ValueGuide July 13

8/12/2019 ValueGuide July 13

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July 2013 Sharekhan ValueGuide2


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Sharekhan ValueGuide July 20133

The rupee crossed the

psychological mark of 60

against the dollar lastmonth. The local

currency s fall to an all-

time low was largely

driven by the

strengthening of the US

Dollar against all the other major currencies. But the currencies of

countries with relatively a high current account deficit, like India, South

Africa and Mexico, were among the worst affected globally.

REGULAR FEATURES

Report Card 4

Earnings Guide I

TECHNICALS

Sensex 29

Stock Updates 14

Sharekhan Special 24

Sector Updates 27

Viewpoint 28

From Sharekhans Desk EQUITY

06

The Rfactor FUNDAMENTALS

DERIVATIVES

View 30

TECHNICALS

Crude Oil 31

Gold 32

Silver 32

FUNDAMENTALS

Copper 32

Lead 32

Zinc 33

Gold 34

Silver 34

Crude Oil 34

Copper 35

Nickel 35

Turmeric 35

TECHNICALS

FUNDAMENTALS

USD-INR 37

EUR-INR 37

GBP-INR 37

JPY-INR 37

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COMMODITY

CURRENCY

PMS DESK

ProPrime - Top Equity 38

ProPrime - Diversified Equity 39

ProTech - Diversified 40

ProTech - Nifty Thrifty 41ProTech - Trailing Stops 42

MUTUAL FUNDS DESK

Top MF Picks (equity) 45

Top SIP Fund Picks 46

RESEARCH BASED EQUITY PRODUCTS

Market Outlook 07

Top Picks basket 10

INR-GBP 36

INR-JPY 36

ADVISORY DESK

MID Trades 43

INR-USD 36

INR-EUR 36

Derivative Ideas 43

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CONTENTS


4/67


REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON JULY 04, 2013)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 04-JUL-13 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

AUTOMOBILESApollo Tyres Hold 60.9 ** 102.5 54.6 -32.3 -26.8 -32.0 -20.4 -32.0 -30.7 -31.4 -29.6

Ashok Leyland Hold 18.6 24.0 29.0 18.4 -18.7 -12.8 -28.1 -20.8 -18.4 -17.5 -27.5 -29.9

Bajaj Auto Hold 1876.6 2028.0 2229.0 1423.1 8.7 14.8 -12.9 24.9 9.1 8.6 -12.1 10.5

M&M Buy 982.1 1129.0 1026.5 675.1 -0.5 15.8 4.3 39.0 -0.1 9.5 5.3 23.0

Maruti Suzuki Buy 1557.4 1950.0 1777.0 1074.3 0.7 18.8 0.8 28.3 1.1 12.3 1.7 13.5

BSE Auto Index 10816.1 11868.6 8762.4 -1.5 12.1 -6.3 16.7 -1.1 6.0 -5.4 3.3

BANKS& FINANCE

Allahabad Bank Hold 88.2 155.0 191.1 85.6 -25.3 -28.8 -49.7 -38.9 -25.0 -32.7 -49.3 -46.0

Andhra Bank Hold 82.7 112.0 130.0 78.0 -5.1 -13.4 -34.7 -30.1 -4.7 -18.1 -34.1 -38.2

Axis (UTI) Bank Buy 1265.0 1650.0 1549.9 926.9 -9.4 1.7 -8.3 21.5 -9.0 -3.8 -7.5 7.5

Bajaj Finserv Hold 635.2 826.0 984.0 613.0 -4.9 -15.9 -31.6 -6.7 -4.5 -20.5 -31.0 -17.4

Bank of Baroda Hold 546.6 820.0 899.7 534.5 -14.3 -13.8 -36.1 -22.7 -14.0 -18.5 -35.5 -31.6

Bank of India Hold 224.6 376.0 393.0 215.1 -19.5 -23.7 -36.0 -34.0 -19.2 -27.9 -35.5 -41.6

CanFin Homes Buy 136.2 220.0 187.9 99.0 -5.2 -3.5 -24.9 26.5 -4.8 -8.7 -24.2 11.9

Capital First Buy 153.2 230.0 235.0 109.5 -1.3 6.9 -26.4 0.0 -0.9 1.0 -25.7 -11.6

Corp Bank Buy 349.2 500.0 495.3 337.0 -9.4 -5.5 -24.6 -14.0 -9.1 -10.6 -24.0 -23.9

Federal Bank Buy 400.5 545.0 571.0 390.0 -12.5 -15.6 -24.0 -9.4 -12.1 -20.2 -23.3 -19.9

HDFC Hold 852.1 910.0 931.4 631.3 1.2 9.1 3.2 28.0 1.7 3.2 4.2 13.2HDFC Bank Hold 655.2 712.0 727.3 505.1 -3.3 7.2 -2.8 14.3 -2.9 1.4 -1.9 1.1

ICICI Bank Buy 1063.7 1320.0 1238.4 866.8 -6.5 7.2 -8.5 19.8 -6.2 1.4 -7.7 6.0

IDBI Bank Hold 71.4 105.0 118.4 66.3 -8.9 -14.2 -38.8 -24.8 -8.5 -18.9 -38.2 -33.5

Punjab National Bank Buy 620.1 998.0 922.1 604.1 -15.4 -10.3 -29.2 -24.0 -15.0 -15.2 -28.5 -32.7

SBI Buy 1900.0 2450.0 2551.7 1815.2 -6.3 -6.3 -22.1 -12.9 -5.9 -11.4 -21.4 -23.0

Union Bank of India Buy 173.4 295.0 288.0 150.1 -17.8 -18.7 -35.1 -15.0 -17.4 -23.2 -34.5 -24.8

Yes Bank Buy 470.2 600.0 547.7 285.0 -4.5 11.5 -2.7 37.6 -4.1 5.4 -1.8 21.8

BSE Bank Index 13006.9 15335.9 11277.1 -6.9 3.0 -10.3 8.8 -6.5 -2.6 -9.5 -3.7

CONSUMERGOODS

Bajaj Corp Buy 251.4 303.0 284.0 119.2 -9.5 7.0 9.0 113.8 -9.1 1.2 10.0 89.1

GSK Consumers Hold 5582.2 ** 6347.8 2179.0 -5.0 33.9 46.9 108.7 -4.6 26.6 48.2 84.6

Godrej Consumer Products Hold 807.9 845.0 965.0 563.7 -8.9 4.0 11.9 40.3 -8.6 -1.7 12.9 24.1

Hindustan Unilever Hold 601.4 ** 632.0 431.6 1.8 27.9 12.5 40.5 2.2 21.0 13.5 24.3

ITC Hold 338.9 342.0 355.9 220.3 0.5 14.9 21.8 39.8 0.9 8.6 22.9 23.7Jyothy Laboratories Buy 180.6 254.0 211.3 115.5 -10.9 13.4 9.1 53.3 -10.6 7.2 10.1 35.6

Marico Hold 208.7 241.0 251.7 180.3 -10.3 -3.8 -6.9 15.3 -10.0 -9.1 -6.1 2.0

Mcleod Russel India Buy 282.5 405.0 387.0 263.0 -7.0 -14.7 -21.2 -7.3 -6.6 -19.3 -20.5 -18.0

TGBL (Tata Tea) Hold 143.5 168.0 181.7 110.0 -2.7 14.5 -11.1 24.8 -2.3 8.3 -10.3 10.4

Zydus Wellness Buy 655.0 741.0 755.0 336.0 8.9 55.3 30.8 65.5 9.3 46.9 32.0 46.4

BSE FMCG Index 6785.4 6942.0 4832.4 0.3 17.5 16.4 42.8 0.7 11.1 17.4 26.3

IT / IT SERVICES

CMC Buy 1319.5 1650.0 1523.0 824.0 10.7 -6.3 9.3 55.6 11.1 -11.4 10.3 37.7

HCL Technologies Buy 799.8 900.0 810.0 471.5 8.7 7.9 26.8 68.0 9.2 2.0 28.0 48.6

Infosys Hold 2468.0 ** 3010.0 2060.6 -1.1 -13.3 6.3 1.3 -0.7 -18.0 7.2 -10.4

NIIT Technologies Hold 264.9 305.0 324.9 238.6 3.9 -1.7 8.7 -4.5 4.3 -7.1 9.7 -15.5

Persistent Systems Buy 492.3 600.0 591.0 363.6 -5.1 -8.9 -7.0 26.9 -4.7 -13.9 -6.2 12.3

Tata Consultancy Services BUY 1538.3 1650.0 1598.0 1055.0 5.9 2.9 19.7 25.2 6.3 -2.7 20.8 10.8

Wipro Reduce 349.7 ** 418.3 263.1 7.2 -10.7 -1.0 1.2 7.6 -15.5 -0.1 -10.4

BSE IT Index 6244.4 7069.4 5134.1 2.8 -6.6 8.9 11.4 3.2 -11.6 9.8 -1.5

CAPITALGOODS/ POWER

Bharat Heavy Electricals Hold 174.8 240.0 272.5 162.1 -10.5 -1.9 -27.3 -22.9 -10.2 -7.2 -26.6 -31.8

CESC Hold 358.4 385.0 368.0 252.5 8.9 32.7 14.0 21.6 9.3 25.4 15.0 7.6

Crompton Greaves Hold 88.4 105.0 143.6 71.7 -2.6 -3.0 -28.8 -30.9 -2.2 -8.3 -28.2 -38.9

Greaves Cotton Buy 60.1 95.0 87.6 59.0 -10.4 -10.4 -24.9 -11.7 -10.0 -15.3 -24.2 -21.9

Kalpataru Power Transmission Buy 65.7 115.0 106.9 64.0 -9.4 -15.7 -33.0 -18.2 -9.1 -20.3 -32.4 -27.6

PTC India Buy 49.4 75.0 81.3 44.7 -12.7 -19.9 -36.8 -21.4 -12.3 -24.3 -36.2 -30.5

Thermax Reduce 593.5 553.0 691.0 462.7 2.3 3.6 -3.8 19.7 2.7 -2.0 -2.9 5.9

V-Guard Industries Hold 472.0 508.0 590.5 248.0 -0.8 7.6 -6.1 89.8 -0.4 1.7 -5.3 67.9

BSE Power Index 1619.6 2113.7 1534.7 -7.1 -2.2 -19.5 -17.9 -6.8 -7.5 -18.8 -27.4

BSE Capital Goods Index 9077.9 11408.6 8671.0 -3.3 1.1 -18.0 -9.5 -2.9 -4.4 -17.3 -20.0

NEW

NEW

NEW

NEW

NEW


5/67


REPORT CARDEQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON JULY 04, 2013)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 04-JUL-13 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

In Top Picks basket ** Price target under review

NEW

NEW

NEW

NEW

NEW

INFRASTRUCTURE/ REALESTATE

Gayatri Projects Buy 65.6 275.0 130.6 64.0 -12.6 -10.6 -46.0 -35.5 -12.2 -15.5 -45.5 -42.9

ITNL Buy 143.7 302.0 228.9 141.1 -17.4 -22.3 -32.6 -20.4 -17.1 -26.6 -32.0 -29.5

IRB Infra Buy 95.3 175.0 161.4 85.6 -18.0 -15.7 -27.0 -26.6 -17.7 -20.3 -26.3 -35.1

Jaiprakash Associates Buy 52.4 95.0 106.8 48.5 -20.8 -17.8 -48.1 -32.1 -20.5 -22.3 -47.7 -39.9Larsen & Toubro Buy 1402.2 1790.0 1720.0 1307.3 -0.5 3.0 -13.9 -0.1 -0.1 -2.7 -13.1 -11.6

Mahindra Lifespace Developers Buy 421.6 460.0 453.8 313.2 7.5 8.0 0.3 29.2 7.9 2.1 1.2 14.3

Orbit Corporation Buy 17.1 48.0 65.8 13.0 -1.4 -29.3 -70.2 -70.8 -1.0 -33.1 -69.9 -74.1

Pratibha Industries Buy 28.0 65.0 59.0 25.0 -22.6 -29.5 -50.1 -45.7 -22.3 -33.3 -49.7 -52.0

Punj Lloyd Hold 32.4 53.0 64.1 31.3 -25.9 -38.6 -47.2 -40.3 -25.6 -41.9 -46.7 -47.2

Unity Infraprojects Buy 25.5 57.0 53.4 23.2 -12.2 -12.2 -44.8 -44.9 -11.9 -17.0 -44.3 -51.2

CNX Infra Index 2268.8 2684.7 2151.9 -3.4 3.7 -14.0 -7.4 -3.0 -2.0 -13.2 -18.1

BSE Real Estate Index 1510.9 2326.8 1431.4 -9.7 -14.6 -31.0 -14.1 -9.3 -19.3 -30.4 -24.0

OIL& GAS

GAIL Hold 333.8 390.0 397.2 276.2 7.3 6.9 -9.0 -5.4 7.7 1.1 -8.2 -16.3

Oil India Buy 567.9 650.0 629.9 432.0 -2.6 9.4 23.1 19.6 -2.3 3.4 24.2 5.8

Reliance Ind Buy 861.7 1010.0 955.0 682.4 10.4 13.5 1.1 18.7 10.9 7.3 2.0 5.0

Selan Exploration Technology Buy 243.6 365.0 351.0 197.4 -6.2 -3.5 -21.5 -13.4 -5.8 -8.8 -20.8 -23.4

BSE Oil and Gas Index 8785.4 9890.9 7825.6 3.7 6.7 0.2 10.6 4.1 0.9 1.1 -2.1

PHARMACEUTICALS

Aurobindo Pharma Buy 185.0 267.0 204.9 99.7 -0.3 13.8 -7.8 63.2 0.1 7.6 -6.9 44.4

Cipla Buy 394.6 490.0 435.0 314.4

Cadila Healthcare Buy 781.9 906.0 975.0 714.2 -3.0 4.0 -11.3 4.5 -2.7 -1.6 -10.5 -7.5

Dishman Pharma Buy 54.9 130.0 124.5 53.6 -24.8 -17.6 -53.9 -18.5 -24.5 -22.1 -53.5 -27.9

Divi's Labs Buy 962.7 1262.0 1234.4 924.5 -0.3 -3.4 -13.3 -5.5 0.1 -8.6 -12.5 -16.4

Glenmark Pharmaceuticals Buy 575.1 600.0 610.0 360.4 -3.7 23.3 9.6 52.3 -3.3 16.6 10.6 34.7

Ipca Laboratories Hold 684.8 675.0 701.7 355.2 12.1 32.6 35.1 91.2 12.6 25.4 36.3 69.2

Lupin Buy 850.7 810.0 855.0 496.4 10.6 35.2 40.7 59.2 11.0 27.8 42.0 40.8

Sun Pharma Buy 1030.7 1120.0 1116.6 580.0 1.2 19.9 40.2 63.7 1.6 13.3 41.4 44.8

Torrent Pharma Hold 835.0 890.0 863.9 597.7 2.4 22.3 18.3 40.5 2.9 15.6 19.4 24.3

BSE Health Care Index 9070.9 9223.1 6882.7 1.1 10.6 10.7 32.3 1.5 4.6 11.7 17.0

AGRI-INPUTS

Tata Chemicals Buy 272.0 380.0 381.5 260.3 -10.0 -12.7 -25.4 -11.1 -9.7 -17.4 -24.8 -21.4

United Phosphorus Buy 134.7 180.0 167.5 101.6 -16.0 14.4 1.0 8.1 -15.7 8.1 1.9 -4.4BUILDINGMATERIALS

Grasim Hold 2797.0 3300.0 3511.0 2566.2 1.7 2.6 -12.3 5.2 2.1 -3.0 -11.5 -6.9

India Cements Hold 56.3 95.0 104.7 52.3 -17.4 -30.0 -38.6 -33.0 -17.1 -33.8 -38.0 -40.7

Madras Cements Hold 213.2 250.0 273.5 151.2 -5.1 -11.6 -11.1 37.7 -4.7 -16.4 -10.3 21.9

Shree Cement Hold 4554.0 4660.0 5384.4 2790.0 -4.3 12.9 -0.8 49.0 -4.0 6.7 0.1 31.8

UltraTech Cement Hold 1907.0 2100.0 2154.2 1510.8 2.1 9.4 -6.6 24.6 2.5 3.4 -5.8 10.3

DISCRETIONARYCONSUMPTION

Eros International Media Buy 130.5 240.0 235.1 126.3 -19.9 -23.7 -37.0 -25.6 -19.6 -27.8 -36.4 -34.1

Indian Hotel Company Hold 48.7 61.0 71.8 46.1 -5.9 -11.9 -26.3 -20.5 -5.5 -16.7 -25.7 -29.7

KKCL Buy 753.4 810.0 903.2 485.4 -15.0 8.8 4.7 38.0 -14.7 2.9 5.6 22.1

Raymond Buy 241.0 477.0 488.9 227.9 -12.8 -9.5 -46.6 -41.0 -12.5 -14.4 -46.2 -47.8

Relaxo Footwear Buy 793.0 845.0 918.0 426.8 17.4 43.3 -1.9 49.4 17.9 35.5 -1.0 32.2

Speciality Restaurants Buy 151.2 230.0 226.3 141.3 -12.5 -9.6 -20.8 -30.7 -12.2 -14.5 -20.0 -38.7

Zee Entertainment Buy 241.7 280.0 255.2 140.0 1.2 16.4 6.5 63.9 1.6 10.0 7.4 45.0

DIVERSIFIED/ M ISCELLANEOUS

Aditya Birla Nuvo Buy 1026.0 1254.0 1191.0 737.3 -1.4 5.7 -8.5 27.5 -1.0 -0.1 -7.7 12.8

Bajaj Holdings Buy 770.5 1334.0 1058.3 730.0 -14.0 -12.5 -23.0 -0.6 -13.7 -17.3 -22.3 -12.1

Bharti Airtel Hold 301.2 340.0 370.6 215.8 -1.0 10.4 -7.6 -7.2 -0.6 4.4 -6.8 -17.9

Bharat Electronics Hold 1248.2 1485.0 1399.5 1105.3 -5.9 5.8 -4.8 -7.3 -5.5 0.0 -4.0 -18.0

Gateway Distriparks Buy 105.0 163.0 150.7 100.0 -12.8 -12.9 -22.0 -22.6 -12.5 -17.6 -21.3 -31.5

Max India Buy 209.4 296.0 273.0 173.1 1.1 -4.8 -16.7 13.8 1.5 -10.0 -16.0 0.7

Ratnamani Metals and Tubes Hold 144.0 170.0 162.1 101.0 -4.0 16.7 0.3 33.2 -3.6 10.3 1.2 17.8

Sintex Industries Buy 39.4 89.0 75.6 36.6 -18.8 -15.2 -43.9 -40.5 -18.5 -19.8 -43.4 -47.4

BSE500 Index 7182.3 7792.7 6407.8 -2.6 3.4 -6.4 8.1 -2.2 -2.3 -5.6 -4.3

CNX500 Index 4517.7 4877.7 3996.4 -2.6 3.9 -5.9 9.0 -2.2 -1.8 -5.1 -3.6

CNXMCAP Index 7359.8 8859.4 6996.9 -5.7 0.1 -15.1 0.0 -5.3 -5.4 -14.4 -11.5


6/67


The R factor

FROM SHAREKHANS DESK

fromshare

khan

sdeskThe rupee crossed the psychological mark of 60 against the dollar last month. The local

currencys fall to an all-time low was largely driven by the strengthening of the US Dollaragainst all the other major currencies. But the currencies of countries with relatively a highcurrent account deficit, like India, South Africa and Mexico, were among the worst affectedglobally. On the other hand, the currencies of countries with a current account surplus, likeIndonesia and Singapore, managed to sail through with a limited damage.

The strengthening of the US Dollar was triggered by the US Federal Reserves indicationthat it might slow its bond purchases this year and withdraw the economic stimulusaltogether by the next year, as the recovery in the US economy gathers steam. The changein the stance of the US Federal Reserve came as a surprise to traders and led to a scrambleto unwind the US Dollar carry trades. Consequently, the bond and equity markets globallysuffered unexpected and sharp moves during the initial phase of the knee-jerk reaction.Experts believe the transition process of adjusting to the potential withdrawal of easyliquidity could continue further but at a more measured pace now.

As if this were not enough, the negative cues from the slowing Chinese economy and the re-emergence of tremors in Europe (the resignation of the finance minister in Portugal and theInternational Monetary Funds growing tough stance on Greece) added to the uncertaintyin the equation. The sudden change in the global environment and its fall-out on the rupeeand the withdrawal of close to $7.5 billion from Indias debt market galvanised thegovernment into taking some corrective actions.

After a gap of several months, the government has reached a positive decision on some long-pending tough issues. It has cleared the new gas pricing formula that could nearly double theprice of natural gas from $4.2mbtu to $8-8.5mbtu with effect from April 2014. The move isexpected to encourage investments in the domestic oil & gas exploration sector and hopefullyreduce the countrys dependence on imported gas. The government is also set to put a regulatorin place for the real estate sector, hike the foreign direct investment limit in some sectors and

address the coal supply issue for the power sector. Hopefully, the pressure on the rupee andthe economy would be a reminder to the government to limit its tendencies to announce hugegiveaways under social spending schemes in the run-up to the elections, though the governmenthas pushed the Food Security Bill through an ordinance.

On the macro-economy front, the depreciation in the rupee is eating into some of themacro gains, such as moderation of inflation, and would be a cause for concern for thecentral bank. Inflation has moderated to the Reserve Bank of India (RBI)s comfort levelit slipped to a 43-month low of 4.70% in May from 4.89% in April this year. However, theRBI maintained its cautious stance at its policy meet in June and slowed the pace of monetaryeasing. The global uncertainties and the rupees depreciation-led pressure on inflation wouldonly lead to further delays in the much awaited policy rate cuts and other measures to

improve liquidity domestically.The Indian companies are all set to announce their results for the first quarter of FY2014.We expect a lot of volatility ahead in view of the result announcements locally and therising uncertainty globally. In the days ahead the market is expected to take its cue fromthe result announcements, the governments policy actions, the monsoons progress, thecrude oil prices, the USAs data announcements and the global markets. For a detailed viewof the equity market please read our Market Outlook report, Its more global than localthis time around, on page 7.


7/67


Its more global than local this time around

MARKETOUTLOOK JULY05, 2013

Volatility picks up as Ben pulls the plug and cues turnnegative in China, Europe:The unexpected move bythe US Federal Reserve to begin tapering of themonetary stimulus under the quantitative easing (QE)programme jolted the financial markets globally. Aspart of the knee-jerk reaction to the Feds statement ascramble began for unwinding of the leveraged dollarcarry trades which perked up the bond yields,strengthened the dollar and led to the withdrawal ofmoney from risky assets. India also suffered its shareof collateral damage with the sudden outflow of $7.5billion from the Indian debt market and the freefall of

the rupee beyond the important psychological barrierof Rs60 to the dollar. The deterioration in the Chineseeconomic data and the re-emergence of issues in someof the troubled European nations added to theuncertainty in the equation.

Rupee dives but creates room for radical policy moves:

The global uncertainty and the steep depreciation inthe rupee have galvanised the government into takingpolicy decisions on some pending critical issues. Thecabinet committee has approved the new gas priceformula that makes investment in oil & gas explorationmuch more attractive, taken steps to address theavailability of coal for the power sector and is lookingat hiking foreign direct investment (FDI) limits incertain sectors. Therefore, by hiding behind thecompelling circumstances and due to the growingdifferences within the opposition parties thegovernment may be able to push some pending bills inthe forthcoming parliamentary session. Though thegovernment has passed the food bill ordinance,hopefully the pressure on the rupee would act as a grimreminder to the government to maintain fiscal prudence

rather than focus on giveaways under social schemesduring the election year.

RBI to retain cautious monetary stance; corporate

earnings to remain muted:Despite the moderation inthe inflation rate, the Reserve Bank of India (RBI) is

MARKET OUTLOOKEQUITY FUNDAMENTALS

SENSEX ONE-YEAR FORWARD P/E BAND

Source: Bloomberg, Sharekhan researc

likely to retain its cautious view in the light of theinflationary pressures resulting from the rupeedepreciation. We do not expect it to cut the key policyrates or take any measure to ease liquidity during thepolicy review meet at the end of July. Thus, the cyclicauptick in the economy could be more sluggish thanexpected or get delayed due to the uncertainty causedby external factors. The earnings season would berather lacklustre with the expectations of a marginadecline in the cumulative earnings of the Sensex in Q1of FY2014 and the growing risk of further downgradein the FY2014 earnings estimates.

Nifty likely to fluctuate in a broader range: The globaevents pushed the market towards the lower end of itmulti-month trading range of 5600-6100; however, thbenchmark indices are stabilsing after the initial kneejerk reaction. In the immediate term, the continuedpressure on the rupee remains the key risk to inflationmight delay monetary easing by the RBI and put furthestress on already stretched corporate balance sheetsHowever, the valuation is quite reasonable with a oneyear forward price/earnings (PE) multiple of 13.8xwhich is at 5% discount to the long-term averagevaluation of the Sensex. Consequently, the benchmarkindices are likely to consolidate within a broad rangethough with increase in volatility.

7.0

12.0

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27.0

Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13

PER +1 sd Avg PER -1 sd


8/67


MARKET OUTLOOK EQUITY FUNDAMENTALS

TRADE BALANCE INDIA

Source: Bloomberg, Sharekhan Research

DEBT FUNDS REDEMPTIONS


Macro issues intensify with rupees depreciation

The sharp depreciation in the rupee (due to taper talk bythe US Fed) has brought Indias macro-economic concernsto the fore. The current account deficit (CAD; 4.8% ofthe gross domestic product [GDP] in FY2013) has beenrunning high and weakness in the domestic currency will

further push up the twin deficits. Inflation has shownsignificant moderation in the past several months but couldrise again due to imported inflation since Indias importsare significantly higher (30% of the GDP). If the situationpersists, the GDP growth estimate, pegged at 6% forFY2014, may face downward revision as slowdown ininvestments and higher interest rates may constrainrecovery.

continue even after the replacement of Ben Bernanke inJanuary 2014. But the bouts of surprises from the eurozone and China will keep the global markets edgy andincrease risk aversion. The outflows from the equitysegment in India have been lower than those seen by theother markets, but if the global uncertainty continues it

could affect the inflows to the Indian stock market.

...but opportunity for firmer actions from government

Under compelling circumstances the government has beenable to fast-track certain long pending proposals (coallinkages, fuel pass-through, gas price hike, FDI intelecommunications sector etc). In addition, thegovernment has formed special committees headed by AnilSwarup to resolve stalled projects worth Rs7 lakh croreto revive growth. While one would assume the governmentwould go slow on reforms in an election year, thegovernment could actually surprise all by passing the keyreforms, like the land acquisition bill and FDI in insurance,given the urgency on the CAD front. Also, given the splitin the opposition forces (Bharatiya Janata Party-JanataDal United split), resistance will be diluted and thelongevity of the government (till May 2014) will increasewhich will give the government time to patch up later.

Global volatility a key concern for the markets

The mere indication of tapering of QE has unnerved theglobal markets leading to the unwinding of carry tradesin dollar, a rise in bond yields and redemptions from theemerging market funds. Also, Chinas economy is growingat a lower than expected rate and the recent tightening byPeoples Bank of China has further weakened marketsentiment. After the recent turbulence in the global marketsthe Fed has become dovish. The stance is expected to

NET FII EQUITY INVESTMENT ($ MN)


FISCAL DEFICIT TO GDP (%)


-2 5

-2 0

-1 5

-1 0

-5

0

May-09 May -10 May -11 May-12 May -13

-50.0

-30.0

-10.0

10.0

30.0

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70.0

Trade balanc e-LHS ($bn) Imports grow th (Y oY ,% )Expor ts grow th (YoY ,%)

-300

-200

-100

0

100

200

300

400

Dec-

11

Feb-12

Apr-12

Jun-

12

Aug-

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Apr-13

Jun-

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5.0

6.0

7.0

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-8,000

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0

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16-May-13

26-May-13

5-Jun-13

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25-Jun-13

5-Jul-13

8486889092949698100

102104

FII f lows in indian debt ($ mn) - LHS INRUSD Currency


9/67


MARKET OUTLOOKEQUITY FUNDAMENTALS

BRENT CRUDE ($/BBL)


RBI to hold back ammunitionmonsoon and commodity pricesamong the key monitorables

The prices of commodities (crude oil) have corrected by8-10% in the year till date (YTD) and are expected toremain soft due to the slower growth in China, India etc.This along with some moderation in gold imports could

provide some relief on the CAD front but the same willnot be enough to trigger further rate cuts by the RBI. Theapex bank has clearly articulated that the room for furtherrate cuts is limited due to the global uncertainty and thelingering concern on inflation (due to high food inflationand the local currencys depreciation). It seems the foodinflation could ease going ahead as the hike in theminimum support price was lower than expected and themonsoon is largely favourable.

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or

having a position in the companies mentioned in the article.

For detailed report, please visit the Research section of our website, sharekhan.com.

improvement in certain sectors which will hit harderbecause of the declining revenues. However the export-oriented companies may deliver relatively better resultsThe Sensex consensus earnings estimate for FY2014 hasundergone downward revisions in the past couple omonths and the benchmark index earnings are now

expected to grow in single digits.

VARIANCE OF ACTUAL RAINFALL FROM LPA


Corporate earnings growth to be muted

The corporate earnings season (Q1FY2014) has begun,but there is not much of fuss around as the earnings growthis likely to show a decline on a year-on-year basis. Theweakening of the local currency is likely to reflect in theearnings of the companies especially the ones having ahigher foreign exchange debt. It will also halt the margin

SENSEX ONE-YEAR FORWARD P/E BAND

Source: Bloomberg, Sharekhan Researc

FY2014 CONSENSUS EARNINGS ESTIMATE OF SENSEX

Source: Bloomberg, Sharekhan Researc

Nifty likely to fluctuate in a broader range

The global events have pushed the market towards thelower end of its multi-month trading range of 5600-6100However, the benchmark indices are stabilsing after theinitial knee-jerk reaction to the Feds taper talk. In theimmediate term, the continued pressure on the rupeeremains the key risk as it would stoke inflation, delay theRBIs monetary easing and put further stress on the alreadystretched corporate balance sheets. However, the valuation

is quite reasonable with a one-year forward price/earnings(PE) multiple of 13.8x, which is at 5% discount to thelong-term average valuation of the Sensex. Consequentlythe benchmark indices are likely to consolidate within abroad range though with increase in volatility.

95

100

105

110

115

Jan-13

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Jul-13

-60.0%-40.0%-20.0%

0.0%20.0%40.0%60.0%80.0%

100.0%120.0%140.0%

Country

as a

w hole

Northwest

India

Central

India

South

Peninsula

East &

northeast

India

7.0

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27.0

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PER +1 sd Avg PER -1 sd

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10/67


Sharekhan Top Picks

SHAREKHANTOPPICKS

It was another month of outperformance by the Top Picks basket,which appreciated by 0.7% in June 2013 despite a volatile equitymarket. In comparison, the benchmark indices, the Nifty and theSensex, declined by 1.4% and 0.8% respectively and the CNX Mid-cap Index slid by close to 4% in the same period.

The three stocks that boosted the performance of Top Picks areReliance Industries (which surged by over 10% in the month onthe back of a gas price hike), NIIT Technologies (which rose by8.1% due to the weakness in the rupee) and Zee EntertainmentEnterprises (which climbed up by 8.9% despite the overhang of therevision in the norms for advertisements per hour by the TelecomRegulatory Authority of India). On the other hand, the three banksin the Top Picks basket pulled down its overall returns.

* CMP as on July 01, 2013

NAME CMP* PER ROE (%) PRICE UPSIDE(RS) FY13 FY14E FY15E FY13 FY14E FY15E TARGET (%)

Bajaj Corp 249 22.0 18.0 14.1 36.7 38.8 41.5 303 22

Divi s Laboratories 991 22.3 17.7 15.0 23.6 26.2 25.8 1,262 27

HCL Technologies 759 13.6 12.4 11.4 34.7 29.9 26.3 900 19

HDFC Bank 667 23.6 19.3 15.4 20.3 20.9 22.2 712 7

ICICI Bank 1,070 14.8 13.2 11.1 13.1 13.5 14.7 1,320 23

Larsen & Toubro 1,450 18.5 16.4 14.4 17.7 17.3 17.4 1,790 23

Oil India 581 9.7 9.3 8.0 19.4 18.5 19.0 650 12

Reliance Industries 883 13.7 13.7 11.9 10.7 9.6 10.0 1,010 14

SBI 2,015 9.8 9.2 7.8 15.4 14.3 15.0 2,450 22

Sun Pharma 1,004 34.5 28.9 23.3 25.4 22.5 22.3 1,120 12

Zee Entertainment Enterprises 247 33.4 29.8 23.3 19.5 19.3 21.4 280 13

ABSOLUTE OUTPERFORMANCE CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS

This month also we are making a lone change in the portfolio. Weare replacing NIIT Technologies with Divis Laboratories. The ideais to reduce the weightage of the information technology servicessector in the portfolio (due to the immigration issues in the USAand the expectations of margin pressure following a salary hike inQ1FY2014) and increase the exposure to another export-drivensector, pharmaceuticals. Divis Laboratories has a relatively highproportion of revenues coming from exports and would be amongthe key beneficiaries of the weakness in the rupee. The core businessis also expected to pick up after the Q4FY2013 numbers, whichwere lower than expected.

-40.0%

-20.0%

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40.0%

60.0%

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100.0%

120.0%

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YTD

CY2013

CY2012 CY2011 CY2010 CY2009 Since

inception

(Jan

2009)Sharekhan (Top Picks ) Sens ex Nif ty

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

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280.0%

Jun-09

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11/67


NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY13 FY14E FY15E FY13 FY14E FY15E TARGET (%)

BAJAJ CORP 249 22.0 18.0 14.1 36.7 38.8 41.5 303 22

Remarks: Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in the premium light hair oil (LHO)category with its Almond Drops hair oil.

With consumers upgrading to the LHO category, we expect the strong volume growth momentum to continue in the coming quarters.With the prices of the key inputs stabilising, we expect the GPM to improve in the coming quarters.

The companys thrust on enhancing the distribution reach in rural India and improving the market share every year has helped it clocka good sales volume growth in the past few quarters. Any initiative to expand its limited product portfolio or strengthen its core businesswould be a key upside trigger for the stock.

At the CMP, the stock is trading at 18x its FY2014E EPS of Rs13.8 and 14.1x its FY2015E EPS of Rs17.6.

DIVIS LABORATORIES 991 22.3 17.7 15.0 23.6 26.2 25.8 1,262 27

Remarks: Despite a weaker performance in Q4FY2013, we are confident of Divis Laboratories growth potential. Its recent performance wasaffected by the expansion process and the switching of production to new facilities which partly disrupted supplies. The growth willbounce back on normalisation of supplies by the end of Q1FY2014.

It will benefit from the rupees depreciation against major other currencies, thanks to its debt-free balance sheet and the fact that nearly90% of its revenues come from the export market (mainly the USA and Europe).

The new DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for the company as it would improve the economiesof scale and lead to tax benefits. A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuingstrategic investments and exploit the growth opportunities in niche segments, like oncology and steroids for contraceptives.

The stock is currently trading at 17.7x and 15.0x estimated earnings for FY2014 and FY2015 respectively. We have a Buyrecommendation on the stock with a price target of Rs1,262, which implies 19x FY2015E earnings.

HCL TECHNOLOGIES 759 13.6 12.4 11.4 34.7 29.9 26.3 900 19

Remarks: HCL Tech is an IT services company providing software-led IT solutions, remote infrastructure management services and BPO services.The company has a leading position in remote infrastructure management services which has helped it win large IT outsourcingcontracts. Through the Axon PLC acquisition, the company has gained a strong SAP consulting footing.

In the current environment, we believe HCL Tech is well placed in terms of its business strategy of consciously targeting the re-bidmarket. The results of the same are evident in its consistent outperformance in terms of volume and revenue growth. The companyhas allayed the apprehensions on the margin front by consistently improving its margins despite head winds.

The management acknowledged the potential threat of the impending US immigration bill and expressed concern over the outplacementclause in the current form (we, therefore, hope for some dilution in the final bill). Nevertheless, among the top four IT companies, HCLTech is relatively better placed, as around 50% of its total workforce in the USA holds the H1-L1 visa against a higher percentage ofsuch visa holders for TCS, Infosys and Wipro.

The management continues to see EBIT margin corridor of 19-20% for the coming quarter. However, with the rupee depreciating consistently,the margin could improve further, if the rupee stays at 57-58 a dollar over the coming quarters. Among the top 4 IT companies HCL Techhas shown the highest sensitivity to the rupees depreciation in terms of margin improvement in the last seven quarters.

In view of its better earnings predictability compared with its peers, stable margins and sustainable momentum in the IMS vertical, werecommend a Buy on it with a price target of Rs900.

HDFC BANK 667 23.6 19.3 15.4 20.3 20.9 22.2 712 7

Remarks: HDFC Bank is expected to continue its strong growth in advances due to a strong presence in the retail segment. While the credit

demand has moderated in the corporate segment, it remains reasonably strong in the retail segment which will benefit the bank.

The bank has the highest current and savings account (CASA) ratio in the sector with a stable net interest margin (NIM; at 4.5%levels). Any reduction in the policy rates by the central bank would improve the credit demand and be positive from the marginperspective.

HDFC Banks asset quality is among the best in the sector and the bank is expected to maintain the same due to its strong credit originationpractices and marginal exposure to the troubled segments. Further, the higher provisions provide comfort on asset quality front.

We expect HDFC Bank to deliver earnings CAGR of 23.8% over FY2013-15 leading to RoE and RoA of 22.2% and 1.8% respectively.We believe the bank will continue to command a premium over its peers due to a strong and consistent growth. We have a price targetof Rs712 for the stock.

SHAREKHAN TOP PICKS EQUITY FUNDAMENTALS


12/67


NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY13 FY14E FY15E FY13 FY14E FY15E TARGET (%)

ICICI BANK 1,070 14.8 13.2 11.1 13.1 13.5 14.7 1,320 23

Remarks: ICICI Bank continues to report a strong growth in earnings led by a growth in advances and expansion in margins (2.9% in FY2013).We expect its advances to grow at 19.5% CAGR over FY2013-15. This should lead to an 18% CAGR growth in the net interest income(NII) in the same period.

ICICI Banks asset quality has shown a turnaround as its non-performing assets (NPAs) have continued to decline over the last elevenquarters led by contraction in slippages. This has led to a sharp reduction in the provisions and an increase in the profitability. Goingforward, we expect the NPAs to decline further which will lead to lower NPA provisions and hence aid the profit growth.

Led by a pick-up in the business growth and an improvement in the margins, the RoE is likely to expand to 14.7% by FY2015 while theRoA is likely to improve to 1.7%. This would be driven by a 15.7% growth (CAGR) in the profit over FY2013-15.

The stock trades at 1.5x FY2015E BV. Moreover, given the improvement in the profitability led by lower NPA provisions, a healthygrowth in the core income and improved operating metrics, we recommend Buy with a price target of Rs1,320.

LARSEN & TOUBRO 1,450 18.5 16.4 14.4 17.7 17.3 17.4 1,790 23

Remarks: Larsen & Toubro (L&T), the largest engineering and construction company in India, is a direct beneficiary of the strong domesticinfrastructure development and industrial capex boom.

L&T continues to impress us with its good execution skills, reporting decent numbers throughout despite the slowdown in the industrialcapex cycle. Also, we have seen order inflow traction in recent quarters which enhances the revenue visibility.

Despite challenges like deferral of award decisions and stiff competition, the company has given a robust guidance of ~15% growth inthe future.

A sound execution track record, a healthy order book and a strong performance of its subsidiaries reinforce our faith in L&T.

At the CMP, the stock is trading at 14.4x its FY2015E stand-alone earnings.

OIL INDIA 581 9.7 9.3 8.0 19.4 18.5 19.0 650 12

Remarks: Oil India Ltd (OIL) has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. The total1P (proven) and 2P (proven and probable) reserves of the company stood at 473 million barrels (mmbbls) and 941mmbbls in March2012. In addition to the huge oil reserves, the companys reserve-replacement ratio (RRR) is quite healthy at 1.23x, which implies acomfortable level of accretion of oil reserves through new discoveries.

The recent move by the CCEA to increase gas price to $8.4/mmbtu from $4.2/mmbtu and the partial deregulation of diesel price augurwell for the company. However, the company may not be able to capture the full benefit of the increase in the gas price because of a

likely increase in the subsidy/royalty burden. Overall, the move is positive for the company and will provide earnings growth over thelonger run.

The key risks remain any adverse movement in the price of crude oil and a failure to properly utilise the huge cash.

We remain bullish on OIL because its huge reserves and healthy RRR would provide a reasonably stable revenue growth outlook. Itsstock is also available at an attractive valuation and is likely to see a re-rating on account of the partial deregulation of diesel prices.The fair value works out to Rs650 per share (based on the average fair value arrived at using the DCF, PE and EV/EBIDTA valuationmethods).

RELIANCE INDUSTRIES 883 13.7 13.7 11.9 10.7 9.6 10.0 1,010 14

Remarks: Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refiningdivision of the company is the highest contributor to the companys earnings and is operating efficiently with a better gross refiningmargin (GRM) compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. However,the gas production from the Krishna-Godavari-D6 field has fallen significantly in the past one year. With the government approval for

additional capex, we believe production will improve going ahead. In case of the upstream exploration business, RIL has got the nod for further investments in exploration at the Krishna-Godavari basin,

which augurs well for the company and could address the issue of falling gas output.

Further, the CCEA has approved a new gas pricing formula, which increases the price of gas to $8.4/mmbtu from $4.2/mmbtu andaugurs well for the company. This could provide further upside to the companys earnings.

The key concerns remain in terms of a lower than expected GRM, profitability of the petrochemical division and the companys inabilityto address the issue of falling gas output in the near term.

At the CMP the stock is trading at a PE of 11.9x its FY2015E EPS.

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS


13/67


14/67


Price target reduced to Rs240COMPANY DETAILSPrice target: Rs240

Market cap: Rs1,498 cr

52 week high/low: Rs235/153

NSE volume (no. of shares): 2.9 lakh

BSE code: 533261

NSE code: EROSMEDIA

Sharekhan code: EROSMEDIA

Free float (no. of shares): 2.3 cr

(%) 1m 3m 6m 12m

Absolute -6.2 -6.5 -22.8 0.6

Relative to Sensex -7.9 -11.4 -25.1 -19.0

PRICE PERFORMANCE

BUY CMP: RS163 JUNE3, 2013EROSINTERNATIONALMEDIA

RESULT HIGHLIGHTSAhead of expectations: In Q4FY2013 Eros International Media Ltd (EIML)s performancewas ahead of our expectations, with a better than expected growth in both the top line andthe bottom line on a Y-o-Y basis.

The consolidated revenues rose by 2.6% YoY to Rs212.3 crore (ahead of our expectationof Rs169 crore). In Q4FY2013, the EBITDA margin (including amortisation) of thecompany stood at 19.6%, up 310 basis points YoY (but lower than our estimate of22.6%). The management expects the margin to improve in FY2014 on account of animprovement in the monetisation of TV syndications and big movie releases.

On the back of a better than estimated top line performance, the net income of thecompany grew by 7% YoY to Rs31.8 crore in Q4FY2013. In FY2013 the net incomerose by 5% YoY to Rs154.6 crore.

Valuation: In view of the fact that the company has gone slow on acquisitions of SuperA category movies, we have reduced our earnings estimates for FY2015 by 7% and keptour estimate for FY2014 intact. Consequently, we have reduced our price target for thecompany to Rs240. We expect EIMLs earnings to grow at a CAGR of 17% over FY2013-15. At the current market price of Rs163 the stock trades at 8.4x and 7x FY2014E andFY2015E earnings respectively. We maintain our Buy rating on the stock with a revisedprice target of Rs240.

SHAREHOLDING PATTERN

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.For detailed report, please visit the Research section of our website, sharekhan.com.

Norwest Venture Partners to invest inSnowman Logistics

COMPANY DETAILS

Price target: Rs163



NSE volume (no. of shares): 99,048

BSE code: 532622

NSE code: GDL

Sharekhan code: GDL


(%) 1m 3m 6m 12m

Absolute -9.4 -7.4 -14.6 -12.9


PRICE PERFORMANCE

BUY CMP: RS110 JUNE18, 2013GATEWAYDISTRIPARKS

Norwest Venture Partners to invest Rs60 crore in Snowman Logistics; GDL to remainpromoter:Gateway Distriparks Ltd (GDL) and its subsidiary, Snowman Logistics Ltd(SLL), have today executed a share subscription agreement with Norwest VenturePartners (NVP), pursuant to which NVP will invest Rs60 crore (1.7 crore shares atRs35/share) in SLL by subscribing to SLLs equity shares.

Along with it GDL will acquire 5% shareholding in SLL from IFC for a totalconsideration of Rs18 crore (GDLs acquisition at Rs35/share). Following the completionof GDLs acquisition and NVPs investment, NVP will hold 14.3% stake in SLL. Theshareholding of GDL will come down from 53% to close to 51%.

Valuation at 16x FY2013 EBITDApremium for growth: The price paid for the abovetwo transactions at Rs35 per share values SLL at Rs420 crore, which is at a multiple of16x FY2013 EBITDA. The higher valuation is owing to SLLs robust growth trajectoryin the near future.

Volume and realisation to improve return ratios:The company recently opened 5,500pellets in Kolkata and is expected to augment new capacities in Chandigarh and Suratin a few weeks. The company has a return on equity of 10% currently, which is slatedto increase to 16% over the next two years. We believe an increase in the capacitiesalong with a higher realisation will lead to better return ratios.

Outlook and valuation: We maintain our Buy recommendation on GDL with a pricetarget of Rs163.



holding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.

Promoters

74%

Institutions

3%

Foreign

10%

Non-promoter

corporate

6%

Public &

Others

7%

Public &

others

16%

Institutions

17%

FII

26%Promoters

41%

STOCK UPDATE EQUITY FUNDAMENTALS


15/67


STOCK UPDATEEQUITY FUNDAMENTALS

Management interaction noteCOMPANY DETAILS

Price target: Rs845

Market cap: Rs26,169 cr52 week high/low: Rs936/550


BSE code: 532424

NSE code: GODREJCP

Sharekhan code: GODREJCP


(%) 1m 3m 6m 12m

Absolute -9.1 6.5 9.0 43.3

Relative to Sensex -4.8 4.4 9.3 23.4

PRICE PERFORMANCE

HOLD CMP: RS761 JUNE20, 2013GODREJCONSUMERPRODUCTS

KEY POINTS

Maintain steady growth in the domestic market:With no signs of slowdown in the keycategories in the domestic market, GCPL expects to achieve a steady revenue growth inthe stand-alone business in the coming quarters. We expect GCPLs revenues at thestand-alone level to grow by around 20% in FY2014.

Lower raw material prices to aid profitability:The company would benefit from thedecline in the key input prices as it will help in improving the GPM in the comingquarters. However, if the rupee remains weak against the dollar and there are purchaseof key inputs in dollar terms in the coming quarters, it would negate the impact of thesoftening of the commodity prices to some extent.

International business likely to see margin improvement on Y-o-Y basis:The managemenbelieves the margin picture should improve in FY2014. The Indonesian business is expectedto remain in the range of 18-20% in the coming quarters. We expect the Latin Americanmargin to improve to high single digits in FY2014. The African business is expected to

see a gradual improvement in the coming quarters. Overall, we believe the internationalbusiness would see a Y-o-Y improvement in the OPM in FY2014.

Outlook and valuation: We like GCPL on account of its strong focus on driving growthin the domestic and international markets by keeping the balance sheet lean to drivefuture inorganic growth initiatives. We believe the company has a strong potential toachieve top line and bottom line growth of above 20% (CAGR) over the next twoyears. At the current market price, the stock is trading at 30.0x its FY2014E EPS ofRs25.7 and 23.7x its FY2015E EPS of Rs32.5. We maintain our Hold recommendationon the stock with a price target of Rs845.




Promoters

64%

Foreign &

Institutions

28%

Others

8%

Upgraded to Buy with increased price target of Rs900COMPANY DETAILSPrice target: Rs900




BSE code: 532281

NSE code: HCLTECH

Sharekhan code: HCLTECH


(%) 1m 3m 6m 12m

Absolute 7.8 -1.7 23.3 62.2

Relative to Sensex 12.5 -1.9 21.7 39.8

PRICE PERFORMANCE

BUY CMP: RS779 JUNE18, 2013HCL TECHNOLOGIES

We recently interacted with Sanjay Mendiratta, head-Investor relations, HCL Technologie(HCL Tech), to gain an insight into the current state of the companys business as well athe concerns over and the impact of the impending US immigration bill. HCL Tech is nowparticipating in and getting invited to big-ticket deals of size in the $400-500-million range

The infrastructure management services (IMS) vertical will continue to drive the incrementagrowth going ahead,

On the margin side, the management continues to see EBIT margin corridor of 19-20% forthe coming quarter.

It acknowledged the potential threat of the impending US immigration bill and expressedconcern over the outplacement clause in the current form (we hope for some dilution in thefinal bill). Nevertheless, among the top four IT companies, HCL Tech is relatively betteplaced, as around 50% of its total workforce in the USA holds an H1-L1 visa against ahigher percentage of H1-L1 visa holders in Tata Consultancy Services, Infosys and Wipro

Valuation: We see further upgrades driven by the higher sensitivity of HCL Techs EBITmargin to the rupees depreciation. At the current market price of Rs779, the stock tradeat 12.7x and 11.7x earnings for FY2014E and FY2015E, though we currently maintainour estimates (we will revisit our estimates after the announcement of the Q4FY2013results). We expect a potential earnings upside post-currency reset. Hence, we have upgradedour rating on HCL Tech from Hold to Buy with an increased price target of Rs900 pershare.




Promoters

61%

Foreign

26%

Institutions

7%

Non-promoter

corporate

3%

Public & Others

3%


16/67



Book some profits, hold from long-term perspectiveCOMPANY DETAILS

Price target: Rs600



BSE code: 500696

NSE code: HINDUNILVR

Sharekhan code: HINDUNILVR


(%) 1m 3m 6m 12m

Absolute -0.4 27.2 9.8 31.0

Relative to Sensex 5.3 27.7 13.1 18.0

PRICE PERFORMANCE

HOLD CMP: RS588 JUNE25, 2013HINDUSTANUNILEVER

KEY POINTS Unilevers $5.4-billion open offer commences:Unilever PLCs voluntary open offer to

acquire 48.7 crore shares of HUL at a price of Rs606 per share commenced on June 21,2013 and will end on July 4, 2013. With this, Unilever is planning to increase its stakein HUL to 75% from 52.48% currently.

Advise investors to partially book profits:After the announcement of the open offer,the stock price had a strong run-up and is currently trading at ~32x its FY2015Eearnings. Hence, we advise investors to take home some profits at the current level.From the tax perspective, it is advisable to sell the share in the open market rather thantendering to the open offer.

Hold for the long term: Though there is a near-term concern over the moderatingvolume growth, but we believe the long-term growth story of HUL is intact. Further,after the open offer there will be some reduction in the free float, thus the supply

constraints will keep the long-term investors interest in the company intact and thecompany will hold onto its premium valuation. Also, the anecdotal evidence suggeststhat a front-line company with lesser free float has always traded at premium valuations.The stock price of GSK Consumers had moved up significantly by almost 50% afterthe closure of its open offer. Hence, looking at the long-term potential of HUL withsuperior management bandwidth, we maintain our Hold rating on the stock from along-term perspective. At the current market price, the stock trades at 35.1x its FY2014EEPS of Rs16.6 and 31.8x its FY2015E EPS of Rs18.4.




Promoters

53%

Domestic

Institutions8%

FIIs

22%

Others

17%

Annual report reviewCOMPANY DETAILS

Price target: Rs1,320


52 week high/low: Rs1,237/808


BSE code: 532174

NSE code: ICICIBANK

Sharekhan code: ICICIBANK


(%) 1m 3m 6m 12m

Absolute -2.5 -0.2 1.4 37.1


PRICE PERFORMANCE

BUY CMP: RS1,076 JUNE11, 2013ICICI BANK

KEY POINTS

Going strong: ICICI Banks annual report for FY2013 highlights the structural initiativesdriving the improvement in the banks profitability and asset quality. As per the report,unsecured lending has come down significantly though the shortfall in PSL has increased.We expect the banks earnings to grow at a CAGR of 15.7% (over FY2013-15) leadingto the expansion in the RoE to 14.7% by FY2015. We maintain our Buy rating on thestock with an SOTP based price target of Rs1,320.

Proportion of unsecured loans dips to 14% from 21% in FY2011: During FY2013, theproportion of the banks unsecured loan book declined to 14.1% from 15.1% in FY2012and 21.1% in FY2011. The advances to the sensitive sectors grew by 13.7% YoY

compared with the 14.4% growth in the overall book. The growth in the real estatebook was driven by residential mortgages.

Improvement in asset quality continues: The asset quality of the bank improved inFY2013 as the gross non-performing assets (NPAs) from the retail segment declinedsignificantly during the fiscal. However, the NPAs have slightly increased in sectorslike services, iron & steel and construction.

Valuations: We expect the banks earnings to grow at a CAGR of 15.7 % YoY overF2013-15 leading to an RoE of 14.7% by FY2015. Currently, the stock is trading at1.6x FY2015E book value. We maintain our Buy rating on the stock with an SOTP-based price target of Rs1,320.




MF & FI

24%

Foreign

38%

Public &

others

38%


17/67



Environment ministry clears 3 road projectsCOMPANY DETAILS

Price target: Rs302




BSE code: 533177

NSE code: IL&FSTRANS

Sharekhan code: IL&FSTRANS


(%) 1m 3m 6m 12m

Absolute 0.7 -12.1 -14.3 -6.0

Relative to Sensex 4.7 -10.3 -13.3 -17.1

PRICE PERFORMANCE

BUY CMP: RS175 JUNE14, 2013IL&FS TRANSPORTATIONNETWORKS

KEY POINTS

Receives nod to commence work on 3 road projects: IL&FS Transportation Networks Ltd(ITNL) has informed the Bombay Stock Exchange that concession agreements have beensigned with the concerned authorities for the following projects:

1. The Kiratpur-Ner Chowk section of National Highway (NH)21 of 90.175km in Punjaband Himachal Pradesh

2. The Beawar-Gomti section of NH8 of 88km of the total 116km (capacity augmentationin Rajasthan

3. The Sikar-Bikaner section of NH11 of 237.57km in Rajasthan

The commencement of work on the aforesaid projects was pending receipt of clearancefrom the forest department.

Moreover, the Forest Advisory Committee of the environment & forest ministry at a meetingheld on June 10, 2013 cleared the proposal to commence work on all the aforesaid projectsThe development is positive for ITNL.

Outlook: We are confident of ITNLs ability to achieve faster clearances for its road projectsand a financial closure thereafter. Considering the strong order backlog, an expected pickup in project execution and a healthy new project award pipeline of National HighwaysAuthority of India (NHAI), we remain positive on ITNLs financial performance goingahead. Moreover, we expect ITNL to be among the key gainers of the easing of competitivepressure in the large NHAI projects. We maintain our SOTP based price target of Rs302and Buy rating on the stock.




Promoters72%

Institutions

4%

FII

4%

Public &

others

20%

Price target revised to Rs675COMPANY DETAILSPrice target: Rs675




BSE code: 524494

NSE code: IPCALAB

Sharekhan code: IPCALAB


(%) 1m 3m 6m 12m

Absolute 14.9 30.3 38.8 99.4


PRICE PERFORMANCE

HOLD CMP: RS648 JUNE24, 2013IPCALABORATORIES

KEY POINTS

Marginal impact of DPCO 2013 for Ipca:As per notifications issued recently undeDrug price Control Order (DPCO) 2013 prescribing the ceiling price for 150 drugs, webelieve the incremental impact for Ipca Laboratories (Ipca) under the new drug pricingpolicy would be virtually neutralised, as price erosion in some of products would bematerially compensated by the scope to increase the price of the other products. Howevera slow offtake by traders and stockists would hamper sales in the domestic market fothe next two to three months. The domestic formulation business contributes nearly32% of the net revenues of Ipca.

Depreciating rupee to benefit exports:Exports constitute nearly 63% of the net revenue

of Ipca and the company has a practice to cover 30-40% of receivables through forwardcontracts. Besides, the uncovered portion of exports is also naturally hedged partly byway of raw material imports, which constitute nearly 28% of the exports. However, athe company has nearly $70 million of foreign debts outstanding and $17 million ofthe same is payable in FY2014, forex loss is bound to accrue; though the same wouldbe materially compensated by the gains on exports.

We upgrade price target to Rs675 on roll-over of valuation:Owing to a better visibilityof its earnings, we have rolled over our valuation to the earnings estimate for FY2015(from 14x average earnings of FY2014 and FY2015). Accordingly, our price targestands revised up by 10% to Rs675 (14x FY2015E earnings per share). However, wemaintain our Hold rating on the stock.




Foreign

21%Promoters

46%

Institutions16%

Non-promoter

corporate

6%

Public and

others

11%


18/67



M&M to consolidate automotive component businessCOMPANY DETAILS




BSE code: 500520

NSE code: M&M

Sharekhan code: M&M


(%) 1m 3m 6m 12m

Absolute -3.4 1.5 -0.3 37.5


PRICE PERFORMANCE

BUY CMP: RS989 JUNE17, 2013MAHINDRA& MAHINDRA

Mahindra Systech to consolidate auto component business: Mahindra and Mahindra(M&M) entered into an agreement with CIE Automotive (CIE) to form a consolidatedcompany that would merge the automotive (auto) component business of M&M (heldunder the Systech Group, which contains five companies [Mahindra Forgings, MahindraUgine Steel, Mahindra Composites, Mahindra Hinoday and Mahindra Gears]), andthe forging business of CIE in Spain and Lithuania.

The business would be merged under Mahindra Forging, which would be rechristenedas Mahindra CIE. M&M would hold a 20% stake in Mahindra CIE while CIE wouldhold about 51% of the merged entity.

Mahindra to sell stake in Systech business; to pick up 13.5% stake in CIE:As part ofthe agreement, M&M would sell its stake in Mahindra Forgings (52.65% stake forRs393.08 crore), Mahindra Hinoday (64.96% stake for Rs268.96 crore) and MahindraComposites (30.38% stake for Rs10.01crore). Also, M&M would invest Rs340 crore(paid on account of acquiring other partners stake in Mahindra Ugine Steel), whichwould form the consideration for the deal.

M&M would invest Rs740 crore to get a stake of 13.5% in CIE. It would invest thesum at price of Euro 6 a share as against the current price of Euro 5.57 a share.

Valuation:Mahindra CIE would emerge as a strong alliance in the auto component space.With complementary product segments and markets, the deal is a win-win situation forM&M and CIE.

We are maintaining our stand-alone estimate for M&M. We have marginally increasedour price target accounting for additional investment in CIE (valued at the investmentcost). Our price target stands revised at Rs1,129 per share. We maintain our Buyrecommendation on the stock.




Institutions

16%Foreign

38%

Promoters

25%

Public & Others

14%

Bodies

corporate

7%

Upgraded to BuyCOMPANY DETAILS

Price target: Rs600




BSE code: 533179

NSE code: PERSISTENT

Sharekhan code: PERSISTENT


(%) 1m 3m 6m 12m

Absolute -6.1 -12.5 3.0 44.9

Relative to Sensex -2.4 -10.7 4.2 27.7

PRICE PERFORMANCE

BUY CMP: RS506 JUNE17, 2013PERSISTENTSYSTEMS

We recently interacted with Rohit Kamat, chief financial officer of Persistent Systems Ltd(PSL), to discuss the current state of the business and concerns around the US immigrationbill. Overall, the management expects H2FY2014 to be better than H1FY2014 on accountof revenue acceleration from the HP Client Automation (HPCA) deal (IP-led revenues).The EBITDA margin is expected to decline sequentially in Q1FY2014 (in line with theearlier commentary) on account of an onsite wage hike (2%) and visa costs (approximately$1 million) coupled with initial knowledge transfer cost of HPCA. The depreciation in therupee is unlikely to negate the margin head winds in the current quarter as the currencybenefits were only for one month (June 2013). On the impending US immigration bill, themanagement expects a potential negative impact of 100-150 basis points on the margin inFY2015 (PSL will be relatively less affected by the impending bill among the Indian ITcompanies).

Valuation: We maintain our positive stance on PSLs business model. Further, given itshighest offshore revenues among the Indian IT companies, there will be materially lowerimpact on the margin from the impending US immigration bill. At the current market priceof Rs506, the stock trades at 9.7x and 8.5x earnings estimates for FY2014 and FY2015(based on USD/INR of Rs54 and Rs53.5 respectively). Given the room for potential upgradesfrom the consistent depreciation in the rupee coupled with the recent correction in thestock (it has corrected 12% in the last three months), we have upgraded our rating on PSLto Buy from Hold with a price target of Rs600.




Promoters

39%

Non-promoter

corporate

2%

Institutions

17%

Foreign

18%Public & Others

24%


19/67



Muted execution and higher interestexpenditure dent earnings

COMPANY DETAILS

Price target: Rs65

Market cap: Rs364 cr



BSE code: 532718

NSE code: PRATIBHA

Sharekhan code: PRATIBHA


(%) 1m 3m 6m 12m

Absolute -10.8 -11.0 -28.8 -4.2


PRICE PERFORMANCE

BUY CMP: RS36 JUNE4, 2013PRATIBHAINDUSTRIES

RESULT HIGHLIGHTS

Muted revenue growth of 5% due to lower project execution: In Q4FY2013 theconsolidated revenues of Pratibha Industries Ltd (PIL) saw a muted growth of 5% YoYto Rs541 crore, which was much lower than our expectation. The subdued growth wasled by a lower execution across the projects.

Margin contracts by 87 basis points:The OPM contracted by 87 basis points YoY to12.7% vs 13.6% in Q4FY2012 (75 basis points higher than expected). An increase o438 basis points YoY and 208 basis points YoY in the other expenditure and employeeexpenses respectively eroded the margin.

Muted earnings growth led by higher interest expenses:The reported net profit duringthe quarter stood at Rs18.3 crore (lower than our expectation), registering a decline of32.3% YoY. The interest expenses for the quarter increased by 70% YoY to Rs46.6

crore while the effective tax rate stood at 30.1% (as against 27.4% in Q4FY2012)which led to a decline in the profit after tax.

Valuation: Maintain Buy with a price target of Rs65: We continue to like PIL given itspresence in the high-margin water segment, well-diversified order book and better thanindustry OPM. The stock currently trades at 3.6x and 2.7x its FY2014E and FY2015Eearnings respectively. Hence, we maintain our Buy recommendation on the stock with aprice target of Rs65.




FII

16%

Institutions

6%

Public &

others27%

Promoters

51%

Annual report reviewCOMPANY DETAILSPrice target: Rs477




BSE code: 500330

NSE code: RAYMOND

Sharekhan code: RAYMOND


(%) 1m 3m 6m 12m

Absolute -13.5 -6.4 -43.3 -27.3


PRICE PERFORMANCE

BUY CMP: RS271 JUNE19, 2013RAYMOND

KEY POINTS

Disappointing performance; inventory overhang and one-offs mar profitability duringthe year:In FY2013, Raymonds consolidated revenues grew by 11.7% YoY to Rs4,069.16crore on account of a decent growth in all its segments especially the garment and tools& hardware segments. The operating performance, however, was dented by inventoryoverhang issues. Consequently, the OPM declined by about 330 basis points YoY to9.1% in FY2013. The weak operating performance coupled with exceptional expensescaused the companys reported PAT to decline by 81.6% YoY to Rs28.7 crore.

Efficient working capital management results in improved cash flow: The companyefforts to liquidate inventory bore fruits in the form of improved cash flow and operating

cash cycle even though the same pressurised the margin and profitability. The operatingcash cycle improved to 104 days from 114 days in FY2012.

Business outlook: Going forward, the management expects the FY2014 performanceto be better than the FY2013 one, largely owing to two key reasons: (a) strong costmanagement and inventory rationalisation process will bear fruits, and (b) the revivaof consumer discretionary demand will drive the volumes and hence the growth.

Maintain our positive stance: We believe Raymonds efforts towards cost rationalisationthrough supply chain initiatives, inventory liquidation and a favourable consumerdemand are likely to result in better margins going forward. The company enjoys strongbrand equity and we expect it to report better profitability in FY2014. We maintainour positive stance on the stock. Currently, we have a Buy rating on Raymond with aprice target of Rs477.




Promoters

42%

Foreign

14%

Institutions16%

Non-promoter

corporate

7%

Public &

Others

21%


20/67



Refining margin to correct; petchem margin toimprove in the quarter coming ahead

COMPANY DETAILS





BSE code: 500325

NSE code: RELIANCE

Sharekhan code: RELIANCE


(%) 1m 3m 6m 12m

Absolute -0.5 1.9 0.2 14.0

Relative to Sensex 4.3 -0.1 0.5 -1.8

PRICE PERFORMANCE

BUY CMP:RS799 JUNE20, 2013RELIANCE INDUSTRIES

KEY POINTS

Singapore complex GRM corrected in April-June 2013:The Singapore complex GRMcorrected in the past couple of months by around $1.5-2/barrel on account of weaknessin the product cracks, particularly gasoil (16%) and gasoline (~19%), compared with theaverage crack for Q4FY2013. Reliance Industries Ltd (RIL) reported an impressive GRMof $10.1/barrel during Q4FY2013 but looking at the recent correction in the productcracks, we believe the company is expected to post a decline in the GRM in Q1FY2014QoQ. However, the average GRM for Q1FY2014 is expected to remain higher YoY.

Petchem margin to improve with increase in product prices and decline in feedstock:On the positive side, the petrochemical (petchem) business is expected to witness anexpansion in the margin. The expansion in the margin is on account of lower feedstockprices and an increase in the prices of most of the end products. During Q4FY2013,the company posted an EBIT margin of 8.6%, which we believe will improve in

Q1FY2014 on account of a recent increase in the margin of most of the products andlower feedstock prices.

Outlook: Given the recent correction in the GRM, we believe the near-term environmentfor its refining business remains challenging. However, a recent improvement in its petchemmargin, a healthy ramp-up in the US shale gas and a likely revision in the prices of gasfrom March 2014 are providing visibility of earnings growth going ahead. Further, anyapproval for further development of the KG-D6 block could be positive for RIL. Hence,we maintain our Buy recommendation on the stock with a price target of Rs1,010.




Promoters

45%

Bodies

Corporate

5%

Institutions29%

Others

21%

Budget for development activities approved; retain BuyCOMPANY DETAILSPrice target: Rs365

Market cap: Rs450 cr



BSE code: 530075

NSE code: SELAN

Sharekhan code: SELAN


(%) 1m 3m 6m 12m

Absolute 7.5 -3.1 -9.9 1.5

Relative to Sensex 9.4 -3.8 -10.7 -14.6

PRICE PERFORMANCE

BUY CMP: RS265 JUNE10, 2013SELANEXPLORATIONTECHNOLOGY

RESULT HIGHLIGHTS

The quarterly performance remained subdued...: In Q4FY2013, the net revenues(adjusted for the petroleum profit) of Selan Exploration Technology (Selan) declinedby 12-13% YoY due to lower both volume and realisation. We believe a delay inobtaining the regulatory approval for developing its wells resulted in the subduedproduction. The adjusted PAT stood at Rs8.2 crore in Q4FY2013, down 14% and32% YoY and QoQ respectively due to a higher tax outgo.

...but received approval for development activities: During Q3FY2013, the companyhad received approvals from the Directorate General of Hydrocarbons (DGH) fordeveloping five wells. Recently, during May 2013 the company received the approval

for the proposed FY2014 budget (worth Rs57 crore) for development activities inthree (Lohar, Indrora and Karjisan) fields. The approvals would be helpful for thecompany to lift the production in future. We believe that after two years there arepositive developments on the approval side which would be a key driver of growth forthe company; therefore, we remain positive on Selan.

View and valuationretain Buy recommendation: The company is expected to receivethe approval for the proposed budget for developing five wells in Q1FY2014. Weexpect the development work to progress soon and the incremental production to reflectin future. However, it depends on the execution ability of the company. Hence, weremain positive on the stock with a Buy recommendation on the stock with a pricetarget of Rs365 (3.5x EV/EBITDA FY2015E).




Promoters

42.2%

Others

57.6%

Foreign

0.1%

Institutions

0.2%


21/67



Annual report review - Price target revised to Rs2,450COMPANY DETAILSPrice target: Rs2,450


52 week high/low: Rs2,550/1,816


BSE code: 500112

NSE code: SBIN

Sharekhan code: SBIN


(%) 1m 3m 6m 12m

Absolute -7.7 -4.7 -14.8 -7.9


PRICE PERFORMANCE

JUNE25, 2013 CMP: RS1,915 BUYSTATEBANKOFINDIA

The annual report of State Bank of India (SBI) points to stress on margin due to an increasein the term deposits and the banks focus on derisking the loan book. We expect the assetquality pressures to persist for the next few quarters due to a rise in the restructured loansand a recovery in the economy will be the key to a decline in the NPAs. We have revisedour estimates downwards leading to a revision in our SOTP based price target to Rs2,450We maintain Buy rating on the stock.

KEY POINTS

Margin likely to decline:SBIs reported NIM (global) declined to 3.34% in FY2013largely driven by a decline in the yields on advances. During FY2013, the depositaccretion was largely towards the longer tenure; hence, the cost of funds may remainsticky. In addition, the bank is likely to focus on derisking the book while pressure onthe lending rates remains which will affect the NIM in FY2014.

Proportion of secured advances rises to 82.6%:SBIs proportion of secured advances

has gradually risen from 78.5% in FY2010 to 82.6% in FY2013. About 87% of thebanks large corporate book was within the investment grade. However, the advanceto the sensitive sectors grew by 28.7% YoY.

Asset quality pressure remains: The banks gross and net NPAs increased from FY2012levels led by a sharp rise in the slippages. The restructured loans expanded sharply ledby an economic slowdown and rising stress across sectors. Going ahead, given therising pipeline of restructured loans and corporate debt restructuring cases, the pressureon the banks asset quality may remain.




Promoter

62%Foreign11%

MF & FI

16%

Public &

others

11%

Upgraded to Buy post-correction withrevised price target of Rs1,120

COMPANY DETAILS



52 week high/low: Rs1,085/575


BSE code: 524715

NSE code: SUNPHARMA

Sharekhan code: SUNPHARMA


(%) 1m 3m 6m 12m

Absolute 2.9 18.5 35.1 70.2


PRICE PERFORMANCE

BUY CMP: RS949 JUNE13, 2013SUNPHARMACEUTICALINDUSTRIES

KEY POINTS

Sun Pharma to pay $550 million to settle patent litigation case on Protonix: SunPharmaceutical Industries (Sun Pharma) together with its subsidiaries has settled anongoing litigation pending in the United States District Court, District of New Jerseyregarding its subsidiarys generic pantoprazole (reference brand Protonix). As per theagreement, Sun Pharma, Wyeth (now a division of Pfizer Inc.) and Altana Pharma AG(Altana; now known as Takeda GmbH) have dismissed all their claims. Sun Pharmawill pay a lump sum $550 million as a part of this settlement. The company had launchedgeneric pantaprazole in January 30, 2008 at risk pending patent infringement litigation

by Wyeth and Altana. Cash balance to shrink by nearly 55%; constraints for big acquisitions: Though Sun

Pharma would be comfortably able to pay the settlement amount of Rs3,190 crore, buwe estimate the consolidated cash balance (excluding cash on the book of TaroPharmaceutical Industries) would reduce by 55%. We estimate the other income wouldreduce by 37% YoY to Rs235 crore in FY2014. As a result, our EPS estimates foFY2014 and FY2015 get reduced by 5.6% and 2.7% respectively.

A major overhang removed; stock upgraded to Buy with revised price target of Rs1,120We believe a major overhang will disappear for Sun Pharma, limiting the downside forthe stock. We have marginally reduced our price target for Sun Pharma by 2.7% toRs1,120 (which implies 26x FY2015E EPS). However, a deep correction in the pricecomforts us to upgrade the rating on the stock to Buy.




Promoters

64%

Institutions

3%

Non-promoter c orporate

5%Public and others

5%

Foreign

23%


22/67



TCS reiterates FY2014 will be better than FY2013COMPANY DETAILS



52 week high/low: Rs1,598/1,176


BSE code: 532540

NSE code: TCS

Sharekhan code: TCS


(%) 1m 3m 6m 12m

Absolute 1.7 -3.3 24.5 23.7

Relative to Sensex 6.1 -1.4 25.0 5.9

PRICE PERFORMANCE

BUY CMP: RS1,468 JUNE12, 2013TATACONSULTANCYSERVICES

We recently attended the pre-quarter analyst meet of Tata Consultancy Services (TCS).The management maintained its positive stance on the demand environment and reiteratedthat FY2014 would be better than FY2013. The incremental growth would be led by anuptick in the revenues of the BFSI vertical (43.5% of total revenues) and the improvingtraction in the new deals coupled with the revenues from the ALTI acquisition (the financialswould be consolidated by Q2FY2014E). The management expects the margins to gainfrom the rupees depreciation. However, it indicated that it would continue to invest in theselling, general and administrative activities to strengthen the companys growth engine.On the flip side, the management acknowledged the potential structural negative of the USimmigration bill, specifically the outplacement clause.

Valuation

At the current market price of Rs1,468, the stock trades at 18x and 16x FY2014E andFY2015E earnings. Currently, our earnings estimates for FY2014 and FY2015 stand at

Rs81.6 and Rs90.4 based on the dollar/rupee exchange rate of Rs54.5 and Rs53.5respectively. Given the consistency in the rupees depreciation vis--vis the dollar, there isalso a likelihood of further upgrade in the earning estimates for TCS in particular and theIT sector in general. However, the impending US immigration bill will continue to be anoverhang on the sector. We maintain our Buy rating on the stock with a price target ofRs1,650.



holding or having a postition in the companies mentioned in the article.

ValueGuide July 13

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Transcript of ValueGuide July 13