India Equity Analytics Today- Buy Stock of Oriental Bank and Finolex Cables Ltd

IEA-Equity
Strategy

India Equity Analytics

13th Feb, 2014

Daily Fundamental Report on Indian Equities

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

"BUY"

Edition : 205
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 : 2-3)

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 : 4-6)

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 : 7- 11)

UNION BANK :

"BUY"

12th Feb 2014

Union Bank’s profit growth was due to lower provisions led by lower slippage and restructure assets. Operating profit was negative due to
muted NII growth and higher operating expenses. Bank’s loan and deposits both are grown by 20% along with improvement in CD ratio. This
would help to expand margin and hence profitability. Like other PSBs, Union bank is trading at attractive valuation and we value Rs.152/share
which is 0.5 times of FY14E’s book ...................................................... ( Page : 12- 16)

TATAMOTORS :Strong Results

"BUY"

11th Feb 2014

Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back of strong demand ,Growth in volume and favourable
product mix and geography mix of Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new Range Rover Sport,
New Range Rover and Jaguar F-Type . ........................................................... ( Page :17- 18)

ACC Ltd:

"BUY"

10th Feb 2014

ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC declined a mere 2% to Rs 10,908.41 crore, as the sales
relaisations remained low and Cost remained stable. Cement sales volumes remained flat for ACC .At current price of Rs 1046, stock is trading at
2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks good from current level, hence we recommend Buy on the stock at CMP Rs.1046
for a target price Rs.1257. ..................................................... ( Page : 19-21)

Ambuja Cements Ltd:

"Neutral"

10th Feb 2014

For the full year,net profit declined 1% to Rs 1278 crore as against Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs
9795 crore in CY12.Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, -1.9% YoY) . At current price of Rs 163,
stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP Rs.163 for a target price Rs.165.
........................................................... ( Page : 22-24)
Narnolia Securities Ltd,

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

Share Holding Pattern-%
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)

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

(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)

2

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)


3

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
(Source: Company/Eastwind)

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.


4

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



5

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%



6

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

BUY
172
216
222
26
-2.703

Market Data
BSE Code
NSE Symbol

500315
ORIENTBANK

52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
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

Current 1QFY14 4QFY1
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
7

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.


8

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

9

ORIENTAL BANK
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 on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
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

10

ORIENTAL BANK
P/L

2011

2012

2013

2014E

2015E

Others
Others Income
Total Income
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


11

UNION BANK

"BUY"
12h Feb, 2014

Company Update
CMP
Target Price
Upside

BUY
105.2
152
163
45
-7

Union bank reported profit growth of 15.4% largely due to lower provisions
and contingencies led by lower slippage and restructure assets. At operating
profit level bank reported negative growth of 7.1% YoY due to margin
compression and higher operating expenses. Bank’s loan and deposits both
are grown by 20% along with improvement in CD ratio. Like other PBS, Union
Bank also trading at 0.4 times of one year forward book which is impressive.
We value bank at Rs.152/share which is 0.5 times of FY14E’s book value.

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

532477
UNIONBANK
255/97
6281
2.37 cr
6063

Muted NII growth due to margin compression
During quarter, bank’s NII grew by 3.8% YoY despite of loan and deposits growth of
20%. Lower NII was driven by higher cost of fund than yield on fund (Loan+
Investment). Total interest earned by bank was grown by 19.5% whereas interest
expenses increased by 26.2% which took muted NII growth. Other income was
Rs.680 cr versus Rs.611 cr in previous year and Rs.640 cr in last year. With the little
support from other income, revenue during quarter was grown by 4.4% YoY to
Rs.2643 cr.

Stock Performance
1M
Absolute
-15.3
Rel.to Nifty
-11.9

1yr
-54.8
-56.8

YTD
-54.8
-56.8

Higher operating expenses drag operating profit in negative zone
Operating expenses during quarter was higher at 17.8% YoY which drag operating
profit growth in negative direction to 7.1% YoY to Rs.1262 cr. Employee cost and

3
Promoters
60.1
57.9
57.9
FII
8.8
10.2
11.9
DII
17.0
17.8
17.7
Others
14.1
14.2
12.8
UNION Bank Vs Nifty

other operating expenses increased by 12.4% and 27% YoY respectively. Operating
leverage (opex to total asset) remained stable at 0.4%.
Provisions lower because of lower slippage and restructure assets
Provisions and contingencies were lower by 29% YoY and 35% QoQ on the back of
lower slippage and restructure assets. During quarter bank witness fresh slippage of
Rs, 1154 cr versus Rs.1657 cr in previous quarter and thereby taking slippage ratio
to 2.1% from 3.1% in previous quarter. Fresh restructure advance was come down to
Rs.1004 cr as compare to Rs.1534 cr in previous quarter and Rs.1205 cr in last
quarter. Sequentially lower recovery (Rs.265 cr Vs Rs.419 cr) and lower write off (Rs.
174 cr Vs Rs.270 cr) caused spike in gross NPA. GNPA as a percentage to gross
advances was increased by 22.5 bps QoQ to 3.9% from 3.7%. Loan loss provisions
was increased by 10% QoQ taking slightly improvement in PCR to 42.5% (without
technical write off) from 42.1% in previous quarter. Net NPA stood at 2.3% as
against 2.1% in previous quarter.

Financials
NII
Total Income
PPP
Net Profit
EPS

2011
6216
8255
4305
2082
39.7

2012
6793
9241
5254
1787
29.9


Rs, Cr
2013
2014E
2015E
7543
7974
8953
10095
10704
11683
5583
5256
5724
2158
1427
1431
36.2
22.6
22.7
12

UNION BANK
Loan and deposits grew by 20% YoY but CASA declined
On balance sheet front, deposits grew by 19% YoY in which current account and saving
account deposits grew by 3.3% and 12.2% YoY respectively. Overall CASA increased by
10% YoY and in percentage to total deposits CASA ratio declined by 245 bps YoY to
28.8% due to higher growth in wholesale deposits. Term deposits grew by 23.4% YoY
taking overall deposits growth. Due to higher share in bulk deposits, cost of fund spike
from 7.4% to 7.8%. In loan growth perspective, it grew by 20% YoY to Rs.2230 bn.
Incremental loan growth came from MMSE (29.5% YoY) followed by retail (28% YoY) and
agriculture (18.7% YoY). Credit deposits ratio improved by 56 bps to 78.2%.
Margin narrowed due to higher cost of fund and asset yield
Margin narrowed by 50 bps on account of higher cost of fund than yield on assets.
Overall cost of fund increased from 7.8% to 7.4% largely due to higher share of bulk
deposits and lower CASA ratio. Yield on loan declined by 30 bps to 10% from 10.3% in
last quarter. Investment yield improved by 28 bps YoY to 8.2% from 7.9% in 3QFY13.
Higher profit on account of lower provisions led by lower slippage and restructure
assets
Union Bank reported net profit growth of 15.4% YoY largely driven by lower provisions
and contingencies. Tax rate was higher at 46.4% versus 28% in previous quarter mainly
due to Rs.44 cr created for deferred tax liabilities on special reverse as per suggestion of
RBI. Bank has also normalized tax rate of 30% in 9MFY14.
Valuation & View
Union bank reported profit growth of 15.4% largely due to lower provisions and
contingencies led by lower slippage and restructure assets. At operating profit level bank
reported negative growth of 7.1% YoY due to margin compression and higher operating
expenses. Bank’s loan and deposits both are grown by 20% along with improvement in
CD ratio. Like other PBS, Union Bank also trading at 0.4 times of one year forward book
which is impressive. We value bank at Rs.152/share which is 0.5 times of FY14E’s book
value.


13

UNION BANK
Chart Focus

Muted NII growth due to margin compression

Higher operating expenses drag operating
profit in negative zone

Higher profit on account of lower provisions
led by lower slippage and restructure assets


14

UNION BANK
Quarterly Performance
Others
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit

3QFY14
5565
1911
36
38
7550
680
8230
5587
1964
680
2643
823
559
1382
1262
610
651
302
349

3QFY13
4775
1478
41
26
6320
640
6959
4428
1891
640
2531
733
440
1173
1358
857
501
199
302

% YoY Gr

Balance Sheet ( Rs Cr)
Net Worth
Deposits
Borrowings
Investment
Advances

18165 18046 15973
285125 287029 239355
31730 27664 22883
93778 95600 75117
223024 217295 185885

13.7

0.7

19.1

-0.7

38.7

14.7

24.8

-1.9

20.0

2.6

37.5

8.9

59.3

8.1

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

8776
5048
3.9
2.3
42.5

2QFY14
5288
1890
51
43
7271
611
7882
5317
1954
611
2566
807
534
1341
1225
937
288
80
208

8061
4670
3.7
2.1
42.1

6384
3168
3.4
1.7
50.4

16.6
29.3
-11.7
46.3
19.5
6.3
18.3
26.2
3.8
6.3
4.4
12.4
27.0
17.8
-7.1
-28.8
30.0
52.2
15.4

% QoQ Gr 3QFY14E Variation(%)
5.3 5422
2.6
1.1 1839
3.9
-28.6 51
-28.8
-12.1 44
-14.7
3.8 7356
2.6
11.2 684
-0.6
4.4 8040
2.4
5.1 5313
5.1
0.5 2043
-3.9
11.2 684
-0.6
3.0 2727
-3.1
2.0 757
8.8
4.6 484
15.4
3.1 1241
11.4
3.0 1486
-15.1
-34.8 913
-33.2
126.0 573
13.7
277.6 172
75.9
67.7 401
-13.0

17847
271558
23945
91294
198543

1.8
5.0
32.5
2.7
12.3


15

UNION BANK
P/L

2011

2012

2013

2014E

2015E

Others
Others Income
Total Income
Others
Interest Expended
NII
NII Growth(%)
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit

12031
4003
161
258
16453
2039
18491
9538
113
585
10236
6216
48.3
2039
8255
2600
1350
3950
4305
2223
2082
0.3

16027
4570
331
101
21028
2448
23477
13406
141
689
14235
6793
9.3
2448
9241
2479
1508
3988
5254
3467
1787
-14.2

19140
5671
199
115
25125
2552
27677
16551
274
756
17582
7543
11.0
2552
10095
2755
1757
4512
5583
3425
2158
20.7

21702
7428
185
169
29483
2730
32213
18844
379
1309
21509
7974
5.7
2730
10704
3323
2124
5447
5256
3144
1427
-33.9

23074
8313
185
169
31741
2730
34471
21106
378
1305
22788
8953
12.3
2730
11683
3634
2324
5958
5724
3680
1431
0.3

202461
19.1
13316
44.5
150986
26.5
58399
7.3

222869
10.1
17909
34.5
177882
17.8
62364
6.8

263762
18.3
23797
32.9
208102
17.0
80830
29.6

290138
10.0
32238
35.5
228912
10.0
93811
16.1

324954
12.0
32138
-0.3
256382
12.0
103914
10.8

8.0
6.9
7.2
4.7
5.2
4.7

9.0
7.3
8.3
6.0
4.6
5.9

9.2
7.0
8.3
6.3
4.3
6.1

9.5
7.9
9.1
6.5
4.3
6.7

9.0
8.0
8.8
6.5
4.5
6.4

243
1.4
8.7

245
1.0
7.8

290
0.7
5.8

293
0.4
4.7

307
0.3
4.7

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


16

TATAMOTORS

"BUY"
11th Feb' 14

Strong Results
Result Update

BUY

CMP
Target Price
Upside

364
425
17%

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

500570
TATAMOTORS
405/252
98,064
4681598
6053

Tata Motors has posted 3QFY14 revenues at Rs 63877 Cr up by 38.59% YoY on the back
of strong demand ,Growth in volume and favorable product mix and geography mix of
Jaguar and land Rover. The growth in the volume of JLR is largely driven by launch of new
Range Rover Sport, New Range Rover and Jaguar F-Type, along side higher volume of the
newer XF and XJ derivatives. JLR whole sales volume for the 3QFY14 grew by 22.7 %
YoY to 116357 units while its retail volume grew by 26.5 5 to 112172 units. The revenues
for JLR for the 3QFY14 came at GBP 5328 Mn representing growth of 40 %YoY. Amidst
of splendid performance by British subsidiary, the domestic operations still acting as
dragger to the consolidated performance. The domestic business once again for the quarter
under review posted declining performance. The sales (including exports ) of the
commercial and passenger vehicles for the 3QFY14 stood at 132087 units translating a
decline of 35.7% YoY. The revenues for the quarter from domestic business came at Rs
7770 Cr as compared to Rs 10630 Cr for the same time last fiscal. This weak performance
in the quarter came on the back of prolonged slowdown in economic activities, weak
consumer segment, tight financing norms with high interest rates, weak operating
economics for the transporters due to lower fleet utilization and stagnant fright rates
combined with fuel price hikes.

Stock Performance-%
Absolute
Rel. to Nifty

YTD
48.6
35.6

The consolidated operating EBITDA for the quarter came at Rs 9948 Cr and OPM at 15.5
%.The OPM surges by 330 bps due to improvement in operational metrics. The RM cost as
percentage of sales stands 59% in comparison to 62 % for 3QFY13.The company spends
nearly 1% of sales for its R&D. There is improvement of almost 100bps in other expenses
as percentage of sales on yearly basis.

4
34.3
34.3
34.3
28.0
26.7
26.6
9.6
11.7
11.4
28.1
27.3
27.7

The consolidated adjusted net profits surged almost by 200 % YoY to Rs 4863 Cr. The
sharp rise in the profits came in due to an exceptional income of Rs 1,948 Cr accruing to
the local business, which came from a sale of stake in its Korean subsidiary to its Singapore
subsidiary.

1M
-1.1
0.8

1yr
27.5
25

Promoters
FII
DII
Others

One Year Price vs Nifty

The management of the company after the results said that it expects capital expenditure of
about 3.5 billion pounds to 3.7 billion pounds in fiscal 2015 from an estimated 2.75 billion
pounds in fiscal 2014, raising worries that the increased spend would hurt free cash flow.
The company lost his Managing Director Karl Slym last week in an accident, and company
has set up a panel, headed by Tata Sons chairman Cyrus P. Mistry, to oversee its
operations and strategy as an interim measure after Slym's death.

View And Valuation
The stock at its CMP of Rs 364 is trading at 7.34 x of one year forward FY14E EPS of Rs
50.The robust 3QFY14 results, Strong cash flows by JLR and better demand outlook, new
product mix of JLR with brand positioning makes us positive for the company .We Maintain
BUY for the stock with Target Price Rs 425.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
63877
9948
4863
15.6%
7.6%

2QFY14
56882
8635
3559
15.2%
6.3%

(QoQ)-%
12.3
15.2
36.6
40bps
140bps

3QFY13
46090
5657
1636
12.3%
3.5%

Rs, Crore
(YoY)-%
38.6
75.9
197.2
330bps
410bps



17

TATAMOTORS
Sales and PAT Trend (Rs)

The revenue jumps by 38.59% YoY on the
back of strong demand ,Growth in volume
and favorable product mix and geography
mix of Jaguar and land Rover.


OPM % & NPM %

The OPM surges by 330 bps due to
improvement in operational metrics.The
sharp rise in the profits came in due to an
exceptional income of Rs 1,948 Cr accruing to
the local business


JLR Whole Sales Vol. Trend

The growth in the sales volume come from all
geographies including Brazil, China, India and
the United States.



18

ACC Ltd.
Result Update

BUY

CMP
Target Price
Upside

1046
1257
1122
20%
12%

Market Data
BSE Code
NSE Symbol

500410
ACC

52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty

1355/912
19634
9817
6063

"BUY"
10th Feb' 14

ACC's sales turnover slipped to Rs 11169 crore in 2013 against Rs 11358 crore in the
previous year. At first glance, consolidated net profit growth of 9% from the year-ago
period looked impressive, given the dull market. But a closer look shows that net profit
for the quarter included a tax write-back. PAT was Rs.1094Cr. As this pat is incomparable
with previous year pat due to additional depreciation charge as extra-ordinary item in
previous year, we adjusted the pat and it reported Rs.1081Cr for Cy13 Down by -19%
from Rs 1339Cr in CY12.
ACC's EBIDTA declined by 16% to Rs 1848 crore, While y-o-y sales turnover of ACC
declined a mere 2% to Rs 10,908.41 crore, as the sales relaisations remained low and
Cost remained stable. Cement sales volumes remained flat for ACC .
Lower Cement Volume Impacted the Bottomline Growth
What is more worrying for the company is that it sold less cement in 2013 than what it
did in 2012. This comes as a major jolt for the cement giant which saw its cement sales
volume dropping to 23.93 million tonne compared with 24.11 million tonne. It not only
impacted its bottom-line growth but also hit its revenues.

Stock Performance-%
1M
-3.5
-1.9

Absolute
Rel. to Nifty

1yr
-22.3
-24.4

YTD
-21.0
-22.8

Cureent
Promoters
FII
DII
Others

50.3
20.0
12.9
16.8

3QCY13 2QCY13
50.3
20.9
11.9
16.9

50.3
19.5
11.7
18.6

1 yr Forward P/B

Source - Comapany/EastWind Research

Poor Operational Performance :
At the operating level, poor volumes down by 1.5% from the year-ago period and weak
realizations pulled down revenue during the quarter. Net consolidated sales fell by 13%
to Rs.2,693.1 crore. Profitability was further hit as costs during the quarter, mainly on
freight and power, rose compared with the year-ago period and the September quarter
as well.
During the CY13 Acc suffered through sluggish demand and at the same time with
increasing cost. Company unable to pass on the cost to the consumer due to lower sales
volume. Sales Volume come to 23.93 Mmt form 24.11 Mmt(down by ~1%). Rising Input
Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 5% to
Rs.778/ton from Rs.740/ton and freight cost increased ~5% Rs.961/ton from Rs.920/ton.
Other expenses increased ~9% to Rs.975/ton from Rs.894/ton.
Management Quotes :
According to Management the economic environment in the country was sluggish, thus
impacting the demand for cement and concrete. As a result, the company's cement
volumes remained almost flat. The company appears not enthusiastic for demand growth
going forward. Based on current demand indications, we do not foresee any significant
improvement in the cement.
Financials :
Q4CY13
Y-o-Y %
Q-o-Q %
Q4CY12
Q3CY13
Net Revenue
2792
-12.2
8.6
3180
2570
EBITDA
361
-9.3
26.2
398
286
Depriciation
153
-3.2
6.3
158
144
Interest Cost
12
-55.6
9.1
27
11
Tax
-36
-190.0
-170.6
40
51
PAT
278
16.3
129.8
239
121
(In Crs)


19

ACC Ltd.
Outlook
Company has made several capacity expansion plans in the region. ACC is replacing the
existing facilities at Jamul, Chhattisgarh with a clinker plant with an annual production
capacity of 2.8 MT and local grinding capacity of 1.1 MT of cement, while a new plant
with annual capacity of 2.7 MT is scheduled to be built in Kharagpur. The capacity
expansion plant will increase the company's total cement production capacity to 35 MT
from the existing 30 MT.On a QoQ basis, the EBITDA/tonne improved 10.4% due to an
improvement in realisations & comparatively lower increase in total expenditure/tonne,
it shows a positive view for the further quarters.onsidering the expansion plans we
expect 4% growth in sales volume and 10% growth in realization for CY14.

Cement Sales Volume

Valuation And Recommendation
Cement prices witnessed an increase during Oct-Nov,13 but also witnessed a sharp fall
during Dec,13 which has contributed towards lower average realizations for the year for
the company. Further, with a strong balance sheet with zero debt and better dividend
yield of 3%, we continue to remain positive despite near term challenges. We revise our
estimates downwards to factor in lower demand growth scenario. At current price of Rs
1046, stock is trading at 2.6x P/B and 2.8x P/B on CY14 estimates. The valuation looks
good from current level, hence we recommend Buy on the stock at CMP Rs.1046 for a
target price Rs.1257.

Cement Realization
Cement Realization

Company Description :
ACC Limited (ACC) is engaged in manufacture of cement & ready mixed concrete. The
Company has grinding plants in Karnataka and clinkering line in Maharashtra. The
Company’s subsidiaries include ACC Mineral Resources Limited, Lucky Minmat Limited,
Bulk Cement Corporation (India) Limited, National Limestone Company Private Limited
and Encore Cement and Additives Private Limited. The Company is subsidiary of Ambuja
Cement India Private Limited.
P/L PERFORMANCE
CY11
CY12
CY13
CY14E
Net Revenue from Operation
10237
11358
11169
13027
Other Income
191
263
219
219
Total Income
10428
11621
11389
19723
Power and fuel
2199
2384
2384
0
Freight and forwarding
1940
2219
2299
0
Expenditure
8316
9162
9540
10942
EBITDA
1921
2197
1848
2084
Depriciation
510
569
584
639
Interest Cost
97
115
52
50
Tax
215
391
132
323
PAT
1276
1050
1094
1292
ROE%
17.7
18.8
13.8
15.3

20

ACC 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%
EV
P/E
EV/EBIDTA
Dividend Yield%
ROCE%
Debt/Equity
Current Ratio
Cash from Operation
Cash From Investment
Cash from Finance

CY10
188
6093
6281
510
14
188
1581
1466
11041
77
5230
1564
283
926
249
1086
162
11041
CY10
3.2
57.4
3.0
19.1
1.1
19632
18.7
12.7
2.8
14.6
0.1
1.0
1823
(785)
(641)

CY11
188
6791
6979
506
0
126
816
1051
11921
48
6359
370
461
1113
266
1660
279
11921
CY11
3.1
68.7
2.6
8.0
1.1
20180
16.5
10.5
2.5
15.2
0.1
1.3
1506
(258)
(768)

CY12
188
7184
7372
85
0
157
661
1227
11928
39
5893
314
566
1134
303
681
325
11928
CY12
3.6
73.8
2.7
5.8
1.0
26240
19.4
11.9
2.1
16.3
0.0
1.4
2027
(308)
(1066)

CY13
188
7625
7813
0
0
89
642
1081
12101
40
6040
322
880
1122
397
506
340
12101
CY13
2.7
57.6
3.6
5.7
1.0
20296
19.2
12.5
2.7
12.3
0.0
1.4
2027
(308)
(1066)

Trading At :


21

Ambuja Cements Ltd.
Result Update

Neutral

CMP
Target Price
Upside

163
165
NA
1%
NA

Market Data
BSE Code
NSE Symbol

500425
AMBUJACEM

52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty

212/148
25166
12583
6063

Absolute
Rel. to Nifty

1yr
-18.6
-20.7

YTD
-19.2
-21.0

Cureent
Promoters
FII
DII
Others

50.5
30.5
9.4
9.6

10th Feb' 14

Net profit of Ambuja Cements decline 49% to Rs 317 crore in Q4CY13 as against Rs 212
crore during Q4CY12. Sales declined 5% to Rs 2191 crore Q4CY13 as against Rs 2313
crore during Q4CY12. For the full year,net profit declined 1% to Rs 1278 crore as against
Rs 1293 crore during CY12. Sales declined 6% to Rs 9192 crore as against Rs 9795 crore in
CY12.
Flat realisations (Rs 4,177/t,3.5% QoQ) and sluggish volumes spoiled the show(5.3mT, 1.9% YoY) .
During the CY13 Ambuja Cement suffered through sluggish demand and at the same time
with increasing cost. Company unable to pass on the cost to the consumer due to lower
sales volume. Sales Volume come to 21.6 Mmt form 21.99 Mmt(down by ~2%). Rising
Input Cost mainly due to Raw Material and Freight Cost.Raw material cost increased 63%
to Rs.358/ton from Rs.219/ton and freight cost increased ~5% Rs.1097/ton from
Rs.1046/ton. Other expenses increased 8% to Rs.847/ton from Rs.742/ton.
The company is undertaking expansion at Rabriyawas (Rajasthan 0.8 mTPA) and Sankrail
(WB, 0.8 mTPA) to be completed by CY14 and CY15 respectively.

Stock Performance-%
1M
-7.1
-5.4

"Neutral"

3QCY13 2QCY13
50.5
30.1
9.6
9.8

50.6
28.7
10.2
10.5

1 yr Forward P/B

Decline in EBITDA margin
Key concerns for EBITDA margins to decline in CY13 are Lower realizations, Cost push and
no seasonal benefits from operating leverage, Weak rupee push fuel costs higher as
rupee depreciation likely to outweigh lower coal prices (more than 35 percent of total
requirement comes by import), Higher freight costs and impact of diesel price hike Inched
up power fuel and Freight cost.
Challenging Outlook
Management views the company was able to keep its production cost flat year-on-year
and would continue to work on improving operational efficiencies, cost optimization and
continued focus on customer and commercial excellence. Board has recommended a final
dividend of Rs 2.20 per share and together with the Rs 1.40 per share of interim dividend,
the total dividend for the year is Rs 3.60 per share.
Key issues to watch out for
1 Volume growth recovery and outlook
2 Cement pricing outlook and sustainability, considering recent downtrend in November
3 and December


Progress in ongoing mining land acquisition and capex in Nagaur plant of 4.5mt
Financials :
Q4CY13
Y-o-Y %
Q-o-Q %
Q4CY12
Q3CY13
Net Revenue
2209
-5.4
9.5
2335
2017
EBITDA
307
-31.8
14.6
450
268
Depriciation
123
-33.9
-1.6
186
125
Interest Cost
17
-29.2
-5.6
24
18
Tax
-61
-152.6
-192.4
116
66
PAT
317
49.5
91.0
212
166
(In Crs)


22

Ambuja Cements Ltd.
PER Ton Analysis
4QCY13
4QCY12
YOY%
3QCY13
QOQ%
Volumes mT
5
5
-2
5
8
Realization(Rs/T)
4177
4332
-4
4126
1
R&M Cost(Rs/T)
406
266
53
415
-2
P&F Cost(Rs/T)
946
1015
-7
934
1
Freight Cost(Rs/T)
1093
1079
1
1073
2
Employee(Rs/T)
226
254
-11
266
-15
Others(Rs/T)
924
884
5
890
4
Valuation and Recommendation
India average cement price is still down 0.5 percent Y-o-Y, making Q3CY13 the third
consecutive quarter of Y-o-Y decline. On a QoQ basis, the EBITDA/tonne improved 6%
due to an improvement in realisations & comparatively lower increase in total
expenditure/tonne. The outlook continues to remain challenging due to difficult macroeconomic condition and resultant subdued cement demand. At current price of Rs 163,
stock is trading at 3x P/B on CY14 estimates. We are Neutral on the stock at CMP
Rs.163 for a target price Rs.165.
Company Description :
Ambuja Cements Ltd. (ACL) is a cement manufacturing company in India. The Company
has five integrated cement manufacturing plants and eight cement grinding units. The
Company is engaged in manufacturing of Portland cement. The Company manufactures
Portland Pozollana cement and ordinary Portland cement. The Company operates in
Cementitious Materials segment .
Trading At :

P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Power and fuel
Freight and forwarding
Expenditure
EBITDA
Depriciation
Interest Cost
Tax
PAT
ROE%

CY10
7390
248
7638
1697
352
5568
1822
387
49
398
1262
16.9

CY11
8571
248
8819
2003
1939
6594
1977
446
53
474
1228
15.5

CY12
9795
349
10144
2334
2300
7322
2473
569
78
604
1293
17.9


CY13
9192
391
9583
2066
2370
7549
1643
494
67
220
1278
13.2




23

Ambuja Cements 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%
EV
P/E
EV/EBIDTA
Dividend Yield%
ROCE%
Debt/Equity
Current Ratio
Cash from Operation
Cash From Investment
Cash from Finance

CY10
306
7021
7327
65
0
17
1109
1079
10320
16
5616
931
299
902
128
1648
142
10320
CY10
3.0
8.1
1.7
15.0
1.2
20301
17.7
11.1
1.8
15.6
0.0
1.4
1896
(527)
(474)

CY11
307
7758
8065
51
8
19
961
1173
11577
42
6223
488
504
928
248
2073
238
11577
CY11
3.0
8.2
2.9
11.2
1.1
21829
19.0
11.0
2.1
14.2
0.0
1.5
1554
(445)
(473)

CY12
308
8489
8797
39
10
22
949
1421
12457
47
5904
524
641
987
221
2260
251
12457
CY12
3.5
10.2
2.3
9.7
1.0
28780
19.7
11.6
1.8
16.7
0.0
1.7
1900
(388)
(509)

CY13
309
9153
9462
33
1
26
980
1076
12957
6798
0
0
307
936
235
2345
271
12957
CY13
3.0
8.1
2.6
10.7
1.0
25865
22.5
15.7
2.0
12.4
0.0
1.9
0
0
0



24

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
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in this report/message.

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