Stock Advisory for Today - Buy Stock of Dabur India Ltd and CAN FIN HOME

CAN FIN HOME "BUY" 7th Mar 2014

We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has

delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in

operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving

operating leverage and aggressive branch expansion. ................................................... ( Page :7-13)

Dabur India Ltd: "Confident tone for growth" "BUY" 7th Mar 2014

Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If

discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street. Considering its expected

expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our

positive stance on the stock. ............................................................. ( Page : 2-6)

DB CORP : "Waging war on Print media" "NEUTRAL" 7th Mar 2014

The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of

the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This judgment will

work as a dampener for newspaper industry as well as DB CORP. Company’s EBITDA margin will be effected very negatively not only in FY15E

but also next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’ ........................................................................ (

Page : 14-15)

SWARAJ ENGINES Ltd : "BOOK PROFIT" 6th Mar 2014

In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view to earn healthy gains. As expected, the counter

have given a premium of 40 per cent over its recommended price. We expect the current price growth rally factored all the fundamental

changes, and we advise our readers to book profits at the current levels. Our bearish attitude on the counter stems from its valuations. At a

P/BV of 2.8x of its annualised FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own past historical data .

...................................................................... ( Page : 21-22)

Hindustan Zinc LTD : Good gains ahead "BUY" 6th Mar 2014

Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet

and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant

player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in

one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our

positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. ....................................................... ( Page : 16-18)

Voltas Ltd : Downgrade to "Neutral"……. "NEUTRAL" 6th Mar 2014

5th Mar 2014

Healthy movies pipeline for FY15E; Company is expecting to release more than 8 big budget movies across Hindi and regional languages.

Likewise, company is going to release much awaited Rajnikanth’s movie Kochadaiiyaan on 11 April, 2014. Its well positioned to monetize rich

content of library ensures annuity and regular set of revenue. .......................................... ( Page :23-25)

IEA-Equity

Strategy

7th March, 2014

Edition : 220

EROSMEDIA :"Moving to Blockbuster" "BUY"

The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2

times of its FY15E book value. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but

we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given

the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120. ................................................................ (

Page : 19-20)

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

Dabur India Ltd.

BUY

Expecting for bottomed up sign on volume growth:

1M 1yr YTD

Absolute 0.3% 30% 33.9%

Rel. to Nifty -6.03% 19% 22.0%

Current 2QFY14 1QFY14

Promoters 68.64 68.66 68.66 Aggression on expending distribution reach:

FII 19.94 20.71 20.4

DII 4.47 3.96 3.97

Others 6.95 6.7 7

View and Valuation:

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

1904.28 1748.81 8.9 1635.98 16.4

297.59 329.24 (9.6) 274.51 8.4

243.5 249.83 (2.5) 209.87 16.0

15.6% 18.8% 220bps 16.8% 120bps

12.8% 14.3% 150bps 12.8% -

2

PAT Margin

Financials

Revenue

EBITDA

PAT

EBITDA Margin

Post earning, management of the company expressed hypothetically its view regarding

bottoming out of urban demand. The management of other FMCG bellwether like Marico

had also stated that the trend of volume decline has bottomed out based on hypothesis.

Recent Consumer Confidence Index indicates some upward movement than previous

quarters. At a same point, recent softening in CPI and Food Inflation Index (graph on 3rd

page of this company's report) hint to improve consumer discretionary demand from rural

and urban area.

Dabur is working on chemist channel to drive growth of its health care and Personal care

portfolio, and they are planning to distribute personal products through this channel.

Dabur had direct coverage of 55,000 chemist stores, which has now increased to 75,000;

plans to take it to 125,000 by FY15E.

Despite signs of weak discretionary demand and increased competitive intensity in the

market, Dabur India has reported comparatively better volume growth in its key

categories. On all operating parameters, its performance was satisfactory. Still,

management is cautious for margin ramp up due to high inflation in India.The strong momentum in relatively low competition in the core categories with

diversified portfolio, Dabur gets a better place than other peers and its rural distribution

expansion should boost sales volumes. We retain our “Buy” view on the stock with a

target price of Rs206. At a CMP of Rs 173 stock trades at 9x FY15E P/BV.

Analysis on recent management interview to media :

Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and

effective distribution initiatives in chemist channels. If discretionary demand from urban

area improves, then volume growth in double digit would not be a surprise for street.

A mature segment like Hair Oil remains a concern because of competitive intensity,

likely to grow slower than healthcare and home segments.

Consistently, Dabur is aggresively working on innovation activities to launch new

product as well as product development activities. Recently new launches would come

to the people like Vatika Enriched Coconut Oil with hibiscus, Vatika Olive Enriched Hair

Oil.

Considering its expected expressive volume growth than other peers, aggression on new

launches through innovation and aggressive distribution reach energize our positive

stance on the stock.

Previous Target Price -

Upside 19%

Change from Previous -

"Confident tone for growth"

Company update

CMP 173

Target Price 206

Share Holding Pattern-%

NSE Symbol DABUR

30246

Average Daily Volume 908049

52wk Range H/L 185/128

Mkt Capital (Rs Cr)

Market Data

BSE Code 500096

P/BV(x)-1year forward

Rs, Crore

(Source: Company/Eastwind)

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

Stock Performance

Nifty 6401

"BUY"7th Mar' 14


Vatika hair oil

Honitus

3

Odonil Variants


Vatika Shampoo

Dabur India Ltd.


Segment-wise snapshot

Dabur New Launches:

Ratnaprash


Fem with no ammonia


Segments Growth (YoY)-% Key takeaways (3QFY14)

Domestic Business 24%

-Launched Vatika Enriched Olive Hair Oil,

-Shampoo grew by 25%(YOY),

-Perfumed hair oils posted 8% YoY growth,

-Dabur Chyawanprash reported healthy growth with a range of 17-18% YoY,

-Launched premium health supplement – Dabur Ratnaprash,

-Dabur Honey performing well on the back of higher demand,

-Toothpastes grew by 14% with premium offerings/added market share,

-Flattish growh in Red Toothpaste,

-Meswak on new packaging launched ,

-Honitus: Honey & Tulsi variant launched,

-Ethicals portfolio grew by 15.5% YoY,

-Hajmola performed well with positve response from Anadana variants,

-Recently launched Pudin Hara Lemon Fizz has received emense response,

-Odonil 1 Touch Freshener launched in South India,

-Odonil and Sanifresh performed well during the quarter,

-Gulabari performed well during the quarter,

-Launch of Fem Fairness Naturals with No Added Ammonia,

-Fem witnessed double digit growth led by good take from Bleaches,

-Real Fruit Juice reported double digit growth,

-Real in a new Diwali Gift packaging launched,

-Organic International Business grew by 29% with 14% constant

currency(CC) growth driven by strong growth in GCC, Egypt & Nigeria,

-Namaste business registered double digit growth in CC term,

6.9%Hair Care

17.7%

13.2%OTC & Ethicals

Digestives

16.0%Home Care

Health Supplements 19.5%

Oral Care 10.4%

Skin Care 13.4%

Foods 18.0%

International Business 26.0%

Ratnaprash

Odonil Variant

Beverage variants

Vatika Shampoo variant

Vatika hair oil

Fem portfolio with no ammonia

Pudin Hara Lemon Fizz

Vatika Hair Oi l with Hibiscus

OxyLi fe Men

Odoni l re-launched with 2x perfume content

Test launched Real Mi lk Shakes in Delhi and Punjab

Oxy life Aloe Vera Gel Bleach

Real Activ Drinking Yoghurts in mango and strawberry flavours

Hajmola Anardana

Super Babool + Salt Power

New Ethnic flavour "Kokam" under Real Burrst

Fem brand was introduced in Turkey

Odoni l Gel

Dabur's New Launches

3QFY14

Q2FY14

Q1FY14

4QFY13

Slowdown in Hair Oils segment remains for long term?

How chemist channel would play a role to opportune the gain of market share?

4



Dabur India Ltd.

Pace of innovation continues ‐ Vatika

Enriched Olive Hair Oil

launched during the quarter

Key Takeaways:

On 3QFY14, Hair Oils segment witnessed decline across categories. Marico reported only

2% YoY volume growth in parachute rigid packs and 8% YoY in value-added hair oils, Bajaj

Corp and Navratna oil clocked 1% YoY volume growth. While, Coconut oil segment

reported 3-4% YoY volume decline.

Importantly, Hair Oil segment is adversely impacted by high input cost pressure leading to

frequent price hike. We believe, slowdown in Hair Oil segments could be a short-term

jerk. Dabur management believes that there is some structural change in Coconut Hair Oil

because of consumption shifting from Coconut Hair Oil to Light Hair Oil. Dabur is carrying

small exposures in Coconut Oil; still there is room to report value and volume growth

because of support from new launches. Company is likely to be better placed with value-

added offerings Vatika enriched coconut oil with Hibiscus and Vatika Olive Enriched Hair

Oil.

We expect that the volume growth in Hair Oil segment has bottomed out and coming

quarter and next spell of growth would come largely from increasing per capita income.

Innovation combined with optimum pricing strategy to maintain market share will be

key growth driver of this category.

Considering the weak consumer sentiment in urban area, there was less opportunity to

invest in urban growth in the past 2 years. Now, as green shoots are visible and consumer

sentiment is improving, the company is beginning to invest in urban growth with Project

CORE—chemist outlet and range expansion. However, there could be a few quarters of

transitory period. As part of this project, Dabur has recruited 350 people in the front end

and will incur Rs15cr for the first phase.

Project CORE’s primary focus will be the health care portfolio(Chyawanprash, Honey,

Glucose), OTC products (Honitus, Lal Tel) and personal care portfolio which are more

relevant to the chemist channel than to general trade. At present, it increased its

coverage to 75000 from 55000-chemist store and, plans to take it to 125,000 by FY15E.

We expect that project CORE will be favorable to improve margin picture as well as

revenue builder.

Chemist Shope in India


21%

16% 16%

GCC EGYPT NIGERIA

5

Hair Care -Dabur expects to maintain growth of high single-digit in this segment.

Health Care-Dabur expects that there is huge opportunities for growth in this segment and Project CORE will help to drive

growth for the same.

-For 4QFY14E, price increase could be at a range of by 1-2% YoY. The company may hike prices by 4-5% in

FY15E and focus will be on pursuing an aggressive and profitable growth strategy.

Urban and Rural

Growth

-Its rural growth has been faster than urban growth since the past few quarters but now this gap has reduced.

Now, Dabur believes that growth will be driven by the urban areas, which is witnessing an uptick. The company

will be shifting its focus to the urban area, which will drive premiumization.

Innovation and new

launches

-The company expects to continue with the new launches and innovations, but spread over the year and not

cluttered in one quarter. Dabur could launch a range of summer products in beverages and health supplements.

Ad spend -Ad expenses to be maintain within the range of 13-15% at the consolidated level for FY15E.

-Dabur expects to improve gross margin in FY15E, its inventory that includes the high cost raw materials

(increased due to high-cost petroleum derivatives) will exist until February 2014. Dabur expects gross margin to

improve by 100bps if the inflation scenario remains benign.

Margin Growth

Dabur India Ltd.

Conference Call (Q3FY14 ): Key Facts at a glance

-Dabur expects to achieve volume growth in the range of 8-12% in FY15%E, and if urban growth revives,

volume growth could be in the range of double digit growth.Volume Growth

Pricing Growth

Dermoviva Face Wash

Fem Gold Hair Removal Cream

Dermoviva Hand Wash(Source: Company)

International business

Oral Care:

Key Growth Markets –Q3FY14(%)

-Dabur does not believe that launching sensitive toothpaste now will drive growth of this portfolio as big

players are already present in this segment.


Skin Care The company expects to see growth in mid-teens helped by the pickup in winter in Q4FY14.

For 3QFY14, The International Business (contributes around one third of consolidated

sales) grew by 26%. Organic business grew by 29% with 14% constant currency growth

rate led by strong performance in GCC, Egypt and Nigeria. The GCC business reported a

21% growth, while sales in Egypt and Nigeria both grew by 16%.

Bangladesh remains an important geography for the company, which was impacted by

political instability and economic uncertainty resulting in slow growth of 10% YoY. Dabur

has organized a strong team and product portfolio for this geography.

Dabur will expand its footprint only in adjacent geographies of its current markets like in

Iran, Iraq and Africa. It believes that Bangladesh and Pakistan together have the potential

to become Rs500cr market each over the long term.

Intl‐Business – New Launches


6



Dabur India Ltd.

Financials


Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 3391.4 4104.5 5305.4 6178.9 7070.30 8203.32

RM Cost 811.0 1806.8 2278.8 2422.1 2757.42 3240.31

Purchases of stock-in-trade 750 252 509 599 742.38 820.33

WIP (10) (122) (103) (2) (71) (41)

Employee Cost 285 309 387 471 608.05 738.30

Ad Spend 493.5 534.6 659.5 837.0 996.91 1132.06

Other expenses 438.4 524.1 683.1 819.10 908.53 1066.43

Total expenses 2767.3 3304.8 4415.2 5146.6 5942.59 6956.42

EBITDA 624.1 799.7 890.2 1032.2 1127.71 1246.90

Depreciation and Amortisation 50.0 95.2 103.4 112.7 111.09 133.15

Other Income 39.4 32.2 57.4 92.0 141.41 164.07

EBIT 613.5 736.6 844.2 1011.5 1158.03 1277.82

Interest 12.3 29.1 53.8 58.9 54.69 51.95

PBT 601.2 707.5 790.4 952.6 1103.34 1225.87

Tax Exp 100.5 139.0 146.4 182.62 212.39 232.91

PAT 500.7 568.5 644.0 770.0 890.95 992.95

Volume 9.5% 10.5%

Pricing 4.5% 5.0%

Sales 20.9% 21.0% 29.3% 16.5% 14.4% 16.0%

EBITDA 33.9% 28.1% 11.3% 16.0% 9.3% 10.6%

PAT 28.1% 13.5% 13.3% 19.6% 15.7% 11.4%

RM Cost 23.9% 44.0% 43.0% 39.2% 39.0% 39.5%

Ad Spend 14.6% 13.0% 12.4% 13.5% 14.1% 13.8%

Employee Cost 8.4% 7.5% 7.3% 7.6% 8.6% 9.0%

Other expenses 12.9% 12.8% 12.9% 13.3% 12.9% 13.0%

Tax rate 16.7% 19.6% 18.5% 19.2% 19.3% 19.0%

EBITDA 18.4% 19.5% 16.8% 16.7% 16.0% 15.2%

EBIT 18.1% 17.9% 15.9% 16.4% 16.4% 15.6%

PAT 14.8% 13.9% 12.1% 12.5% 12.6% 12.1%

CMP 158.6 96.1 103.2 131 173.00 173.00

No of Share 86.8 174.1 174.2 174.3 174.30 174.30

NW 935.4 1391.1 1716.9 2124.38 2689.06 3335.36

EPS 5.8 3.3 3.7 4.4 5.11 5.70

BVPS 10.8 8.0 9.9 12.19 15.43 19.14

RoE-% 53.5% 40.9% 37.5% 36.2% 33.1% 29.8%

P/BV 14.7 12.0 10.5 10.75 11.21 9.04

P/E 27.5 29.4 27.9 29.7 33.84 30.37

Valuation:

Margin-%

Expenses on Sales-%

Growth-% (YoY)

189

220

-

16

-

1M 1yr YTD

Absolute 8.7 26.9 26.9

Rel.to Nifty 3.1 15.0 15.0


3Promoters 42.4 42.4 42.4

FII 0.6 0.6 0.6

DII 0.5 0.5 0.5

Others 56.5 56.5 56.5

Financials Rs, Cr

2010 2011 2012 2013 2014E

NII 63 72 84 96 162

Total Income 71 77 91 110 162

PPP 54 60 68 74 114

Net Profit 39 42 44 54 80

EPS 19.1 20.5 21.4 26.4 39.3

7

We have initiated coverage with Buy rating on the stock with price target of

Rs.220 which implies 1 times of FY14E book value. The company has

delivered strong performance all around. During quarter, profitability was up

by 60% on the back of healthy NII growth and improvement in operating

leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is

expected to remain healthy on the back of improving operating leverage and

aggressive branch expansion.

Healthy NII growth on the back of robust loan growth

The company’s NII grew by 39% YoY to Rs.40.2 Cr which came from impressive

loan growth of 49% YoY. Margin of the company was however declined by 13 bps

sequentially on account of higher cost of fund. Yield on loan remained same

sequentially which restricted NII growth below than previous quarter (49% YoY).

CanFin Home has about 16-17% of exposure in rural area where spread is lower.

From last two quarters, yield on loan remained same while cost of borrowing

increased by 10 bps which made margin lower sequentially.

Loan book continued to be healthy on account of higher non housing loan

growth

Loan book grew by 49.1% YoY led by strong disbursement in retail segment. The

company’s exposure to non house loan was about 7% of total loan which grew from

Rs.138 cr in 3QFY13 to Rs.400 cr in 3QFY14. The company remains focus on

salaried segment which account about 90% of loans. Average ticket size loan is Rs.

16 lakhs. Concentration of individual loan segment declined to 92% of total loan

from 94% in March 2013 and this segment shifted towards non housing. Although

revenue contribution from this segment is very low but spread is relatively thicker

than housing segment.

CAN FIN HOME

Average Daily Volume

389

Previous Target Price

Market Data

Upside

196/113

BSE Code 511196

NSE Symbol

CMP

Target Price

Funding compositions have high credit quality and carried low risk

CANFINHOME

Company UPDATE BUY

Mkt Capital (Rs Cr)



Stock Performance

52wk Range H/L

Funding composition of the company continued to be rate MAA+ by ICRA indicating

high credit quality and carried low risk. The composition comprises 50% from NHB

and 45% from banks, altogether account for 95% of total funding while remaining

come from deposits. Average tenure of funding is 7-10 years due to its loan tenure

portfolio of 10-15 years. From year FY12 to FY13, source of funding composition

saw dramatically changed as share of NHB increased to 50% from previous year of

23% while loan from related party declined to 45% from 70% in FY12. The benefit

was also come at effect as blended borrowing cost came down to 9.2% in FY13 from

9.8% in FY12. At the end of 3QFY14, borrowing cost stood at 9.3% from 9.4% in last

quarter.

Change from Previous

CANFINHOME Vs Nifty


15.59 Lakh

Nifty 6401

"BUY"7th March 2014


8

Asset quality continues to be healthy.

On asset quality front, the company continues to remain healthy with gross NPA level

came down to 0.3 during quarter from 1.6 in FY07. With the strong recovery and high

coverage ratio, net NPA level has been 0% since FY11. During quarter, Can Fin’s GNPA

was declined to 0.32% from 0.34% in previous quarter whereas net NPA level was at 0%

led by almost 100% provision provided by the company. Asset quality is expected to

remain healthy going forward on the back of strict lending practice and 90%+ exposure to

salaried personal where chances of slippage is relatively low.

CAN FIN HOME

Source:Company/Eastwind


Aggressive branch expansion drives incremental business growth

The company has opened almost 40 branches from last two years and it became double

to 81 from 41 in March 2011. The company has planned to open 85 braches at the end

of FY14. The incremental business came from additional branches as we got evidence

from revenue growth. The company revenue was Rs.72 cr in FY11 which increased to

Rs.96 cr in FY13 and in 9MFY14, it reached to Rs.115 cr while cost to income ratio was

remained flat at 30% level. The company is planning to open other 25 branches by 2015

in north area which would cater for incremental loan growth outside of southern state.

Being presence in Bangalore would help to get benefit naturally in realty boom

The reality volume in Bangalore is higher than Mumbai, Pune and Delhi-NCR region

according to our real estate analyst as we got evidence from recent result publish. Can

Fin Home’s 16% total branches are in Bangalore region, so it will be natural beneficiary of

this realty boom in Bangalore. At present 4 southern states constitute about 70% of loan

book.

Strong profit growth due to healthy NII growth and improvement in operating

leverage

During quarter, the company reported healthy net profit growth of 60% YoY on the back

of robust loan growth of 50% YoY and declined cost income which led by improvement in

operating leverage. With the improvement in operating leverage, the company’s return

ratio ROE improved from 12.6% in FY12 to 18% in 3QFY14. As discuss above, the

company is more aggressive in branch expansion which would increase incremental

business and profitability and hence return ratio.


9

Can Fin Homes Ltd was promoted in 1987 by Canara Bank in association with reputed

financial institutions including HDFC and UTI. Canara Bank holds 42.4% stake in CFHL.

Today, CFHL offers a range of products on housing, such as loans for home purchase,

home construction, home improvement/extension and site purchase as well as non-

housing finance. The company has 81 branches at present with a large presence in

South India.

Concern

Any sharp increase in the interest rate would discourage consumers to purchase home

and thus demand could be impacted. Around 45% of funding source come from banking

and any adverse regulation like hike of interest rate could impact borrowing cost. This

would impact company’s NII, NIM and profitability.

View & Valuation

We have initiated coverage with Buy rating on the stock with price target of Rs.220 which

implies 1 times of FY14E book value. The company has delivered strong performance all

around. During quarter, profitability was up by 60% on the back of healthy NII growth and

improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in

3QFY14 which is expected to remain healthy on the back of improving operating leverage

and aggressive branch expansion.

CAN FIN HOME

Source: Eastwind/Company


About the company


10

CHART FOCUS

CAN FIN HOME




11

Valuation BaND

CAN FIN HOME




12

CAN FIN HOME




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

Interest Earned 151.7 137.9 102.8 47.5 10.0

Interest Expenses 111.5 99.8 73.9 51.0 11.8

NII 40.2 38.1 29.0 38.7 5.4

Other Income 0.1 0.0 0.1 36.4 144.2

Total Income 40.3 38.2 29.0 38.7 5.5

Operating Expenses 11.4 12.4 11.3 1.3 -8.3

PPP 28.9 25.7 17.8 62.4 12.2

Provisions 0.0 0.0 0.0

PBT 28.9 25.7 17.8 62.4 12.2

Tax Expenses 8.5 7.0 5.1 66.1 22.0

PAT 20.3 18.7 12.6 60.9 8.6

Balance Sheet

Capital 20 20 20 0.0 0.0

Reserves and surplus 428 407 366 17.0 5.2

Net Worth 448 427 386 16.1 4.9

Borrowings 4817 4315 3144 53.2 11.6

TOTAL LIABILITIES 5265 4742 3530 49.2 11.0

Loans 5355 4864 3592 49.1 10.1

TOTAL ASSETS 5355 4864 3592 49.1 10.1

Spread Analysis

Yield On Advances 11.3 11.3 11.5

Cost of Borrowings 9.3 9.2 9.4

Spread 2.1 2.1 2.1

NIM 3.0 3.1 3.2

ROE% Break-Up

ROA 1.5 1.5 1.5

Total Assets/ Total Equity 12.2 11.6 10.3

ROE(%) 18.2 17.6 15.9

13

CAN FIN HOME

Financials & Assumption




PROFIT & LOSS ACCOUNT( Rs Cr) 2010 2011 2012 2013 2014EInterest Earned 208 226 279 379 586

Interest Expenses 145 154 196 283 424

NII 63 72 84 96 162

Other Income 9 5 8 14 0

Total Income 71 77 91 110 162

Operating Expenses 17 17 23 36 48

PPP 54 60 68 74 114

Provisions -1 1 7 -1 0

PBT 55 58 61 75 114

Tax Expenses 16 16 17 21 34

PAT 39 42 44 54 80

BALANCE SHEET ITEMS( Rs Cr)

Net Worth 275 311 348 392 463

Borrowings 1865 1904 1982 3073 5309

Loans 2167 2250 2673 4012 6600

SPREAD ANALYSIS(%)

Yield On Advances 10.7 10.5 10.7 9.8 11.3

Cost of Borrowings 9.9 8.1 9.9 9.2 9.3

Spread 0.8 2.4 0.8 0.6 2.0

NIM 3.1 3.2 3.1 2.4 3.0

EFFICENCY RATIO(%)

Operating Expenses to Total Income ( CI Ratio) 24.4 22.3 25.2 32.8 30.0

NII to Loan fund 2.9 3.2 3.1 2.4 0.8

Loan to borrowings 116.2 118.2 134.8 130.6 111.2

VALUATION

Book Value(Rs) 134 152 170 191 226

P/B(x) 0.6 0.7 0.7 0.7 0.8

P/E(x) 4.2 5.2 5.2 5.2 4.8

DB CORP

1M 1yr YTD

Absolute -6 22 0

Rel. to Nifty -7.32 11.3 -0.002


Promoters 74.96 74.97 74.98

FII 17.73 16.46 14.66

DII 2.95 4.00 5.34

Others 4.36 4.57 5.02

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

Revenue 518.2 438 18.3 438.9 18.1

EBITDA 153.8 112.5 36.7 122.8 25.2

PAT 93.57 63.2 48.0 73.2 27.9

EBITDA Margin 29.7% 25.7% 400bps 28.0% 170bps

PAT Margin 18.1% 14.4% 370bps 16.7% 140bps

14

5521Mkt Capital (Rs Crores)

Market DataBSE Code 533151

NSE Symbol DBCORP


52wk Range H/L 321.50/210

Latest update Neutral

"Waging war on Print media"

The Supreme Court upheld the constitutional validity of the November 11, 2011 Union

government notifications, directing implementation of the recommendations of the

Majithia Wage Boards for journalists and non-journalists of newspapers and news

agencies.

This will act as a huge negative for newspaper industry. They have to pay all arrears up

to March 2014.It will be paid in four equal installments within one year from

November 11, 2011.

This would create huge financial burden to a industry already facing problems of rising

raw material prices. One the other hand most of newspaper venturing into reginal

market in search for better sales volume and margin.

Previous Target Price -

Upside -

Stock Performace with Nifty

Rs, Crore



CMP 301

Target Price

This judgment will work as a dampener for newspaper industry as well as DB CORP.

Company’s EBITDA margin will be effected very negatively not only in FY15E but also

next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’6261.65

Stock Performance During the quarter, company has seen 18.2% revenue growth from its advertisement,

14% from circulation and 25% from Radio business on YoY basis. Management

expressed its interest regarding inorganic expansion in near future to maintain its

healthy growth across all segments.

3QFY14E Earning Performance:

Management Commentary:According to management, Company will maintain a pragmatic approach towards

operational controls and higher efficiency. DBCORP will continue to capitalize its

consumption potential of Tier 2 and 3 cities. And they are studying on marketing

strategies of niche brands in Tier 2 and 3 cities. Company is expected to launch its Bihar

edition on 19 Jan, 2014, and we expect to see some part of additional revenue from

Bihar edition by 4QFY14E and also expect to see breakeven in 3 to 4 years.

View and Valuation:

In view of upcoming general election, we expect government ad spending to go up

substantially. Provision of TRAI’s 12 minutes ad cap would provide revenue visibility to

print media players, being one of the largest players DB Corp will be strong beneficiary

in near future. But Considering latest update regarding directing implementation of

the recommendations of the Majithia Wage Boards for journalists and non-journalists

of newspapers and news agencies, earning visibility could not be promising. Wages

hike and payment of arrers will create huge burden to the profit and loss A/C of the

company as well as margin shape. And it may hamper company's plan for investing in

regional market in future because it needs internal cash flow. Therefore we are

downgrading this stock from`BUY' to `Neutral'.



Nifty

"Neutral"7th March' 14


15



Financials;

DB CORP

Revenue Geography-wise Revenue Segments


Rs,cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 1062.1 1265.18 1451.51 1592.32 1861.91 2176.94

RM Cost 327.87 383.91 508.04 544.54 623.74 740.16

WIP -0.0016 -0.06 -0.04 0.03 -1.86 -2.18

Employee Cost 131.81 184.56 242.93 279.5 307.21 380.97

Ad Spend 12.98 12.52 15.04 17.21 22.34 23.95

Other expenses 161.24 185.2 216.06 234.07 260.67 315.66

Total expenses 720.03 862.13 1105.03 1210.25 1371.5 1656.7

EBITDA 342.07 403.05 346.48 382.07 490.5 520.3

Depreciation and Amortisation 37.83 43.28 50.57 58.06 64.5 75.4

Other Income 11.15 14.18 24.02 21.34 27.9 28.3

EBIT 304.24 359.77 295.91 324.01 426.0 444.9

Interest 35.69 15.3 9.23 7.99 8.0 5.1

PBT 279.70 358.65 310.7 337.36 445.9 468.1

Tax Exp 105.72 99.97 98.32 113.18 156.1 163.8

PAT 173.98 258.68 212.38 224.18 289.8 304.3

Growth-% (YoY)

Sales 10.5% 19.1% 14.7% 9.7% 16.9% 16.9%

EBITDA 132.2% 17.8% -14.0% 10.3% 28.4% 6.1%

PAT 265.4% 48.7% -17.9% 5.6% 29.3% 5.0%

Expenses on Sales-%

RM Cost 30.9% 30.3% 35.0% 34.2% 32.0% 34.3%

Employee Cost 12.4% 14.6% 16.7% 17.6% 16.6% 17.0%

Ad Spend 1.2% 1.0% 1.0% 1.1% 1.2% 1.1%

Event Expenses 1.1% 1.3% 1.0% 0.8% 0.8% 1.0%

consumption of store & spare 4.8% 4.6% 5.8% 6.0% 6.0% 6.2%

Distribution expenses 2.1% 1.7% 1.7% 1.8% 1.8% 1.9%

Other expenses 15.2% 14.6% 14.9% 14.7% 14.0% 14.5%

Tax rate 10.0% 7.9% 6.8% 7.1% 8.4% 7.5%

Margin-%

EBITDA 32.2% 31.9% 23.9% 24.0% 26.3% 23.9%

EBIT 28.6% 28.4% 20.4% 20.3% 22.9% 20.4%

PAT 16.4% 20.4% 14.6% 14.1% 15.6% 14.0%

Valuation:

CMP 239 246 219 212.1 301 301

No of Share 18 18 18 18.33 18.33 18.33

NW 649 829 927 1029 1180 1344

EPS 9.6 14.1 11.6 12.2 15.8 16.6

BVPS 36 45 51 56 64 73

RoE-% 27% 31% 23% 22% 25% 23%

P/BV 6.7 5.4 4.3 3.8 4.7 4.1

P/E 24.9 17.4 18.9 17.3 19.0 18.1

Hindustan Zinc LTD.

123

148

148

20%

0%

500188

51929

5192

6329

Robust Q3FY14 Performance :1M 1yr YTD

Absolute 4.3 -1.7 -3.4

Rel. to Nifty 0.0 9.2 11.3

3QFY14 2QFY14 1QFY14

Promoters 64.9 64.9 64.9

FII 1.8 1.8 1.5

DII 31.4 31.4 31.5

Others 1.8 1.8 2.1

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14

Net Revenue 3450 8.6 -9.8 3178 3826

EBITDA 1824 22.1 -3.1 1494 1883

Depriciation 210 18.6 12.9 177 186

Tax 305 50.2 20.1 203 254

PAT 1723 6.8 5.1 1613 1640(In Crs)

16

Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive

outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over

production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being

an integrated & dominant player in the domestic industry with low cost of production,

the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one

year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant

growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY

rating to the stock with a target price of Rs. 148/-.

Zinc market was bearish during last consecutive years having surplus in inventory, but

now sentiment is slowly turning positive showing some uptrends in Zinc LME prices.

Visible inventories on the London Metals Exchange, as well as on the Shanghai Futures

Exchange, are down about 30% over the last year. And zinc demand is increasing steadily.

We believe Zinc price will be the core fundamental behind the Hindustan zinc’s bull story

in the coming years. We see a improving volume of production through FY15.More So

Govt. The attorney-general’s clearance for the Centre’s proposal to divest its residual

stake in Hindustan Zinc Ltd (HZL) lifted the Street’s mood. Again the board delayed this

process and guided investors that disinvestment of government's remaining stake in

Hindustan Zinc will happen next fiscal year. Stake sale in HZL again seems to be back

burner now. We also see gradual and sustainable recovery in global macro Scenario

which supports a positive cycle in industrial metals. So, we believe there exists a strong

case for significant earnings estimate for Hind Zinc in coming months.

Mkt Capital (Rs Crores)

142/94

Upside


Result Update

52wk Range H/L

CMP

Target Price

Hindustan Zinc’s (HZL) Q3FY14 performance was inline to our estimates on the back of

healthy zinc sales volumes and higher metal premiums. Total operating income for

Q3FY14 stood at Rs. 3450.1 crore higher by 8.6% YoY but lower by 3.1% QoQ. Total zinc

sales in Q3FY14 came in at 196,000 tonne, up 17% YoY and 2% QoQ . The company

realised premium on metal sales amounting to $241/tonne for zinc (Zn) & $305/tonne for

lead (Pb) . Lead sales volume for the quarter stood at 23500 tonnes (lower by 24% QoQ

and 22% YoY), while silver sales volumes stood at 78500 kg (lower by 31% YoY and 14%

QoQ) . EBITDA came in at Rs.1823.8 crore and inline to our estimate of Rs. 1829.6 crore.

Subsequently, net profit stood at Rs. 1722.7 crore .

Valuation & Recommendation

Good gains ahead



Stock Performance-%


1 yr Forward P/B

Source - Comapany/EastWind Research

Nifty

BUY

Market Data

Average Daily Volume (Nos.)

BSE Code

HINDZINCNSE Symbol

"BUY"6th March' 14


0

50

100

150

200

250

300

350

400

450

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Lower Production Guideline LME Price/Ton

Key Concerns

A.

B.

C.LME Price/Ton

D.

E.

Key Triggers for Growth

A. Company is tracking on 95% capacity utilization.

B.

C.

D. LME Price/Ton

E.

F.

G.

H. Zinc premium reaches six year high as inventories shrink

I. Fees that zinc smelter charge to refine the metat that probably to increase 5%.

17

The Rampura Agucha underground mine project is operational via ramps (tunnel driven

downward from the surface) and commercial production already ramp up in Q3 and will

in Q4 of FY14 . The Kayad mine project will also commence commercial production in

the current fiscal year.

A cash-rich balance sheet, low cost of production and inexpensive valuations make HZL

an attractive bet at the current price levels.

Disinvestment of government's remaining stake in Hindustan Zinc and Bharat

Aluminium (Balco) will happen next fiscal year .

In the past Vedanta Group has said it wanted majority control when Vedanta had earlier

offered Rs 149 a share . If this is any benchmark,then investors will stand to gain.

Smelting Plants are improvised and management is confident that the smelting plants

will maintain their stance for the coming quarters also.


HZL has marginally downward revised its mined metal production guidance for FY14 from

950,000 tonnes earlier to 900,000 tonnes. This reflects slower-than-expected ramp up of

underground mining projects and some changes in mining sequence wherein preference

has been given to primary mine development during this period.

HZL’s revenues are directly linked with the global market for products essentially, Zinc

and Lead which are priced with reference to LME prices and Silver to LBMA (London

Bullion Metal Association) prices.

Lower than expected demand by galvanizing industries for zinc and industrial batteries,

car batteries industries for lead would affect the company estimates.

Disruptions in mining due to equipment failures, unexpected maintenance problems ,

non-availability of raw materials of appropriate price, quantity and quality for energy

requirements, disruptions to or increased cost of transport services or strikes and

industrial actions or disputes.

Captive plants enjoy the lower Tax rate and company enjoys zero tax from tax free

geographycal areas.

Hindustan Zinc LTD.

Volatile Desel Price and high Sulphuric acid price affecting the company,s PAT adversly.

A reason to wait and watch , is since the government is looking at auction, how much

will Vedanta be able to garner and what price it is willing to pay is not known.




0200400600800

10001200140016001800

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-

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Au

g-1

3

Se

p-1

3

Oct

-13

No

v-1

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De

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Silver(rs/ounce)

020000400006000080000

100000120000140000160000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

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Ma

y-1

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-13

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Lead

90000

95000

100000

105000

110000

115000

120000

125000

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

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-13

Jul-

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g-1

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Oct

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3

Zinc

FY11 FY12 FY13 FY14E

9912 11405 12700 13577

979 1543 2032 1787

10891 12948 14732 15364

1023 1228 1070 1291

492 568 696 707

4417 5336 6218 6484

5496 6069 6482 7093

475 611 647 718

19 14 29 37

1059 1419 921 1097

4900 5526 6899 6967

22.0 21.0 21.0 19.0

FY10 FY11 FY12 FY13

423 845 845 845

17701 21688 26036 31431

18124 22533 26881 32276

478 475 410 484

340 567 504 825

20238 25053 29485 35465

109 109 47 10

6071 7145 8466 8474

1113 875 445 1082

361 594 876 1898

452 762 798 1111

152 209 332 403

928 5633 5255 6942

96 158 233 373

20238 25053 29485 35465

FY10 FY11 FY12 FY13

3.2 2.2 2.1 1.7

95.6 11.6 13.1 16.3

1.9 2.1 2.9 3.2

6.0 4.8 3.6 3.8

0.6 0.8 0.7 0.9

FY10 FY11 FY12 FY13

4001 4483 4553 4935

77 -212 -61 -183

4077 4272 4492 4752

-3881 -3658 -3499 -3234

-187 -363 -1242 -1257

8 250 -248 262

18

Hindustan Zinc LTD.

Reserve & Surplus

Total equity


Interest Cost

Net tax expense / (benefit)

Repairs

EBITDA

P/L PERFORMANCE

Net Revenue from Operation

Other Income

Total Income

Power, fuel & water

ZinC Productions:

Expenditure

Trade payables

Short-term provisions

B/S PERFORMANCE

Share capital

Depriciation

PAT

ROE%

Total liabilities

Intangibles

Tangible assets

Capital work-in-progress

Long-term loans and advances


CASH FLOWS

Debtor to Turnover%

Cash From Investment

Cash from Finance

Net Cash Flow during year

Creditors to Turnover%

Inventories to Turnover%

Cash from Operation

Changes In Working Capital

Net Cash From Operation

Short-term loans and advances

Total Assets

P/B

EPS

RATIOS


EBIDTA & Margin :

Inventories

Trade receivables

Cash and bank balances


43 43 41

49

42

49 47

0

10

20

30

40

50

60

0

500

1000

1500

2000

2500EBIDTA

EBIDTA %

0

50000

100000

150000

200000

250000

Zinc Production (tons)

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

500

1000

1500

2000

2500

3000

3500

4000

4500 NetRevenuefromOperation

RevenueGrowth

Voltas Ltd.

CMP 139

Target Price 125

Previous

Target Price

95

Upside -10%

Change from

Previous

32%

BSE Code 500575

NSE Symbol VOLTAS

52wk Range

H/L

65/143

Mkt Capital

(Rs Crores)

4,609

Nifty 6,329

1M 1yr YTD

Absolute 28.5 75.2 84.2

Rel. to Nifty 23.1 64.0 72.9


Promoters 30.3 30.2 30.2

FII 15.2 14.5 18.1

DII 29.8 29.8 25.6

Others 24.8 25.6 26.1

19


1 yr Forward P/B

Stock Performance-%

Share Holding Pattern-%About Dow Group :

Dow Chemical Pacific (Singapore) Pte Ltd was established in 1992. Catering to customers in Asia

Pacific, particularly South East Asia, Dow Group combines the power of science and technology to

passionately innovate what is essential to human progress. The company is driving innovations

that extract value from the Intersection of chemical, physical and biological sciences to help

address many of the world's most challenging problems such as the need for clean water, clean

energy generation and conservation, and increasing agricultural productivity. The company's

integrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials,

agrosciences and plastics businesses delivers a broad range of technology-based products and

solutions to customers in high growth sectors such as packaging, electronics, water, coatings and

agriculture.Valuation :

The company has been evaluating strategic alternatives since 2012, we believe the company is

not inclined to sell at valuations multiple of 2 times of its FY15E book value. We estimate that at

the lower end of management's guidance this translates into a 12.1%/12.7% RoE forFY14/15E.

We believe management is attempting to be conservative regarding the guidance for FY14 &

FY15, but even with a 60/90 bps improvement in the operating margin the RoE would be

approximately 12.1%/12.7% for FY14/15E , which we believes would translate into a P/B multiple

of approximately 2.0x – to 2.2x. This translates to a 12 month price target of approximately Rs.

120 based on our FY14E BVPS of Rs. 59. However, If the company if things will going positively we

could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing

to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral

given the recent rise in its share price following 3QFY14 earnings and revised our price target

to Rs. 120.”

Water has been identified as a key focus area for the Tata group. With its unrivalled know-how

and technological leadership in the water treatment space, the partnership, will help Voltas

Water Solutions cater to the growing water treatment requirements of the Indian subcontinent.

They further believe that partnership will simultaneously leverage the brand and distribution

strength of Voltas, along with the technology prowess of the water and process solutions division

of the Dow Group.

Our View on said JV :

In today scenario major Water and Waste Water Treatment market is mostly and largely catered

by unorganized players. And the market which is targeted by this new joint venture will provide a

branded and differentiated product line in the sector, with a focus on quality and service

delivery.

Average Daily Vol. (Nos.) 624,126

Management comment on above JV :

Downgrade to "Neutral"…….

What New...???

Market Data

Company update NeutralVoltas Ltd has proposed to form a new joint venture (JV) company named –“ Voltas Water

Solutions” which will have equal capital contribution from “Voltas” and “Dow Chemical Pacific”

(Singapore) Pte (Dow). This JV company will market and distribute standard packaged Water

Treatment Systems and Waste Water Treatment Systems of capacity up to 20 m 3/hour, to

residential and commercial complexes and light industrial markets in the Indian subcontinent.

The entity's operations would include designing, procuring, testing, marketing, selling and

servicing of such standard water treatment systems and waste water treatment systems.

"Neutral"6th Mar' 14


20

Voltas Ltd.

Key financials :


Ammount in crores (Source: Company/Eastwind)

Ammount in crores (Source: Company/Eastwind)


Ammount in crore

INR in crores (Source: Company/Eastwind)


PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E

Performance

Revenue 4326 4757 5191 5186 5531 5320 5852

Other Income 94 78 58 98 90 84 100

Total Income 4420 4836 5250 5284 5621 5404 5952

EBITDA 283 460 463 336 245 261 296

EBIT 262 438 442 303 217 237 268

DEPRICIATION 21 21 21 34 28 24 28

INTREST COST 11 10 17 31 40 35 42

PBT 372 532 524 219 280 286 326

TAX 117 147 172 57 73 74 85

Extra Oridiniary Items 26 25 40 -150 12 0 0

Reported PAT 255 385 352 162 207 211 241

Dividend (INR) 73 73 73 73 73 54 54

DPS 2.2 2.2 2.2 2.2 2.2 61.5 61.5

EPS 7.7 11.6 10.6 4.9 6.3 6.4 7.3

Yeild %

EBITDA % 6.5% 9.7% 8.9% 6.5% 4.4% 4.9% 5.1%

NPM % 5.8% 8.0% 6.7% 3.1% 3.7% 3.9% 4.0%

Earning Yeild % 16.2% 6.5% 6.2% 4.4% 8.3% 4.4% 5.0%

Dividend Yeild % 4.7% 1.2% 1.3% 2.0% 2.9% 42.4% 42.4%

ROE % 32.2% 35.4% 25.8% 11.0% 12.7% 11.9% 12.3%

ROCE% 27.3% 35.2% 24.6% 11.4% 13.1% 12.3% 13.0%

Position

Net Worth 790 1085 1362 1478 1626 1775 1955

Total Debt 181 35 137 223 261 225 225

Capital Employed 971 1120 1498 1701 1887 2000 2180

No of Share (Adj) 33 33 33 33 33 33 33

CMP 48 178 172 112 75 145 145

Valuation

Book Value 23.9 32.8 41.2 44.7 49.1 53.7 59.1

P/B 2.0 5.4 4.2 2.5 1.5 2.7 2.5

Int/Coverage 23.8 44.5 26.7 9.6 5.5 6.8 6.4

P/E 6.2 15.3 16.1 22.9 12.1 22.7 19.9

V- SWARAJ ENGINES Ltd.

CMP 648

Target Price 648

600

Upside 0%

7%

BSE Code 500407

NSE Symbol

801

1,015

Nifty 6,329

1M 1yr YTD

Absolute 5.3 47.8 63.4

Rel. to Nifty (0.2) 36.6 52.0


Promoters 50.6 50.6 50.6

FII 1.9 1.9 1.5

DII 10.6 10.4 10.6

Others 36.9 37.1 37.3

21

Stock Performance-%

Average Daily Volume

Moreover, we feel that caution is necessary over the recent robust financial as well as

operational performance that the company has delivered over the past year. With 90 per cent of

its turnover generated through parent company, the revenue stream also seems concentrated. In

conclusion, looking at the above mentioned woes, we advise readers to book profits in the

counter at its current levels and fresh buying may be considered at cheaper levels of around Rs.

500-550 a share.

Our bearish attitude on the counter stems from its valuations. At a P/BV of 2.8x of its annualised

FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own

past historical data

" Book Profits While The Going Is Good…. "

Book ProfitCompany update

Mkt Capital (Rs Crores)

52wk Range H/L


SWARAJENG


Market Data

382/672

In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view

to earn healthy gains. As expected, the counter have given a premium of 40 per cent over its

recommended price. We expect the current price growth rally factored all the fundamental

changes, and we advise our readers to book profits at the current levels.

We are quite positive on the Swaraj Engines, owing to its strong tractor volume growth, capacity

expansion to 1,05,000 engines pa from 75,000 of current level, softening of commodity prices

and company presence in all HP segments. We are upbeat on the stock on the account of core

business momentum remains robust with healthy EPS growth, cash flow generation and high

RoE.

Recommendation History

Valuation

At the CMP of INR610, the stock discounts its FY14E EPS of Rs. 54.20 by 12.0x and FY15E EPS of

Rs. 61.7 by 10.5x. Given the strong revenue growth at a CAGR of 21%; PAT growth at CAGR of

26% post acquisition and stable margins at ~15%, the company is poised to grow further and

capable of ustaining its healthy earnings. Furthermore, despite the capex of Rs. 38 crore, the

company has strong cash flows and the company is debt free. Also, Company assurance of 30-

60% dividend payout ratio implies an attractive dividend yield of 4-9%.


1 yr Forward P/B


"Book Profit"6th Mar' 14


Date Report Type CMP Target PriceChange From

Previous in %

25th April' 13 Company Update 460 515 NA

17th June' 13 Company Update 511 535 3.9%

10th July' 13 Company Update 533 535 0.0%

1st Aug' 13 Result Update 484 535 0.0%

26th Nov' 13 Result Update 610 600 12.1%

3rd Feb' 14 Result Update 602 648 8.0%

9

22


(Ammount in crore) (Source: Company/Eastwind)

SWARAJ ENGINES Ltd.

Key financials :

(Source: Company/Eastwind Research) (Figures In crore)


PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E

Performance

Revenue 208 282 361 449 479 600 680

Other Income 5 10 8 12 15 18 20

Total Income 213 292 369 461 494 618 700

EBITDA 32 50 61 69 71 89 102

EBIT 27 45 56 65 64 80 91

DEPRICIATION 5 5 4 4 7 9 11

INTREST COST 0 0 0 0 0 0 0

PBT 32 55 64 77 79 98 111

TAX 11 17 20 24 24 30 34

Reported PAT 21 37 44 53 55 67 77

Dividend 7 12 14 19 48 24 30

EPS 17.2 30.1 35.4 42.5 44.6 54.2 61.7

DPS 5.9 9.3 11.6 15.1 38.4 19.3 24.2

Yeild %

EBITDA % 15.3% 17.6% 16.8% 15.5% 14.9% 14.8% 15.0%

PBT % 15.5% 19.4% 17.8% 17.2% 16.6% 16.3% 16.3%

NPM % 10.2% 13.2% 12.2% 11.8% 11.6% 11.2% 11.3%

Earning Yeild % 8.0% 31.6% 12.2% 9.9% 11.3% 8.4% 9.5%

Dividend Yeild % 2.7% 9.8% 4.0% 3.5% 9.7% 3.0% 3.7%

ROE % 21.9% 30.4% 28.8% 28.4% 28.6% 28.5% 26.6%

ROCE% 21.9% 30.4% 28.8% 28.4% 28.6% 28.5% 26.6%

Position

Net Worth 97 123 152 186 194 236 287

No of Share 1 1 1 1 1 1 1

CMP 214 95 290 429 395 648 648

Valuation

Book Value 78.3 98.8 122.6 150.0 156.0 190.2 231.5

P/B 2.7 1.0 2.4 2.9 2.5 3.4 2.8

P/E 3.5 5.3 5.6 5.1 6.8 12.0 10.5

Net Sales/Equity 2.1 2.3 2.4 2.4 2.5 2.5 2.4

EROSMEDIA

1M 1yr YTD

Absolute 13.1 -7.3 -

Rel. to Nifty 8.2 -17.4 -


Promoters 74.88 74.88 74.88

FII 12.45 12.16 11.35

DII 1.56 1.87 2.95

Others 11.11 11.09 10.82

Financials

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

Revenue 432.68 201 115.2 369.3 17.2

EBITDA 135.6 51.2 165.0 90.6 49.6

PAT 92.0 37.0 148.8 65.2 41.1

EBITDA Margin 31.3% 25.4% 590bps 24.5% 680bps

PAT Margin 21.3% 18.4% 290bps 17.7% 360bps

23

Nifty 6298

Stock Performance

Buy

P/BV-1 year forward

Rs, Crore



Recent initiatives: Eros has struck new deals during the period with MSM

Satellite Singapore private ltd for broadcast of films on Sony as well as with

Viacom18 media for broadcast films on colours.Recently Eros International media has launched two new movie channels HBO

DEFINED and HBO HITS, which will reduce its dependence on highly

unpredictable revenue streams going forward.


CMP 160

Target Price 200

Initiating Report


"Moving to Blockbuster"

Healthy movies pipeline for FY15E; Company is expecting to release more than

8 big budget movies across Hindi and regional languages. Likewise, company is

going to release much awaited Rajnikanth’s movie Kochadaiiyaan on 11 April,

2014. Apart from this, company is expected to release Dishkiyaaoon, Shadi Ke

Side Effect, Action Jackson, Tanu weds Manu season 2, Sarkar3, Chalo China,

NH-10, Dekho Magar Pyaar Se, Happy Ending and Rana in FY15E.

It has largest Indian content library of films with 1100+ films and digital rights

to an additional 700 films. Its well positioned to monetize rich content of

library ensures annuity and regular set of revenue. Considering diversified and sustainable Business Model along with well

positioned to monetize rich content of its library and block buster success ratio

of movies (out of the top 10 grossing films in recent years, 3 are from Eros.)

make us positive view on the stock.About Company: Eros International Media (EROS) is one of the largest films co-

production and distribution company in India and overseas, engage with pre-

sales of overseas rights, music rights and broadcasting rights. It recovers 35-40%

of its costs by selling movie rights to channels, recovers another 35-40% from

selling its overseas rights to overseas entities. Similarly, it gets 10-15% of the

cost of movies by selling music rights .

-

Upside 25%


Robust 3QFY14 Result: Company reported better numbers with sales growth of

17% (YoY) led by huge spurt in catalogue monetization, which increase by approx-

75% (YoY). Its PAT grew by 41%(YoY).

View and Valuation: Management is very excited to invest into different

medium like internet and launching channels to generate revenue. Company’s

optimistic stance towards maintaining margins, strong movies slate and very low

valuation makes attractive. At a CMP of Rs 160, stock trades at 1.1 P/BVx FY15.

We initiate “BUY” with a target price of Rs 200.

During the quarter, Its EBITDA margin improved by 680bps (YoY) to 31.3%

because of reduction in operational expenses and employee expenses.

Management expects to see EBITDA margin at 25% in FY14E and FY15E than 20-

22% range of margin in previous 4 years.

52wk Range H/L 195/107

1467Mkt Capital (Rs Crores)

Market DataBSE Code 533261

NSE Symbol EROSMEDIA


"BUY"5th March' 14


24

Upcoming Movies:




EROSMEDIA

Margin-%


1. Piracy is the key concern for the

company. Indian film industry loses

approx. Rs.2000 cr. every year due to

piracy (source: FICCI-KPMG report 2009).

Key Concerns:

2. Lower consumer discretionary demand.

3. Difficult to predict fate of films.

Sales and Sales growth(%)(yoy)


Date of Release Upcoming movies Director Starcast

28-Feb-14 Shaadi Ke Side Effects Saket Chaudhary Farhan Akhtar,Vidya Balan

21-Mar-14 Dishkiyaaoon Sanmjit Singh Talwar Sunny Deol, Harman Baweja

28-Mar-14 Happy Ending Raj and DK Saif Ali Khan, Ileana D'Cruz

11-Apr-14 Kochadaiiyaan Soundarya Ashwin Rajnikanth, Deepika Padukone

6-Jun-14 Action Jackson Prabhu Deva Ajay Devgn, Sonakshi Sinha

12-Sep-14 NH-10 Navdeep singh Anushka sharma,Neil bhoopalam

Tanu Weds Manu Season 2 Anand Rai R.Madhavan,Kangana Ranaut

R. Balki Untitled R.Balki Amitabh Bachchan, Dhanush

Aankheen 2 Apoorva Lakhia Abhishek Bachchan

Illuminati Untitled Arif Ali Armaan Jain

Dekh Tamasha Dekh Feroz Abbas Khan Satish Kaushik and Others

Purani Jeans Tanushree Basu Aditya Seal

Chalo china Shashank Ghosh Vinay Pathak, Lara Dutta

FY15E

Q2FY15

Q1FY15

Q4FY14E

1. Catalogue monetization will continue to grow strong in the upcoming quarters.

2. Company will monetize entire portfolio across different platforms

3. Catalogue monetization will increase from 13%-14% to 20-25% of overall revenue in coming 3 to 4 years.

4. Management is looking for more and more free cash flows going forward.

5. Q4 will be very positive and going forward FY15E will also be very positive for the company.

6

25



Financials;

EROSMEDIA

Management Guidance:

Management is very confident about its performance going forward and expects EBITDA margin to be around 25% in

FY14E and FY15E.


Rs,cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 640.88 706.97 943.88 1067.95 1110.8 1229.9

RM Cost(Operatinal expenses) 480.33 495.13 665.45 765.78 766.5 860.9

WIP 0 0.84 -2.92 -2.55 -2.7 -2.9

Employee Cost 19.7 25.28 22.55 27.29 29.4 36.9

Other expenses 27.81 29.57 42.96 47.47 29.4 36.9

Total expenses 527.84 550.82 728.04 837.99 822.7 931.8

EBITDA 113.04 156.15 215.84 229.96 288.1 298.1

Depreciation and Amortisation 4.39 3.82 6 6.45 7.7 9.2

Other Income 12.62 8.95 19.3 6.4 11.1 12.3

EBIT 108.65 152.33 209.84 223.51 280.4 288.9

Interest 9.02 9.39 13.44 9.22 25.4 26.0

PBT 112.25 151.89 215.7 220.69 266.2 275.2

Tax Exp 29.63 33.67 63.14 61.19 77.7 80.4

PAT 82.62 118.22 152.56 159.5 188.5 194.8

Sales 16.9% 10.3% 33.5% 13.1% 4.0% 10.7%

EBITDA 52.8% 38.1% 38.2% 6.5% 25.3% 3.5%

PAT 72.1% 43.1% 29.0% 4.5% 18.2% 3.4%

RM Cost 74.9% 70.0% 70.5% 71.7% 69.0% 70.0%

Employee Cost 3.1% 3.6% 2.4% 2.6% 2.7% 3.0%

Other expenses 4.3% 4.2% 4.6% 4.4% 2.7% 3.0%

Tax rate 4.6% 4.8% 6.7% 5.7% 7.0% 6.5%

EBITDA 17.6% 22.1% 22.9% 21.5% 25.9% 24.2%

EBIT 17.0% 21.5% 22.2% 20.9% 25.2% 23.5%

PAT 12.9% 16.7% 16.2% 14.9% 17.0% 15.8%

CMP 138.9 138.9 181.15 180.53 160.0 160.0

No of Share 9.14 9.14 9.17 9.19 9.2 9.2

NW 237.55 670.48 834.61 986.5 1158.6 1337.0

EPS 9.0 12.9 16.6 17.4 20.5 21.2

BVPS 26.0 73.4 91.0 107.3 126.1 145.5

RoE-% 35% 17.6% 18.3% 16.2% 16.3% 14.6%

P/BV 5.3 1.9 2.0 1.7 1.3 1.1

P/E 15.4 10.7 10.9 10.4 7.8 7.5

Valuation:

Margin-%

Expenses on Sales-%

Growth-% (YoY)

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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Stock Advisory for Today - Buy Stock of Dabur India Ltd and CAN FIN HOME

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