India's auto mobile 2 W and 3W 9MFY14 sales Analysis | India Equity Analytics

SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES 29th Jan 2014

India's auto mobile sales continued to remain on sluggish trajectory as most of the companies reported a decline in sales number due to

slowdown in economic activity and increasing fuel prices. However, two-wheeler segments continued to grow at a healthy rate, led by strong

rural demand ........................................... ( Page : 2-3)

Shree Cement Ltd has reported a 47% fall in its December quarter net profit on lower sales as well as 5% degrowth in realization. PAT impacted

due to lower other income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41% YOY). Volumes grew by18 %

to3.8mn ton from 3.3mn ton QOQ. After a good monsoon and election ahead management expecting a good performance from shree cement

for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/- . ............................................ ( Page :4-6)

As per the management, the quarterly margins differ for every quarter as the project completion cycle is different and hence it is difficult to

capture the EBITDA movement every quarter. Though we agree with the management’s comment, we still believe that there would be some

amount of pressure on the margins on a yearly basis due to risks related to competition, inflation, adverse mix and a slowdown. As regards the

results we are of the opinion that, despite the gloomy scenario the results have been good. Consistent order inflow is a major positive factor.

We expect the sector to witness revival in coming quarters, whereas we see a near term earnings growth muted and look for a better entry

point. Currently we have a neutral view on a stock ......................... ( Page :23)

KPIT Tech: "On billion dollar journey" "NEUTRAL" 27th Jan 2014

KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in

USD term due to the delay in project kick-off and additional loss of billing days in Q3FY14. Considering delay executions of some projects for

next 2 quarters and ongoing change in organization structure, we have a “Neutral” view on the stock. .............................................................. (

Page :20-22)

29th Jan, 2014

Edition : 194

IEA-Equity

Strategy

Larsen & Toubro Ltd: "On Track of Revival………" "NEUTRAL" 24th Jan 2014

UCO BANK : "BUY" 27th Jan 2014

UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII along with higher than industry average loan growth.

Bank’s asset quality improved sequentially despite of challenging macro environment. However bank’s CASA growth has declined marginally in

sequential basis but still at comfortable level. UCO Bank’s operating as well as financials metrics has been improving continuously. We value

bank at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14E’s earning. ............................................................ (

Page :15-19)

SHREE CEMENT : "BUY" 28th Jan 2014

Persistent System: "Persistently innovating.." "BUY" 28th Jan 2014

Delivered inline set of numbers but better on all aspects than its peers did: For 3QFY14, Persistent System’s sales was almost flat (QoQ) in INR

term, while grew 2.2% (QoQ) in USD term impacted by seasonality and furloughs impacts. Considering the company’s ability to achieve scale and

growth, we upgrade our target price from Rs 960 to Rs 1070 with “BUY” view on the stock. ................................................................ ( Page : 12

- 14)

ALLAHABAD BANK : "BUY" 28th Jan 2014

Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due muted NII growth and deteriorated asset quality. Bank’s operating

expenses were stable in absoluter term but as cost income ratio increased drastically on account of lower revenue growth. Asset quality has

deteriorated sequentially. Due to lower corporate demand, loan growth remain muted and bank’s lower its total business (Loan + Deposits)

guidance to Rs.340,000 cr from earlier of Rs.360,000 cr. We value bank at Rs.92/share which is 0.4 times of FY14E’s book value. We are not

impression with bank’s fundament but current price provide 15% upside from our target price. ........................................................... ( Page : 7-

11)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES

2

Year Wise Motorcycle SalesYear Wise Motorcycle Market Share

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

The scooter sub segment grew well led by new launches from Honda (New Activa), Hero (Maestro), TVS (Jupiter) and Suzuki (Swish),

the scooter segment grew at a faster clip of 19% YoY for Apr-Dec'13 period against a flattish (3%) growth in the motorcycle segment.

The faster volume growth of the scooter segment led to a 220bps improvement to 21.2% in its share of the two-wheeler market during

this period. The main drivers for this growth are (a) growing acceptability of gearless scooters, particularly by women, (b) rising

urbanization and increasing proportion of working women and (d) new launches.

Sub Segment Motorcycle

The analysis of previous year’s sales indicates that the three major players viz Heromoto Corp, Bajaj-Auto,TVS Motors have shown

declining performance along with market share loss to both HMSI and Yamaha. The strong rural demand helps to boost the sales of

commuter sub segment (100-125 CC) of motorcycles. The following table shows yearly performance of some of major motorcycle

players

(Source: Company/Eastwind)

The graph clearly indicates that of total automobiles sold for 9MFY14

the contribution of two wheelers stand at maximum. This trend shows

that slow down in consumer discretionary expenses. The differential

pricing makes people to spend more towards two wheelers more over

people look for option which gives them more mileage for every unit of

fuel. As stated earlier there is growth in rural economy and trend is

clearly visible from the sales made by two wheelers in total

automobiles sold for the period.

Sub Segment Scooter

Industry Overview:India's automobile sales continued to remain on sluggish trajectory as most of the companies reported a decline in sales number due to

slowdown in economic activity and increasing fuel prices. However, two-wheeler segments continued to grow at a healthy rate, led by

strong rural demand.The contribution of various segment for the 9MFY14 automobiles sales stands as under :

Two Wheelers For December 2013, overall auto industry volumes were led by the two-wheeler industry (4% YoY growth). Two Wheelers segment

contribution has increased to 80.2% of the total auto volume, during first nine months of FY14 from 77% in FY 13.The cumulative volume

for 9MFY14 for 2 Wheelers stands at 12489192 units up 5.3% YoY.

Better monsoon benefitted rural demand, while urban sales remained lackluster, which was higher than offsetting the rural growth. With

the festive season ending early in November 2013 this year, the positive momentum seen October 2013 has cooled off with retail sales

largely lagging wholesales. The two-wheeler segment has again managed to keep its head over water even as all other segments have

shown an annual decline with last years' festive season ending later.


Companies FY12-13 FY11-12 FY10-11

Hero MotoCorp 46% 48% 48%

Bajaj Auto 31% 32% 32%

TVS Motors 6% 7% 8%

HMSI 11% 7% 7%

Yamaha 4% 4% 3%

Companies FY12-13 FY11-12 FY10-11

Hero MotoCorp 5499245 5779621 5040971

Bajaj Auto 3757094 3834405 3387043

TVS Motors 749806 843338 836831

HMSI 1291688 864183 748488

Yamaha 437998 484891 366770

SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES

3

Given its low ticket size and high rural share, this segment of the auto industry is sure to pick up momentum in the coming months. With

urbanization, rise in women riders, higher fuel efficiency and improving per capita income, the penetration of scooters will continue to

increase and at a pace faster than motorcycles. 2/3 wheeler companies which are the direct beneficiaries of the rural consumption are

expected to remain strong given the buoyant prices for food items, strong monsoon and additional benefits of government doll outs and

largesse.

Future Outlook (Source: Company/Eastwind)

Continued…Scooter sales growth has taken-off since FY10 and has consistently

outgrown that for the motorcycle segment. An increasing population of

working women, mainly in urban markets, has led to rapid sales-volume

growth in this segment. On a longer term perspective, scooter industry

volumes are expected to grow at ~20% CAGR over FY14-20, twice the

growth rate for motorcycles. Overall two wheeler industry volumes are likely

to grow at 12% CAGR during this period. The shares of scooters are

expected to increase to 37% by 2020, with annual sales of 10.7m units

(equal to the current market size of the domestic motorcycle industry).

Three Wheelers (Source: Company/Eastwind)


In three wheelers universe for the December 2013 Industry domestic volumes were down 21% to 35249 units led by 27% drop in the

passenger segment. There was a 7% rise in the goods carrier segment in Dec 13. Exports registered 11% rise to 33,044 units. This segment

for 9MFY14 registered domestic sales was 364669 units down by 9 % YoY for the same period last fiscal. The exports have done fairly well

for the period with 11 % growth YoY to 33044 units. The three wheeler segment remains flat on YoY to 626749 units for 9MFY14. The three

Wheelers demand largely driven by exports, while domestic sales remained weak.

Bajaj-Auto with 55% market share is the market leader in 3 Wheeler sales in the country. Q1FY14 Domestic 3W sales accounted for 38% of

the company's total 3W sales. Of the total 3W sales, 15-20% came from new permits, while replacement accounts for the rest. On the

domestic 3W front, the outlook remains positive with 20000 permits opening up in Hyderabad (5k already utilized in June-July 2013) and

3000 permits opening up in Maharashtra in Sept-Oct 2013. Also, its plan to launch a renewed range of 3W (RE Compact) promises to drive

replacement demand.

For TVS, 3W sales stood up by 36.8% YoY to 6,137 units with most of it coming from the overseas markets; 3W share to total sales forms

3.8% in December and 3.9% YTD, 150bp higher YoY. The Company is expected to benefit from this as 3W forms a high margin product.On

the other hand, Mahindra & Mahindra's 3w sales were up 7.6% to 5.6k units. Sales were down 5% on a MoM basis.

The YTD performance of Three wheelers for FY14 is tabulated as under:

While the macro-economic environment remains challenging, OEMs have pinned hopes on the bevy of launches that might trigger a

response from customers. Also, the recent cut in the price of petrol might just prove to be a good thing for companies. Additionally, better

crop realization due to a good monsoon and hike in MSP is expected to boost the rural income leading to a sales recovery. Over the long

term, easing macro headwinds in terms of lower interest rates and higher economic growth would be the key driver for volume growth and

profitability.

Conclusion


Month 9MFY14 Sales (Volume) 9MFY13 Sales (Volume) Change %

April 69562 61772 12.6%

May 61089 55184 10.7%

June 71889 54274 32.5%

July 66335 65352 1.5%

August 67141 72122 -6.9%

September 80549 78097 3.1%

October 76874 86072 -10.7%

November 65017 80325 -19.1%

December 68293 74596 -8.4%

YTD 626749 627794 -0.2%

SHREE CEMENT.

4325

4791

4791

11%

0%

500387

15502

3875

6136

1M 1yr YTD

Absolute 0.1 -4.8 -5.1 MAT Credit support the buttom line :Rel. to Nifty 0.0 -8.0 -9.2

2QFY14 1QFY14 4QFY13

Promoters 64.8 64.8 64.8

FII 8.2 8.2 8.1

DII 5.9 5.7 5.9

Others 21.2 21.3 21.2

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14

Revenue 1318 -7.7 5.6 1428 1248

EBIDTA 271 -24.7 8.8 360 249

Net Profit 115 -46.9 -32.9 217 172

EPS 33 -46.9 -32.9 62 49

EBIDTA% 21 -18.4 3.1 25 20

NPM% 9 -42.5 -36.5 15 14(In Crs)

4

52wk Range H/L

Mkt Capital (Rs Crores)

5210/3413


Stock Performance-%

Share Holding Pattern-%

1 yr Forward P/B

During the Quarter Company got MAT (minimum alternative tax) credit entitlement of

Rs9.25 crore and deferred tax of Rs1.79 crore. This reduced total tax payable amount to

Rs15.27 crore from Rs26.31 crore.Company’s EBIDTA/ton decreased 6% to Rs.712 (vs Rs.756 in previous quarter), at the

same time the Expenditure also decreased 9% to Rs.2757 (vs Rs.3025 in Q1).Hence we

believe that company will outperform among its peers ,once Realization get improve.The

exceptional weakness is there in the cement prices. Volumes have grown by about 18

percent but the prices have come down by 5 percent and naturally the cost increase is

there. So the EBITDA margin has been badly hit .

The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of

similar capacity along with 25MW of WHRS (at the same location) is expected by

Jun’14.Two grinding units of 2m tons each, at Ras and in Bihar,are being constructed and

expected by Jun’14.We expect Shree to be a 21.5m-tpa company by Jun’15.It plans to

foray into high demanding eastern.Total capex for these expansion is Rs.3,000 crore

which is spread over next 2 years.

Source - Comapany/EastWind Research

On the expansion front :

Nifty

Buy

Market Data

Average Daily Volume (Nos.)

Volumes grew by18 % but prices came down by 5%. So the EBITDA margin has hit

badly:Shree Cement Ltd has reported a 47% fall in its December quarter net profit on

lower sales as well as 5% degrowth in realization. PAT impacted due to lower other

income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41%

YOY). Volumes grew by18 % to3.8mn ton from 3.3mn ton QOQ. Net profit decreased by

47% yoy from Rs.217.44 crore (Rs.62.42 per share) in 2Q13 to Rs.115.49 crore (Rs.33.15

per share) in 2Q14.Total net income from operations stood at Rs.1318.13 crore in 2Q14,

a 6% fall yoy from Rs.1401.23 crore in 2Q13.Other income decreased from Rs.30.2 crore

in 2Q13 to Rs.9.9 crore in 2Q14.In the mean time company declares a Rs.10 as interim

dividend/share.

Power Segment: Realization Down By 15% : For power generation the net realization has

come down from Rs 383 to Rs 334 compared to last year same quarter and in the first

quarter it was still better at Rs 397.So the power realization is down by 13 percent and

hence sales also have come down by 35 percent to Rs.290 Cr. At the same time 14%

increase in its profitability from power segment to Rs112.56 crore while its cement

segment reported 79% fall in its profitability to Rs37.65 crore.

Upside

Change from Previous

CMP

Target Price

Previous Target Price

Result Update

BSE Code

SHREECEMNSE Symbol

"BUY"28th Jan' 14


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PRICE 1.5x2x 2.5x3x 3.5x4x 4.5x

Outlook :

FY11 FY12 FY13 FY14E

3454 5898 5590 5798

203 163 188 217

3656 6061 5779 6015

905 1500 1513 1409

602 1006 915 1090

2569 4252 4029 4275

885 1646 1561 1523

676 873 436 470

98 235 193 145

-99 69 115 118

365 619 1004 1007

20.8 23.1 26.1 21.1

5

Net tax expense / (benefit)

PAT

ROE%

Power and fuel

Freight and forwarding

Expenditure

EBITDA

Depriciation

Interest Cost

SHREE CEMENT.

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income



Company Description : Shree Cement (SCL) is a cement producer operating in the two

segments cement and power. As of June 30, 2012, the company had a cement capacity

of 13.5 million tonnes per annum (MTPA) and power capacity of 560 MW. The

company's waste heat recovery power plants have a total capacity of 46 MW. The

company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It has

manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units

at Khushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in

Uttarakhand.

Management Corner : From mid-January there is a big change in demand scenario

because of the Indian calendar, the prices have improved, the demand has also

improved and they think that January to June some impact of elections will be there -

pre-election demand and other things. So margins should be better than 21 percent.

From the view company Operations in the high utilisation North and Central markets,

capacity expansions underway, low gearing and strong RoE are fundamental positives.

We believe although, near term challenges in terms of a slowdown in demand for

cement would remain, strong balance sheet and better efficiency in terms of cost

remains a key positive for this company to overcome challenges.Company Management

is bull for the rest two quarters of FY2014 as according to them demand has already

buttom out.We are positive on the stock as it always beats its peers group with lower

operational cost.Shree cement follows a multi brand strategy and sells cement under

the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together

enjoy the largest market share in high value markets of Rajasthan, Delhi and Haryana.

After a good monsoon and election ahead we are expecting a good performance from

shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price

Rs.4791/-


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EBIDTA

INTEREST SERVICE COVERAGERATIO

FY10 FY11 FY12 FY13

35 35 35 35

1798 1951 2699 3809

1833 1986 2734 3844

1789 1472 818 443

318 217 143 534

28 16 17 18

171 185 584 81

472 267 178 87

4906 4940 5973 6160

0 0 0 0

752 1167 1521 1782

967 729 97 133

299 308 205 378

358 404 503 530

82 108 181 315

416 499 459 369

415 429 363 326

4906 4940 5973 6160

FY10 FY11 FY12 FY13

4.4 3.6 3.8 4.2

212.3 118.6 177.5 288.2

2.3 3.1 3.1 5.6

4.7 5.3 9.9 1.4

1.0 1.2 0.9 0.9

6

Inventories to Turnover%

Short-term loans and advances

Total Assets

P/B

EPS

Debtor to Turnover%

Tangible assets

SHREE CEMENT.

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Creditors to Turnover%


B/S PERFORMANCE

Trading At :

RATIOS

Long-term provisions

Trade payables

Short-term provisions

Total liabilities

Intangibles

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances


80

92

121

16

31.5

1M 1yr YTD

Absolute -14.9 -55.2 -55.2

Rel.to Nifty -12.5 -56.6 -56.6

Current 4QFY13 3QFY1

3Promoters 58.9 55.2 55.2

FII 8.7 8.0 8.1

DII 18.5 21.1 22.0

Others 13.9 15.6 14.7

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 4022 5163 4866 5426 6715

Total Income 5393 6461 6343 7745 9034

PPP 3055 3770 3385 4361 5150

Net Profit 1423 1867 1185 1290 1522

EPS 29.9 39.2 23.7 23.7 27.9

7

ALLAHABAD BANK

Allahabad bank’s NII grew by 0.4% YoY to Rs.1336 cr versus our expectation of

Rs.1422 cr largely due to lower interest income led by lower than expected loan

growth and loan yield as well. Bank’s deposits growth was also lower than expected

but cost of deposits was almost same in previous quarter. Therefore interest income

was lower than interest expenses which cause muted NII growth. During quarter,

bank’s other income was Rs.542 cr as against Rs.341 cr in last quarter which helped

to report revenue growth of 11% YoY.

CI ratio up drastically in sequential basis but in absolute term it remain

comfortable

Cost to income ratio was higher at 46.3% versus 42.5% in previous quarter largely

due to lower revenue growth. In absolute term operating expenses increased by

2.2% QoQ and 7.3% YoY on which employee cost and other operating expenses

increased by 1% and 22% YoY respectively. With lower operating cost and high

support from other income, operating profit grew by 17.2% YoY to Rs.1008 cr.

Worsen asset quality led by macro environment

NII growth muted on account of lower loan growth and loan yield

Company UPDATE BUY

CMP

Target Price

Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due

muted NII growth and deteriorated asset quality. Bank’s operating expenses

were stable in absoluter term but as cost income ratio increased drastically on

account of lower revenue growth. Asset quality has deteriorated sequentially.

Due to lower corporate demand, loan growth remain muted and bank’s lower

its total business (Loan + Deposits) guidance to Rs.340,000 cr from earlier of

Rs.360,000 cr. We value bank at Rs.92/share which is 0.4 times of FY14E’s

book value. We are not impression with bank’s fundament but current price

provide 15% upside from our target price.


Market Data

Upside

BSE Code 532480

52wk Range H/L


Allahabad Bank Vs Nifty


8.26 LAKH

Nifty 6136

Average Daily Volume

3975

176/65

NSE Symbol ALBK

Mkt Capital (Rs Cr)



Stock Performance

During this quarter bank’s asset quality worsen with gross NPA further deteriorated

by 14% QoQ in absolute term while as a percentage to gross advance, this ratio

stood at 5.5% versus 5% in previous quarter. Provisions had increased by 19% on

sequential basis which led net NPA deterioration to 12% QoQ. In percentage term,

net NPA to net advance stood at 4.1% versus 3.8% in previous quarter. Provision

coverage ratio (w/o technical write-off) marginally improved to 24.8% from 23.7% in

2QFY14. During this quarter, bank’s sold Rs.389 cr of non- performing assets to

asset reconstruction companies. Total outstanding restructure at the end of stood at

Rs.12624 cr which is 9.2% of net advance.

"BUY"28th Jan, 2014


8


Lower business growth target due to absence of corporate loan

Allahabad Bank’s total deposits grew by 10% YoY and advance grew by 13% YoY to

Rs.1875 bn and Rs.1373 bn respectively. Muted growth in loan was on account of lower

borrowing from corporate segment whereas bank reported retail, MSME and priority

sector registered handsome growth. CASA for the quarter stood at 30.8% versus 31.2%

in previous quarter. Bank management lower its FY14’s total business guidance to

340,000 cr from Rs.360,000 cr earlier. Accordingly we lower our loan and deposits growth

to 12% and 9% from earlier of 15% each. Credit deposits ratio was stable at 73.2%.

Lower profit growth because of muted NII growth and deteriorating asset quality

Net profit of Allahabad bank’s grew by 4.7% YoY to Rs.325 cr largely due to muted NII

growth and high provision led by deteriorating asset quality. Due to lower demand from

corporate borrowing, banks reduce its business growth target by 5.5% for FY14. Asset

quality pressure would likely to persist in FY14 which would result of lower valuation

multiple. We lower our book value estimate to Rs. 229.3 from earlier of Rs.254 primarily

due to equity dilution and lower profit expectation in FY14E.

Valuation & View

Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due muted NII

growth and deteriorated asset quality. Bank’s operating expenses were stable in

absoluter term but as cost income ratio increased drastically on account of lower revenue

growth. Asset quality has deteriorated sequentially. Due to lower corporate demand, loan

growth remain muted and bank’s lower its total business (Loan + Deposits) guidance to

Rs.340,000 cr from earlier of Rs.360,000 cr. We value bank at Rs.92/share which is 0.4

times of FY14E’s book value. We are not impression with bank’s fundament but current

price provide 15% upside from our target price.

ALLAHABAD BANK

Source:Company/Eastwind


9

ALLAHABAD BANK

Source: Eastwind/Company


Fundamant Through Graph

NII growth muted on account of lower loan

growth and loan yield

With the support from other income and

lower operating expenses, PP grew by 17.2%

YoY

Lower profit growth because of muted NII

growth and deteriorating asset quality


10

ALLAHABAD BANK




Quarterly Performance (Rs Cr) 3QFY14 2QFY14 3QFY13 % YoY % QoQ 3QFY14E Variation

Interest/discount on advances / bills 3533 3422 3234 9.2 3.2 3669 -3.7

Income on investments 1161 1131 1161 0.0 2.6 1199 -3.2

Interest on balances with Reserve Bank of India 27 28 29 -7.9 -5.1 33 -18.5

Others 42 25 21 102.9 67.8 43 -2.6

Total Interest Income 4762 4607 4445 7.1 3.4 4944 -3.7

Others Income 542 696 341 59.2 -22.1 599 -9.4

Total Income 5305 5303 4785 10.9 0.0 5542 -4.3

Interest Expended 3427 3298 3114 10.0 3.9 3522 -2.7

NII 1336 1309 1330 0.4 2.0 1422 -6.1

Other Income 542 696 341 59.2 -22.1 599 -9.4

Total Income 1878 2005 1671 12.4 -6.3 2021 -7.1

Employee 569 550 563 1.0 3.4 301 89.3

Other Expenses 301 301 247 21.7 0.0 558 -46.1

Operating Expenses 870 852 811 7.3 2.2 859 1.3

PPP( Rs Cr) 1008 1154 860 17.2 -12.6 1162 -13.3

Provisions 555 742 432 28.3 -25.2 699 -20.6

PBT 453 411 428 5.9 10.1 463 -2.2

Tax 128 136 117 9.2 -5.9 139 -8.2

Net Profit 325 276 311 4.7 18.0 324 0.4

Balance Sheet ( Rs Cr)

Net Worth 12410 12085 11572 7.2 2.7 12409 0.0

Deposits 187478 180396 170649 9.9 3.9 192974 -2.8

Loans 137300 131896 121555 13.0 4.1 139757 -1.8

Asset Quality

GNPA( Rs Cr) 7,512 6,613 3,532 112.7 13.6 6,997 7.4

NPA( Rs Cr) 5651 5048 2478 128.1 11.9 5320 6.2

%GNPA 5.5 5.0 2.9

%NPA 4.1 3.8 2.0

PCR(w/o technical write-off)(%) 24.8 23.7 29.8

Operating Metrics

Credit-Deposits Ratio(%) 73.2 73.1 0.0

Cost-Income Ratio(%) 46.3 42.5 48.5

11

Financials & Assumption

ALLAHABAD BANK




Income Statement 2011 2012 2013 2014E 2015EInterest Income 11015 15523 17436 18958 22529

Interest Expense 6992 10361 12569 13532 15814

NII 4022 5163 4866 5426 6715

Change (%) 51.8 28.3 -5.7 11.5 23.8

Non Interest Income 1370 1299 1477 2319 2319

Total Income 5393 6461 6343 7745 9034

Change (%) 29.4 19.8 -1.8 22.1 16.6

Operating Expenses 2338 2691 2958 3384 3885

Pre Provision Profits 3055 3770 3385 4361 5150

Change (%) 19.9 23.4 -10.2 28.8 18.1

Provisions 1112 1602 1865 2527 2976

PBT 1943 2167 1520 1835 2174

PAT 1423 1867 1185 1290 1522

Change (%) 18.0 31.2 -36.5 8.8 17.9

Balance SheetDeposits( Rs Cr) 131887 159593 178742 194828 222104

Change (%) 24 21 12 9 14

of which CASA Dep 44156 48668 54930 60397 68852

Change (%) 21 10 13 10 14

Borrowings( Rs Cr) 6918 9094 10098 13544 15440

Investments( Rs Cr) 43247 54283 58306 60428 71263

Loans( Rs Cr) 93625 111145 129490 145028 165332

Change (%) 31 19 17 12 14

RatioAvg. Yield on loans 8.8 10.5 9.8 9.7 10.0

Avg. Yield on Investments 6.2 6.8 7.7 7.5 8.0

Avg. Cost of Deposit 4.9 6.1 6.7 9.2 9.5

Avg. Cost of Borrowimgs 7.1 6.8 5.2 7.1 7.1

Persistent System.

BUY Delivered inline set of numbers but better on all aspects than its peers did :

11%

1M 1yr YTD

Absolute 1.1 76.8 85.7

Rel. to Nifty 3.4 75.8 82.3


Promoters 38.96 38.96 38.96

FII 18.26 15.28 14.84

DII 18.78 21.23 19.31

Others 24 24.53 26.89

Financials

3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 432.75 432.37 0.1 332.98 30.0

EBITDA 104.3 100.8 3.5 82.4 26.6

PAT 64.2 60.8 5.6 49.5 29.7

EBITDA Margin 24.1% 23.3% 80bps 24.7% (60bps)

PAT Margin 14.8% 14.1% 70bps 14.9% (10bps)

12

PERSISTENT

"Persistently innovating.."

Results update

CMP 994

Target Price 1070

For 3QFY14, Persistent System’s sales was almost flat (QoQ) in INR term, while grew

2.2% (QoQ) in USD term impacted by seasonality and furloughs impacts. During the

quarter, volume growth from Offshore increased by 3.8% and Onsite volume growth

was flat, sequentially. PAT grew by 5.5% (QoQ)


Previous Target Price 960

Upside 8%

The management remains confident of FY14 with deal pipeline being strong and

remains focused on increasing the share of IP-led revenues in its portfolio. The

management expects to see more than 15% dollar revenue growth, more than

NASSCOM guidance of 12-14 % for FY14E.

Margin ramp up: During the quarter, Its EBITDA margin improved by 80bps to 24.1%

because of cost rationalization. PAT margin up by 70bps to 14.83%. However,

management expects to maintain margin at 24-25% for FY14E.

On segmental front: The Company’s cash cow segment Infrastructure and System,

which contributes 69% on sales, was flat than previous quarter and Telecom (18%

contribution on sales) was up by 2% sequentially. While, Life Science space (13%

contribution on sales) down marginally by 1% (QoQ).

Geography wise revenue: Because of weak seasonality and furloughs impact, North

America and APAC regions were marginally down by 1-2%(QoQ). The company’s earning

potential from US is 83% and APAC is 11%. While Europe contributes 6% of sales and has

seen tremendous set of growth at 36% (QoQ) led by a large account execution during

the quarter.

1 year forward P/E-x

Rs, Crore


View and Valuation: The company’s focus is shifting greater proportion to IP led services

and company has marquee clientele in cutting-edge technologies around cloud,

mobility, collaboration and analytics; witnessing faster growth. Considering the

company’s ability to achieve scale and growth, we upgrade our target price from Rs

960 to Rs 1070 with “BUY” view on the stock. Recently we had advised to book profit

on the stock at a target price of Rs 960. Post 3rd quarter earnings, we upgrade our EPS

for FY15E from Rs 76.9 to Rs 79.1. At a CMP of Rs 994, stock trades at 12.6x FY15E

earnings.

Clients Metrics: During the quarter, company added 2 clients(Total 34) under medium

category( >$1mn to $3mn) and no client addition (Total) 16 from large ( > $ 3Mn) .

Revenue contribution from top-1 client declined from 22.5% (2QFY14) to 19.8% and

contribution from top-5 and Top-10 marginally down. DSO at 63days, almost 12

quarters low.

Average Daily Volume 12139

Market Data

BSE Code 533179

NSE Symbol

Persistent management suggests that deal pipeline are looking strong and seeing good

activity and traction in the market across the board. Its focus on some of newer

technologies like cloud, analytics and mobility, M2M, digital transformation are

gaining a lot of traction because of pickup in demand environment. Because of actively

investment in these themes, management is very confident to see healthy growth.


52wk Range H/L 1058/477


3974

Nifty


6136

Stock Performance

"BUY"28th Jan' 14


■Persistent is confident of doing more than 15% revenue growth in$ terms(FY14E).

■They expect to maintain margin at 24-25% for FY14E

■ The company is optimistic to see more deals on SMACS and IP led business.

■ Services business can continue to keep the growth momentum.13



Key facts from Concall (attended on 27th Jan,2014)

■The Company’s focus on newer technologies like cloud, analytics, mobility and digital

transformation are gaining traction.

■ Expects 20-21% growth in the next year from IP led business, which in turn will help

improve margins going forward.


Persistent System.

Sales (INR) and Sales growth-%(QoQ)

On $term, Sales growth was up by 2.2%

(QoQ) and 0.8% on INR term,

Segmental Revenue-%

Persistent's exposure on Infr and System has

increased to 69%, growth in Infra space

indicates more visibility of deal intake in near

future,


Margin-%

Its EBITDA margin improved by 80bps to

24.1% because of cost rationalization.


14

Persistent System.


Operating Metrics

Financials



2QFY12 3QFY12 4QFY13 1QFY13 QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

Top1 16.0% 15.9% 17.2% 17.8% 20.7% 21.1% 21.6% 21.2% 22.5% 19.8%

Top 5 38.6% 37.0% 36.6% 33.5% 36.3% 37.3% 36.7% 34.7% 36.4% 36.9%

Top 10 49.4% 48.3% 48.8% 45.3% 47.0% 49.4% 47.9% 46.0% 47.3% 46.9%

Onsite - Linear 12665 12387 12603 12789 12863 12772 14014 14567 14283 14510

Offshore - Linear 3803 3778 3895 3898 3978 4032 4143 4111 4109 4179

Yeild per Employee(excld- Trainee) 3208 3247 3350 3345 3746 3817 3769 3602 3919 3934

Total Employee 6900 6706 6628 6536 6370 6719 6970 7144 7457 7602

Attrition 17.7% 17.4% 18.3% 18.9% 16.9% 16.0% 14.4% 14.2% 14.0% 13.2%

Utilization rate %(xclude IP Led ) 73.8% 74.1% 71.7% 74.1% 75.2% 77.3% 72.5% 70.0% 71.7% 72.9%

Billing Rate-USD/ppm

Employee Metrics

Client Concentration

Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 601.16 775.84 1000.3 1294.5 1666.59 2061.72

Employee Cost 368.74 481.62 599.05 719 899.96 1123.64

Cost of technical professionals 0 30.67 41.68 54 91.66 113.39

Other expenses 86.05 105.24 135.2 218 291.65 366.99

Total expenses 454.79 617.53 775.93 990.78 1283.28 1604.02

EBITDA 146.37 158.31 224.37 303.72 383.32 457.70

Depreciation 33.52 42.39 61.1 78 100.55 93.54

Other Income 11.23 34.44 34.44 34.44 55.00 72.16

EBIT 112.85 115.92 163.27 225.44 282.76 364.16

Interest Cost 0 0 0.00 0.03 0.05 0.05

Profit (+)/Loss (-) Before Taxes 124.08 150.36 197.71 259.851 337.71 436.28

Provision for Taxes 9.05 10.62 55.09 75.37 92.03 119.98

Net Profit (+)/Loss (-) 115.03 139.74 142.62 184.481 245.69 316.30

Growth-% (YoY)

Sales 1.2% 29.1% 28.9% 29.4% 28.7% 23.7%

EBITDA 60.2% 8.2% 41.7% 35.4% 26.2% 19.4%

PAT 74.1% 21.5% 2.1% 29.4% 33.2% 28.7%

Expenses on Sales-%

Employee Cost 61.3% 62.1% 59.9% 55.5% 54.0% 54.5%

Other expenses 14.3% 13.6% 13.5% 16.9% 17.5% 17.8%

Tax rate 7.3% 7.1% 27.9% 29.0% 27.3% 27.5%

Margin-%

EBITDA 24.3% 20.4% 22.4% 23.5% 23.0% 22.2%

EBIT 18.8% 14.9% 16.3% 17.4% 17.0% 17.7%

PAT 19.1% 18.0% 14.3% 14.3% 14.7% 15.3%

Valuation:

CMP 310 366.7 409.2 541 994 994

No of Share 4 4 4 4 4 4

NW 639.0 747.1 840.5 1018.3 1212.5 1477.3

EPS 28.8 34.9 35.7 46.1 61.4 79.1

BVPS 159.7 186.8 210.1 254.6 303.1 369.3

RoE-% 18.0% 18.7% 17.0% 18.1% 20.3% 21.4%

P/BV 1.9 2.0 1.9 2.1 3.3 2.7

P/E 10.8 10.5 11.5 11.7 16.2 12.6

84

82

#####

1M 1yr YTD

Absolute -0.7 -5.4 -5.4

Rel.to Nifty -0.6 -9.0 -9.0


3Promoters 69.3 69.3 69.3

FII 4.2 3.9 3.2

DII 12.4 12.5 13.0

Others 14.2 14.3 14.6

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 3845 3902 4582 6186 6289

Total Income 4770 4868 5534 7335 7438

PPP 2695 2811 3357 4850 5132

Net Profit 907 1109 618 1585 2101

EPS 16.5 17.7 9.3 23.8 31.6

15

During quarter, bank reported NII growth of 33% YoY to Rs.1566 cr below of our

expectation of Rs. 1642 cr largely due to higher cost of fund than anticipated which

led by sequentially declined of low cost deposits(CASA). NII growth of 33% YoY was

much higher than its peers which have delivered result so far. Other income was

Rs.190 cr versus Rs.209 cr in 2QFY14 and Rs.190 cr in 3QFY14. With the lower

support from other income, total revenue growth was 28.5% YoY to Rs.1756 cr.

Upside

86.65/46

Mkt Capital (Rs Cr)

Market Data

NSE Symbol UCOBANK

UCO bank reported net profit growth of 207% YoY largely due to robust

growth in NII along with higher than industry average loan growth. Bank’s

asset quality improved sequentially despite of challenging macro

environment. However bank’s CASA growth has declined marginally in

sequential basis but still at comfortable level. UCO Bank’s operating as well

as financials metrics has been improving continuously. We value bank at

Rs.84/share which is 0.5 times of one year forward book and 3.5 times

FY14E’s earning.

NII growth of 33% YoY led by higher than industry loan growth and high CD

ratio

Operating expenses increased by 15.5% YoY in which employee cost and other

operating expenses increased by 12.7% and 21% YoY respectively. Cost income

ratio declined from 39.2% in 3QFY13 to 35.3% inn3QFY14. With the support from

healthy NII growth and lower cost income ratio, bank’s operating profit grew by 37%

YoY to Rs.1137 cr.

Healthy NII growth and controlled cost income ratio led operating profit growth

BSE Code

UCO BANK

Company Update BUY

CMP

532205

Target Price

Average Daily Volume

5561



UCO Bank Vs Nifty


2960821

Nifty 6154



Stock Performance

52wk Range H/L

Stable asset quality in sequential basis despite of challenging environment

On delinquencies front, bank reported very stable asset quality in sequential basis

with GNPA deteriorated by 0.3% to Rs.7353 cr versus Rs.7376 cr in challenging

macro environment. In percentage term GPA improved by 25 bps to 5.2% versus

5.5% in previous quarter. Provisions in absolute term declined by 0.7% in sequential

basis which led net NPA improve to 0.3%. In percentage of gross NPA to gross

advance, it stood at 5.2% versus 5.5% in 2QFY14 while net NPA in percentage term

was improved to 3% from 3.1% in previous quarter. Provisions coverage ratio

(without technical write-off), was 46.4% as against 46.6% in previous quarter.

"BUY"27h Jan, 2014


16

UCO BANK


Loan and deposits reported higher growth than industry average

On balance sheet growth front, bank’s advance grew by 16.5% YoY while deposits grew

by 13.4% YoY led by CASA growth of 23% YoY in absolute term. CASA in percentage of

total deposits improved to 30.5% versus 19.2% in 3QFY13. Saving deposits and current

deposits increased by 13% and 38% YoY respectively. But in sequential basis, CASA

deposits declined to 30.5% from 31.8% and 32.1% in 1QFY14. Credit deposits ratio for

quarter stood at 73.5% as against 71.6% in 3QFY14 and 71.4% in previous quarter. Total

business (Deposits +Advance) grew by 14.7% YoY to Rs.3.34 lakh Cr versus Rs.2.91

lakh Cr.

Marginal expansion of NIM on account of declined loan yield than cost of fund

NIM improved by 60 bps YoY to 3.06% from 2.42% largely due to lower cost of deposits

which was lead by low cost franchise network. Cost of deposits stood at 6.27% versus

6.92% in 3QFY14. Yield on advance (EW calculation) declined from 10.5% to 10% which

has restricted limited NIM growth.

Profit tripled on account of healthy NII growth, lower CI ratio and stable asset

quality

UCO Bank reported net profit growth of 207% YoY to Rs.315 cr as against our

expectation of Rs.338 cr largely due to robust growth in NII, lower cost income ratio,

improving asset quality which led lower provisions and high credit deposits ratio.

Valuation & View

UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII

along with higher than industry average loan growth. Bank’s asset quality improved

sequentially despite of challenging macro environment. However bank’s CASA growth

has declined marginally in sequential basis but still at comfortable level. UCO Bank’s

operating as well as financials metrics has been improving continuously. We value bank

at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14E’s

earning.


17

UCO BANK

Source:Eastwind/Company


Fundamental Through Graph

NII growth of 33% YoY led by higher than

industry loan growth and high CD ratio

Healthy NII growth and controlled cost

income ratio led operating profit growth

Profit tripled on account of healthy NII

growth, lower CI ratio and stable asset

quality


18

UCO BANK



Quarterly Performance


Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY % QoQ

Interest/discount on advances / bills 3543 3396 3197 10.8 4.3

Income on investments 1138 1026 923 23.3 11.0

Interest on balances with Reserve Bank of India 29 8 30 -2.7 243.2

Others 19 14 21 -13.7 31.7

Total Interest Income 4729 4444 4171 13.4 6.4

Others Income 190 209 190 0.4 -9.0

Total Income 4919 4653 4361 12.8 5.7

Interest Expended 3163 2875 2994 5.6 10.0

NII 1566 1569 1177 33.0 -0.2

Other Income 190 209 190 0.4 -9.0

Total Income 1756 1779 1367 28.5 -1.3

Employee 395 382 351 12.7 3.3

Other Expenses 225 230 186 20.9 -2.4

Operating Expenses 620 612 536 15.5 1.2

PPP( Rs Cr) 1137 1166 831 36.8 -2.5

Provisions 812 759 728 11.5 7.0

PBT 325 408 103 215.1 -20.3

Tax 10 7 1 1536.5 40.7

Net Profit 315 400 102 206.9 -21.4

Balance Sheet

Net Worth 11085 10770 9399 17.9 2.9

Deposits 192406 188779 169711 13.4 1.9

Total Liabilities 203491 212416 179110 13.6 -4.2

Advances 141457 135233 121455 16.5 4.6

Total Assets 141457 212416 121455 16.5 -33.4

Asset Quality

GNPA 7,353 7,376 6,711 9.6 -0.3

NPA 4217 4228 3927 7.4 -0.3

% GNPA 5.2 5.5 5.5

% NPA 3.0 3.1 3.2

% PCR(Without technical writeoff) 46.4 46.6 41.5

19

UCO BANK

Source: Company/Eastwind



Income Statement 2011 2012 2013 2014E 2015EInterest Income 11371 14632 16752 18346 22476

Interest Expense 7526 10730 12170 12160 16186

NII 3845 3902 4582 6186 6289

Change (%) 65.4 1.5 17.4 35.0 1.7

Non Interest Income 925 966 952 1149 1149

Total Income 4770 4868 5534 7335 7438

Change (%) 45.0 2.0 13.7 32.5 1.4

Operating Expenses 2075 2056 2177 2485 2306

Pre Provision Profits 2695 2811 3357 4850 5132

Change (%) 58.0 4.3 19.4 44.5 5.8

Provisions 1788 1661 2710 3217 2798

PBT 907 1150 647 1634 2334

PAT 907 1109 618 1585 2101

Change (%) -10.4 22.3 -44.2 156.4 32.5

Balance SheetDeposits( Rs Cr) 99071 115540 128283 153939 184727

Change (%) 17 11 20 20

of which CASA Dep 32031 34403 55733 67707 81249

Change (%) 6 7 62 21 20

Borrowings( Rs Cr) 5475 12901 9492 12315 14777

Investments( Rs Cr) 42927 45771 52245 62692 75231

Loans( Rs Cr) 99071 115540 128283 153939 184727

Change (%) 20 17 11 20 20

RatioAvg. Yield on loans 8.6 9.9 10.0 9.0 9.0

Avg. Yield on Investments 6.6 7.1 7.1 6.8 7.5

Avg. Cost of Deposit 4.7 6.5 6.6 7.0 6.4

Avg. Cost of Borrowimgs 12.5 6.1 7.0 6.0 6.0

Valuation

Book Value 135 137 146 173 185

CMP 107 79 50.1 75.25 75.25

P/BV 0.8 0.6 0.3 0.4 0.4

KPIT Tech.

KPIT Tech witnessed weak numbers, now..they will miss its earning guidance;

1M 1yr YTD

Absolute -7.95 32.66 -17.1

Rel. to Nifty -7.65 29.16 -18.32


Promoters 22.53 22.87 24.25

FII 41.96 36.42 32.79

DII 6.99 11.12 10.93

Others 28.52 29.59 32.03

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 677.93 702.76 (3.5) 567.02 19.6

EBITDA 103.5 108.1 (4.3) 94.1 10.0

PAT 66.7 66.7 0.0 48 39.0

EBITDA Margin 15.3% 15.4% (10bps) 16.6% (130bps)

PAT Margin 9.8% 9.5% 30bps 8.5% 130bps

20

Price Performance

Rs, Crore


Deal Momentum: There has been good momentum during Q3 across the business lines

in terms of deal closure and pipeline building. Though in 3 large deals there has been

almost a quarter’s delay in closure, two in SAP and one in A&E, that got closed during

Q3. Company closed large deals in excess of USD 70 million during the quarter, which

provides a sound platform, going into FY15E.

View and Valuation: Impressive organic growth despite inorganic thrust (acquired 10

companies in the last 10 yrs), Potential option value from success of its hybrid engine

venture Revolo (on trial). KPIT has targeted to reach $1bn sales by 2017. Its

differentiated positioning and competitive edge in its focus areas, imperatives to the

success of smaller-sized IT vendors impress to investors.

Considering delay executions of some projects for next 2 quarters and ongoing change

in organization structure, we have a “Neutral” view on the stock. Already we had

advised to book profit on 8th Jan 2014 at a target price of Rs177(Initiated at Rs115). Our

view on the stock could be change after favorable update on stock and healthy earning

guidance for FY15E. At a CMP of Rs151, stock trades at 9x FY15E EPS.

Previous Target Price -

KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales

declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in USD term due to the delay in

project kick-off and additional loss of billing days in Q3FY14. Despite cost optimization

strategy by company, PAT dip by 9% (QoQ).

"On billion dollar journey"

CMP 151

Target Price -

Result update Neutral

The company expects better earnings, confident of generating a positive cash flow for

FY14E, after considering the balance payments for existing M&A deals.

Upside

BSE Code 532400

NSE Symbol

-

Change from Previous - Now, Company will be in the position of short with its annual revenue guidance. The

shortfall in the revenue is entirely because of deficit in SAP SBU revenue for FY14.

However, on profit they are confident to exceed the higher end of the guidance

despite the challenges faced on SAP SBU profitability.

Market Data

KPIT

52wk Range H/L 189/92

Steady set of margin: EBITDA margin almost flat at 15.3% and PAT margin declined by

50bps to 9%, sequentially. Commenting on margin, management stated that the higher

margin growth business coming up apart from revenue growth would improve the

margins going ahead. By next couple of quarter margin from SAP business would inch

up.

Growth inside the Europe: Europe region has been the leading growth market with

9.1%. During the quarter, USA had a marginal de-growth in USD terms and APAC

declined by 18%(QoQ) because of seasonality and furloughs impact. In INR terms,

Europe grew by 7.7%, US down by 2.5% and APAC 19.4%, on QoQ.

Share Holding Pattern-% Mix growth across verticals: On INR basis, KPIT reported 8% of growth from Energy &

Utilities (15% contribution on sales), while Manufacturing (39% contribution on sales)

down by 4%(QoQ) and Automotive & Transport-(36% contribution on sales) down by

1.5%, sequentially.

6267


Stock Performance

2910

Average Daily Volume 144511

Nifty

"NEUTRAL"27th Jan' 14


21


KPIT Tech

Sales and Sales growth-%(QoQ)


Margin-%

Sales Mix


Revolo: The unit has been in the process of conducting trials in 40 vehicles, which has

been yielding encouraging results, with fuel savings between 30-40%. KPIT is working to

bring the costs down further and attaining regulatory approvals.As per the management,

by next year it could be a part of revenue.

Headcounts Metrics: During the quarter, Considering the ramp up of deals, this quarter

was good for hiring prospect, adding around 300+ people during the quarter.Over the

next few quarters, we expect, company will introduce multiple initiatives to develop

individuals to take on more responsibilities in future. During the quarter, Attrition at 18%

(LTM).

Client Metrics: Amongst the top customer accounts, Cummins has grown by 4.7% on a Q-

o-Q basis with revenue share at 17.9% during the quarter. The top 5 and top 10

customers had Q-o-Q decline of 3.2% and 1% respectively.


4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

USA 73.3% 76.2% 76.4% 74.7% 76.3% 75.0% 71.9% 72.6%

UK & Europe 14.4% 14.6% 12.1% 13.9% 11.3% 13.1% 13.8% 15.4%

RoW 12.3% 9.2% 11.6% 11.4% 12.3% 11.9% 14.4% 12.0%

Automotive & Transportation 37.1% 39.6% 38.8% 40.3% 38.5% 35.5% 36.1% 36.4%

Manufacturing 35.0% 32.9% 32.4% 34.0% 35.4% 39.6% 39.7% 38.9%

Energy & Utilities 11.6% 13.7% 15.3% 14.2% 13.5% 14.1% 13.6% 15.1%

Others 16.4% 13.8% 13.5% 11.5% 12.7% 10.8% 10.7% 9.7%

Sales Mix (% of Sales) - Geography

Sales Mix (% of Sales) - Verticles

22

KPIT Tech

Operating Metrics


Financials



4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14

No. of Customers Added 4 3 4 2 5 6 3 3

No. of Active Customers 169 172 176 178 183 189 192 195

Customers with run rate of >$1Mn 59 65 69 72 78 78 78 78

Top Client – Cummins 19.5% 20.6% 19.7% 19.1% 16.6% 16.8% 16.5% 17.9%

Top 5 Clients 33.0% 36.3% 35.2% 36.8% 35.2% 38.6% 38.0% 38.2%

Top 10 Clients 42.2% 44.0% 43.7% 45.2% 44.0% 47.3% 46.3% 47.6%

DSO 90 75 75 70 75 77 75 76

Total Employee 7719 7873 8111 8286 8321 8456 8816 9136

Onsite Utilization 94.5% 94.7% 94.5% 92.8% 94.3% 94.2% 92.4% 88.1%

Offshore Utilization 74.3% 74.1% 74.7% 72.9% 74.1% 73.4% 72.9% 71.3%

Client Metrics

Client Concentration

Employee Metrics

Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales-USD 153.76 224.07 306.71 410.46 449.39 543.42

Net Sales 731.64 987.05 1500.00 2238.63 2696.33 3233.33

Employee Cost 265.92 529.95 771.78 1140.79 1367.04 1649.00

Other expenses 280.65 254.81 430.30 762.32 903.27 1067.00

Total Expenses 570.62 838.77 1283.75 1903.11 2270.31 2715.99

EBITDA 161.02 148.28 216.25 335.52 426.02 517.33

Depreciation 30.80 41.12 44.49 47.16 58.32 77.73

Other Income 1.20 6.74 13.82 11.74 13.48 16.17

Extra Ordinery Items -26.45 0.00 10.05 -1.30 -18.61 16.17

EBIT 130.22 107.16 171.76 288.36 367.70 439.60

Interest Cost 2.74 3.78 7.32 13.99 24.31 24.59

PBT 102.23 110.12 188.31 284.81 338.26 447.35

Tax 16.91 15.49 43.67 76.55 94.71 123.02

PAT 85.32 94.63 144.64 208.26 243.55 324.33

PAT (excluding EO Items) 111.77 94.63 134.59 209.56 262.16 308.16Growth-%

Sales -7.8% 34.9% 52.0% 49.2% 20.4% 19.9%

EBITDA -12.2% -7.9% 45.8% 55.2% 27.0% 21.4%

PAT 129.4% 10.9% 52.8% 44.0% 16.9% 33.2%

Margin -%

EBITDA 22.0% 15.0% 14.4% 15.0% 15.8% 16.0%

EBIT 17.8% 10.9% 11.5% 12.9% 13.6% 13.6%

PAT 11.7% 9.6% 9.6% 9.3% 9.0% 10.0%

Expenses on Sales-%

Employee Cost 36.3% 53.7% 51.5% 51.0% 50.7% 51.0%

Other Exp 38.4% 25.8% 28.7% 34.1% 33.5% 33.0%

Tax rate 16.5% 14.1% 23.2% 26.9% 28.0% 27.5%

Valuation

CMP 115.00 168.05 122.90 99.00 151.00 151.00

No of Share 7.90 8.70 17.80 19.28 19.28 19.28

NW 387.11 603.19 712.55 1036.23 1263.99 1565.76

EPS 10.80 10.88 8.13 10.80 12.63 16.82

BVPS 49.00 69.33 40.03 53.75 65.56 81.21

RoE-% 22.0% 15.7% 20.3% 20.1% 19.3% 20.7%

Dividen Payout ratio 6.4% 6.8% 4.9% 7.9% 6.5% 7.0%

P/BV 2.35 2.42 3.07 1.84 2.30 1.86

P/E 10.65 15.45 15.12 9.17 11.95 8.98

V- Larsen & Toubro Ltd.

CMP 1033

Target Price NA

Previous

Target Price

NA

Upside NA

Change from

Previous

NA

BSE Code 500510

NSE Symbol LT

52wk Range

H/L

861/114

6Mkt Capital

(Rs Crores)

80,145

Average Daily

VolumeNifty 6,346

1M 1yr YTD

Absolute (2.7) 0.8 13.5

Rel. to Nifty 1.1 4.6 11.6

3QFY14 2QFY14 1QFY14

Promoters 0.0 0.0 0.0

FII 17.9 15.3 16.1

DII 36.6 37.4 36.9

Others 45.5 47.4 47.2

Financials Rs, Crore

3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 14387.5 12308.4 16.9% 12869.3 11.8%

EBITDA 1674.8 1185.7 41.3% 1258.3 33.1%

PAT 1240.7 864.6 43.5% 1013.2 22.4%

EBITDA Margin 11.6% 9.6% 200 bps 9.8% 180 bps

PAT Margin 8.4% 6.8% 160 bps 7.5% 90 bps

23

(Standalone)


(Source: Company/ Eastwind Research)

Price Performance V/s NIFTY

Outlook

We have a Neutral on L&T as we think it will be difficult rate L&T from today’s level without

earnings upgrade and/or uncertanity across sector. Downside risks are project delays, weaker

margins and stronger Rupee. Upside risks are higher than expected order inflow and higher

operating margins a head.

Contribution margin expansion came as a surprise and in our recent meeting the management

attributed it to quarterly skews rather than improvement in project-level profitability. We build

slightly higher margins for FY2014E at 10.9% (versus 10% earlier). However, we believe margins

face downward trajectory over FY2014-16E (build EBITDA margin of 10.5% in FY2015E and 10.3%

in FY2016E) due to risks related to competition, inflation, adverse mix and a slowdown. L&T

maintained its revenue growth guidance of 15% yoy for FY2014 (9% posted in 9MFY14). We build

lower revenue growth of 12% in FY2014 implying 16% growth requirement in 4QFY14. L&T also

maintained its inflow guidance of 15-20% in FY2014 (strong 23% growth in 9MFY14; but is a bit

wary about maintaining this traction on delayed decision making by customers).


"On Track of Revival………"

95,662

NeutralResult update

Market Data

Stock Performance-%

Construction & engineering major, L&T posted a surprisingly set of numbers for the quarter

ended Dec, 13. The company's net sales grew by a mere 11.8% on a yearly basis to Rs

14387.5crore. The company recurring bottom line witnessing a upstik of 12.15% , and came in

at Rs. 1136.3 crore. the results have been adjusted for the quarter as it transferred

hydrocarbon business to its subsidiary L&T Hydrocarbon Engineering with effect from April 1,

2013. Accordingly, the company restated suitably its earnings for the previous quarter ended

September 2013 and numbers relating to previous periods. However, if we If we consider the

exceptional gains on dilution of part stake in a subsidiary company, the overall PAT grew by

22.1 % during the quarter. While the operational performance has been good, the company

has witnessed good traction in its order book also. Order inflow for the quarter stood at Rs

21722 crore showing a growth of 21% on Y-o-Y basis. The total order book as on December

31st 2013 stood at Rs 171184 crore showing an increase of 13 % on Y-o-Y basis. EBITDA

margins for the Dec 2013 quarter expanded by 180 bps to 11.6% against 9.8% last year.

However, as per the management, the quarterly margins differ for every quarter as the project

completion cycle is different and hence it is difficult to capture the EBITDA movement every

quarter. Though we agree with the management’s comment, we still believe that there would

be some amount of pressure on the margins on a yearly basis due to risks related to

competition, inflation, adverse mix and a slowdown. As regards the results we are of the

opinion that, despite the gloomy scenario the results have been good. Consistent order inflow

is a major positive factor. We expect the sector to witness revival in coming quarters, whereas

we see a near term earnings growth muted and look for a better entry point. Currently we

have a neutral view on a stock.

Why neutral…???

"Neutral"24th Jan' 14


Narnolia Securities Ltd402, 4th floor 7/ 1, Lords Sinha Road Kolkata 700071, Ph

033-32011233 Toll Free no : 1-800-345-4000

email: [email protected],

website : www.narnolia.com

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