IEA Daily Fundamental Report on Indian Equities and CIPLA

IEA-Equity
Strategy

India Equity Analytics

14th Feb, 2014

Daily Fundamental Report on Indian Equities

CIPLA :

"BUY"

Edition : 206
14th Feb 2014

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with
well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the
quarter while domestic business grew by 9% YoY to 1044 Cr. ................................................ ( Page : 2-3)

Somany Ceremics: "Outlook Challenging in near term"

"REDUCE"

14th Feb 2014

At the current CMP of Rs. 131, the stock is trading at a PE of 15.1x and 11.0x of FY14E and FY15E. The company can post RoE of 17.0% and 17.1%
& EPS of Rs. 8.7 and Rs. 10.8 FY14E and FY15E. We are downgrading the rating to "Reduce" and advise investors to book profits at current level.
Over the longer term, we expect the efforts to introduce new ventures, curtail costs and the expected economic revival driven by an uptick in
demand in the latter part of FY2015, to boost its fortunes. In the interim period, we are reducing our target multiple to 10x of FY15E and price
target to Rs 115. ............................................................ ( Page : 4-5 )

Coal India LTD :

"BUY"

14th Feb 2014

Earlier we suggested, if earnings falls, then price might go beyond 256, but p/b level may be maintained , else we assume that since the
company is a good dividend paying company with Roe above 30% we assume p/b should remain above 3. We see Coal India at a attractive
valuation to go long from the current dips. So we stick to our previous estimates and recommend Maintain Buy CIL at price dips with a target
price of Rs.307/-. ............................................................... ( Page : 6-8)

CANARA BANK :

"NEUTRAL"

14th Feb 2014

Canara bank’s performance was muted all through despite of healthy loan growth. Canara bank was unable to translate its balance sheet growth
in profit & loos account due to lower base rate among peers. Bank’s asset quality was deteriorating sequentially along with higher fresh
slippage. PCR was lowest among peers (without technical write off). We are disappointed with growth parameters of the bank. We have neutral
view on the stock. ..................................................................... ( Page : 9-13)

Finolex Cables Ltd: "Reasonable prospects…..."

"Book Partial
Profit "

13th Feb 2014

Finolex Cables’ (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales and EBITDA margin. Decline in communication
cable segment segments as well as high raw material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore in
the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter ended December 2012. Third Quarter result were
marginally below our expectaton which led us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even after
posting marginally below result the stock is quite attractive at current market price of Rs. 81 and left a limited upside of 11%, however we
advised our reader to book a part profit on stock . ......................................... ( Page : 14- 15)

IT Industry;NASSCOM Guidance :"FY15E; a year of growth opportunity"

13th Feb 2014

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to grow by 9-12% based on broad feedback loop from
companies and captives. Overall, Indian IT Industry is expected to reach the mark of USD130billion. For FY14, Indian IT industry is expected to
report 13% growth, in line with NASSCOM guidance at 12-14%. ....................................................... ( Page : 16-18)

ORIENTAL BANK :

"BUY"

13th Feb 2014

Orient Bank’s profitability declined by 31% YoY on the back of subdues growth at NII level led by margin compression. Higher operating
expenses and tax rate caused muted return ratios. Asset quality pressure remained persist and asset impaired (GNPA + Restructure advance)
remained at elevated level. We have buy rating on the stock due to inexpensive valuation. We value bank at Rs.216/share which is 0.4 times of
FY14E’s book. ................................................. ( Page : 19- 23)
Narnolia Securities Ltd,

"BUY"

CIPLA
Result Update

BUY

CMP
Target Price
Previous Target Price
Upside
Change from Previous

381
440
15%

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

500087
CIPLA
450/354
30,591
617290
6,001

Stock Performance-%
Absolute
Rel. to Nifty

1M
-4.5
-1.7

1yr
-3
-4.3

YTD
-2
-14

Share Holding Pattern-%
Promoters
FII
DII
Others

Current 2QFY14 1QFY1
4
36.8
36.8
36.8
23.8
23.8
23.1
10.6
10.9
10.8
28.8
28.5
29.3

One Year Price vs Nifty

14th Feb' 14

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10
% YoY led by healthy growth in export business with well support from India operations to.
The revenues from export business including formulations and API grew by 36 % to 1509
Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. The growth in
export revenues was primarily due to growth in anti-retroviral, anti-cancer, anti-allergic and
anti-biotic segments.
The operating EBITDA for the quarter under review came Rs 403 Cr and OPM at 17.88
%.The OPM declines by more than 600 bps YoY due to the increase in the R&D and the
ramp up in the Staff cost during the quarter. The employ cost as percentage of sales stands
at 14 % while it was 12 % for the same time last fiscal. The other expenses as percentage
of sales were 27% for the 3QFY14 versus 25 % in 3QFY13.The other expenditure
increased largely due to rise in R&D expenses and rise in the cost owing to filings and
setting up of the front end during the quarter. The R&D expenses 4.5% of Sales during the
quarter.
The net profits for the quarter came at Rs 261 Cr and NPM stands at 11.43 %. The Rs 40
Cr Forex gain is included in the other income during the quarter. The tax rate for the quarter
was nearly at same rate as in corresponding last quarter at 25 %.
The Company filed 10 ANDA's in the last nine months and got 6 approvals for the same
period. It has 35 ANDA's under approval as on 31st December 2013. The few of the
approval products are commercialized. Cipla Medpro formed as acquisition of
Medpro,South Africa last year added 500 Cr to top line and 50 Cr to the operating profits
during the quarter.
The management of the company after the results said that the Global respiratory unit
expects some of launches in the next year. It has set up new global respiratory team during
the quarter. The Combination inhalers planned to launch in FY'15.Company expects to be
more than 5% of Sales on the back of ramp up filings for the FY'15.The Capex is 90 Cr
during the quarter and expects to be Rs 400 Cr FY'14. The Rollover Capex of previous year
is Rs 150 Cr during the year.
View & Valuation
The stock at its CMP of Rs 381 is trading at 19.58 x of one year forward FY14E EPS of Rs
19.40.The stock has reacted negatively after 3QFY14 results however we don’t see any
downside risks to our estimates. We further believe that Cipla-Medpro would be earning
accretive in medium to long term horizons and we view the recent correction a good entry
point for the stock. We maintain our view BUY for the stock with Target Price of Rs
440.

Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
2282
403
261
17.7%
11.4%

2QFY14
2347
533
376
22.7%
16.0%

(QoQ)-%
(2.8)
(24.4)
(30.6)
(500bps)
(460bps)

3QFY13
2070
492
338
23.8%
16.3%

(YoY)-%
10.2
-18.1
-22.8
(610bps)
(490bps)

(Source: Company/Eastwind)

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

2

CIPLA
Business Trend

The revenues from export business including
formulations and API grew by 36 % to 1509
Cr for the quarter while domestic business
grew by 9% YoY to 1044 Cr.


Revenue Trend %

Net revenues at Rs 2282 up 10 % YoY led by
healthy growth in export business with well
support from India operations to.


OPM & NPM Trend %

The OPM declines by more than 600 bps YoY
due to the increase in the R&D and the ramp
up in the Staff cost during the quarter.



3

Somany Ceremics Ltd.

V-

"Reduce"
13th Feb' 14

"Outlook Challenging in near term…….."
Result update

Reduce

CMP
Target Price
Upside

131
115
95
-12.2%
21.1%

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

531548
SOMANYCERA
61/155
452
3,109
6,001

Stock Performance-%
1M
13.2
16.0

Absolute
Rel. to Nifty

1yr
59.9
58.1

YTD
103.2
97.6

Promoters
FII
DII
Others

3QFY14
63.3
2.8
1.7
32.2

2QFY14 1QFY14
63.3
63.3
0.8
0.2
1.9
2.0
34.0
34.5

The Q3FY2014 results were weak marked by a double-digit decline in the profit after tax on the
back of subdued increase in fuel cost, dollar v/s rupee volatility and a pressure on the margin.
The management expect improvement in the demand conditions in the near term and guided a
revenue growth of 20% in FY14E-15E, however we expect the revenue growth to be
somewhere arround 12-15% and financial performance to remain weak on account of margin
pressure. Consequently, we are downgrading the rating to "Reduce" and advise investors to
book profits at current level. Over the longer term, we expect the efforts to introduce new
ventures, curtail costs and the expected economic revival driven by an uptick in demand in the
latter part of FY2015, to boost its fortunes. In the interim period, we are reducing our target
multiple to 10x of FY15E and price target to Rs 115.
Result highlights :
For Quarter Ended 2QFY14
• For the quarter ended September 2013, Somany Ceramic registered 6.5% rise in sales to Rs
284.5 crore.
• OPM fell 230 basis points to 6.0% taking OP down 8.3% to Rs 17.0 crore.
• Other income also rise 77.8% to Rs 48 lakh and interest cost decreased 8.9% to Rs 4.6 crore.
• As depreciation increased 9.1% to Rs 5.7 crore, PBT fell 41.1% to Rs 7.1 crore.
• Taxation fell 40.3% to Rs 2.3 crore (tax incidence grew from 32.5% to 32.9) and PAT fell 41.4%
to Rs 4.8 crore.
For Nine Month Ended 9MFY14
• For the nine month ended December 2013, Somany Ceramic registered 18.7% rise in sales to Rs
848.8 crore.
• However, OPM dived from 8.5% to 6.4% taking OP down 10.7% to Rs 54.5 crore.
• Other income jumped 28.1% to Rs 1 crore and interest cost decreased 8.2% to Rs 13.8 crore.
• As depreciation increased 8.7% to Rs 16.5 crore, PBT fell 20.3% to Rs 25.2 crore.
• Taxation fell to 15.5% to Rs 8.6 crore but tax incidence grew from 32.1% to 34.0% which finally
saw PAT falling 22.5% to Rs 16.6 crore.
Management Guidence FY14E
Management is expected to achive a top-line growth of arround 20-25% in FY14E.

1 yr Forward P/B
Valuations :
At the current CMP of Rs. 131, the stock is trading at a PE of 15.1x and 11.0x of FY14E and FY15E.
The company can post RoE of 17.0% and 17.1% & EPS of Rs. 8.7 and Rs. 10.8 FY14E and FY15E.
We are downgrading the rating to "Reduce" and advise investors to book profits at current
level. Over the longer term, we expect the efforts to introduce new ventures, curtail costs and
the expected economic revival driven by an uptick in demand in the latter part of FY2015, to
boost its fortunes. In the interim period, we are reducing our target multiple to 10x of FY15E
and price target to Rs 115.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
284.5
17.0
4.8
6.0%
1.7%

2QFY14
305.6
19.4
6.0
6.4%
2.0%

(Standalone)

(QoQ)-%
-6.9%
-12.8%
-20.5%
(40) bps
(30) bps

3QFY13
267.2
22.1
8.2
8.3%
3.1%

Rs, Crore
(YoY)-%
6.5%
-23.3%
-41.4%
(230) bps
(140) bps

(Source: Company/Eastwind Research)


4

Somany Ceremics Ltd.
Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

446
2
448
42
28
14
16
14
5
9
1
2.5
0.4

542
3
545
56
41
15
13
31
10
20
2
5.9
0.7

720
1
721
68
50
17
17
34
11
24
3
6.9
0.8

879
1
880
74
56
18
21
36
11
25
3
7.3
0.9

1054
3
1056
86
65
21
20
48
15
33
5
9.4
1.4

1250
3
1253
83
59
24
17
44
14
30
6
8.7
1.9

1438
3
1440
95
75
26
17
60
19
41
6
11.9
1.9

9.5%
3.0%
2.0%
28.5%
3.9%
13.5%
12.3%

10.3%
5.6%
3.8%
18.8%
2.2%
24.6%
13.8%

9.4%
4.8%
3.3%
18.0%
2.1%
23.0%
15.7%

8.4%
4.1%
2.9%
19.5%
2.5%
20.1%
16.6%

8.1%
4.5%
3.1%
14.6%
2.2%
21.3%
17.8%

6.6%
3.5%
2.4%
6.6%
1.4%
17.0%
9.8%

6.6%
4.2%
2.9%
9.1%
1.4%
19.4%
12.0%

65
138
202
3
9

83
162
245
3
31

104
158
262
3
38

126
151
276
3
38

153
142
295
3
65

177
130
307
3
131

211
130
341
3
131

18.8
0.5
1.7
3.5
2.2
6.9

24.0
1.3
3.1
5.3
2.2
6.6

30.1
1.3
2.9
5.6
2.8
6.9

36.5
1.0
2.7
5.1
3.2
7.0

Performance
Revenue
Other Income
Total Income
EBITDA
EBIT
DEPRICIATION
INTREST COST
PBT
TAX
Reported PAT
Dividend
EPS
DPS
Yeild %
EBITDA %
PBT %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
Total Debt
Capital Employed
No of Share
CMP
Valuation

(Ammount in crore)
Book Value
P/B
Int/Coverage
P/E
Net Sales/CE
Net Sales/Equity


(Source: Company/Eastwind Research)

44.4
1.5
3.3
6.8
3.6
6.9

51.2
2.6
3.4
15.0
4.1
7.1

61.2
2.1
4.4
11.0
4.2
6.8

(Figures In crore)


5

Coal India LTD.
Result Update
CMP
Target Price
Upside

261
307
330
18%
-7%

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

533278
COALINDIA
372/238
176226
17622
6001

Stock Performance-%
1M
-1.3
2.8

Absolute
Rel. to Nifty

1yr
-21.2
8.8

YTD
-21.4
8.6

Promoters
FII
DII
Others

3QFY14
90.0
5.5
2.4
2.1

2QFY14 1QFY14
90.0
90.0
5.5
5.4
2.3
2.3
2.2
2.4

1 yr Forward P/B

Source - Comapany/EastWind Research

"Buy"
14th Feb' 14

CIL reported Rs.16928 Cr Sales (-2% YOY) against Rs.17325 Cr in Q3FY13 due to poor off
takes of the coal during the quarter. Q3FY14 PAT slipped to -11% to Rs.3894 Cr against
Rs.4395 Cr in Q3FY13.Q3FY14 EBIDTA/ton remained flat YOY at Rs.350/ton while it is
increased 36% through QOQ. EBIDTA margin corrected in this quarter to 24% from 18% in
Q2FY14.Depriciation slipped 11% to 442Cr against 495 Cr in Q2FY14, moderating the
burden on EBIDTA.
On the expenditure side contractual expenses increased ~20% to Rs.154/ton from
Rs.128/ton in Q2FY14.Powerfuel cost and other expenses per ton remained flat, while
cost of project per ton decreased to Rs149/ton from Rs.206/ton in the previous quarter.
Poor Realization of Coal India showed little uptick like 2% to Rs.1445/ton.
Fluctuation in Domestic and international coal price impacted coal offtake
In this quarter the international coal price were relatively down by 9% against Q2FY14
while the domestic coal price were showed upward movement. So the Major domestic
consumers of coal imported coal at lower price, hence it impacted the off takes and
revenue of CIL slipped -2% YOY and unable to meet the target off takes. Govt decision
related labor strikes impacted the productions of CIL too. Sequential increase in tax rate
further contracted the NPM%. From January we have seen a recovery in international
coal price which is positive sign for CIL.
Rescheduling Date of hearing stands a key concern
Competition Appellate Tribunal stays Rs 1,773 Crore fine on CIL, and will decide on the
matter on next hearing 16th April 2014 (Rescheduled from 11th Feb 2014). The quantum
of penalty Rs 1,773.05 Crore is equal to three per cent of the PSU's average turnover for
the last three years. We believe, A Rs 1800-crore fine could possibly mean less profits for
the company and less dividend income for its owners. But as the main owner, the
government, will pocket this amount in the form of a fine, it will not be poorer in any
way.
Realization gain on Revised Coal Price
Meanwhile, Coal India Ltd is likely to get additional revenue of Rs 2,119 Crore in this fiscal
on account of revision in dry fuel prices.CIL (Coal India Ltd) has revised and rationalized
the basic notified prices of all the grades of non-coking coal except GI, G2 and G5.The
estimated additional revenue due to revision of basic notified price for the current
financial year is Rs 2,119 cr. Though the incremental revenue is a positive sign but it fails
to change our previous valuation.
Financials :
Q3FY14
Y-o-Y %
Q-o-Q %
Q3FY13
Q2FY14
Net Revenue
16928
-2.3
9.8
17325
15411
EBITDA
4104
-4.3
46.9
2794
4288
Depriciation
442
5.2
-10.7
495
420
Interest Cost
10
0.0
25.6
8
10
Tax
1930
4.9
36.6
1412
1839
PAT
3894
-11.4
27.6
4395
3052
(In Crs)


6

Coal India LTD.
View & Outlook
We revised our estimates due to sequential poor production and off takes of CIL. We
expect modest increase in sales volumes growth during FY2013-15 on account of poor
off take capabilities of CIL. Management showed his confidence about their coal
production target and coal off take target for FY2014E, in previous quarter, which is
482mt and 492mt respectively. But Due to sequential poor production and off take we
revised the target to 464mt and 475mt respectively. Also, we expect CIL’s margins to
decline during FY2014 due to lower e-auction realizations and higher staff costs/other
expenses. We are expecting flat sales growth for 2014.Coal India Ltd sprang a positive
surprise by reporting higher-than-expected realizations as well as earnings before
interest, tax, depreciation and amortization (Ebitda). Average price realizations
increased by 2.3% sequentially to Rs.1,444.87 per tonne which is positive sign for future
growth.
Recommendation
Earlier we suggested, if earnings falls, then price might go beyond 256, but p/b level
may be maintained , else we assume that since the company is a good dividend paying
company with Roe above 30% we assume p/b should remain above 3. We see Coal India
at a attractive valuation to go long from the current dips. So we stick to our previous
estimates and recommend Maintain Buy CIL at price dips with a target price of Rs.307/-.

P/L PERFORMANCE
Net Revenue from Operation
Cost Of Projects & Contractual
Power and fuel
contractual expenses
Employee benefit Expence
Expenditure
EBITDA
Depriciation
Interest Cost
Tax
PAT
ROE %
OPERATING MATRIX
Coal Production in MT
Coal Offtake in MT
Revenue Generation From unit Ton
Avg Man Power (in numbers)
Productivity Per Man

FY11
50234
7573
1755
4580
20481
40390
9843
1673
79
5595
10868
33
FY10
431
416
1073
404744
1066

FY12
62415
5123
2013
4901
26705
40857
21558
1969
54
6484
20588
51
FY11
431
425
1183
390243
1105

FY13
68303
6556
2333
5802
27943
50219
18084
1813
45
7623
17356
36
FY12
436
433
1441
377447
1155


FY14E
69960
8372
2591
6049
28943
53705
16255
1860
34
7310
17921
40
FY13
452
465
1468
364736
1240
7

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

Trading At :

FY10
6316
20956
27273
343
1620
2545
772
1404
5443
0
12035
2211
610
4402
2169
39078
8066
17921
FY10
0.0
0.0
4.9
1.7
1.0

FY11
6316
26998
33314
1334
33
22461
645
12387
8490
779
12065
2057
845
5586
3419
45806
11180
21646
FY11
5.7
17.3
22.8
4.3
3.7

FY12
6316
34137
40453
1305
0
28271
829
15595
9785
759
12681
1848
1017
6071
5663
58203
13478
24688
FY12
5.5
32.6
29.2
4.3
3.1

FY13
6316
42156
48472
1078
0
31144
837
20447
12385
712
12754
3496
1181
5618
10480
62236
16189
25479
FY13
4.0
27.5
52.7
4.2
2.8

FY10
FY11
FY12
10727
12819
16323
-131
-3822
3565
10596
8997
19888
950
697
-10410
2163
2911
-7382
13708
12606
2095
Down 21% from its 52week High
Up 14% from its 52 week Low

FY13
15948
-6839
9109
-1833
-7852
-575


8

CANARA BANK
Result update
CMP
Target Price
Upside

NEUTRAL
213
256
20

Market Data
BSE Code
NSE Symbol

532483
CANBK

52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

Stock Performance
1M
Absolute
-17.2
Rel.to Nifty
-13.3

459/190
9427
1.93 lakh
6001

1yr
-52.3
-54.1

YTD
-52.3
-54.1

3
Promoters
69.0
67.7
67.7
FII
10.3
11.9
12.7
DII
12.9
13.1
13.3
Others
7.7
7.3
6.3
CANARA BANK Vs Nifty

"NEUTRAL"
14h Feb2014

Canara bank’s performance was muted all through despite of healthy loan
growth. Canara bank was unable to translate its balance sheet growth in profit
& loos account due to lower base rate among peers. Bank’s asset quality was
deteriorating sequentially along with higher fresh slippage. PCR was lowest
among peers (without technical write off). We are disappointed with growth
parameters of the bank. We have neutral view on the stock.
Moderate growth in NII was due to margin compression
During quarter bank’s NII grew by 12% YoY to Rs.2227 cr despite of 32% loan
growth and 26% deposits growth. Moderate growth in NII was due to margin
compression in YoY basis which was lead by lower base rate among peers. On NII
level, bank’s interest earnings asset grew by 18% YoY while interest bearing
liabilities grew by 20% due to higher share of wholesale deposits which somehow
increased cost. Other income was flat from last quarter and was stood at Rs.851 cr
versus Rs.846 cr. Consequently from lower support of other income, revenue grew
by 8.6% YoY to Rs.3078 cr.
Higher opex and moderate NII growth led muted operating profit growth
Operating cost increased by 12.9% YoY was due to higher cost registered in other
operating expenses which were came because of 47 new branches and 245 ATMs
added on yearly basis. Employee cost was flat on YoY basis while other operating
expenses increased by 26.3% YoY. Cost to income ratio 180 bps improved on YoY
basis to 48.3%. With moderate NII growth and higher operating expenses led
operating profit growth of 4.9% YoY.
Deteriorating asset quality with higher slippage
On asset quality front, gross NPA increased by 8% QoQ in absolute term whereas
fresh slippage was high at Rs.2100 cr versus Rs.1520 cr in previous quarter. In
percentage term, GNPA stood at 2.8% versus 2.7% in previous quarter whereas
fresh slippage in annualised basis increased by 76 bps sequentially to 2.9%. During
quarter, bank’s increased provisions by 19% QoQ thereby net NPA increased by 6%
in absolute term. In percentage term net NPA stood at 2.4% versus 2.3% in previous
quarter.PCR slightly improved from 13.6% to 14.9% (without technical write off)
much lower than peers. However bank reported PCR at 57.4% in 3QFY14.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
7823
10526
6107
4026
90.9

2012
7689
10617
5943
3283
74.1


Rs, Cr
2013
2014E
2015E
7879
8511
12169
11032
12328
15986
5890
6381
8792
2872
2399
3869
64.8
52.0
83.9
9

CANARA BANK
Healthy loan growth led by retail sector
Bank’s loan grew by 32% YoY led by retail sector growth of 55% YOY followed by SME
(46% YoY), Infrastructure (24% YoY). Within infrastructure loan growth, power generation
and transmission growth was strong at 63% YoY. Deposits grew by 1% YoY and 4% QoQ
in which current and saving account deposits grew by 19% and 16% YoY respectively. In
deposits profile, term deposits de-grew by 3% YoY which was took flat growth in overall
deposits as share of term deposits reduce to 77% from 80% in last quarter. CASA ratio
was declined by 123 bps QoQ to 23%. Credit deposits ratio for the quarter stood at
70.4% versus 71.8% in previous quarter and 67.4% in last quarter.
Margin compression on account of higher cost of fund
NIM compressed by 15 bps YoY to 2.21 largely due to lower loan yield 70 bps YoY
whereas cost of fund increased by 120 bps YoY. Higher cost of fund was due to higher
cost of bulk deposits. However declining share of bulk deposits and increasing CASA
ratio restricted to escalate funding cost. Yield on loan declined by 70 bps YoY despite of
healthy loan growth was due to lower base rate among peers.
Valuation & View
Canara bank’s performance was muted all through despite of healthy loan growth.
Canara bank was unable to translate its balance sheet growth in profit & loos account
due to lower base rate among peers. Bank’s asset quality was deteriorating sequentially
along with higher fresh slippage. PCR was lowest among peers (without technical write
off). We are disappointed with growth parameters of the bank. We have neutral view on
the stock.
Valuation Band


10

CANARA BANK
Chart Focus

Moderate growth in NII was due to margin
compression

Higher opex and moderate NII growth led
muted operating profit growth

Profitability declined due to moderate NII
growth, higher provisions and higher tax rate


11

CANARA BANK
Quarterly Performance

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

3QFY14
7360
2575
149
0
10084
851
10935
7311
7857
2227
851
3078
873
614
1488
1591
1052
539
130
409

2QFY14
6964
2597
93
0
9654
773
10427
6923
7463
2191
773
2964
933
607
1539
1425
674
751
125
626

Balance Sheet
Deposits
CASA(%)
Loan
Investments

408924 391613 323963
23.1
24.3
20.0
287700 281104 218242
130359 119481 118835

26.2

4.4

31.8

2.3

9.7

9.1

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

8,074
6870
2.8
2.4
14.9

32.6

8.0

33.8

6.4

7,475
6459
2.7
2.3
13.6

3QFY13
5958
2460
127
0
8544
846
9390
6307
6556
1988
846
2834
831
486
1317
1516
626
891
180
711

6,090
5134
2.8

% YoY % QoQ 3QFY14E % Variation
23.5
5.7
7298
0.9
4.7
-0.9
2701
-4.7
17.1
60.3
216
-30.8
-13.5
0
18.0
4.4
10214
-1.3
0.7
10.1
1006
-15.3
16.5
4.9
11220
-2.5
15.9
5.6
0
19.8
5.3
7608
3.3
12.0
1.6
2606
-14.5
0.7
10.1
1006
-15.3
8.6
3.9
3612
-14.8
5.1
-6.3
1127
-22.5
26.3
1.2
751
-18.3
12.9
-3.4
1878
-20.8
4.9
11.6
1734
-8.2
68.0
56.0
700
50.3
-39.4
-28.2
1034
-47.8
-27.8
4.0
258
-49.7
-42.4
-34.6
775
-47.2

400424
0.0
291913
127099

2.1
-1.4
2.6


12

CANARA BANK
Income Statement
Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)

2010

2011

2012

2013

2014E

2015E

18752
13071
5681
#DIV/0!
2858
8538
#DIV/0!
3478
5061
#DIV/0!
2039
3021
3021
45.8

23064
15241
7823
37.7
2703
10526
23.3
4419
6107
20.7
2081
4026
4026
33.2

30851
23161
7689
-1.7
2928
10617
0.9
4674
5943
-2.7
1860
4083
3283
-18.5

34078
26199
7879
2.5
3153
11032
3.9
5142
5890
-0.9
2218
3672
2872
-12.5

39193
30682
8511
8.0
3817
12328
11.8
5947
6381
8.3
3347
3034
2399
-16.5

47413
35244
12169
43.0
3817
15986
29.7
7194
8792
37.8
3565
5228
3869
61.3

234651
#DIV/0!
68261
#DIV/0!
8441
69677
169335
#DIV/0!

293973
25
83117
22
14262
83700
212467
25

327054
11
79611
-4
15525
102057
232490
9

355856
9
86061
8
20283
121133
242177
4

409234
15
102878
20
24439
133305
293034
21

470620
15
118310
15
28105
168631
339919
16

8.2
6.6
5.2
9.3

8.0
6.9
4.8
7.0

10.1
6.9
6.7
7.7

10.1
7.5
7.1
4.7

9.6
7.7
7.0
7.0

10.0
7.5
6.9
7.0

358
410
1.1

452
627
1.4

512
474
0.9

562
393
0.7

639
214
0.3

710
214
0.3

Balance Sheet
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)

Ratio
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Deposit
Avg. Cost of Borrowimgs

Valuation
Book Value
CMP
P/BV


13

Finolex Cables Ltd.

V-

"Book Partial Profit"
13th Feb' 14

"Reasonable prospects…..."
Book Partial Profit
81
90
73
11%
0%

Result update
CMP
Target Price
Previous
Target Price
Upside
Change from
Previous

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

500144
FINCABLES
41/92
1,238
94,300
6,084

Stock Performance-%
1M
(4.1)
(2.7)

Absolute
Rel. to Nifty

1yr
46.7
43.7

YTD
78.0
71.0

Promoters
FII
DII
Others

3QFY14
35.8
1.8
9.8
52.5

1 yr Forward P/B

2QFY14 1QFY14
35.8
35.8
1.1
1.0
10.2
10.5
52.9
52.8

Finolex Cables’ (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales
and EBITDA margin. Decline in communication cable segment segments as well as high raw
material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore
in the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter
ended December 2012. Third Quarter result were marginally below our expectaton which led
us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even
after posting marginally below result the stock is quite attractive at current market price of Rs.
81 and left a limited upside of 11%, however we advised our reader to book a part profit on
stock
The copper rods segment was initially set up as backward integration for the cables segment. The
excess production after captive consumption is sold off to third parties at market price. However,
owing to thin and declining margins from third party transactions, FCL is gradually reducing its
exposure to the segment. The contribution of the segment to the top-line has decreased from
21% in FY2010 to ~5% currently. This trend is expected to continue, thereby improving the
overall EBIT margin of the company.

Outlook :
FCL being one of the leading players in the cable industry seems well placed to capture huge
opportunities considering the strengths & the industry in which the Company is operating.
Derivative losses coupled with bleak performance by communication cable segment were the
major reasons for de-rating of the stock in past which in our view seems to have been overdone.
The company’s LT division is doing very well, they have recently entered into HT and Extra High
Voltage (EHV) cable verticals. The company has market share of around 15-16 percent in both
electrical and telecommunication verticals. Further the company has approved setting up a
captive 5 MW solar power plant at its manufacturing facilities at Urse, Pune at an estimated cost
of Rs 40 crore.
Valuation :
We cut our earnings estimates to factor volume decline in electrical & communication cable
segment, margin decline in copper rod segment and losses in the others segment. Consequently,
we cut our earnings estimates by 8.6% for FY14E (Rs. 11.6/Share) and 4.1% for FY15E (Rs.
12.6/Share). At the CMP of Rs. 81 stock is trading at PE of 7.0/6.4 of FY14E/15E. We revised our
rating on stock from "Buy" to "Hold". However owing to slower pace of economic growth further
we advised our readers to book part profit on stock and hold the balance with a target price of
Rs. 90

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
563.1
44.3
24.5
7.9%
4.3%

2QFY14
593.1
76.4
80.0
9.3%
12.8%

(Source: Company/ Eastwind Research)


(QoQ)-%
-5.1%
-42.0%
-69.4%
(140) bps
(850) bps

3QFY13
534.3
42.9
24.0
8.0%
4.5%

Rs, Crore
(YoY)-%
5.4%
3.2%
2.1%
(10) bps
(20) bps
(Standalone)

14

Finolex Cables Ltd.
Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

1342
51
1392
100
61
39
32
-30
5
-109
-35
3
-2.3
0.2

1619
24
1643
195
157
37
19
89
32
-74
58
9
3.8
0.6

2036
26
2062
174
135
39
19
107
22
-34
85
11
5.6
0.7

2064
36
2100
175
135
39
26
109
11
-36
98
12
6.4
0.8

2271
24
2295
229
182
47
12
171
26
-23
145
18
9.5
1.2

2315
47
2362
241
191
50
14
234
56
10
178
23
11.6
1.5

2500
42
2542
258
205
53
14
233
56
0
185
23
13.1
1.5

7.4%
-2.5%
-12.0%
1.0%
-6.0%
-4.0%

12.0%
3.5%
7.4%
1.2%
9.0%
6.3%

8.5%
4.1%
11.7%
1.5%
11.9%
8.7%

8.5%
4.7%
20.6%
2.6%
12.3%
10.1%

10.1%
6.3%
20.9%
2.6%
15.7%
13.1%

10.4%
7.5%
14.3%
1.9%
16.5%
14.3%

10.8%
7.3%
16.2%
1.9%
15.4%
13.7%

596
296
892
15
19

643
275
918
15
51

717
260
978
15
47

800
172
972
15
31

924
184
1109
15
46

1079
160
1239
15
81

1249
160
1409
15
81

39.0
0.5
1.9
-8.3

42.0
1.2
8.4
13.4

46.9
1.0
7.0
8.5

52.3
0.6
5.2
4.9

60.4
0.8
14.6
4.8

70.6
1.1
13.6
7.0

81.7
1.0
14.6
6.4

Performance
Revenue
Other Income
Total Income
EBITDA
EBIT
Depriciation
Intrest Cost
PBT
TAX
Derrivative Loss
Reported PAT
Dividend
EPS
DPS
Yeild %
EBITDA %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
Total Debt
Capital Employed
No of Share
CMP
Valuation
Book Value
P/B
Int/Coverage
P/E

(Source: Company/ Eastwind Research)


15

IT Industry;NASSCOM Guidance
"FY15E; a year of growth opportunity"
Performance of Our IT Coverage
NASSCOM Guidance and Industry Growth-USD term
Year NASSCOM Guidance-% Actual Growth-%
FY03
30
25
FY04
26-28
34
FY05
30-35
37
FY06
30-32
33
FY07
25-27
32
FY08
24-27
30
FY09
21-24
17
FY10
4-7
5
FY11
13-15
19
FY12
16-18
16
FY13
11-14
10
FY14E
12-14
13
FY15E
13-15

INR/USD&CNX IT Performance(2013);
Export Revenue (USD, mn)
Year
Tier-1
IT Exports
FY04
3670
12900
FY05
5300
17700
FY06
7163
23605
FY07
10142
31206
FY08
14399
40418
FY09
16200
47103
FY10
17100
49690
FY11
21342
59035
FY12
25475
68687
FY13
28165
75800
FY14E 31000-32000 84000-87000
FY15E
-

Optimistic guidance by NASSCOM (FY15E), IT Industry is fit-well for all grounds;
After 3 consecutive conservative guidance, NASSCOM (National Association of
Software and Services Companies) revealed earning guidance for FY15E with positive
outlook led by favorable demand discretionary environment. Overall, Industry is
cheering with NASSCOM’s fair guidance and they are confident to catch up the growth
target.
For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to
grow by 9-12% based on broad feedback loop from companies and captives. Overall,
Indian IT Industry is expected to reach the mark of USD130billion. Considering the
better economic data, healthy growth pattern of US economy, and the increase in
global IT spending & global sourcing models, Indian IT players are confident to see
3.9% of global IT spending and 5.9% growth in Business Process Management space in
2014.

FY14E and NASSCOM Guidance;
For FY14, Indian IT industry is expected to report 13% growth, in line with NASSCOM
guidance at 12-14%. While, domestic revenue could be seen below expectation because
of delay in decision-making and policy paralysis by government.
Despite various challenges across the Industry, overall ecosystem is changing and they
are transforming into dynamic era by adapting new verticals like SMAC (Social, Mobility,
Analytics, and Cloud), Big data and Digital etc. Even, IT players are making its healthy
existence in US and Europe regions. They are also running for new geographies like
Africa, APAC and MEA.

Interesting analytical facts behind NASSCOM Guidance :
(a) Growth rate for the Big 4 (Infosys, Wipro, TCS and HCLT) has been better than
industry growth from FY02-08. However, that trend started changing from FY09 with at
least two players underperforming the industry growth every year (with the exception of
FY11). For FY14E, a street expectation also indicates that still 2 players could be
underperformer.
(b) Profitability growth is also equally important than revenue growth. While this may be
nitpicking, even in a healthy year of growth of 16% for the Indian IT industry in FY12, and
EBITDA margins of Tier-1 IT (ex-HCLT) declined 50-180 bps. This was even after 6%
depreciation of the Rupee against the US$ and favorable cross-currency trends.

(Tier-1: TCS, INFY, HCLTECH, and WIPRO)

(c) This is fact; the tempo of market share gain by top players is reducing combined
because of faster growth by global players, faster focus on captives, and dogfight over
bidding and vendors consolidation. For FY15E, Tier-1 players are sanguine on beating
guidance by on an average 1-2% as record of accomplishment of previous 5 years.

2013 has been a year of innovation and
transformation and 2014 could be an
execution year….

Despite above facts, our optimism on Indian IT is based on possibility of accelerated
growth in 2014, on: (1) Improved business sentiment in the US and Europe; (2) signs of
discretionary spending coming back; (3) continued market share gains for Indian
companies; and (4) increased spending due to adoption of new technologies.


16

Underlying strengths to dictate FY15E growth;

Performance of Our IT Coverage

Favorable demand discretionary environment: US is witnessing better GDP growth
combined with improving business sentiment, higher consumer spend, lower
Government spending cuts and improving job data. These facts are playing key role to
uptick in discretionary spending in North America. At a same time, revival in Euro zone
has taken place and offshore services from Europe is compounding to revenue traction.
We expect to see potential uptick in IT budget.
No pressure on billing rate: Considering healthy economic scenario across US and Europe,
we are not expecting to see any pressure on billing term. If INR depreciates to the mark of
Rs65 against the USD, then client can go with marginal bargaining. Post earning of
3QFY14E, most of management quoted for stable billing rate and clients confident on
billing front.
Active participations of new emerging verticals: SMAC is throwing up huge opportunities
as firms want to optimize investments in current technology and drive growth by using
digital technologies and platforms. The digital forces of social, mobile, analytics and cloud
(SMAC), Bigdata and digital will reach mainstream status in 2014 and create
requirements, drive new purchasing and establish new competitive realities.
Favorable supply side scenario: Though attrition remained higher than last year,
especially among the bellwethers, campus hiring and fresh offers declined during the
year. However, utilization rate especially on onsite and offshore are on increasing mode,
it indicates favorable supply side scenario for the industry.
Cost rationalization still a part of agenda: Across the Industry, most of players are
focusing on cost control by improving volume, reducing expenses, and improving attrition
rate to maintain stability on margin front. Considering flat range of currency exchange
rate (INR against USD), we expect to see 50-150bps ups and down in IT industry in FY15E.


Quote on NASSCOM Guidance
"The guidance is a clear reflection that
the market is strengthening, so 13-15%
overall growth seems like a fair number,”
(CMD, Persistent System)

Concerns:
However, hardening of regulatory related to visa approval in USA, Canada and Australia
could spoil the party. Even, the approval of Immigration Bill attached with higher visa fee,
wage requirements and enhanced audit by US agencies could turn the growth story of
Indian IT players adversely. If passed in its current form, the Bill could hurt the margins
of the Indian IT export sector, which derives almost 55-60% of its revenues from USA.

Tier-1 Revenue Growth and Margin
Year
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14E
FY15E

TCS
41.7
36.4
44.3
36.6
7.5
4.4
28.4
25.1
15.2
18.1
18

Revenue Growth-%
INFY
WIPRO HCL TECH
51.6
41.6
41.4
35.4
35.9
29.6
43.8
36.5
37.6
35.5
61.3
40.4
11.7
17.8
18.9
3
0.5
25.3
24.6
18.3
27.6
15.8
13
22.4
6.7
6
12.9
12
6.7
14.8
17.5
18.5
18.7

TCS
32.8
32.5
31.6
31.4
33.2
34.6
32.6
31.8
29.1
29.75
28.5

EBITDA Margin-%
INFY
WIPRO
29.3
29.9
27.7
27.8
27.2
27.4
26
24.6
25.8
24.3
28.9
26.7
30
25.7
29.5
23.9
29
23.7
27
22.7
25.5
21.8

“13-15% (estimate) for exports looks like
a good number,” (CEO, outsourcing
advisory Offshore Insights)

HCL TECH
22.9
21.7
21.1
21.2
21.4
19.7
16.6
18.7
21.6
25
24

Revenue in USD-(mn) term-FY14E



17

Our view on Industry Per se:

NIFTY and CNX IT performance

We have seen a significant increase in global technology spending this year, creating
opportunities for the Indian software services sector to post double-digit growth again
in export as well as in the domestic markets. FY15 promises to be bigger and stronger
than the last 3 years, which were marked by bloodbath in global markets due to Eurozone crisis and falling consumer confidence in the US. Demand is set to pick up in
sectors like BFSI, healthcare, retail and transportation globally in the year ahead.

43.9%

For FY15E, We expect that strong fundamentals should help to sustain earning
momentum in FY15E. Foray into niche verticals and executions of large deal would play an
important factor for better earning visibility in near future. There is a window of
opportunity for competent large caps and midcaps to displace incumbents and gain some
incremental business. In the past 4 quarters, large caps (four companies) have grown at
3.4% CQGR, while midcaps (five companies) at 3.2%which is comparable to larger peers.

3.1%

On Tier-1 IT players, we are positive on INFY, TCS and HCL Tech. While, across the Mid
cap and niche players we are optimistic view on TECHM, PERSISTENT, ZENSARTECH,
ECLERX and KPIT .

View and Valuation;
CMP
Company
(12.02.14)
TCS
2103.8
INFOSYS
3599.6
HCLTECH
1491.6
WIPRO
562.15
TECHM
1875.55
CMC
1424.45
NIITTECH
421.55
KPIT
167.15
HEXAWARE
144.55
PERSISTENT
1021.8
eCLERX
1203.15
TATAELXSI
392.1
ZENSARTECH
365.65
MINDTREE
1644.45

View

Target

BUY
BUY
BUY
NEUTRAL
BUY
NEUTRAL
BUY
BUY
NEUTRAL
BUY
BUY
NEUTRAL
BUY
NEUTRAL

2510
3910
1560
2130
443
177
1065
1358
440
-

Upside
%
FY13
19.3% 71.82
8.6% 164.2
4.6% 58.10
25.0
13.6% 123.97
75.27
5.1% 36.28
5.9% 10.80
13.9
4.2% 46.12
12.9% 64.25
10.63
20.3% 40.03
89.72

EPS-Rs
FY14E
95.00

188.0
79.36
31.07
155.37
86.04
43.33
12.63
15.0
61.42
71.61
24.02
52.70
100.94

FY15E
109.31

218.2
98.11
33.5
175.50
92.35
54.18
16.82
16.0
79.08
83.65
28.36
68.97
114.93

FY13
29.29
21.92
25.67
22.44
15.13
18.92
11.62
15.47
10.40
22.16
18.72
36.89
9.13
18.33

P/E-x
FY14E
22.15
19.15
18.79
18.10
12.07
16.56
9.73
13.23
9.61
16.64
16.80
16.32
6.94
16.29

FY15E
19.25
16.50
15.20
16.78
10.69
15.42
7.78
9.94
9.03
12.92
14.38
13.83
5.30
14.31

FY13
36.4%
24.8%
30.7%
21.7%
34.8%
24.1%
20.0%
20.1%
27.4%
18.1%
43.8%
16.9%
23.2%
28.4%

RoE-%
FY14E
37.5%
23.7%
31.5%
22.7%
30.7%
22.8%
19.4%
19.3%
24.9%
20.3%
37.9%
29.7%
24.5%
25.6%

FY15E
34.4%
22.9%
29.4%
20.8%
26.0%
20.7%
19.6%
20.7%
22.5%
21.4%
34.4%
27.4%
25.2%
23.6%



18

ORIENTAL BANK
Result update
CMP
Target Price
Upside

BUY
172
216
222
26
-2.703

Market Data
BSE Code
NSE Symbol

500315
ORIENTBANK

52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

Stock Performance
1M
Absolute
-16.8
Rel.to Nifty
-13.8

310/121
4920
2.21 cr
6084

"BUY"
13h Feb2014

Orient bank reported weak set of quarterly numbers with net profit declined by
31% YoY due to muted growth in NII and higher operating expenses. Asset
quality pressure remain persist with total impaired asset (GNPA+ Restructure
advances) remain high at 11.1% of loan. Bank made lower provisions against
bad loan despite of deterioration in asset. We have buy rating on the stock
due to inexpensive valuation. We Value bank at Rs.216/share which is 0.5
times of FY14E’s book value.
Muted NII growth on the back of margin compression
During quarter bank’s NII grew by 2% YoY lower than expectation largely due to
margin compression and lower growth in loan and deposits. Margin compression was
on account of lower loan yield as compare to cost of deposits. Total interest income
grew by 6% YoY while interest expenses increased by 18% YoY which drag lower
growth in NII. Other income was lower by 10% YoY to Rs.341 cr versus Rs.378 cr in
last year led by 48% declined in treasury gain. Overall revenue de-grew by 1% YoY
to Rs.1571 cr.
Subdue NII growth and higher operating expenses led negative growth in PPP

1yr
-44.4
-47.4

YTD
-44.4
-47.4

3
Promoters
59.1
58.0
58.0
FII
9.6
10.0
10.1
DII
24.9
24.0
24.6
Others
6.4
8.1
7.3
ORIENT BANK Vs Nifty

Operating expenses increased by 9% YoY in which employee cost and other
operating cost increased by 1% and 20% respectively. Flat employee cost was due
to lower wage settlement provisions made by bank. Consequently CI ratio declined to
45.4% from 41.5% in last quarter and 48.2% in previous quarter. Muted NII growth,
lower other income and higher operating cost led pre provisioning profit declined to
7% YoY.
Asset quality stress persists
During quarter bank made provisions and contingencies to tune of Rs.561 cr as
against Rs.551 cr in previous quarter and Rs.604 cr in last quarter. During quarter
bank reported fresh slippage of Rs. 1043 cr (3.1% annualized) as against Rs.1015 cr
(3.2% annualized) in previous quarter. In absolute term GNPA increased by 6% YoY
to Rs.5184 cr while provision decreased by 8% YoY to Rs.1351 cr. Consequently net
NPA increased by 12% QoQ to Rs.3833 cr. In percentage term, gross GNPA and net
NPA stood at 3.87% and 2.9% from 3.81% and 2.7% respectively sequentially. Due
to lower provisions PCR (without technical write off) declined from 30% to 26%.
Fresh restructure sharply surged to Rs.1365 cr during quarter and outstanding
restructure book stood at Rs. 9687 cr
Rs, Cr
Financials
2011
2012
2013
2014E
2015E
NII
4178
4216
4701
5136
6970
Total Income
5138
5456
6356
6724
8558
PPP
3245
3141
3691
3680
4707
Net Profit
1503
1142
1328
1046
1812
EPS
51.5
39.1
45.5
34.9
60.4
19

ORIENTAL BANK
Subdue loan and deposits growth
On balance sheet front, bank reported very sluggish growth rate with deposits grew by
4% YoY in which current account and saving account deposits grew by 3% and 12%
YoY. CASA deposits in absolute term grew by 10% YoY and in percentage to total
deposits it stood at 24.2% as against 23.9% in last quarter. Loan grew by 8.4% YoY to
Rs.1340 bn led by 16% YoY growth in retail loan followed by mid corporate and large
corporate. Credit deposits ratio for the quarter remained same and it stood at 73.4%.
Margin compression on account of higher cost of fund than loan yield
Bank reported 15 bps QoQ margin compressions on account of higher cost of fund than
loan yield. During quarter bank’s cost of fund declined by 10 bps QoQ while yield on loan
declined by 38% QoQ to 10.8% from 11.2%. Yield in investment also declined from 7.4%
to 6.9% which also cause margin compression.
Profitability declined on account of muted NII growth, higher operating expenses
and tax rate
Orient bank’s profitability declined by 31% YoY to Rs.224 cr lower than our expectation of
Rs. 269 cr largely due to weak performance all around. During quarter bank reported
muted NII growth, lower other income, higher operating cost and higher tax rate.
Valuation & View
Orient bank reported weak set of quarterly numbers with net profit declined by 31% YoY
due to muted growth in NII and higher operating expenses. Asset quality pressure remain
persist with total impaired asset (GNPA+ Restructure advances) remain high at 11.1% of
loan. Bank made lower provisions against bad loan despite of stress in asset. We have
buy rating on the stock due to inexpensive valuation. We Value bank at Rs.216/share
which is 0.5 times of FY14E’s book value.


20

ORIENTAL BANK
Chart Focus

Muted NII growth on the back of margin
compression

Subdue NII growth and higher operating
expenses led negative growth in PPP

Profitability declined on account of muted NII
growth, higher operating expenses and tax
rate

Source : Eastwind/ Company

21

ORIENTAL BANK
Quarterly Result ( Rs Cr)
Others
Others Income
Total Income
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit

3QFY14 2QFY14 3QFY13
3622
3591
3507
1075
1076
954
21
9
8
6
0
0
4723
4676
4469
341
312
378
5064
4988
4847
3322
3234
3150
93
93
79
78
68
35
3493
3395
3264
1230
1281
1204
341
312
378
1571
1593
1582
394
446
391
319
322
265
713
768
656
858
825
926
561
551
604
297
275
323
73
23
-4
224
251
326

% YoY Gr
3.3

Balance Sheet ( Rs Cr)
Deposits
Loan

182470 175153 164174
133962 128353 123623

11.1

Asset Qiality
GNPA
NPA
% GNPA
% NPA

5184
3833
3.9
2.9

4887
3423
3.8
2.7

3690
2610
3.0
2.1

12.7
167.2
2868.4
5.7
-9.8
4.5
5.5
17.9
119.1
7.0
2.2
-9.8
-0.7
0.8
20.3
8.7
-7.3
-7.1
-7.8
-1996.1
-31.3

% QoQ Gr 3QFY14E
0.9
3783
-0.1
1137
135.4
20
5027.3
4
1.0
4943
9.3
425
1.5
5368
2.7
0
0.0
0
14.9
0
2.9
3548
-3.9
1395
9.3
425
-1.4
1820
-11.7
496
-0.8
359
-7.1
856
4.0
965
1.9
581
8.3
384
215.3
115
-10.8
269

8.4

184299
4.4 135102

40.5

6.1

46.9

12.0

4.2

Source: Company/Eastwind

22

ORIENTAL BANK
P/L

2011

2012

2013

2014E

2015E

Others
Others Income
Total Income
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
NII Growth(%)
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit
Net Profit Growth(%)

8954
2774
335
25
12088
960
13048
7474
23
413
7910
4178
43.7
960
5138
1048
844
1892
3245
1742
1503
32.4

12075
3671
34
35
15815
1240
17055
11213
38
348
11599
4216
0.9
1240
5456
1357
959
2315
3141
1999
1142
-24.0

13758
3854
31
61
17705
1655
19359
12553
111
340
13004
4701
11.5
1655
6356
1576
1089
2665
3691
2363
1328
16.3

14677
4316
80
17
19090
1588
20678
11765
175
525
13954
5136
9.3
1588
6724
1796
1248
3043
3680
2243
1046
-21.2

16545
4491
80
17
21134
1588
22721
13408
189
567
14164
6970
35.7
1588
8558
2272
1579
3851
4707
2118
1812
73.3

139024
15.6
5639
15.4
95908
14.9
42075
17.6

155965
12.2
5259
-6.7
111978
16.8
52101
23.8

175898
12.8
7679
46.0
128955
15.2
58555
12.4

189928
8.0
9996
30.2
139271
8.0
63976
9.3

205123
8.0
10796
8.0
150413
8.0
69094
8.0

9.3
6.6
7.8
5.4
7.7
5.5

10.8
7.0
9.2
7.2
7.3
7.2

10.7
6.6
9.0
7.4
5.9
7.1

10.5
6.7
9.4
6.2
5.9
7.0

11.0
6.5
9.6
6.5
7.0
6.6

380
1.0
7.5

409
0.6
6.4

403
0.6
5.5

433
0.4
5.0

483
0.4
2.9

Key Balance sheet data
Deposits
Deposits Growth(%)
Borrowings
Borrowings Growth(%)
Loan
Loan Growth(%)
Investments
Investments Growth(%)

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

Source: Company/Eastwind

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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