Narnolia Securities Limited India Equity Analytics Strategy 16th Dec, 2013
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Transcript of Narnolia Securities Limited India Equity Analytics Strategy 16th Dec, 2013
email: [email protected], website : www.narnolia.com
Narnolia Securities Ltd,
402, 4th floor 7/1, Lords Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000
JLR VOLUME UPDATE : NOVEMBER 2013 16th Dec 2013
JLR wholly owned subsidiary of Tata Motors come up with November 2013 volume, the company for the month sold 37403 units up by 25%
YoY. This total volume of JLR includes 6244 units of Jaguar and 31159 units of Land Rover. This month’s performance in particular is marked by
stellar performance by Jaguar .................................................... ( Page : 2)
IEA-Equity
Strategy
16th Dec, 2013
Amara Raja Batteries Limited : OPTIMISTIC MANAGEMENT SPEECH "BUY" 6th Dec 2013
Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the back of the strong demand in the automotive replacement and
industrial battery business. There was double digit growth in both of these segments.The automotive battery business reported double digit
growth in revenues........................................ ( Page : 16-17)
NIIT Tech : "Next Journey to Billion Dollar" "BUY" 9th Dec 2013
NIIT Tech management expressed its confidence of driving growth in the organization and looking at an aspirational goal of USD 1 billion
revenue in next 5 years.its order wins in the recent quarters have been healthy, lending visibility on revenue growth. At a CMP of Rs332, trades
at 7.5x FY14E earnings. We retain “ buy” view on the stock with a price target of Rs360 (revised from Rs310)............................................. (
Page : 14- 15)
TATA Steel Ltd : "HOLD" 10th Dec 2013
Over the past two quarters, Tata Steel has reported strong growth in volumes in the domestic operations despite weak demand. Its Europe
operations have been broadly better than expectations indicating some stability and predictability from its Europe operations. Tata Steel’s
earnings growth is likely to be driven by higher sales volume in FY2014-15 on the back of 2.9mn ton brownfield expansion project in
Jamshedpur and steady improvement in profitability of European operations. We have arrived at "Hold" rating on the stock watching our step
for a target price of Rs.340 in near term. ................... ( Page : 10-13)
LUPIN : "Optimistic Guidance " "BUY" 11th Dec 2013
The management of the company in its latest interaction said that company is confident of logging 15-20 % CAGR in US and India in the days to
come on the back of rich pipeline as well as acquisition based strategy . ……………………………………… ( Page : 8-9)
COAL INDIA : "BUY" 12th Dec 2013
We expect modest increase in sales volumes growth during FY2013-15 on account of poor offtake capabilities of CIL. Also, we expect CIL’s
margins to decline during FY2014 due to lower e-auction realizations and higher staff costs/other expenses.News flows related to further
divestment in CIL by the government is likely to keep the stock price under pressure in our view. we recommend Buy rating on the stock with
our previous target price Rs.350............................................ ( Page : 5-7)
Persistent System : "Persistently innovating.." "BUY" 13th Dec 2013
With the potential revenue growth, strong deal pipeline and multi-year relationships with marquee clientele in the Infrastructure vertical, we
upgrade this stock and expect for better earning visibility across niche IT players.we rate “BUY” on the stock and we revise our target price from
Rs 890to Rs 960. At a CMP of Rs 876, stock trades at 13.8x FY14E earnings........................ ( Page : 3-4)
India Equity Analytics
JLR wholly owned subsidiary of Tata Motors come up with November 2013 volume, the
company for the month sold 37403 units up by 25% YoY. This total volume of JLR includes
6244 units of Jaguar and 31159 units of Land Rover. This month’s performance in particular is
marked by stellar performance by Jaguar with volume growth of almost 55 % YoY while the
Land Rover portfolio has grown by 20 % YoY.The new F type Jaguar is getting good
response.Company manage to sell 557 units of F-Type this month.
Please refer to the Disclaimers at the end of this Report.
The Table shows the Performance of Land Rover Portfolio : Model Wise.
JLR VOLUME UPDATE : NOVEMBER 2013
The performance of JLR on Geography Wise has been Tabulated as under :
The various models under JLR portfolio have grown well for the company however Jaguar
XJmodel has done exceptionally well .The company has sold 6244 units of Jaguar for the
Nov2013.The Land Rover is also growing good for the company. The Range Rover Evoque has
grown by 10% YoY to 10953 units for the month.
The Table shows the Performance of Jaguar Portfolio : Model Wise.
Strong Performance For The Month.
(Source: Company/Eastwind)
(Source: Company/Eastwind)
We continue to like Tata Motors, led by strong volume traction at JLR to continue over the
coming months as new Range Rover Sport get rolled out across more geographies, in
addition to continued traction from RR and F-Type, which in turn will boost realisation and
margin.
The volumes for JLR across geographies came relatively, good all the geographies have
done well except for UK where volume de grew by 1%YoY. The markets of china continues
to do well for the company. The Chinese market have grown over 40% YoY for the JLR
followed by ROW markets.
The stock is trading at price of Rs 370 on the back of splendid performance from its cash
machine JLR portfolio. We are still positive for the stock in the light of management
commentary and continuous good performance by JLR though domestic operations are still
painful for the company.
Earlier management said that company would invest 1.5 billion pounds for new technically-
advanced aluminum vehicle architecture in forthcoming models. The first new model to
utilize this innovative architecture will be an all-new mid-sized sports sedan from Jaguar.
The product will be launched by 2015.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Model Nov-13 Nov-12 Change % (YoY)
UK 5231 5276 -1%
North America 6657 4843 37%
Europe 7300 6829 7%
China 9751 6879 42%
Asia Pacific 1882 1428 32%
All other markets 6582 4638 42%
Monthly Performance of JLR : Geography Wise
Model Nov-13 Nov-12 Change % (YoY)
Defender 1615 1274 27%
Freelander 4124 4517 -9%
Discovery 3424 3683 -7%
New Range Rover Sport 6833 0 NA
Range Rover Sport 106 4909 NA
Range Rover 2 1417 NA
Range Rover Evoque 10953 9919 10%
New Range Rover 4102 143 NA
Monthly Performance of Land Rover: Model Wise
Model Nov-13 Nov-12 Change % (YoY)
XF 3825 2743 39%
XJ 1628 1004 62%
XK 234 284 -18%
F-TYPE 557 NA
Monthly Performance of Jaguar : Model Wise
Persistent System.
BUY
8%
1M 1yr YTD
Absolute 7.5 83.5 126.6
Rel. to Nifty 4.9 77.8 107.9
Current 1QFY14 4QFY13
Promoters 38.96 38.96 38.96
FII 15.28 14.84 12.39
DII 21.23 19.31 21.59
Others 24.53 26.89 27.06
Financials
2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%
Revenue 432.37 357.29 21.0 326.86 32.3
EBITDA 100.8 76.8 31.3 89.06 13.2
PAT 60.8 57.1 6.5 44.71 36.0
EBITDA Margin 23.3% 21.5% 180bps 27.2% (390bps)
PAT Margin 14.1% 16.0% (190bps) 13.7% 40bps
3
Stock Performance
Change from Previous
Previous Target Price 890
Upside 10%
52wk Range H/L 906/477
"Persistently innovating.."
Company update
CMP 876
Target Price 960
Persistent Sytem’s 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.
Market Data
BSE Code 533179
NSE Symbol PERSISTENT
Please refer to the Disclaimers at the end of this Report.
3505
Average Daily Volume 12139
1 year forward P/E-x
Rs, Crore
(Source: Company/Eastwind)
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 rate “BUY” on the stock and we revise
our target price from Rs 890 to Rs 960. At a CMP of Rs 876, stock trades at 13.8x FY14E
earnings.
Persistent's 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 are gaining a lot of traction because of
pickup in demand environment. The emerging themes, (CAMB) Cloud, Analytics,
Mobility, and Big data could also see strong demand traction ahead. Because of
actively investment in these themes, management is very confident to see healthy
growth and also they expressed their confidence to beat the NASSCOM guidance (12-
14% revenue growth for FY14E).
Mkt Capital (Rs Crores)
Nifty
Share Holding Pattern-%
6237
With the potential revenue growth, strong deal pipeline and multi-year relationships
with marquee clientele in the Infrastructure vertical, we upgrade this stock and expect
for better earning visibility across niche IT players.
Recently , Persistent System reported superlative set of numbers during the 2QFY14
with 21%(QoQ) sales growth in INR term and 8.6%(QoQ) growth in USD term led by
38%(QOQ) growth on the intellectual property (IP) revenues. PAT growth was at 6.5%
(QoQ).
Margin ramp up: During the quarter, Its EBITDA margin improved by 180bps to 23.3%,
positively impacted by currency gain(270bps), while during the quarter company wage
hike to its off shore employee at a range of 8-9% was impacted margin by 310 bps
adversely. However, management expects to maintain margin at a range of 24-25% for
FY14E.
On segmental front: The Company’s cash cow segment Infrastructure and System,
which contributes 69% on sales, grew by 21% and life science (13% contribution on
sales) was up by 57% sequentially. While, Telecom space (17.6% contribution on sales)
increased marginally by 3% (QoQ).
Clients Metrics: During the quarter, company added 2 clients at 32 under medium
category( >$1mn to $3mn) and 1 client at 16 from large ( > $ 3Mn) . Revenue from top-1
client was improved from 21.2% (1QFY14) to 22.5% . DSO at 62days, almost 12
quarters low.
"BUY"13th Dec' 13
Narnolia Securities Ltd,
4
Persistent System.
(Source: Company/Eastwind)
Operating Metrics
Financials
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
2QFY12 3QFY12 4QFY13 1QFY13 QFY13 3QFY13 4QFY13 1QFY14 2QFY14
Top1 16.0% 15.9% 17.2% 17.8% 20.7% 21.1% 21.6% 21.2% 22.5%
Top 5 38.6% 37.0% 36.6% 33.5% 36.3% 37.3% 36.7% 34.7% 36.4%
Top 10 49.4% 48.3% 48.8% 45.3% 47.0% 49.4% 47.9% 46.0% 47.3%
Onsite - Linear 12665 12387 12603 12789 12863 12772 14014 14567 14283
Offshore - Linear 3803 3778 3895 3898 3978 4032 4143 4111 4109
Yeild per Employee(excld- Trainee) 3208 3247 3350 3345 3746 3817 3769 3602 3919
Total Employee 6900 6706 6628 6536 6370 6719 6970 7144 7457
Attrition 17.7% 17.4% 18.3% 18.9% 16.9% 16.0% 14.4% 14.2% 14.0%
Utilization rate %(xclude IP Led ) 73.8% 74.1% 71.7% 74.1% 75.2% 77.3% 72.5% 70.0% 71.7%
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 1657.54 2053.93
Employee Cost 368.74 481.62 599.05 719 895.07 1119.39
Cost of technical professionals 0 30.67 41.68 54 82.88 102.70
Other expenses 86.05 105.24 135.2 218 290.07 379.98
Total expenses 454.79 617.53 775.93 990.78 1268.02 1602.06
EBITDA 146.37 158.31 224.37 303.72 389.52 451.86
Depreciation 33.52 42.39 61.1 78 93.54 84.18
Other Income 11.23 34.44 34.44 34.44 66.30 71.89
EBIT 112.85 115.92 163.27 225.44 295.98 367.68
Interest Cost 0 0 0.00 0.03 0.00 0.00
Profit (+)/Loss (-) Before Taxes 124.08 150.36 197.71 259.851 362.29 439.57
Provision for Taxes 9.05 10.62 55.09 75.37 108.69 131.87
Net Profit (+)/Loss (-) 115.03 139.74 142.62 184.481 253.60 307.70
Growth-% (YoY)
Sales 1.2% 29.1% 28.9% 29.4% 28.0% 23.9%
EBITDA 60.2% 8.2% 41.7% 35.4% 28.3% 16.0%
PAT 74.1% 21.5% 2.1% 29.4% 37.5% 21.3%
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% 18.5%
Tax rate 7.3% 7.1% 27.9% 29.0% 30.0% 30.0%
Margin-%
EBITDA 24.3% 20.4% 22.4% 23.5% 23.5% 22.0%
EBIT 18.8% 14.9% 16.3% 17.4% 17.9% 17.9%
PAT 19.1% 18.0% 14.3% 14.3% 15.3% 15.0%
Valuation:
CMP 310.0 366.7 409.2 541.0 876.0 876.0
No of Share 4.0 4.0 4.0 4.0 4.0 4.0
NW 639.0 747.1 840.5 1018.3 1234.4 1504.7
EPS 28.8 34.9 35.7 46.1 63.4 76.9
BVPS 159.7 186.8 210.1 254.6 308.6 376.2
RoE-% 18.0% 18.7% 17.0% 18.1% 20.5% 20.4%
P/BV 1.9 2.0 1.9 2.1 2.8 2.3
P/E 10.8 10.5 11.5 11.7 13.8 11.4
Coal India LTD.
CCI’s Rs 1,773-crore penalty:289
350
350
21%
NA
533278
176226 Coal India to get Rs 2,119 cr extra on coal price revision :17622
6308
1M 1yr YTD
Absolute -1.3 -21.2 -21.4
Rel. to Nifty 2.8 8.8 8.6
2QFY14 1QFY14 4QFY13
Promoters 90.0 90.0 90.0
FII 5.5 5.4 5.4
DII 5.3 2.3 2.0
Others 2.2 2.4 2.6
Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14
Net Revenue 15411 5.8 -6.4 14573 16472
EBITDA 2794 -2.4 -29.4 2862 3958
Depriciation 495 27.8 4.1 387 476
Interest Cost 8 -22.2 7.0 10 7
Tax 1412 -4.2 -27.9 1475 1958
PAT 3052 -0.8 -18.2 3078 3731(In Crs)
5
The company’s net sales grew 5.8% yoy to 15,411cr (above our estimate of 15,083cr).
Sales volumes stood at 109mn ton in 2QFY2014 compared to 102mn ton in 2QFY2013.
The blended realizations declined by 1.4% yoy to 1,414/ton (despite price hike) due to
lower realization on FSA coal.Despite 5.8% yoy growth in top-line, EBITDA decreased by
8.2% yoy to 3,176cr due to higher raw material costs (18.1% yoy to 2,251cr) and
contractual expenses (27.6% yoy to 1,394cr). The depreciation expenses increased by
27.8% yoy to 495cr; hence, adjusted net profit was flat yoy at 3,043cr .1 yr Forward P/B
Coal India 2QFY2014 top-line was above our estimate. The company’s net sales grew
5.8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared to
102mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/ton
despite price hikes. Its FSA coal’s realizations were lower than expected due to lower
grade coal. The company liquidated 11mn ton of old stock.
Source - Comapany/EastWind Research
Please refer to the Disclaimers at the end of this Report.
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.) Coal India Ltd is likely to get additional revenue of Rs 2,119 cr in this fiscal on account of
revision in dry fuel prices.CIL (Coal India Ltd) has revised and rationalized the basic
notified prices of all the grades of non-coking coal except GI, G2 and G5.The estimated
additional revenue due to revision of basic notified price for the current financial year is
Rs 2,119 cr.CIL had revised the prices of all grades of coal, barring three, for all its eight
producing subsidiaries with effect from May 28 this year. Mahanadi Coalfields which is
expected to contribute Rs 686 crore, followed by Rs 664 crore from Northern Coalfields
and Rs 495 crore from South Eastern Coalfields.
Nifty
Stock Performance-%
Share Holding Pattern-%
Company UpdateCMP The Competition Commission of India (CCI) imposed a Rs 1,773 cr fine on Coal India, the
country' monopoly commercial coal miner, based on a complaint filed by two power
companies that India's monopoly producer of coal abused its dominance. The
government owns 90% stake in Coal India, and has traditionally drawn hefty dividend
income from the cash rich coal company. In 2012-13, the company paid a total dividend
of Rs 8,843 cr out of which the government's share was Rs 7,959 cr. A Rs 1800-crore fine
could possibly mean less profits for the company and less dividend income for its owners.
But as the main owner, the government, will pocket this amount in the form of a fine, it
will not be poorer in any way.
Target Price
Previous Target Price
Upside
Change from Previous
Market DataBSE Code
NSE Symbol COALINDIA
52wk Range H/L 372/238
"Buy"12nd Dec' 13
Narnolia Securities Ltd,
OUTLOOK:
FY10 FY11 FY12 FY13
431 431 436 452
416 425 433 465
1073 1183 1441 1468
404744 390243 377447 364736
1066 1105 1155 1240
FY11 FY12 FY13 FY14E
50234 62415 68303 69864
7573 5123 6556 8383
1755 2013 2333 2595
4580 4901 5802 6057
20481 26705 27943 28943
40390 40857 50219 53738
9843 21558 18084 16126
1673 1969 1813 1860
79 54 45 34
5595 6484 7623 7332
10868 20588 17356 15870
33 51 36 33.1
6
ROE
Cost Of Projects & Contractual
Power and fuel
contractual expenses
Employee benefit Expence
Expenditure
EBITDA
Depriciation
Interest Cost
Tax
PAT
Net Revenue from Operation
OPERATING MATRIX
Coal Production in MT
Coal Offtake in MT
Revenue Generation From unit Ton
Avg Man Power (in numbers)
Productivity Per Man
P/L PERFORMANCE
Coal India LTD.
Coal India 2QFY2014 top-line was above our estimate. The company’s net sales grew
5.8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared to
102mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/ton
despite price hikes. Its FSA coal’s realizations were lower than expected due to lower
grade coal. The company liquidated 11mn ton of old stock.
CIL’s e-auction realizations have declined over the past one year on account of decline
in international coal price coupled with weak domestic demand. Going forward, we
expect CIL’s profitability to be affected due to lower e-auction realizations, sticky staff
costs and other expenses. Moreover, given the price hike taken during 4QFY2013, we
do not expect CIL to undertake any further price hikes in the near-term.
We expect modest increase in sales volumes growth during FY2013-15 on account of
poor offtake capabilities of CIL. Also, we expect CIL’s margins to decline during FY2014
due to lower e-auction realizations and higher staff costs/other expenses.News flows
related to further divestment in CIL by the government is likely to keep the stock price
under pressure in our view. we recommend Buy rating on the stock with our previous
target price Rs.350.
Narnolia Securities Ltd,
FY10 FY11 FY12 FY13
6316 6316 6316 6316
20956 26998 34137 42156
27273 33314 40453 48472
343 1334 1305 1078
1620 33 0 0
2545 22461 28271 31144
772 645 829 837
1404 12387 15595 20447
5443 8490 9785 12385
0 779 759 712
12035 12065 12681 12754
2211 2057 1848 3496
610 845 1017 1181
4402 5586 6071 5618
2169 3419 5663 10480
39078 45806 58203 62236
8066 11180 13478 16189
17921 21646 24688 25479
FY10 FY11 FY12 FY13
0.0 5.7 5.5 4.0
0.0 17.3 32.6 27.5
4.9 22.8 29.2 52.7
1.7 4.3 4.3 4.2
1.0 3.7 3.1 2.8
FY10 FY11 FY12 FY13
10727 12819 16323 15948
-131 -3822 3565 -6839
10596 8997 19888 9109
950 697 -10410 -1833
2163 2911 -7382 -7852
13708 12606 2095 -575
Down 21% from its 52week High
Up 14% from its 52 week Low
7
Net Cash Flow during year
Trading At :
Net Cash From Operation
Cash From Investment
Cash from Finance
CASH FLOWS
Cash from Operation
Changes In Working Capital
Creditors to Turnover%
Inventories to Turnover%
Debtor to Turnover%
Total Assets
RATIOS
P/B
EPS
Trade receivables
Cash and bank balances
Short-term loans and advances
Capital work-in-progress
Long-term loans and advances
Inventories
Tangible assets
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Total equity
Coal India LTD.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Narnolia Securities Ltd,
BUY
1M 1yr YTD
Absolute -1 46 41
Rel. to Nifty -4 39 23
Current 1QFY14 4QFY1
3Promoters 46.8 46.8 46.8
FII 31.5 30.7 28.8
DII 12.1 12.4 14.3
Others 9.7 10.1 10.0
Financials Rs, Crore
2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%
Revenue 2668 2476 7.8 2301 15.9
EBITDA 660 590 11.9 515 28.2
PAT 417 405 3.0 297 40.4
EBITDA Margin 24.7% 23.8% 90bps 22.4% 240bps
PAT Margin 15.6% 16.4% (70bps) 12.9% 270bps
8
LUPIN"Optimistic Guidance "
Target Price 1006
Previous Target Price -
Result Update
CMP 873
The management of the company in its latest media interaction stated that the company is
confident of logging 15-20 % CAGR in US and India in the days to come on the back of rich
pipeline as well as acquisition based strategy. Management further said that company is
expecting to launch about 100 new drugs in next three years. This new launch will include
an entire range of oral contraceptives and opthal products.
One Year Forward P/E
(Source: Company/Eastwind)
39101
Average Daily Volume 395892
Please refer to the Disclaimers at the end of this Report.
15%Upside
We have slightly raise our TP to Rs 1006 on the back management guidance post the
results. The management is quite optimistic for its business outlook going forward and
believes that the company will achieve its set target going forward.
The Net profits for 2QFY14 came at Rs 417 Cr. The higher incidence of tax during the
quarter is due to tax provision of Rs 51 Cr made on dividends received from subsidiaries
Lupin earlier posted slightly better than expected 2QFY14 results ,the company reported
its net sales at Rs 2631 Cr up by 18 % YoY on the back of strong business performance
from US and Europe formulation segment. The segment grew by 31% YoY to Rs. 1108.9
Cr during 2Q FY14, against Rs. 844.4 Cr for Q2, FY 2012
‐
13.This segment contributes
42% to overall Company sales.US brands business contributed 10% of total US sales,
whereas the generics business contributed 90% for the quarter under review.
The Indian formulation business contributed 25% of the Company’s
overall revenues for the quarter.Company’s India formulation business grew by 9%
recording revenues of Rs. 6,635 m. during Q2, FY 2013
‐
14, as compared to Rs. 6,064 m.
for Q2, FY 2012
‐
13. The company’s rest other business geographies to have performed
relatively good for the company.
The company has filed 7 ANDAs and received 6 ANDA approvals in the quarter. Cumulative
ANDA filings with the US FDA now stand at 183 with the company having received 92
approvals to date.
Stock Performance-%
Share Holding Pattern-%
Mkt Capital (Rs, Cr)
The operating EBITDA for the 2QFY14 came at Rs 660 Cr and OPM stands at 24.7%.The
RM cost decreased by 7.7% to 32.0% of net sales at Rs. 841.3 Cr during 2QFY14 as
compared to Rs. 889.8 Cr for 2Q FY 13.Manufacturing & other expenses increased by to
30.4% of net sales at Rs. 798.8 Cr during 2Q FY14 as compared to Rs. 591.7 Cr for the
same period last fiscal.Revenue expenditure on R&D stood at 8.3% of net sales at Rs.
217.2 Cr.
Nifty 6332
Change from Previous -
52wk Range H/L 946/569
NSE Symbol LUPIN
Market Data
BSE Code 500257
"BUY"11th Dec' 13
Narnolia Securities Ltd,
9
Please refer to the Disclaimers at the end of this Report.
LUPIN
Sales and PAT Trend (Rs)
(Source: Company/Eastwind)
OPM %
NPM %
company reported its net sales at Rs 2631 Cr
up by 18 % YoY on the back of strong
business performance from
US and Europe formulation segment.
The higher incidence of tax during the
quarter is due to tax provision of Rs 51 Cr
made on dividends received from subsidiaries
(Source: Company/Eastwind)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
TATA Steel Ltd.
420
440
NA
5%
NA
From the Management Corner the key takeaways are :
500470
40863
28604
6363
1M 1yr YTD
Absolute 21.7 5.5 9.5
Rel. to Nifty 23.4 0.3 3.5
2QFY14 1QFY14 4QFY13
Promoters 31.4 31.4 31.4
FII 13.6 13.2 13.9
DII 26.1 26.3 27.3
Others 29.0 29.2 27.5
Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14
Net Sales 36645 7.4 11.7 34133 32805
EBIDTA 3705 60.4 0.5 2310 3688
Other Income 203 0.5 10.3 202 184
Interest Cost 1067 9.8 7.6 972 992
Depriciation 1444 8.2 2.9 1335 1403
Tax 447 -32.4 27.4 661 351
PAT 917 -325.3 -18.2 (407) 1121(In Crs)
10
Upside
Change from Previous
Initial CoverageCMP
Target Price
Company Update:
TATA Steel’s consolidated net sales increased 7.4% yoy to 36,645Cr. TSE sales volumes
grew by 10.0% yoy to 3.46mt .The consolidated EBITDA increased by 60.4% yoy to
3,705cr. The company’s tax expenses declined 32.3% yoy. There was an exceptional gain
related to deferred tax write-back of 390cr. Adjusting for this, the net profit stood at
527cr, compared to a loss of 407cr in 2QFY2013.
Previous Target Price
Please refer to the Disclaimers at the end of this Report.
Stock Performance-%
Share Holding Pattern-%
1 yr Forward P/B
Source - Comapany/EastWind Research
Outlook: Over the past two quarters, Tata Steel has reported strong growth in volumes in
the domestic operations despite weak demand. Its Europe operations have been broadly
better than expectations indicating some stability and predictability from its Europe
operations. Tata Steel’s earnings growth is likely to be driven by higher sales volume in
FY2014-15 on the back of 2.9mn ton brownfield expansion project in Jamshedpur and
steady improvement in profitability of European operations. We have arrived at "Hold"
rating on the stock watching our step for a target price of Rs.340 in near term.
On the back of a consistent operational improvement at the company’s European
operations We are positive on the stock in long run .However, on the back of ongoing
capacity expansion, the gross debt is expected to increase from 66074 crore (FY13) to
76919 crore (FY14E) and 77543 crore (FY15E).
Market DataBSE Code
TATASTEEL
Average Daily Volume (Nos.)
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
448/195
Nifty
Focus on Domestic Market: The Management aims to sell incremental sales volumes
from Jamshedpur expansion mainly in the domestic market. This is unlike other flat steel
producers such as JSW Steel and Essar Steel who have been opportunistically raising
exports, considering INR depreciation against the USD alongside low domestic demand.
Odisha Project could provide further upside in long-term: The Company aims to make
value added steel products at the new facility in Odisha (3mtpa) where the blended
realizations could be potentially higher than existing products by 2015. We believe timely
clearance for expansion of iron ore mine is critical for the plant. The company's Odisha
plant is highly automated and will require fewer employees/ton compared to its
Jamshedpur facility.
Debt levels to rise: Debt of the company is likely to rise till 2015 as it draws debt for
Odisha expansion.
"Hold"10th Dec' 13
Narnolia Securities Ltd,
INDIAN Operation:
11
TATA Steel Ltd.
TATA Steel Profile:
Tata Steel is among the top ten global steel companies with an annual crude steel
capacity of over 28 mtpa. It is now one of the world's most geographically-diversified
steel producers, with operations in 26 countries and a commercial presence in over 50
countries. The Tata Steel Group, with a turnover of US$ 24.82 billion in FY 2012- 2013,
across five continents and is a Fortune 500 company. Tata Steel’s larger production
facilities include those in India, the UK, the Netherlands, Thailand, Singapore, China and
Australia. Operating companies within the Group include Tata Steel Limited (India),
Tata Steel Europe Limited (formerly Corus), NatSteel, and Tata Steel Thailand (formerly
Millennium Steel).
The Indian Steel industry witnessed an increase in crude steel production of 5.4% y-o-y,
where as the real consumption increased only by 3.3% with imports registering a sharp
increase on account of lower import duties applicable to ASEAN countries. The
slowdown in fixed asset investment and lackluster automotive demand impacted
margins of steelmakers adversely. In Financial Year 2013-14, Indian operations are
expected to benefit on account of stabilization of the commissioned capacity, sourcing
coke internally and reduced impact of exchange fluctuations because of part liquidation
of foreign currency loans. The shift to an enhanced product-mix with new cold rolling
facilities being set up and the collaboration with Nippon Steel to produce high strength
automotive steels is expected to aid profitability.
EUROPIAN Operation:
The apparent steel demand in the European Union continued to deteriorate during
Financial Year 2012-13 having decreased by about 9.7% in 2012. In aggregate, the steel
demand in Europe is currently about 30% below pre-crisis levels, which has impacted
the demand and customer buying behavior significantly. TSE’s performance in the
Financial Year 2012-13 was also impacted on account of operational issues faced in
rebuilding the Blast Furnace at Port Talbot, UK and undertaking of major repairs of the
Blast Furnace at Ijmuiden. Even though the market demand was relatively muted. The
rebuilding of the Blast Furnace and other management tasks and initiatives may
position TSE on a better platform for Financial Year 2013-14 even though the market is
expected to be subdued for the next 12 months. The European operations are
undertaking structural improvement measures including supply chain transformation,
differentiated product strategy, reduction of manufacturing costs and overheads (head
count currently 25% below pre-crisis levels).
Narnolia Securities Ltd,
FY10 FY11 FY12 FY13
102393 118753 132900 134712
1186 680 1573 479
103579 119433 134473 135191
44092 53283 65745 60536
5549 6390 6660 7434
16463 15840 17229 18918
94350 102006 120483 122390
8043 16747 12417 12321
4492 4415 4517 5575
3022 3956 4250 3968
1715 9056 5223 3257
2152 3246 3636 3229-15 60 173 214
-1684 3046 3362 -7390
-2009 8983 5390 -7058
22814 35386 42616 34172
-1.4 16.8 4.8 1.0
257 371 439 352
2.64 0.90 0.98 1.13
FY10 FY11 FY12 FY13
-0.31 4.97 1.51 0.25
3.43 10.33 5.87 4.99
7.76 14.02 9.23 9.11
-185.06 5.38 20.51 116.19-2.41 9.11 5.18 -6.87
-23 94 55 -73
12
EBITDA
Depriciation
Interest Cost
VALUATION
NPM %
Net Worth
ROE%
Book value per share
PBT
Tax
OPERATION & PAT
Net Revenue from Operation
Other Income
Total Income
Total Expenditure
TATA Steel Ltd.
Source - Comapany/EastWind ResearchMinority Interest
Exceptional items
PAT
Cost Of Projects
Freight and forwarding
Employee benefit Expence
EBITDA %
P/B
OPM %
P/EROCE%
EPS Source - Comapany/EastWind Research
Source - Comapany/EastWind Research
Narnolia Securities Ltd,
FY10 FY11 FY12 FY13
887 959 971 971
21927 34427 41645 33201
22814 35386 42616 34172
884 889 1091 1669
28059 49251 45238 46858
25041 3794 4699 8115
53100 53045 49937 54972
1769 2188 2504 3155
3789 4585 4715 5356
22020 18457 20529 21779
2806 3395 3476 2943
109738 135488 146852 146906
1635 1790 2851 2959
14542 15298 17355 13065
31778 34778 39081 51978
12383 13552 20196 14277
3237 4688 2623 2497
4801 8685 6837 7098
18687 24055 25598 24091
11624 14812 14878 13994
6788 10859 10799 9860
1961 3547 3717 4061
2181 3159 1398 760
109738 135488 146852 146906
FY10 FY11 FY12 FY13
5600 13638 10312 10195
Net Cash From Operation 10502 6463 11385 13324
(4700) (8379) 3705 (12321)
(5135) 5993 (8462) (2045)
Net Cash Flow during year 667 4077 6628 (1042)
4.8% Down from its 52week High112% Up from its 52 week Low
13
TATA Steel Ltd.
Total equity
Minority Interest
Long-term borrowings
Short-term borrowings
Cash from Operation
Tangible assets
Capital work-in-progress
Total liabilities
Total Borrowings
Deferred tax liabilities (net)
Long-term provisions
Trade payables
Short-term provisions
Trading At :
Current investments
Total Assets
Cash Flows
Cash From Investment
Cash from Finance
B/S Performance
Share capital
Reserve & Surplus
Intangibles
Goodwill on consolidation
Non-current Investments
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Narnolia Securities Ltd,
NIIT Tech
1M 1yr YTD
Absolute 18.4 19.5 26.8
Rel. to Nifty 18.29 6.1 23.1
Current 1QFY14 4QFY13
Promoters 31.19 31.23 31.29
FII 29.21 29.04 27.79
DII 19.94 19.67 19.52
Others 19.66 20.06 21.4
Financials2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%
Revenue 587.3 541.9 8.4 500.1 17.4
EBITDA 88.6 78.2 13.3 84.8 4.5
PAT 60.4 52 16.2 43.1 40.1
EBITDA Margin 15.1% 14.4% 70bps 17.0% (190bps)
PAT Margin 10.3% 9.6% 70bps 8.6% (170bps)
14
"Next Journey to Billion Dollar"
CMP 332
Target Price 360
Company update In an interview to Media, NIIT Tech management expressed its confidence of driving
growth in the organization and looking at an aspirational goal of USD 1 billion revenue
in next 5 years.
NSE Symbol NIITTECH
Buy
1 year forward P/E
Rs, Crore
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
View and Valuation: We expects good growth from Travel & Tourism vertical in FY'14
but not the same level of the growth, But the BFSI expected to be softer. However, the
MFG and Govt verticals expected to improve going forward. Company’s Order wins in
the recent quarters have been healthy, lending visibility on revenue growth. At a CMP of
Rs332, trades at 7.5x FY14E earnings. We retain “ buy” view on the stock with a price
target of Rs360 (revised from Rs310).
During the 2QFY14, they secured fresh orders of $84 million, leading to $248 million
worth of orders executable over the next 12 months.
Change from Previous 16%
Previous Target Price 310
Upside 8%
Market DataBSE Code 532541
Consistent in order addition: Fresh orders of USD 84Mn versus USD 154 mn in Q1 were
secured during the quarter leading to USD 263Mn worth of orders executable over the
next 12 months. In 1QFY14, Company had huge business in the domestic market which
was USD 65 million intake from the Airports Authority of India (AAI). But in Q2 FY14,
order has primarily been in the international market.
Stock Performance
52wk Range H/L 344/234
Share Holding Pattern-%
Mkt Capital (Rs Crores)
Nifty 6260
2011
Average Daily Volume 20884
The Company's growth in past 3years gives the confidence of driving growth going
forward. NIIT Tech has been strong performer from the slowdown with CAGR of 30%
in the last 3 years and even we look at it in dollar terms, it has been about 22-23%.
Next journey to USD 1 billion in next 5 years, company would report at a CAGR of 20%
in INR term and 18% in USD term for FY13-19E.
Aggressive in the US market:The company is expecting slight uptrend in the US market
(Us market contributes 41% of sales) led by recent healthy demand environment. The
company’s focus would be very sharply on those developed markets particularly the US
as well as Asian market going forward. That will be one aspect of growth strategy.
Scouting for acquisition: NIIT Tech’s focus is on strengthening the industry segments by
meaning full acquisition particularly in the insurance and the travel space. Its
management has indicated that they are constantly on the lookout and in conversation
with the potential assets. Therefore, certain amount of inorganic initiative is important
to sustain the growth momentum.
Eyeing on Infrastructure services: NIIT Tech’s large engagements typically involved with
significant amount of infrastructure management services, which is a strong practice in
the organization. The travel vertical and the infrastructure management services line
will be key areas of focus for NIIT, going forward.
Aspects of growth strategy:
"BUY"9th Dec' 13
Narnolia Securities Ltd,
15
NIIT Tech
Operating Metrics;
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
Financials;
Narnolia Securities Ltd,
. 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14
Banking and Finacial Services 13% 13% 12% 12% 12% 14%
Insurance 21% 20% 19% 19% 18% 19%
Transport 40% 42% 42% 37% 36% 37%
Manufacturing 7% 6% 6% 6% 7% 6%
Government 8% 5% 8% 11% 13% 10%
Others 11% 14% 13% 15% 14% 14%
Americas 36% 38% 37% 38% 39% 41%
EMEA 39% 39% 40% 37% 35% 36%
RoW 25% 23% 23% 25% 26% 23%
DSO-days 84 75 76 82 98 100
Top-5 30% 32% 34% 32% 31% 36%
Top-10 43% 47% 48% 47% 46% 49%
No of Headcounts 7444 7617 7882 8158 8207 8017
Sales Mix-Geography
Revenue Concentration %
Headcounts
Sales Mix-Verticles
Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E
Sales 913.7 1232.25 1576.48 2021.36 2385.41 2863.75
Employee Cost 503.71 601.36 891.12 1115.1 1347.75 1589.38
Other expenses 239.75 393.1 415.26 576.96 667.91 816.17
Total expenses 743.46 994.46 1306.38 1692.06 2015.67 2405.55
EBITDA 170.24 237.79 270.1 329.3 369.74 458.20
Depreciation 35.81 31.46 36.42 56.69 65.73 73.49
Other Income 7.64 13.6 30.37 22.75 71.56 71.59
EBIT 134.43 206.33 233.68 272.61 304.00 384.71
Interest Cost 0 2.22 3.84 1.91 4.89 3.67
Profit (+)/Loss (-) Before Taxes 142.07 217.71 260.21 293.45 370.68 452.64
Provision for Taxes 14.42 32.3 63.75 75.05 105.64 131.26
Net Profit (+)/Loss (-) 127.65 185.41 196.46 218.4 265.03 321.37
Growth-% (YoY)
Sales -6.8% 34.9% 27.9% 28.2% 18.0% 20.1%
EBITDA 2.3% 39.7% 13.6% 21.9% 12.3% 23.9%
PAT 9.6% 45.2% 6.0% 11.2% 21.4% 21.3%
Expenses on Sales-%
Employee Cost 55.1% 48.8% 56.5% 55.2% 56.5% 55.5%
Other expenses 26.2% 31.9% 26.3% 28.5% 28.0% 28.5%
Tax rate 10.1% 14.8% 24.5% 25.6% 28.5% 29.0%
Margin-%
EBITDA 18.6% 19.3% 17.1% 16.3% 15.5% 16.0%
EBIT 14.7% 16.7% 14.8% 13.5% 12.7% 13.4%
PAT 14.0% 15.0% 12.5% 10.8% 11.1% 11.2%
Valuation:
CMP 170.25 184.65 270.9 262.35 332 332
No of Share 5.88 5.93 5.96 6.02 6.02 6.02
NW 579.78 752.11 922.2 1094.12 1350.45 1662.62
EPS 21.7 31.3 33.0 36.3 44.0 53.4
BVPS 98.6 126.8 154.7 181.7 224.3 276.2
RoE-% 22.0% 24.7% 21.3% 20.0% 19.6% 19.3%
P/BV 1.7 1.5 1.8 1.4 1.5 1.2
P/E 7.8 5.9 8.2 7.2 7.5 6.2
BUY Company hopeful to maintain double digits growth for second half of the year.
1M 1yr YTD
Absolute 4.0 29.0 69.0
Rel. to Nifty 5.0 23.0 53.0
Current 1QFY14 4QFY1
3Promoters 52.1 52.1 52.1
FII 11.1 10.8 10.1
DII 15.0 14.2 15.3
Others 21.9 22.9 22.6
Financials Rs, Crore
2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%
Revenue 807 894 (9.7) 719 12.2
EBITDA 142 145 (2.1) 118 20.3
PAT 95 98 (3.1) 70 35.7
EBITDA Margin 17.6% 16.2% 140bps 16.4% 120bps
PAT Margin 11.8% 11.0% 80bps 9.7% 200bps
16
The operating EBITDA for the 2QFY14 came at Rs 142 Cr and OPM at 17.6%.The OPM
improves by nearly 118 bps mainly due to decrease in purchase of stock in trade as
percentage of sales. The purchase of stock in trade as percentage of sales stands at 3%
versus 7% for the same time last fiscal. However RM cost to sales have increased to 64%
from 59% due to rise in the price of major component of RM, lead and an employee benefit
cost was higher by 60 bps to 4.8% during the period.
The management of the company after results said that company will maintain its margins at
17-18 % for the rest of the fiscal with no pricing moderation. The management further said
that company is confident of maintaining double digit growth for the second half of the year.
The company believes that there is improvement in the market share.
The Company's effort to enhance the capacities of Two-wheeler battery in the existing plant
has witnessed some delay and is likely to go on stream by end January 2014. The enhanced
capacities will support the Company to commence business with other major Two-wheeler
OEM's and to grow the aftermarket business in a big manner. The green field project for
enhancement of Four-wheeler capacity is progressing as per schedule and is likely to
commence production by Q2 of next financial year.
Target Price 365
Previous Target Price 315
CMP 328
4%
Upside
Amara Raja Batteries Limited
OPTIMISTIC MANAGEMENT SPEECH
Result Update
One Year Forward P/Bv Band
(Source: Company/Eastwind)
5,606
Average Daily Volume 163647
Nifty 6241
AMARAJABAT
Stock Performance-%
Share Holding Pattern-%
Mkt Capital (Rs, Cr)
Please refer to the Disclaimers at the end of this Report.
52wk Range H/L 342/207
11%
Market Data
BSE Code 500008
The stock is currently trading at CMP Rs 328 and it has achieve our first TP Rs 315.The
strong 2QFY14 results , Optimistic management speech and strong business outlook going
forward raises positive view on the stock. We have slightly tweaked our TP up to Rs 365 on
the back of above fundamental reasons.
NSE Symbol
Change from Previous
Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the back of
the strong demand in the automotive replacement and industrial battery business. There
was double digit growth in both of these segments.
The automotive battery business reported double digit growth in revenue, supported by
strong volume expansion both in 4 wheeler and 2 wheeler batteries in the replacement
market, however the OEM demand continued to be sluggish. The trading volume in the
home UPS business suffered due to unfavorable season on account of mild summer and
good monsoon.
The net profits for the 2QFY14 came at Rs 95 Cr and NPM at 11.7% .The other income for
the quarter came at Rs 7 Cr and Tax rate stands at 29 %.
"BUY" 06th
Dec' 13
Narnolia Securities Ltd,
17
Please refer to the Disclaimers at the end of this Report.
RM Cost as % Sales
(Source: Company/Eastwind)
Lead costs which accounts for a major chunk
of its expenses were higher than the year ago
quarter. As a per cent of sales, raw materials
were at 64 % up 500 bps over the year-ago
period.
(Source: Company/Eastwind)
SALES & PAT TREND
The expansion in OPM seems largely due to
decrease in purchase of stocks in trade costs
by 430 bps to 3% .
Growth in sales came on the back of the
strong demand in the automotive
replacement and industrial battery business.
There was double digit growth in both of
these segments.
Amara Raja Batteries Limited
OPM & NPM TREND
(Source: Company/Eastwind)
Narnolia Securities Ltd,
18
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