .
(Source: Company/Eastwind)
Volume and Pricing Growth (QoQ)-%
With 0.7% pricing growth, volume
growth was reported by 0.7%
growth(QoQ), impacted by seasonal
wave.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
3

4. Infosys.
Geography wise revenue contribution-
we expect that growth from Euro as well
as Europe would prove a milestone for
the company ahead because of healthy
demand environment and optimistic
tempo of clients expanding.
(Source: Company/Eastwind)
On geographical front: During the quarter, company has reported 4% revenue growth
from Euro and RoW each, which contributes 25% and 13% of sales. While revenue from
US declined by 2%, it contributes 60% of Sales.
Clients Metrics
Clients Concentration:
Clients Category
1QFY13 2QFY13 3QFY13
Top clients
4.1%
4%
3.60%
Top 5 clients
16.2%
16%
15%
Top 10 clients
25.3%
25.40% 23.90%
Total Clients and Clients Addition:
4QFY13
3.6%
14.7%
24.0%
1QFY14 2QFY14
3.9%
4%
14.9%
15%
24.0%
24.5%
3QFY14
3.70%
14%
23.5%
The company has added 54 new clients in
the quarter and added 15 clients where
the deal size is over $100 million. This
implies that client confidence is
returning.
Clients, number 3QFY13 4QFY13 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14
Active clients,nos
665
694
711
715
776
798
836
873
888
New clients
49
52
51
39
89
56
66
68
54
(Source: Company/Eastwind)
Headcount Metrics:
Employee's
Total Employees (Cons-)
Net additions
Laterals hired
LTM Attrition (Stand-)
1QFY13
151,151
1,157
5,233
14.9%
2QFY13
153,761
2,610
3,656
15.0%
3QFY13
155,629
1,868
4,351
15.1%
4QFY13 1QFY14
156,688 157,263
1,059
575
3,545
3,008
16%
16.9%
2QFY14 3QFY14
160,227 158404
2,964 -1823
3,806 3,333
17.3% 18.10%
Its attrition increased to 18% from
17.3%(2QFY14) on LTM basis, however
on sequentially basis they have been able
to control its attrition. we hope that the
further salary hikes across the board will
bring down the attrition levels going
forward.
Utilization:
We expect that Infy’s improving
utilization despite higher attrition
compare to its nearest bellwethers is
good sign for its future growth story.
(Source: Company/Eastwind)
The Company's Utilization is likely to keep inching up, which could lead to margin
expansion for a couple of quarters and that is going to be a huge positive for Infosys as a
company.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
4

5. Infosys.
Key facts from Management Interview;
■ Management upgraded its earning guidance for FY14E from 9-10% to 11.5-12%. This
guidnace means the company only has to achieve flat growth in the fourth quarter to
meet the projection.
■ With 85% of the company’s revenues coming from clients based in US and Europe, the
company should hope the current economic recovery in developed countries would help
its revenues.
■They are seeing confidence coming back from client’s metrics. However, they expect
[their] budgets only remain stable from last year. Clients are still focused on cost.
■ The Company is looking to bring in about maximum 6,000 off-campus offers starting
late January early February, so there is a lot of activity going on that is bringing people in,
engaging and developing.
Financials
Rs in Cr,
Sales, INR
Employee Cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
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
22742
12085
2792
14877
7865
905
982
7942
0
7942
1681
6261
FY11
27501
14856
3677
18533
8968
854
1211
9325
0
9325
2490
6835
FY12
33734
18340
4671
23011
10723
928
1904
11699
0
11699
3367
8332
FY13
40352
22565
6254
28819
11533
1099
2365
12799
0
12799
3370
9429
FY14E
50330
28185
8556
36741
13589
1371
2567
14785
0
14785
3992
10793
FY15E
59631
33691
10734
44425
15206
1624
3578
17160
0
17160
4633
12527
4.8%
9.3%
4.6%
20.9%
14.0%
9.2%
22.7%
19.6%
21.9%
19.6%
7.6%
13.2%
24.7%
17.8%
14.5%
18.5%
11.9%
16.1%
34.6%
34.9%
27.5%
32.6%
33.9%
24.9%
31.8%
34.7%
24.7%
28.6%
31.7%
23.4%
27.0%
29.4%
21.4%
25.5%
28.8%
21.0%
53.1%
12.3%
21.2%
54.0%
13.4%
26.7%
54.4%
13.8%
28.8%
55.9%
15.5%
26.3%
56.0%
17.0%
27.0%
56.5%
18.0%
27.0%
2615
57.4
23049.0
109.1
401.7
27.2%
25.1%
6.5
24.0
2765
57.4
25976.0
119.0
452.4
26.3%
45.9%
6.1
23.2
2865
57.4
31332.0
145.1
545.6
26.6%
24.0%
5.3
19.7
2400
57.4
37994.0
164.2
661.7
24.8%
45.1%
3.6
14.6
3549
57.4
45629.8
188.0
794.7
23.7%
23.0%
4.5
18.9
3549
57.4
54797.5
218.2
954.3
22.9%
19.8%
3.7
16.3
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
5

6. INDUSIND BANK
Result update
NEUTRAL
CMP
402
Target Price
428
Previous Target Price
Upside
6
Change from Previous( Rs)
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
532187
INDUSINDBK
561/318
22400
7.88
6171
Stock Performance
Absolute
Rel.to Nifty
1M
-9.2
-7.0
1yr
-6.9
-9.7
YTD
-6.9
-9.7
Share Holding Pattern-%
Current 24QFY1 3QFY1
4
3
Promoters
15.2
15.2
15.3
FII
41.1
39.9
42.3
DII
7.2
7.4
7.0
Others
36.4
37.5
35.4
INDUSIND Bank Vs Nifty
"NEUTRAL"
13th Jan, 2014
Despite of higher profit we remain have neutral view on the stock owing to
shifting of loan mix from retail loan to corporate banking. We anticipate two
things-(a) margin compression, (b) higher slippage. Retail loan generally have
higher yield in nature than corporate loans. Corporate loan has big ticket size
loans and in slowdown of economy, corporate loan emerges as biggest
slippage risk than other loans. At the current price of Rs.405, stock is trading
at 2.4 times of one year forward book. We value bank at Rs.428/share which
would be 2.5 times of FY14E’s book value.
Better than expected earnings led by higher loan growth and margin
During quarter Indusind bank reported better than expected earnings largely due to
higher loan growth and margin expansion. In 3QF14, bank reported NII growth of
26.4% YoY supported higher yield on asset to 13.7% and margin expansion of 20
bps YoY. Other income grew by 35% YoY to Rs. 480 cr in which fee income
registered growth of 30% and trading, forex and other reported 101% growth in YoY
due to low base.
Declined cost to income ratio boost PPP growth
Operating leverage (Operating expenses to total asset) remained at elevated level
but cost to income ratio declined on both front i.e. on sequential and yearly basis as
well. During quarter bank reported employee cost growth of 22% and operating cost
growth of 22% YoY to Rs.206 cr and Rs.563 cr respectively. Cost to income ratio
improved by 80 bps sequentially and 280 bps yearly to 46.5%. This led pre
provisioning profit growth of 37% YoY.
Asset quality witnessed deterioration in sequential basis
During quarter bank witnessed deterioration in asset quality with GNPA and net NPA
in absolute term deteriorated by 14.7% QoQ and 51% QoQ respectively. Fresh
slippages were 1.4% (annualized) as against 1.1% in last quarter. Bank made lower
provisions against loan loss, as the result net NPA as the percentage of net loan
reached to 0.3% as against 0.2% in 2QFY14. Provision coverage ratio (without
technical write off) declined to 73.6% from 80% in 2QFY14 but still above of
regulatory requirement of 70%.
Financials
NII
Total Income
PPP
Net Profit
EPS
2011
1376
2090
1082
577
12.4
2012
1704
2716
1373
803
17.2
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
Rs, Cr
2013
2014E
2015E
2233
2787
4053
3596
4562
5827
1839
2452
2972
1061
1320
1633
20.3
25.3
31.1
(Source: Company/Eastwind)
6

7. INDUSIND BANK
Better than expected profit on the back of healthy core earnings, lower CI ratio and
lower provision
With the support of healthy core earnings, improvement in cost income ratio and lower
provisions, net profit grew by 30% YoY to Rs. 347 cr as against our expectation of
Rs.303 cr largely due to higher than expected loan growth and operating leverage.
Healthy profit led ROA and ROE to 1.74% and 16.8% respectively.
Margin expansion of 10 bps YoY to 3.7%
Bank reported NIM expansion of 20 bps YoY to 3.7% largely due to improvement in loan
yield whereas cost of deposits remained flat. Going forward margin would be
compressed due to bank’s strategy to shift loan mix from consumer to corporate. Loan on
yield during quarter was 13.7% versus 13.5% in last quarter while cost of fund by and
large stable at 10%.
Moderate deposits growth due to muted current and term deposits growth
In balance sheet front, bank reported moderate growth 10% YoY in deposits largely due
to stagnant growth in current account and term deposits. Demand deposits grew by 4%
YoY whereas saving deposits grew by 50% YoY. As a percentage of total deposits
demand deposits and saving deport were 15.7% and 16.5% versus 16.6% and 12.1% in
3QFY13 respectively. CASA ratio was remained flat at 29.6% from 31.4% in 2QFY14 and
28.7% in 3QFY13. Term deposited reported growth of 4.7% YoY to Rs.382 bn.
Loan growth higher than industry average and shifting of loan mix
Loan reported 27.4% YoY growth above industry average of 20% despite of slowdown in
economy. During quarter bank witnessed shifting of loan composition from consumer
finance division to corporate finance which would be result of margin compression and
deterioration asset quality. Consumer loan (which is generally high yielding in nature)
composition has changed to 47% of loan advance from 52% in 3QFY13 whereas
corporate banking division constitute 53% of loan. Corporate loans are generally in high
ticket size and in slowdown of economy; there is high chances of such loan slip into NPA.
But this quarter we note that bank is able to improve it yield in both front. Corporate yield
improved to 11.9% from 11.5% and retail loan improved to 15.6% from 15.5% in
sequential basis.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
7

8. INDUSIND BANK
Fundamenatl Through Graph
NII profit led by higher loan growth and
margin expansion
Sequentail and yearly improvement of CI
ratio boosted PPP
Higher core earnings, improvement in CI ratio
and lower provisions support profit growth
higher than expecattion
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
8

9. INDUSIND BANK
Fundamenatl Through Graph
Loan growth higher than industry average
and moderate growth in deposits led by
muted current deposits and term deposits
Margin expansion of 10 bps on account of
increased in loan yiled and stable cost of fund
Valuation Band (1yr forward book value)
Trading at 1.5 times of one year forward
book which we believe fair looking at indsury
headwinds and economy
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
9

10. INDUSIND 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
Balance Sheet data( Rs. Bn)
Net Worth
Deposits
Borrowings
Total Liabilities
Investments
Advances
Total Assets
Asset Quality
GNPA
NPA
% GNPA
% NPA
3QFY14
1739
368
36
0
2143
480
2624
1413
730
480
1210
206
357
563
647
126
521
174
347
2QFY14
1611
365
42
0
2019
417
2435
1319
700
417
1117
202
327
529
588
89
499
169
330
3QFY13
1455
325
21
0
1800
356
2156
1223
578
356
934
168
293
461
472
79
393
126
267
% YoY
% QoQ
19.5
7.9
13.5
0.8
8664
56247
14771
81799
20134
52469
81799
8313
53058
13995
77422
19413
48968
77422
7495
51098
6567
67896
17594
42426
67896
626
165
1.2
0.3
546
109
1.1
0.2
422
125
1.0
0.3
71.9
-12.9
333.3
-13.3
19.1
6.2
35.0
15.2
21.7
7.7
15.6
7.2
26.4
4.3
35.0
15.2
29.6
8.4
22.1
1.9
21.9
9.3
22.0
6.5
37.1
10.1
60.3
42.0
32.5
4.4
38.1
3.2
29.8
5.0
15.6
4.2
10.1
6.0
124.9
5.5
20.5
5.7
14.4
3.7
23.7
7.1
20.5
5.7
48.3
14.7
32.0
51.0
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
10

11. INDUSIND BANK
Financials & Assuptions
Income Statement
2011
2012
2013
2014E
2015
Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)
3589
2213
1376
5359
3655
1704
6983
4750
2233
8308
5521
2787
10419
6367
4053
714
2090
1012
2716
1363
3596
1775
4562
1775
5827
1008
1082
1343
1373
1756
1839
2110
2452
2855
2972
504
577
577
180
1193
803
263
1576
1061
455
1997
1320
535
2437
1633
Balance Sheet
2011
2012
2013
2014E
2015E
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)
34365
42362
23
11563
24
8682
14572
35064
34
54117
28
15867
37
9460
19654
44321
26
62234
15
20537
29
15559
23338
54071
22
74681
20
22404
9
18670
28005
67589
25
Ratio
2011
2012
2013
2014E
2015E
10.8
5.4
5.3
7.0
12.0
7.4
7.3
6.7
12.7
6.5
8.8
7.6
0.0
6.6
8.9
7.5
12.5
6.5
8.5
7.5
Valuation
2011
2012
2013
2014E
2015E
Book Value
CMP
P/BV
87
264
3.0
101
321
3.2
146
405
2.8
171
405
2.4
195
405
2.1
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Deposit
Avg. Cost of Borrowimgs
9331
5525
13551
26166
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
11

12. Private Bank Result Preview 3QFY14
Stock Performance During Quarter
Revenue growth would be moderate owing to tepid loan growth
Performance of banking sector is likely to remain modest in 3QFY14E as most of
private sector banks in our coverage are expected to reported muted net interest
income owing to tepid loan growth and stress in asset quality. However private sector
banks are expected to report stable asset quality on sequential basis as compare to
PSBs. Loan loss provision are expected to remain high due to higher restructure
assets are in pipeline as per some of key bank management. We expect impairment
of asset in private sector banks are less and slippages are expected to remain same
as in 2QFY14. We expect NII to grow by 23.6% YoY in our private banking
coverage universe. HDFC Bank and DCB are expected to report 34% and 22% YoY
in 3QFY14E led by higher than industry loan growth and stable NIM.
Operating leverage high provision dent net profit
Profitability of private sector banks are expected to report 11% YoY on the back of
loan loss provisions, MTM provisions, cost income ratio and lower core earnings.
HDFC bank and DCB are expected to report 23% YoY and 26% YoY growth in their
3QFY14E while most of large and mid cap banks are expected to report muted profit
growth. With the flow of FCNR deposits, we expect deposits cost to come down from
present level but most likely the bank get benefit from 4QFY14 and onwards.
Nifty Vs Bank Nifty during Quarter
Muted loan growth reported by system
In 2QFY14 banking industry experience loan growth of 18% YoY led by transfer of
CP/CD borrowings to bank loans while in 3QFY14 loan growth has moderated to
15% YoY (as on 13th Dec.2013) due to revival of bond and lower demand of
corporate loan led by slowdown in economy. We expect loan growth of 15-20% YoY
growth in private sector while DCB and HDFC bank are expected to grow by
20%+YoY loan growth.
Loan (Rs tn) and YoY Gr(%)
Deposits growth lead by flow of FCNR deposits
Deposits growth in the system registered 17% YoY growth as per RBI date (as on
13th Dec.2013) due to flow of FCNR deposits through RBI’s special concession
window. As per RBI data total fund inflow through FCNR is the tune of US$ 26 bn
which would help bank to keep cost of deposits low. But we expect bank would get
benefit from 4QFY14 and onwards. We expect lower cost of deposits of deposits in
private sector banks largely due to strong franchise base network. HDFC bank and
ICICI bank which have CASA of 40%+ would be benefited more than other banks in
term of low cost of fund. Through FCNR deposits we expect Yes Bank would be
leader but actual benefit would come from next quarter.
Asset quality pressure continue to persist
Asset quality pressure is likely to remain in 3QFY14E due to rising interest rate, high
inflation and slower pace of economic growth. Gross slippages are expected to be
elevated as per most of banker. We expect restructure asset in private sector bank
would be less as compare to PSBs. With the implementation of FRP (route through
which loans lead to investment book), banks are expected to report lower less
restructure asset as against previous queerer. In worsen macroeconomic
environment, we expect asset quality to remain at the level of 2QFY14.
12
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

13. Private Bank Result Preview 3QFY14
Outlook
Broadly banking indices outperform Nifty by 6% in third quarter and most of banking
stocks are trading at attractive valuation. Despite of, we have caution view on account of
slowdown in economy, high interest rate and inflationary pressure. High inflation would be
risk for the economy going forward. Any rise in inflation would result of rise in interest
rate by RBI in its third quarter monetary policy review on 28th Jan.2014 which would be
negative for banking industry. Most of banking stocks are expected to report moderate
revenue and profit growth owing to multiple headwinds. In private sector banking
universe we like HDFC Bank, ICICI bank and DCB.
Axis Bank
Axis Bank
Rs Cr
NII
PPP
Net Profit
3QFY14E
3006
2772
1333
2QFY14
2937
2750
1362
3QFY13
2495
2311
1296
% YoY Growth
20.5
19.9
2.9
% QoQ Growth
2.3
0.8
-2.1
We expect Axis Bank to report 20% YoY loan growth and 12% YoY deposits growth.
Cost Income ratio is expected to be 42% while loan loss provision was remain same at
sequential basis. Profitability of bank would be muted on account of non improvement of
loan yield.
DCB
DCB
Rs Cr
NII
PPP
Net Profit
3QFY14E
88
42
34
2QFY14
91
40
33
3QFY13
72
32
27
% YoY Growth
22.2
31.3
25.9
% QoQ Growth
-3.3
5.0
3.0
We expect loan and deposits growth of DCB would be higher than industry average.
Profitability would be grown on account of stable asset quality. We expect Cost to Income
ratio at 66% and NIM are expected to compression by >10 bps on sequential basis. Key
monitor able would be CI ratio.
HDFC Bank
HDFC Bank
Rs Cr
3QFY14E
NII
5087
PPP
3695
Net Profit
2289
2QFY14
4477
3387
1982
3QFY13
3799
3024
1859
% YoY Growth
33.9
22.2
23.1
% QoQ Growth
13.6
9.1
15.5
We expect bank to report loan and deposits growth of 21% and 14% respectively. Asset
quality would be remained under control and profitability are expected to grow on account
of comfortable core earnings and stable asset quality. Operating leverage is expected to
be in better position.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
13

14. Private Bank Result Preview 3QFY14
ICICI BANK
ICICI BANK
Rs Cr
3QFY14E
NII
4505
PPP
4235
Net Profit
2504
2QFY14
4044
3888
2352
3QFY13
3499
3452
2250
% YoY Growth
28.8
22.7
11.3
% QoQ Growth
11.4
8.9
6.5
We expect loan and deposits growth of 15% and 11% YoY for 3QFY14E respectively.
Revenue growth was due to hike of lending rate and asset quality is expected to be
stable on sequential basis. Operating leverage and cost of fund would be key
monitorable.
J&K BANK
J&K BANK
Rs Cr
3QFY14E
2QFY14
3QFY13
% YoY Growth
% QoQ Growth
NII
679
682
594
14.3
-0.4
PPP
496
496
435
14.0
0.0
Net Profit
339
303
289
17.5
12.0
J&K bank is expected to report 17.5% YoY profit growth on account of 20%+loan growth
and stable asset quality. We expect little bit higher of gross slippage during the quarter as
bank reported higher slippage in previous quarter. NIM would be expanded <10 bps
QoQ due to high loan yield and lower cost of fund likely to get benefit from CASA
deposits.
YES Bank
YES Bank
Rs Cr
3QFY14E
2QFY14
3QFY13
% YoY Growth
% QoQ Growth
NII
578
672
584
-1.0
-14.0
PPP
664
713
563
17.9
-6.9
Net Profit
358
371
342
4.7
-3.5
We expect Yes bank to report muted earnings on account of high credit cost and
restructure assets. Loan growth and deposits growth are expected to be line with industry
average. We expect NIM compression on account higher cost of fund and lower loan
yield. NIM is key monitorable for the quarter.
Result Preview ; at a glance
PRIVATE BANK
AXISBANK
CUB
DCB
DHANBANK
FEDERALBNK
HDFCBANK
ICICIBANK
INDUSINDBK
INGVYSYABANK
J&KBANK
KARURVYSYA
SOUTHBANK
YESBANK
Total
NII
3006
207
88
96
609
5087
4505
657
397
679
308
374
578
16591
3QFY14E
PPP Net Profit
2772
1333
152
71
42
34
22
0.72
418
230
3695
2289
4235
2504
561
303
275
173
496
339
186
41.5
255
131
664
358
13773
7808
NII
2937
190
91
82
548
4477
4044
700
440
682
298
364
672
15525
2QFY14
PPP Net Profit
2750
1362
141
84
40
33
18
-1.85
354
226
3387
1982
3888
2352
588
330
276
176
496
303
157
83
212
127
713
371
13020
7427
NII
2495
163
72
74
497
3799
3499
578
403
594
308
353
584
13419
3QFY13
PPP Net Profit
2311
1296
131
85
32
27
14
4
394
211
3024
1859
3452
2250
472
267
263
162
435
289
212
113
235
128
563
342
11538
7033
YoY Growth
NII
PPP Net Profit
QoQ Growth
NII
PPP Net Profit
20.5
27.0
19.9
16.0
2.9
-16.5
2.3
8.9
0.8
7.8
-2.1
-15.5
22.2
31.3
25.9
-3.3
5.0
3.0
29.7
57.1
82.0
17.1
22.2
-138.9
22.5
6.1
9.0
11.1
18.1
1.8
33.9
28.8
22.2
22.7
23.1
11.3
13.6
11.4
9.1
8.9
15.5
6.5
13.7
18.9
13.5
-6.1
-4.6
-8.2
-1.5
4.6
6.8
-9.8
-0.4
-1.7
14.3
14.0
17.5
-0.4
0.0
12.0
0.0
-12.3
-63.3
3.4
18.5
-50.0
5.9
-1.0
23.6
8.5
17.9
19.4
2.3
4.7
11.0
2.7
-14.0
6.9
20.3
-6.9
5.8
3.1
-3.5
5.1
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
14

15. GAIL
Company Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
Neutral
348
532155
GAIL
395/273
44,047
399457
6168
Stock Performance
1M
0.6
1.7
About The Company
GAIL (India) Limited is a gas utility company. The Company is engaged in transport
through pipeline; manufacture of basic chemicals, fertilizer and nitrogen compounds,
plastics and synthetic rubber in primary forms; extraction of crude petroleum; extraction of
natural gas and electric power generation, transmission and distribution. The company
operates in five segments viz Gas Transmission Business ,LPG Transmission Business,
Gas Trading Business, Petrochemical Business and LPG and Liquid Hydrocarbon
Business.
1HFY14 Financial Highlights :
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Cap (Rs Crores)
Average Daily Volume
Nifty
Absolute
Rel. to Nifty
"NEUTRAL"
10th Jan' 14
1yr
-5.6
-8.7
YTD
-5.0
-20.0
Share Holding Pattern-%
Current
1QFY14 4QFY13
Promoters
57.3
57.3
57.3
FII
17
16.7
16.3
DII
21.6
22
22.2
Others
3.9
3.9
4
1 yr Price Movement Vs Nifty
Company registered a turnover of Rs. 26902.25 Cr, up by 19% in H1FY14 compared to
corresponding previous year period. There was fall of 10% in operating profits of the
company to Rs 2971.72 Cr for H1FY14. The Other income was down 8% to Rs 279.6 Cr
while Interest cost grew 99% to Rs 169.36 Cr, The net profits for H1FY14 was Rs
1723.84 Cr down by 19 %in comparison to 2HFY13.
The company during the first half of the current financial year, earned the revenues of Rs.
23,437 Cr from Natural Gas Trading up 24% YoY as compared to corresponding period
of the last year. The revenues from Natural Gas Transmission increased by 9% YoY to
Rs. 2,066 Cr for H1FY14. The net sales from LPG and Liquid Hydrocarbons business
increased by 11% YoY to Rs. 2,043 Cr as against Rs. 1,842 Cr for the same period of
last year. The net sales from Petrochemicals business increased by 54% to Rs 2,237 Cr
for 1HFY14. The revenues from LPG transmission increased by 72% to Rs. 189 Cr in
1HFY14.
1HFY14 Production Highlights :
During 1HFY14, Petrochemical Production was 231 TMT, up by 20 % YoY it was 193
TMT in 1HFY13.The Petrochemical Sales were 229 TMT, up by 37 % against 167 TMT in
the corresponding period in the previous year. The LPG and Other Liquid Hydrocarbon
production were 685 TMT, against 684 TMT in 1HFY13.
The LPG transmission was 1,428 TMT. The Natural Gas transmission was 97.25
MMSCMD, against 107.72 MMSCMD. The Natural Gas stood at 80.33 MMSCMD in
1HFY14 as against 81.92 MMSCMD in 1HFY3.
Highlights of Conference Call:
→The company has commissioned Kochi pipeline on 25th August 2013.
→Company has shared Rs 698.68 Cr towards LPG subsidy in the quarter ended
September 2013 compared to Rs 785.67 Cr in the corresponding previous year period.
→Ministry of Petroleum and Natural gas has capped subsidy burden of Gail (India) at Rs
1400 Cr for FY'14.
→Capex incurred during H1FY'13 was Rs 2525 Cr as Rs 1500 Cr on Petrochemical, Rs
400 Cr on pipeline expansion, Rs 270 Cr on E&P and Rs 360 Cr towards equity
contribution.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
2QFY14
13944.6
1405.5
915.7
10.1%
6.6%
1QFY14
12855.6
1136.7
606.5
8.8%
4.7%
(QoQ)-%
8.5
23.6
51.0
120bps
180bps
2QFY13
11361.2
1380.3
985.4
12.1%
8.7%
Rs, Crore
(YoY)-%
22.7
1.8
-7.1
(200bps)
(210bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
15

16. GAIL
Continued
→ Projected Capex for FY'14 is Rs 5000 Cr and Rs 3500 Cr in FY'15.
→ The company has borrowed Rs 585 Cr during Q2FY'14.
→ Total borrowings stood at Rs 10632 Cr at the end of September 2013 quarter-out of which
56% loan is foreign currency loan. Almost 90% of foreign currency loan is financially or
naturally hedged.
→ The company anticipates increase in gas availability in near future. It expects around 20-25
mmscmd of gas over a period of 3-4 years including 11-12 mmscmd of gas from domestic
sources and 10-15 mmscmd from LNG.
→GAIL has shared Rs 698.68 Cr towards LPG subsidy in the quarter ended September 2013
compared to Rs 785.67 crore in the corresponding previous year period
Recent Events
GAIL management indicated that, MoPNG has in-principle agreed to provisionally cap GAIL’s
FY14 subsidy at INR14b, implying 2HFY14 subsidy to be nil. As per our view the final decision
will be post Finance Ministry consent.
Risk & Concern
Uncertainty on under recovery sharing
Near-term gas supply visibility which may lead to under-utilization of new pipelines
View and Valuation :
The stock is currently trading at Rs 346 and business outlook going forward ,management
guidance does not provide us with much convincing thought .We donot see much upsides
attached with the stock in current business scenario. We therefore recommend NEUTRAL
view on the stock.
Graphical Dipiction
2QFY14 SEGMENTAL SALES TURNOVER
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
16

17. GAIL
SALES TREND
Sales increased by 22% YoY driven by higher
revenues from the natural gas
trading and petrochemical segments
(Source: Company/Eastwind)
EBITDA & OPM%
(Source: Company/Eastwind)
Adj PAT & NPM %
Higher Depcreciation owing to capitalization
of assets with respect to new
pipelines and higher interest cost resulted in
a NPM decline
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
17

18. CMC
"Book Profit"
9th Jan, 2014
"On track to deliver"
Company update
Book Profit
CMP
Target Price
High Price (08.01.2014)
Upside
Change from Previous
1657
1690
1729
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
517326
CMC
1780/1107
5020
20884
6175
Stock Performance
1M
15.0
15.4
Absolute
Rel. to Nifty
1yr
29.2
24.6
YTD
40.0
35.8
Share Holding Pattern-%
Promoters
FII
DII
Others
Current
51.12
23.32
17.83
7.73
1 year forward P/E
4QFY13 3QFY13
51.12
51.12
19.87
21.84
20.46
19.05
8.55
7.99
We had initiated this stock at a CMP of Rs 1208 (5th June 2013) and now, it achieved
its target of Rs1690, we advice to book profit on the stock because of its premium
valuation at current price. However, sentiment could take a knock in the short run,
since investors may prefer paying a premium for stock with better earnings visibility.
We believe, CMC will continue with its efforts to enhance revenue contribution of high
margin System Integration (SI) and ITES segments. Further, its high focus on education
space will also add margin in near term. Considering recent healthy demand
environment across the IT space with favorable supply side scenario, we remain
confident on the stock for better earning visibility and stable margin picture.
For 3QFY14E, we expect to see 2-1.5% (QoQ) sales growth in USD term and 1-1.5%
(QoQ) in INR term, PAT is expected to decline by 2-3% (QoQ) led by a marginal growth in
the forex loss. We expect 50-100bps improvement in EBITDA margin to 15.5-16%,
sequentially.
Key things to watch: Outlook for deal pipeline, updates on SMAC(social, mobility,
analytics, cloud) and guidance on forward looking statement.
Healthy Deal pipeline: The deal pipeline is in line with the last year. It indicated that
pursuing good number of deals in the Developed and as well emerging markets.
Considering current sound demand environment across geographies (like US and
Europe) and verticals Company is more optimistic for clients acquisition and deal
executions ahead.
Now, CMC is focusing on new emerging segments like IMS (Infrastructure
Management Services), Cloud, Big data, Mobility and Analytics. Considering its
impressive client as well as market response, company is expecting to quantify into
revenue. Its new and emerging projects like Mining Management System, GPS System
and Port & Cargo Management System would play a major role for generating
revenue.
View and Valuation: View and Valuation: CMC expects the growth momentum to
improve in the quarters ahead and the revenue growth to be higher than the NASSCOM
guidance in FY14. The Company remains a strong with excellent earning visibility led by
joint effort of market strategy by TCS (contributes 59% of sales) in its product and
solutions. Considering the company’s premium valuation, we advice “Book Profit” on
the stock. At a CMP of Rs 1657, stock trades at 16.3x FY14E earnings. Our view could
be change with management guidance and post earnings of coming quarter.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
2QFY14
560.75
88.41
67.3
15.8%
12.0%
1QFY14
486.61
77.04
53.12
15.8%
10.9%
(QoQ)-%
15.2
14.8
26.7
110bps
2QFY13
458.64
76.59
49.4
16.7%
10.8%
Rs, Crore
(YoY)-%
22.3
15.4
36.2
(90bps)
(120bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
18

19. CMC
Financials;
Rs, Cr
Net Sales
Purchases of stock-in-trade
Employee Cost
Subcontracting and outsourcing cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
EBIT
Interest Cost
PBT
Tax
PAT
Growth-%
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Subcontracting Cost
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout ratio
P/BV
P/E
FY10
870.73
99.35
276.16
173.56
159.94
709.01
161.72
9.85
18.75
151.87
3.17
167.45
24.23
143.22
FY11
1084.40
99.28
345.13
262.35
170.17
876.93
207.47
10.46
11.80
197.01
0.22
208.59
32.42
176.17
FY12
1469.34
145.40
440.22
446.11
213.63
1245.36
223.98
21.37
17.46
202.61
0.02
220.05
68.59
151.46
FY13
1927.87
188.56
521.65
679.73
222.88
1612.82
315.05
23.20
13.17
291.85
0.18
304.84
76.76
228.08
FY14E
2239.31
201.54
593.42
794.96
235.13
1825.04
414.27
41.95
22.39
372.33
0.2
394.52
86.79
307.73
FY15E
2600.41
234.04
702.11
923.15
273.04
2132.34
468.07
60.69
26.00
407.38
0.25
433.14
99.62
333.52
-7.4%
27.7%
23.3%
24.5%
28.3%
23.0%
35.5%
8.0%
-14.0%
31.2%
40.7%
50.6%
16.2%
31.5%
34.9%
16.1%
13.0%
8.4%
18.6%
17.4%
16.4%
19.1%
18.2%
16.2%
15.2%
13.8%
10.3%
16.3%
15.1%
11.8%
18.5%
16.6%
13.7%
18.0%
15.7%
12.8%
31.7%
19.9%
14.5%
31.8%
24.2%
15.5%
30.0%
30.4%
31.2%
27.1%
35.3%
25.2%
26.5%
35.5%
22.0%
27.0%
35.5%
23.0%
1340.0
1.50
510.68
95.48
340.45
28.0%
18.6%
3.94
14.03
2079.6
1.50
654.02
117.45
436.01
26.9%
19.9%
4.77
17.71
994.8
3.00
772.19
50.49
257.40
19.6%
23.2%
3.86
19.70
1410.0
3.03
946.26
75.27
312.30
24.1%
19.4%
4.51
18.73
1657
3.03
1192.11
101.56
393.44
25.8%
20.1%
4.21
16.32
1657
3.03
1454.91
110.07
480.17
22.9%
21.2%
2.78
15.05
(Source: Company/Eastwind)
Rating and Price Target Chart
Updation Detail
Date
5-Jun-13
4-Jul-13
18-Jul-13
21-Oct-13
20-Dec-13
9-Jan-14
Update Detail
Initiation
Company Update
Result Update
Result Update
Company Update
Company Update
CMP
View
Target Price
1208
BUY
1380
1315
BUY
1490
1318
BUY
1490
1334
BUY
1490
1510
BUY
1690
1729 Profit Booking
1690
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
19

20. KPIT Tech.
"Book Profit"
7th Jan' 14
"On billion dollar journey"
Company update
Book Profit
CMP
Target Price
Previous Target Price
180
177
-
Upside
Change from Previous
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
532400
KPIT
186/92
3445
144511
6162
Stock Performance
Absolute
Rel. to Nifty
1M
24.7
25.5
1yr
64
61.1
YTD
57.2
54
Share Holding Pattern-%
Promoters
FII
DII
Others
Current
22.87
36.42
11.12
29.59
Price Performance
1QFY14 4QFY13
24.25
24.3
32.79
30.8
10.93
11.8
32.03
33.1
We had initiated this stock at a CMP of Rs 115 (14 Jan 2013) and now, it achieved its
target of Rs 177. Despite better expectation of growth and attractive visibility of its
expansion through inorganic initiative and focus into emerging verticals, we advice to
book profit on the stock because of its premium valuation. However, sentiment could
take a knock in the short run, since investors may prefer paying a premium for stock
with better earnings visibility.
The company expects better earnings, confident of generating a positive cash flow for
FY14E, after considering the balance payments for existing M&A deals.
KPIT ‘s Management is confident to report USD Revenue for FY14 to be in the range of
USD 465 Mn to USD 475 Mn, and INR PAT for FY14 to be in the range of INR 2,309 Mn to
INR 2,388 Mn. They expect better H2FY14E than H1FY14E. KPIT expects to close some
more deals in next quarter, which will again drive growth and expects the company’s
growth to be stronger in the 2H FY14E.
For 3QFY14E, we expect to see 4% (QoQ) sales growth in USD term and 2.7% (QoQ) in
INR term, PAT is expected to grow by 3-4% (QoQ) led by a marginal growth in the forex.
We expect 50-100bps improvement in EBITDA margin to 16-16.5%, sequentially.
Key things to watch: Outlook of deal pipeline, Updates on SAP and Revolo, and
acquisition plan.
Close to Revolo launch and working on cloud based IB tool: The unit has been in the
process of conducting trials in 40 vehicles. As per the management, by next year it could
be a part of revenue. It is also working on cloud based BI tools as well as Analytics tool
for opportunities in warranty management.
Robust pipeline of large deals: During the quarter, company closed 2 larges deals in
excess of USD 10 mn 1 in Europe and 1 in the US and have created a robust pipeline of
larger deals. We expect this large set of deals would reveal stronger 2HFY14
performance with judicious mix of volume and value growth.
View and Valuation: Despite all previous ups and down in IT sector, global demand
environment is on the way of recovery and growth. Impressive organic growth despite
inorganic thrust (acquired 10 companies in the last 10 yrs), Potential option value from
success of its hybrid engine venture Revolo (on trial) . KPIT has targeted to reach USD
1billion in revenues by 2017.
We expect KPIT to grow its revenues at a CAGR of 24% over FY12-14E.Considering the
company’s premium valuation, we advice “Book Profit” on the stock. At a CMP of Rs
180, stock trades at 13.8x FY14E earnings. Our view could be change with
management guidance and post earnings of coming quarter.
Rs, Crore
Financials
2QFY14
1QFY14
(QoQ)-%
2QFY13
(YoY)-%
Revenue
702.76
613.21
14.6
567.02
23.9
EBITDA
108.1
96.6
11.9
94.1
14.9
PAT
66.7
60.1
11.0
48
39.0
EBITDA Margin
15.4%
15.8%
(40bps)
16.6%
(120bps)
PAT Margin
9.5%
9.8%
(30bps)
8.5%
(100bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
20

21. KPIT Tech
Financials
Rs, Cr
Net Sales-USD
Net Sales
Employee Cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
Extra Ordinery Items
EBIT
Interest Cost
PBT
Tax
PAT
PAT (excluding EO Items)
Growth-%
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Subcontracting Cost
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout ratio
P/BV
P/E
Rating and Price Target Chart
FY10
153.76
731.64
265.92
304.70
570.62
161.02
30.80
1.20
-26.45
130.22
2.74
102.23
16.91
85.32
111.77
FY11
224.07
987.05
529.95
308.82
838.77
148.28
41.12
6.74
0.00
107.16
3.78
110.12
15.49
94.63
94.63
FY12
306.71
1500.00
771.78
511.97
1283.75
216.25
44.49
13.82
10.05
171.76
7.32
188.31
43.67
144.64
134.59
FY13
410.46
2238.63
1140.79
762.32
1903.11
335.52
47.16
11.74
-1.30
288.36
13.99
284.81
76.55
208.26
209.56
FY14E
465.00
2790.00
1422.90
906.75
2329.65
460.35
62.58
13.95
-45.17
397.77
21.37
345.17
93.20
251.98
297.15
FY15E
558.00
3320.10
1726.45
1095.63
2822.09
498.02
88.34
16.60
16.60
409.68
18.61
424.28
116.68
307.60
291.00
-7.8%
-12.2%
129.4%
34.9%
-7.9%
10.9%
52.0%
45.8%
52.8%
49.2%
55.2%
44.0%
24.6%
37.2%
21.0%
19.0%
8.2%
22.1%
22.0%
17.8%
11.7%
15.0%
10.9%
9.6%
14.4%
11.5%
9.6%
15.0%
12.9%
9.3%
16.5%
14.3%
9.0%
15.0%
12.3%
9.3%
36.3%
20.8%
16.5%
53.7%
14.5%
14.1%
51.5%
17.2%
23.2%
51.0%
0.0%
26.9%
51.0%
0.0%
27.0%
52.0%
0.0%
27.5%
115.00
7.90
387.11
10.80
49.00
22.0%
6.4%
2.35
10.65
168.05
8.70
603.19
10.88
69.33
15.7%
6.8%
2.42
15.45
122.90
17.80
712.55
8.13
40.03
20.3%
4.9%
3.07
15.12
99
19.28
1036.23
10.80
53.75
20.1%
7.9%
1.84
9.17
180
19.28
1272.42
13.07
66.00
19.8%
6.3%
2.73
13.77
180
19.28
1557.46
15.95
80.78
19.8%
7.3%
2.23
11.28
Updation Detail
Date
14-Jan-13
29-Jan-13
3-May-13
5-Jul-13
25-Jul-13
13-Sep-13
24-Oct-13
22-Nov-13
8-Jan-14
Update Detail
Initiation
Result Update
Result Update
Company Update
Result Update
Company Update
Result Update
Company Update
Company Update
CMP
View
115
BUY
116
BUY
106
BUY
120
BUY
132
BUY
147
BUY
144
BUY
146
BUY
180 Profit Booking
Target Price
145
145
145
145
145
162
162
177
177
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
21

22. IT Industry: 3QFY14E results preview
"As usual flattish 3rd quarter"
Price performance of our coverage:
(Source: Eastwind)
Index Performance:
↑59.5%
↑6.9%
(Source: Eastwind)
CNX IT v/s USD/INR
↑59.5%
↑6.9%
For 3QFY14E, Indian IT players would report muted earnings growth because of seasonal
weakness like furloughs and holidays impacts, already it is understood fact by
consensus. However, this quarter would report better earning and margin growth than
same quarters of last year. Because of stable currency movement, margin could be seen
flattish or marginally inched up.
Post result, earning guidance for FY15E and forward looking statement by most of
companies would be considered as an important fact. Considering recent demand
environment scenario and healthy growth outlook of US and Europe, we are expecting
to see positive outlook on the sector for the year 2014.
Key facts of 3QFY14E earnings:
Seasonal Impacts on (QoQ) earnings, while better on YoY:
For 3QFY14E, we expect to see lower rate of earning growth impacted by furloughs and
holidays, already YoY growth would be a favorable. The December quarter has
traditionally been a soft quarter for the IT sector. On USD term, revenue of top-4 IT
players could be reported at a range of 2-3.3% sequentially. We expect Tier-1 IT to report
constant-currency revenue growth of 1.4-3% (QoQ).
Stable Margin and flat currency movement:
During the quarter, margin for IT Industry will largely be flattish or see marginal decline on
sequential basis. Across the tier-1 IT players, Infosys could improve its margin because of
cost rationalization and slow pace of currency benefit TCS will maintain its previous
quarters margin picture. While, margin of HCLTech and Mindtree could see some dip
because of wage hike during the quarter.
New discretionary spending:
Because of better economic scenario, demand environment expansion has taken place.
Now, domestic IT players have been able to retain its market share in US and successfully
improved its market share in Euro region, at a same point pricing pressure has turned out.
During the quarter, most of multimillion-dollar projects have been bagged from Euro
region. During the current fiscal, out of 27 large projects 11 orders deputed from Euro
(including UK) region and only 3 from US.
Management commentary and forward looking statement:
Post revealing 3QFY14E earnings, street will closely watch on the response of its clients
budgeting cycle to assess the strength of the demand environment and its sustainability.
Most of companies will comment on earning guidance, margin outlook and order pipeline
for FY15E. Taking recent attractive supply side scenario, we would like to see hiring
guidance and commentary on maintaining utilization rate and attrition rate.
Movement of INR-USD and Other Currencies v/s USD
1QFY12
↑13%
INR/USD
Average
Closing
EUR - USD
Average
Closing
GBP-USD
Average
Closing
AUD-USD
Average
Closing
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
44.65
44.59
45.73
48.86
50.84
53.08
50.29
51.4
54.09
56.8
55.19
52.85
54.14
54.97
54.17
54.28
55.93
59.54
62.08
62.59
61.97
61.84
1.41
1.45
1.4
1.36
1.35
1.3
1.31
1.33
1.28
1.26
1.25
1.29
1.3
132
1.32
1.28
1.31
1.3
1.33
1.35
1.36
1.38
1.62
1.61
1.61
1.57
1.57
1.55
1.57
160
1.57
1.56
1.58
1.62
1.61
1.62
1.55
1.52
1.54
1.51
1.55
1.6
1.61
1.66
1.06
1.07
1.05
0.99
1.01
1.02
1.05
1.03
1.01
1.02
1.04
1.04
1.03
1.03
1.04
0.99
0.92
0.93
1.04
0.91
0.93
0.89
(Source: Company/Eastwind)
(Source: Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
22

23. IT Industry: 3QFY14E results preview
Results preview
TCS
Key things to watch - Comments on
volume, demand environment, deal
closures from US, pricing, and
discretionary spends.
Rs, Cr
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
Sales
16069.93 20977.24 21606.56
3.0%
34.5%
EBITDA
4660.49
6632.95
6300.3
-5.0%
35.2%
PAT
3549.6
4633.33
5096.66
10.0%
43.6%
EBITDA Margin
29.0%
31.6%
31.0%
(60bps)
200bps
PAT Margin
22.1%
22.1%
23.6%
150bps
150bps
We expect company is likely to report 3.5% (QoQ) revenue growth in USD term. On a
constant currency basis, the growth will be 3% QoQ.
Margins are likely to decline marginally because of Flattish currency movement
Forex loss as a hedging will reduce the net income growth.
INFY
Street would like to see some up
gradation in given revenue guidance
from 9-10% to 12% for FY14E.
Rs, Cr
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
Sales
EBIT
PAT
EBITDA Margin
PAT Margin
10424
2677
2369
25.7%
22.7%
12965
3346.9
2407
25.8%
18.6%
13069.1
3424.1
2695.8
26.2%
20.6%
0.8%
2.3%
12.0%
40bps
200bps
25.4%
27.9%
13.8%
50bps
(190bps)
We expect revenue growth of 2.2% in USD term for3rd qtr FY14E, sequentially.
Margin is expected to remain stable and benefits from cost optimisation initiatives are
offset by the negative impact of the rupee appreciation by 1.2% during the quarter.
We expect Infosys to increase their FY2014 guidance to ‘at least 12%’ from 9-10% earlier.
The company needs a quarterly run rate of average 2% for the next two quarters to
achieve 12% for FY14E.
WIPRO
Rs, Cr
Key things to watch – 4th quarter
revenue guidance, margin commentary,
visibility of growth/hiring in software
services.
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
9587.5
2050.2
1598.1
21.4%
16.7%
10990.7
2503.8
1932
22.8%
17.6%
11342.40
2552.04
1984.16
22.5%
17.5%
3.2%
1.9%
2.7%
(30bps)
(10bps)
18.3%
24.5%
24.2%
10bps
80bps
The company had guided a strong 3QFY14 USD revenue growth guidance of 1.8-3.6% QoQ
for IT services .We expect IT services revenue growth to be closer to the higher end of this
range and to be 3% QoQ in USD terms.
The large deals won in the previous quarter are ramping up as expected and company
could reveal its orders pipeline.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
23

24. IT Industry: 3QFY14E results preview
HCLTECH
Key things to watch - outlook for
pricing/volumes and deal ramp up and
deal re bid, margin commentary,
visibility of growth/hiring in software
services.
Rs, Cr
2QFY13
1QFY14
2QFY14E
(QoQ)-%
(YoY)-%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
6273.8
1416.6
974.3
22.6%
15.5%
7961
2093
1416
26.3%
17.8%
8160.03
2080.81
1472.64
25.5%
18.0%
2.5%
-0.6%
4.0%
(80bps)
20bps
30.1%
46.9%
51.1%
290bps
250bps
Expect revenue growth of 3% in $-term QoQ and margins to be down by 50-100bps which
is largely attributable to the wage hikes effective from October 1, 2013 for some
employees..
TECHM
Key things to watch – Outlook for deal
pipeline, outlook on BT/AT&T (the
biggest clients), updates on SMAC(social,
mobility,
analytics,
cloud)
and
comments on synergies
Rs, Cr
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
3523.7
756.9
455.9
21.5%
12.9%
4771.5
1110.85
718.2
23.3%
15.1%
4819.22
1084.32
754.11
22.5%
15.6%
1.0%
-2.4%
5.0%
(80bps)
50bps
36.8%
43.3%
65.4%
100bps
270bps
We expect revenue growth guidance of 2.5% in USD term and and full integration of
Complex IT.
Expect margins to be don by 50-100bps (QoQ) - wage hikes deferred to 4QFY14
CMC
Rs, Cr
Key things to watch – Outlook for deal
pipeline, updates on SMAC(social,
mobility, analytics, cloud) and guidance
on forward looking statement.
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
492.97
83.2
61.07
16.9%
12.4%
560.75
88.41
67.3
15.8%
12.0%
566.36
87.79
65.62
15.5%
11.6%
1.0%
-0.7%
-2.5%
(30bps)
(40bps)
14.9%
5.5%
7.4%
(140bps)
(80bps)
We expect revenue growth guidance of 1.5% in USD term and expect margin ramp up by
40bps.
HEXAWARE
Rs, Cr
Key things to watch: Key stance on
dividend policy, deal wins and revenue
growth momentum and outlook for
order win.
4QCY12
3QCY13
4QCY13E
(QoQ)-%
(YoY)-%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
507.52
109.02
66.20
21.5%
13.0%
621.1
147.74
98.7
23.8%
15.9%
629.17
147.86
103.64
23.5%
16.5%
1.3%
0.1%
5.0%
(30bps)
60bps
24.0%
35.6%
56.5%
200bps
350bps
Expect 3% US$ revenue growth. Hexaware discontinued quarterly guidance since the
previous quarter.
Expect 30-50bps decline in margin.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
14

25. IT Industry: 3QFY14E results preview
KPIT
Key things to watch: Outlook of deal
pipeline, Updates on SAP and Revolo,
and acquisition plan.
Rs, Cr
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
563.3
87.9
59.9
15.6%
10.6%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
702.8
108.1
66.7
15.4%
9.5%
721.97
115.52
69.40
16.1%
9.7%
2.7%
6.9%
4.0%
70bps
(90bps)
28.2%
31.4%
15.9%
50bps
120bps
We expect to see revenue growth by 4% (QoQ) in USD term.
PERSISTENT
Key things to watch: Commentary on
deal pipeline and contribution from IPled revenue
Rs, Cr
3QFY13
2QFY14
3QFY14E
(QoQ)-%
(YoY)-%
333
82.4
49.5
24.7%
14.9%
Sales
EBITDA
PAT
EBITDA Margin
PAT Margin
432.4
100.8
60.8
23.3%
14.1%
436.06
104.65
66.88
24.0%
15.3%
1%
4%
10%
70bps
80bps
30.9%
27.0%
35.1%
(70bps)
40bps
We expect overall revenue growth at 3% in USD term due to healthy growth in IP led
business and $1mn HP deal.
PAT is expected to grow by 10% (QoQ) despite a marginal growth in margin due to the
forex gain of Rs 5-6 cr v/s 9 cr of same previous quarter.
NIITTECH
Rs, Cr
Key things to watch: Updates on new
deal win, revenue traction from all
geographies & inorganic initiatives.
3QFY13
2QFY14
3QFY14E
(QoQ)-%
Sales
514.4
587.3
593.50
1.1%
EBITDA
81.3
88.6
86.06
-2.9%
PAT
56.6
60.4
57.38
-5.0%
EBITDA Margin
15.8%
15.1%
14.5%
(60bps)
PAT Margin
11.0%
10.3%
9.7%
(60bps)
We expect the company to report 1% QoQ growth in USD terms. Due to the
lower other income, we expect the net income to decline by 5%.
(YoY)-%
15.4%
5.9%
1.4%
(130bps)
(130bps)
View and valuation:
Company
TCS
INFOSYS
HCLTECH
WIPRO
TECHM
CMC
NIITTECH
KPIT
HEXAWARE
PERSISTENT
eCLERX
TATAELXSI
ZENSARTECH
CMP
Upside
View
Target
(06.01.14)
%
2239.6
BUY
2360
5.4%
3514.2
BUY
3622
3.1%
1251.3
BUY
1415
13.1%
558.05
NEUTRAL 450
1817.65
BUY
2330
28.2%
1734.45
REDUCE 1693
379.85
BUY
408
7.5%
181.55
REDUCE
177
138.65
BUY
141
1.4%
990.05
REDUCE
960
1064.6
BUY
1360
27.7%
413.65
REDUCE
210
397.95
BUY
400
0.5%
FY13
71.82
164.2
58.10
25.0
85.48
75.27
36.28
10.80
11.1
46.12
64.25
10.63
40.03
EPS-Rs
FY14E
90.74
181.1
71.87
25.15
144.15
101.56
44.03
13.07
13.1
63.40
71.61
17.53
57.16
FY15E
102.37
208.2
83.49
27.4
161.64
110.07
53.38
15.95
14.3
76.92
83.65
19.76
74.62
FY13
31.19
21.40
21.54
22.28
21.26
23.04
10.47
16.81
12.49
21.47
16.57
38.91
9.94
P/E-x
FY14E
24.68
19.40
17.41
22.19
12.61
17.08
8.63
13.89
10.61
15.62
14.87
23.60
6.96
FY15E
21.88
16.88
14.99
20.37
11.25
15.76
7.12
11.38
9.69
12.87
12.73
20.93
5.33
FY13
36.42%
24.8%
30.72%
21.7%
35.91%
24.10%
20.0%
20.10%
27.2%
18.1%
43.8%
16.94%
23.22%
RoE-%
FY14E
36.22%
23.0%
29.10%
18.9%
38.31%
25.81%
19.6%
19.80%
27.0%
20.5%
37.9%
23.55%
26.07%
FY15E
32.95%
22.2%
26.39%
17.8%
30.38%
22.92%
19.3%
19.75%
26%
20.4%
34.4%
22.37%
26.34%
key macro indicators in US economy and recent interaction by Industry experts bring some optimistic view in the IT sector. The
meaning full recovery has been seen in US labor market. At the same time, business investment and consumer confidence appear to
be coming back. We believe, uptick in discretionary spend could be sustain over the next 12-18ms.
Commentary on demand outlook, deal pipeline and discretionary spending will be key topic to discuss post results. At a same,
management commentary would also be monitor able.
Hence, with strong medium term earnings visibility, better demand environment and optimistic management comments, we are
positive on (In order of preference) TCS, INFY, and HCL tech from large cap coverage and TECHM, eClerx and NIITTech from Mid cap
space.
Narnolia Securities Ltd,
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