Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and 28.6% growth in operating profit was largely due to higher tax
provisions made of bank (32.4% of PBT versus 27.9% of PBT in 2QFY14). During quarter, bank has created special reserve for deferred tax liability
to the tune of Rs.215 Cr as per recent RBI guideline dated 20th December 2013. Adjusting the same, profit grew by 22% YoY which was quite
impressive. But bank’s cost of fund increased higher than loan yield which would restrict margin expansion. We lower our book value estimates
to Rs.643 from earlier of Rs.657. Accordingly we reduce our target price to Rs.1094 from earlier of Rs.1118.
............................................................... ( Page : 20-24)
3th Feb, 2014
Edition : 197
IEA-Equity
Strategy
ICICI BANK : "BUY" 31th Jan 2014
We have rolled forward our valuation to FY16E earnings and maintained our Accumulated rating on CGL with a revised target price of Rs130
(Rs105 earlier) based on 14xFY16E EPS, driven by likely turnaround in international operations and a better earnings growth trajectory. We
believe that a record backlog, better/leaner cost structure, good & increasing product basket, improved reach in terms of geography will drive
earnings & intrest coverage ratio over the next few years. ................................................ ( Page : 18-19)
Maruti Suzuki India Limited : "NEUTRAL" 31th Jan 2014
The company for 3QFY14 has registered net sales of Rs 10620 Cr down by 2.7% YoY led by 4.5 % volume decline to 288151 units for the period
under review. The decline in the volume came majorly due to weaker performance on export business front. Export sales volumes were down
38.6% YoY ......................................................... ( Page : 16-17)
BANK OF INDIA : "BUY" 31th Jan 2014
Bank of India reported profit de-growth of 27% YoY largely due to higher loan loss provision. At operating profit level, bank reported 15.5% YoY
growth but higher provisions against loan loss (almost double from last quarter) drag profit downward. Bank’s loan and deposits grew
handsomely and asset qualities were also improved sequentially. Restructure loan was at Rs 1146 cr (0.3% loan) which is not alarming. We have
not found any stress at operating profit level. The stock is corrected almost 10% likely due to profit de-growth. We believe buffer up provision
would be temporally phenomena. The stock could reshape its valuation multiple. We have buy rating on the stock with price target of Rs.217
...................................................... ( Page : 11-15)
Crompton Greaves Ltd : "Rebounds begains…….." "BUY" 31th Jan 2014
JSW Steel’s third quarter performance was good and ahead of expectation by a huge margin. Consolidated net sales at Rs 13,383 crore , while
Ebitda at Rs 2,409 crore. While net profit at Rs 466 crore came in below expectations of Rs 583 crore, it was largely due to adjustments on
account of merger with JSW Ispat.Crude steel production-wise, there is a 52% growth, to the tune of 3.17 million tonnes of steel.
...................................................................... ( Page : 7-10)
Marico : " Volume slows…" "NEUTRAL" 3th Feb 2014
Beats the street on profitability and Margin front with poor volume growth;Marico witnessed better numbers than expectation with 10% sales
growth (excluding Kaya Sales) led by 3% volume growth on YoY basis. We believe that slower volume growth could not easily turned out in next
1-2 quarters because of poor discretionary demand environment. Therefore, we downgrade our view from "BUY" to "NEUTRAL".
....................................................................... ( Page : 4-6)
HEROMOTOCO: Average Sales with Flat Profits Growth.. "BUY" 3th Feb 2014
The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by healthy volume growth of 7% for the period under review.
The company during 3QFY14 sold 1680940 units including exports. The volume performance was led by a strong 7.8% YoY growth in the
domestic segment. ..................................................................... ( Page : 2-3)
JSW STEEL LTD : "NEUTRAL" 3th Feb 2014
Narnolia Securities Ltd,
India Equity AnalyticsDaily Fundamental Report on Indian Equities
1M 1yr YTD
Absolute -5.0 9.5 9.3
Rel. to Nifty -1.6 8.9 -4.4
Current 2QFY14 1QFY1
4Promoters 39.9 39.9 39.9
FII 30.6 30.4 29.9
DII 8.5 8.8 9.3
Others 21.0 20.9 8.7
Financials Rs, Crore
3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%
Revenue 6846 5696 20.2 6151 11.3
EBITDA 898 833 7.8 779 15.3
PAT 525 482 8.9 489 7.4
EBITDA Margin 13.1% 14.6% (150bps) 12.7% 50bps
PAT Margin 7.7% 8.5% (80bps) 7.9% (30bps)
2
HEROMOTOCO
Please refer to the Disclaimers at the end of this Report.
52wk Range H/L 2215
6%
Market Data
BSE Code 500182
HEROMOTOCO
Stock Performance-%
NSE Symbol
Change from Previous -
The stock at its CMP of Rs 1979 which is 17.9x of one year forward FY14E EPS of Rs 110
and upcoming capacity expansion, Rising trend of volume growth of scooter business,
Improvement in operational efficiency are few factors which make us positive for the stock.
We recommend BUY for the stock with Target Price Rs 2100.
One Yr Price Vs NIFTY
(Source: Company/Eastwind)
1,434
Average Daily Volume 245841
Nifty 6089
Share Holding Pattern-%
Mkt Capital (Rs, Cr)
The operating EBITDA for the 3QFY14 came at Rs 898 Cr and OPM stands at 13.06
%.There is yearly rise in the OPM by nearly 40 bps however on sequential basis it had
shrunk by 150 bps due to led by increase in raw-material costs and significantly higher other
expenditure. Raw material cost as a percentage of sales increased 120bp QoQ due to the
currency impact on indirect imports, which comes with a quarter’s lag. The other expenses
in the quarter rose significantly very high because of higher advertisement expenses due to
festival season and also due to the launch of new products/ refreshes and higher royalty
payments on the back of rising share of new products. Additionally, the ongoing cost
reduction initiatives from the company led to a savings of Rs45 Cr during the quarter.
View & Valuation
The net profits for the stands at Rs 525 Cr for the quarter grew by only 7.5% yoy as the tax
rate increased to nearly 27% from 16% earlier due to expiry of tax benefits at the Haridwar
facility.
Post the 3QFY14 result management said that Industry motorcycle sales should be in the
range of 5 % and it will be in that level for the year and HMC will be at par with that.
Company has maintained its ad spend guidance at 2-2.5 % of sales and R&D spends at
nearly 0.75% of sales. The capital expenditure guidance for FY2014 stands at Rs1100 Cr to
Rs1200 Crr.For FY2015 the company has guided for Rs 1,500 Cr to Rs1,800 Cr.
The Management indicated that the current dividend policy of 35-45% payout will continue in
future. The total installed capacity of the company currently stands at 6.9mn units. Post the
commissioning of the Neemrana plant, scheduled by end of March 2014, the installed capacity is
expected to increase to 7.65mn units.
Average Sales with Flat Profits Growth..
Result Update BUY
CMP 1979
The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by
healthy volume growth of 7% for the period under review. The company during 3QFY14
sold 1680940 units including exports. The volume performance was led by a strong 7.8%
YoY growth in the domestic segment, while export volumes posted a decline of 26.5% YoY,
mainly due to a weak demand environment in major exporting nations. Scooters sales
maintained strong momentum, led by the success of Maestro.
The average realization for the quarter moved up and came around at Rs 41000 verses Rs
39100 for the same time last fiscal. The net average realization for the quarter was driven by
price increases, which were undertaken in April and October 2013.
Upside
Target Price 2100
Previous Target Price -
"BUY" 3rd
Feb' 14.
Narnolia Securities Ltd,
3
SALES & PAT TREND
Company registered its 3QFY14 net sales at
Rs 6846 Cr up by 11.3% YoY led by healthy
volume growth of 7%.
Rise in the OPM by nearly 40 bps however on
sequential basis it had shrunk by 150 bps due
to led by increase in raw-material costs and
significantly higher other expenditure.
HEROMOTOCO
OPM & NPM TREND
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
Realization Trend
(Source: Company/Eastwind)
Profits for the grew by only 7.5% yoy as the
tax rate increased to nearly 27% from 16%
earlier due to expiry of tax benefits at the
Haridwar facility.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Marico
-
1M 1yr YTD
Absolute -3.6 2.4 0.5
Rel. to Nifty -10.8 -7.9 -9.1
Current 2QFY14 1QFY14
Promoters 59.69 59.69 59.72
FII 27.58 27.6 27.96
DII 5.72 5.88 5.19
Others 7.01 6.83 7.13
Financials Rs, Crore
3QFY14 2QFY14 (QoQ)-% 2QFY13 (YoY)-%
Revenue 1089.29 1115.36 (2.3) 1155.89 -5.8
EBITDA 201.81 168.51 19.8 165.8 21.7
PAT 135.4 105.9 27.9 102.3 32.4
EBITDA Margin 18.5% 15.1% 340bps 14.3% -
PAT Margin 12.4% 9.5% 290bps 8.9% -
4
Stock Performance
MARICO
Upside -
Nifty 6090
Market Data
Please refer to the Disclaimers at the end of this Report.
1 year forward P/BV-X
(Source: Company/Eastwind)
View and Valuation: The company expects demand scenario to remain challenging
especially in urban areas in India and some of its international market like Bangladesh,
Egypt and MENA. Based on hypothesis, management is expecting regarding the bottom
out of volume decline but they are not ignoring the threat of demand environment
challenges for near future. We believe that slower volume growth could not easily
turned out in next 1-2 quarters because of poor discretionary demand environment.
Therefore, we downgrade our view from BUY to NEUTRAL on the stock, at a price of Rs
214, stock trades at 4.9x FY15E P/BV.
Mix segmental growth: India FMCG business grew by 10%(YoY). Parachute’s rigid
portfolio (packs in blue bottles), recorded a volume growth of about 2% during Q3FY14
over Q3FY13. Parachute along with Nihar marginally improved its market share over the
same period last year to 56%. The Saffola refined edible oils franchise grew by about 9%
in volume terms during Q3FY14. During the quarter, Saffola average price hiked by 4-5%
to manage its RM cost and Packaging materials. Marico’s hair oil brands (Parachute
Advansed, Nihar Naturals and Hair & Care) grew by 8% (YoY) in volume terms during
Q3FY14.
Result update Neutral
Change from Previous
" Volume slows…"
CMP 214
Target Price -
Previous Target Price -
Marico witnessed better numbers than expectation with 10% sales growth (excluding
Kaya Sales) led by 3% volume growth on YoY basis. PAT grew by 31% (YoY) because of
cost rationalization across various head of expenses like Ad Spend, employee cost etc.
However, the profits of Q3FY14 are not strictly comparable to Q3FY13 due to the
change in the method of depreciation from WDV to SLM carried out in Q4FY13 and
demerger of Kaya business.
Beats the street on profitability and Margin front with poor volume growth;
Margin ramp up: During the quarter, its EBITDA margin of the India FMCG business
during Q3FY14 was 18.7% and PAT margin was at 11.3%. The Company believes that an
operating margin in the band of 17% to 18% is sustainable in the medium term. On YoY
basis margin growth could not computed because of Kaya consolidation in same quarter
previous year.
Poor volume growth: Because of weak demand discretionary environment and socio
political instability in some regions, its volume growth of various segments have come
down during the quarter. The volume growth in India was marginally above 3% for the
quarter, reflecting continued soft consumption trends. Post earning, management
stated that the trend of volume decline has bottomed out based on hypothesis.
The Company maintained its market share across the portfolio, reflecting strong equity
of its brands, even though the rates of category growth have decelerated over the past
few quarters. We believe that slower volume growth could not easily turned out in next
1-2 quarters because of poor discretionary demand.
Mkt Capital (Rs Cr) 13829
Average Daily Volume 126142
Share Holding Pattern-%
BSE Code 531642
NSE Symbol
52wk Range H/L 248/188
"NEUTRAL"3rd Feb' 14
Narnolia Securities Ltd,
5
Please refer to the Disclaimers at the end of this Report.
Marico
Sales (cr) and Growth (%) -
(Source: Company/Eastwind)
Margin-%
Expenses on Sales -%
For 2QFY14, Marico reported 4% (YoY)
decline in sales growth because of sluggish
volume growth impacted by weaker demand
in urban area.
The demerger of Kaya is on the way, and
new demerged entity would expected to get
listed by November or December.
Because of cost control in ad spend by
200bps and Raw material about 190bps, its
margin gone up by 210 bps to 15.1% on YoY
basis.
Geographical challenges: International market recorded a growth of 15%. Because of
political uncertainty, Bangladesh sales declined by 14%(YoY). While, the MENA business
on an average grew by 10% CC basis. The business in Egypt grew by 22% mainly led by
strong volume growth in Haircode and Fiancée. The business in GCC continued to report a
decline. Political environment in Egypt seems to have bettered for the time being with no
major report of violence, however the uncertainty continues. South Africa reported a top-
line growth of 5%. The business in South East Asia of which Vietnam comprises a
significant portion grew by 24% in constant currency terms.
(Source: Company/Eastwind)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
(3) Operating Margin could sustain at a range of 17-18% in the medium term.
(4) The Youth brands portfolio is expected to grow by about 20% to 25%.
(5) In near term, Company does not expect to see any price hike decision.
6
Marico
Key facts from Management guidance;
Financials
(1) Management believes that the decline trend of volume growth has turned out, while
the economic environment is still challenging and there will be gradual recovery.
Please refer to the Disclaimers at the end of this Report.
(2) Immediate future could see volume growth rates of 7%- 8%. With the price increases
already in market place the overall sales growth could still be in the region of 12%-14%.
This is expected to improve from early/mid FY15.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E
Sales 2500.09 3134.99 4008.28 4259.53 4740.86 5344.65
Other Operating Income 160.67 19.06 30.90 12.51 14.22 16.03
Total income from operations 2660.76 3154.05 4039.18 4596.86 4755.08 5360.68
RM Cost 1265.48 1712.66 2132.04 2212.27 2228.20 2672.32
Purchases of stock-in-trade 12.47 20.36 17.44 116.59 48.53 54.71
WIP -16.35 -115.43 -50.78 -127.47 -98.72 -111.29
Employee Cost 190.13 229.98 307.29 380.56 380.41 428.85
Ad Spend 351.12 345.95 448.99 597.94 618.16 643.28
Other expenses 482.76 523.36 668.90 791.07 808.36 911.32
Total expenses 2285.61 2716.88 3523.88 3970.96 3984.94 4599.19
EBITDA 375.15 437.17 515.30 625.90 770.14 761.49
Depreciation and Amortisation 60.06 70.80 72.52 86.62 145.44 133.80
Other Income 18.26 2.16 1.67 37.52 19.17 21.61
Exceptional Item -9.79 48.91 -1.75 33.20 33.29 37.52
EBIT 323.56 417.44 442.70 610.00 677.15 686.82
Interest 25.69 41.01 42.39 57.43 57.43 57.43
PBT 297.87 376.43 400.31 552.57 619.72 629.39
Tax Exp 64.33 84.98 78.25 146.18 163.95 166.50
PAT 233.54 291.45 322.06 406.39 455.78 462.89
Growth-% (YoY)
Sales 11.4% 18.5% 28.1% 13.8% 3.4% 12.7%
EBITDA 29.2% 16.5% 17.9% 21.5% 23.0% -1.1%
PAT 33.5% 24.8% 10.5% 26.2% 12.2% 1.6%
Expenses on Sales-%
RM Cost 47.6% 54.3% 52.8% 48.1% 46.9% 49.9%
Ad Spend 13.2% 11.0% 11.1% 13.0% 13.0% 12.0%
Employee Cost 7.1% 7.3% 7.6% 8.3% 8.0% 8.0%
Other expenses 18.1% 16.6% 16.6% 17.2% 17.0% 17.0%
Tax rate 21.6% 22.6% 19.5% 26.5% 26.5% 26.5%
Margin-%
EBITDA 14.1% 13.9% 12.8% 13.6% 16.2% 14.2%
EBIT 12.2% 13.2% 11.0% 13.3% 14.2% 12.8%
PAT 8.8% 9.2% 8.0% 8.8% 9.6% 8.6%
Valuation:
CMP 108.55 138.75 206.00 216.95 214.00 214.00
No of Share 60.90 61.40 61.40 64.48 64.48 64.48
NW 653.96 915.44 1143.01 1981.52 2399.58 2824.75
EPS 3.83 4.75 5.25 6.30 7.07 7.18
BVPS 10.74 14.91 18.62 30.73 37.21 43.81
RoE-% 35.7% 31.8% 28.2% 20.5% 19.0% 16.4%
P/BV 10.11 9.31 11.07 7.06 5.75 4.88
P/E 28.31 29.23 39.27 34.42 30.28 29.81
JSW STEEL LTD.
A steely performance917
797
NA
-13%
NA
500228
22175
11087
6089
1M 1yr YTD
Absolute -9.1 5.5 7.0 Operational EfficienciesRel. to Nifty -6.3 4.0 5.7
2QFY14 1QFY14 4QFY13
Promoters 37.3 36.3 35.8
FII 18.6 17.2 18.0
DII 4.9 6.3 6.1
Others 39.2 40.3 40.1 Exports boost
Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY13
Net Revenue 13623 53 5 8888 12984
EBITDA 2409 81 3 1331 2348
Depriciation 806 43 0 563 803
Tax 374 -2300 214 -17 119
PAT 466 -733 -504 -74 -116(In Crs)
7
Initial Coverage NeutralCMP JSW Steel’s third quarter performance was good and ahead of expectation by a huge
margin. Consolidated net sales at Rs 13,383 crore , while Ebitda at Rs 2,409 crore. While
net profit at Rs 466 crore came in below expectations of Rs 583 crore, it was largely due
to adjustments on account of merger with JSW Ispat.Crude steel production-wise, there
is a 52% growth, to the tune of 3.17 million tonnes of steel. Also,reduced inventories by
17,000 tonnes and sold 3.08 million tonnes of steel in this quarter, showing a growth of
42% in terms of volume. Therefore, the volume of production and sales have contributed
to the bottom line.Secondly, the operational efficiencies which were brought in are
clearly visible in the results. EBITDA per tonne improved and the EBITDA margin is 19.3%
as against 15.8% in the corresponding quarter of last year, showing a significant
improvement of 3.5%.
Target Price
Previous Target Price
Upside
Change from Previous
JSL also reported higher incidence of tax amounting to 374 crore with an effective tax
rate at 45% in Q3FY14. The iron ore situation has improved in Karnataka but is below the
company’s comfort levels. We have a cautious view on the stock due to elevated debt
levels and stretched valuations.
Stock Performance-%
Market DataBSE Code
NSE Symbol JSWSTEEL
52wk Range H/L 1046/451
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty
The operating margins are under pressure due to the high cost of raw materials.
company is operating only at 80 per cent of the capacity at Vijayanagar in Bellary district.
The company is sourcing ore from Odisha, Jharkhand and Chhattisgarh besides importing
ore for its Dolvi and Salem plants. It is, however, left with little option to source the raw
material for its Karnataka plant.
Source - Comapany/EastWind Research
Please refer to the Disclaimers at the end of this Report.
This performance is remarkable looking at the fact that JSW’s operations are not
backward integrated in terms of basic raw material like coal and iron ore. While it is
dependent on imported coal to meet its energy requirements, the company has been
grappling with iron ore availability issues in Karnataka for quite a while due to mining
curbs. However, the company’s ability to export a substantial portion of its steel output
has acted as a natural hedge as well as boosted its overall revenues and profitability.
Share Holding Pattern-%
JSW’s exports touched one-million-tonne (mt) mark, which was 60 per cent of India’s
overall steel exports and accounted for 32.4 per cent of the company’s steel sales of 3.08
mt (up 42 per cent year-on-year). Management of JSW Steel, said they are looking at
increasing exports, especially the value-added products to developed markets to boost
profitability.
1 yr Forward P/B
"Neutral"3rd Feb' 14
Narnolia Securities Ltd,
0
500
1000
1500
2000
2500
3000
Mar
-07
Nov
-07
Jul-0
8
Mar
-09
Nov
-09
Jul-1
0
Mar
-11
Nov
-11
Jul-1
2
Mar
-13
Nov
-13
PRICE 0.5x
1x 1.5x
Iron ore availability remains still challenging
Steel Demand Healthy Outlook
Capex Guidiance
About The Company.
8
During the quarter, the company commissioned
a waste heat recovery system for BF-4 stove
heating process. The pickling cum coupled
tandem cold rolling mill (PLTCM) facility, which
is part of phase 1 of CRM2 project has
commenced commercial production at
Vijayanagar from December 1, 2013.
The management has maintained its earlier annual guidance of saleable steel sales
volume of 11.55 MT. However, based on 9MFY14 reported volume of 8.76 MT we
believe JSL will exceed its sales volume target. We have modelled sales volume of 11.75
MT for both FY14E and FY15E.
The work on turning around JSW Ispat’s operations is on and its Dolvi unit (currently
operating at 87-88 per cent utilisation) will become more profitable after the pallet and
coke oven plants are commissioned.JSW’s largest unit at Vijaynagar in Karnataka,
however, is running at 83 per cent capacity utilisation. The iron ore availability situation
in Karnataka still remains challenging. While the overall availability in the state has
improved to 18 mt, steel industries’ requirement in the state is close to 30 mt. JSW, to
meet its requirement, still depends on supplies from outside the state to the extent of
20-25 per cent. Landed blended coal costs for JSW are about $160-165 a tonne and
likely to remain at similar levels during the March quarter, too, believes the
management.
The company remains upbeat on steel demand scenario, especially from emerging
markets. While Rao said that with Chinese steel production declining, exports from
emerging markets should pick up during FY15.JSW Steel, also increased prices by up to
Rs 1,200 a tonne, or up to two per cent, across the board for February, its second
increase in a month, which should support profitability.
The management has front ended its capex programme (10500 crore in FY14-16) with a
capex guidance of 5500 crore for FY14 as against 4000 crore guided in Q2FY14. For
FY15, the company has maintained the guidance of 4000 crore with the balance to be
incurred in FY16E.
Going ahead, the company expects its profit margin to improve with the commissioning
of coke oven and pallet plants at its Dolvi unit in Maharashtra. Besides, the availability
of iron ore in Karnataka is set to improve with the Supreme Court directing the State
and Central governments to submit an action plan to improve supply. We value the
stock,and we are Neutral on the stock at a Target price Rs.797.
JSW Steel is India’s leading private sector steel producer and among the world’s most
illustrious steel companies.JSW Energy Ltd., a power utility arm of Sajjan Jindal-led JSW
group,was incorporated in 1994. Currently, it owns 3.1GW of operationalpower plants,
with another 7GW under various stages of development.It came up with an IPO in 2009
at Rs100/share. Around 50% of thecurrent operational capacity is on merchant.
Project Updates
JSW STEEL LTD.
Narnolia Securities Ltd,
FY12 FY13 FY14E FY15E
34368 38210 49817 49000
21879 24158 29440 28518
846 980 1301 1299
1752 2041 3879 4043
2041 2284 3228 2989
28266 31706 40937 39984
6102 6504 8880 9016
1933 2237 3179 3280
1933 2237 3179 3280
1427 1967 3076 3200
2818 2369 2730 2686
500 845 710 537
2318 1523 2020 2149
14 9 12 11
24.1 43.2 15.0 88.8
9
PAT WITHOUT EXCEPTIONAL ITEMS
ROE%
EPS
EBITDA
Depriciation
Depriciation
Interest Cost
PBT
Net tax expense / (benefit)
JSW STEEL LTD.
P/L PERFORMANCE
Power Fuel
Other expences
Expenditure
Net Revenue from Operation
Cost Of Projects & Contractual
Employee benefit Expence
All India Steel Imports & Exports
India turns into a net exporter; exports surge on
the back of improving demand in developed
markets and INR depreciation enhancing export
competitiveness
Narnolia Securities Ltd,
FY10 FY11 FY12 FY13
527 563 563 563
8730 15966 16186 16781
9257 16529 16750 17344
13454 12173 12889 17393
2719 4302 1376 1653
35 53 35 41
1706 2487 9714 10251
230 347 231 308
35686 46167 54238 57728
254 376 39 55
21198 25435 32529 33348
6956 6508 2832 5898
927 1246 2818 3342
2867 4410 5789 5495
696 933 1462 2106
303 2048 3047 1653
677 910 2058 2535
35686 46167 54238 57728
FY10 FY11 FY12 FY13
2.5 1.2 1.0 0.9
85.4 78.6 24.1 43.2
3.7 3.9 4.3 5.5
9.0 10.4 28.3 26.8
1.5 1.8 1.7 1.4
8.0 6.9 6.7 4.0
14.2 12.8 12.1 11.1
20.9 19.3 17.7 17.0
14.5 11.7 29.9 15.5
9.6 7.5 4.5 5.0
5.8 4.9 1.5 2.4
6.8 5.7 10.0 10.3
1.7 1.0 0.9 1.1
10
JSW STEEL LTD.
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Source - Comapany/EastWind Research
Inventories
Trade receivables
EPS
Debtor to Turnover%
Trading At :
RATIOS
NPM %
Capital work-in-progress
Long-term loans and advances
B/S PERFORMANCE
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Cash and bank balances
Creditors to Turnover%
Total Assets
P/B
Intangibles
Tangible assets
ROCE VS Weighted Avg Cost to Debt
Source - Comapany/EastWind Research
Source - Comapany/EastWind Research
Source - Comapany/EastWind Research
Short-term loans and advances
Weighted Average Cost of Debt %
Debt/Equity
OPM %
EBITDA %
P/E
EV/EBIDTA
ROCE%
Inventories to Turnover%
Narnolia Securities Ltd,
50
70
90
110
130 NIFTY JSWSTEEL
BANK OF INDIA
187
217
235
16
1M 1yr YTD
Absolute -21.6 -47.5 -18.1
Rel.to Nifty -17.9 -47.5 -18.1
Current 1QFY14 4QFY1
3Promoters 64.1 64.1 64.1
FII 13.2 13.6 13.5
DII 15.3 15.6 16.3
Others 7.4 6.7 6.0
Financials Rs, Cr
2011 2012 2013 2014E 2015E
NII 7878 8313 9024 10578 10869
Total Income 10519 11635 12790 15082 15373
PPP 5398 6694 7458 8701 8917
Net Profit 2542 2678 2749 2776 3170
EPS 46.5 46.7 47.9 43.2 49.4
11
BANKINDIA Vs Nifty
Share Holding Pattern-%
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
NII growth on the back of higher loan growth and margin expansion
Operating leverage remained stable
Bank’s operating leverage remained stable at 0.3% which is quite impressive. In
absolute term, operating expenses increased by 20.3% YoY in which employee cost
and other operating expenses increased by 18.7% and 22.8% respectively. Healthy
NII growth and higher operating cost led pre provisioning profit growth of 15.5% YoY.
Loan loss provisions were almost double from last quarter, but asset quality
improved
Provisions and contingencies increased by 53.3% which includes loan loss provision
of Rs.1173 cr which was double from last quarter. But in absolute term, GNPA
marginally increased by 1.4% on sequential basis while in percentage to gross
advance, it improved by 12.5 bps to 2.8% from 3%. Provisions were little higher by
4% in sequential basis taking almost flat improvement in net NPA. In percentage
term, NPA improved to 1.7% from 1.9% in previous quarter. Provision coverage ratio
without technical write-off was 38.7% and with technical write off, it stood at 63.8%.
Slippage during the quarter was at Rs.1747 cr (2% of advance) versus Rs.1469 cr
(1.8% of advance).
2271804
Nifty 6074
Mkt Capital (Rs Cr)
CMP
Target Price
Bank of India reported profit de-growth of 27% YoY largely due to higher loan
loss provision. At operating profit level, bank reported 15.5% YoY growth but
higher provisions against loan loss (almost double from last quarter) drag
profit downward. Bank’s loan and deposits grew handsomely and asset
qualities were also improved sequentially. Restructure loan was at Rs 1146 cr
(0.3% loan) which is not alarming. We have not found any stress at operating
profit level. The stock is corrected almost 10% likely due to profit de-growth.
We believe buffer up provision would be temporally phenomena. The stock
could reshape its valuation multiple. We have buy rating on the stock with
price target of Rs.217.
Company Update BUY
During quarter, Bank India reported NII growth of 17.8% YoY to Rs.2719 cr versus
our expectation of Rs.2683 largely due to higher than expected loan growth,
improvement in credit deposits ratio and margin expansion. Bank reported other
income of Rs.1097 cr versus Rs.937 cr in last quarter and Rs.1097 cr in previous
quarter. Total revenue grew by 17.6% YoY to Rs.3816 cr.
Average Daily Volume
12260
Previous Target Price
Market Data
Upside
393/126
BSE Code
Change from Previous
532149
NSE Symbol BANKINDIA
Stock Performance
52wk Range H/L
"BUY"31th Jan, 2014
Narnolia Securities Ltd,
12
BANK OF INDIA
Please refer to the Disclaimers at the end of this Report.
Balance sheet growth impressive
We are impressed with bank’s balance sheet growth trajectory during the quarter as bank
reported deposits growth of 30% YoY higher than peers (result so far announced) led by
term deposits growth of 35% YoY. Current deposits and saving deposits reported growth
of 24% and 14% respectively taking overall CASA deposits growth of 16%. In percentage
to total deposits, CASA ratio declined to 22.5% from 24.6% in 3QFY13 largely due to
higher growth in term deposits than CASA deposits. Loan grew by 27.2% YoY which is
highest so far result announced. Credit deposits ratio for the quarter stood at 77.4% as
against 76.8% in previous quarter and 79.2% in last quarter.
Margin expansion led by imrprovement in investment yield
NIM for the quarter was 2.89%, an improvement of 50 bps YoY due to improvement of
investment yield. However fund yield and cost of fund both were declined marginally in
sequential but investment yield improved to 8.2% from 7.9% in previous quarter.
Profit declined on account of higher loan loss provisions
Bank of India (Bank India) profit was declined by 27.1% YoY to Rs.586 cr as against our
expectation of Rs.602 cr. Profit growth was lower on account of 98% YoY rise in loan loss
provisions. Overall provisions were increased by 53.3% YoY which drag PBT to 21.3%
YoY de-growth. Tax rate were 21% versus 28.5% of PBT in previous quarter and 14.5 of
PBT in 3QFY13. Total provisions for the quarter stood at 0.4% of net advances higher
than 0.28% in 3QFY13.
Valuation & View
Bank of India reported profit de-growth of 27% YoY largely due to higher loan loss
provision. At operating profit level, bank reported 15.5% YoY growth but higher provisions
against loan loss (almost double from last quarter) drag profit downward. Bank’s loan
and deposits grew handsomely and asset qualities were also improved sequentially.
Restructure loan was at Rs 1146 cr (0.3% loan) which is not alarming. We have not
found any stress at operating profit level. The stock is corrected almost 10% likely due to
profit de-growth. We believe buffer up provision would be temporally phenomena. The
stock could reshape its valuation multiple. We have buy rating on the stock with price
target of Rs.217.
Narnolia Securities Ltd,
13
BANK OF INDIA
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Fundamental Through Graph
NII growth on the back of higher loan growth
and margin expansion
Loan loss provisions were almost double from
last quarter, but asset quality improved
Profit declined on account of higher loan loss
provisions
Narnolia Securities Ltd,
14
BANK OF INDIA
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation
Interest/discount on advances / bills 7017 6631 5791 21.2 5.8 6910 -1.5
Income on investments 2207 2129 1809 22.0 3.7 2261 2.5
Interest on balances with Reserve Bank of India 546 479 298 83.4 14.0 472 -13.5
Total Interest Income 9769 9239 8023 21.8 5.7 9644 -1.3
Others Income 1097 1100 937 17.1 -0.3 1141 4.0
Total Income 10866 10340 8960 21.3 5.1 10784 -0.8
Interest Expended 7050 6712 5714 23.4 5.0 6960 -1.3
NII 2719 2527 2308 17.8 7.6 2683 -1.3
Other Income 1097 1100 937 17.1 -0.3 1141 4.0
Total Income 3816 3627 3246 17.6 5.2 3824 0.2
Employee 989 897 833 18.7 10.2 931 -5.8
Other Expenses 684 628 557 22.8 8.8 674 -1.3
Operating Expenses 1672 1525 1390 20.3 9.7 1606 -4.0
PPP( Rs Cr) 2144 2102 1856 15.5 2.0 2218 3.4
Provisions 1404 1232 916 53.3 13.9 1382 -1.5
Net Profit 586 622 803 -27.1 -5.8 602 2.7
Balance Sheet Data
Equity Capital 643 597 575 11.9 7.8 597 -7.2
Reserve & Surplus 26,672 25,686 22,698 17.5 3.8 27,243 2.1
Deposits 454,140 432,282 349,117 30.1 5.1 449,063 -1.1
Borrowings 40,545 41,751 28,686 41.3 -2.9 42,513 4.9
Other liabilities and provisions 14,492 12,727 14,890 -2.7 13.9
Total Liability 536,492 513,042 415,966 29.0 4.6 -100.0
Cash in hand 21,406 24,621 17,940 19.3 -13.1 -100.0
Cash and balances with reserve bank of india 39,662 34,658 22,580 75.7 14.4 -100.0
Investment 108,253 107,413 86,083 25.8 0.8 2,261 -97.9
Advance 351,725 332,190 276,486 27.2 5.9 345,503 -1.8
Fixed Assets 2,975 2,957 2,853 4.3 0.6
Others Assets 12,470 11,203 10,024 24.4 11.3
Total Assets 536,492 513,042 415,966 29.0 4.6
Asset Quality
GNPA 9881 8765 8898 11.0 12.7
NPA 6156 5947.3 5,228 17.7 3.5
GNPA(%) 3.0 3.0 3.5
NPA(%) 1.9 2.0 2.0
PCR(%) Without technical write off 37.7 32.1 41.2
15
BANK OF INDIA
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Financials & Assuption 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 15570 20241 23139 27015 31171
Income on investments 5195 7142 7261 8562 10773
Interest on balances with Reserve Bank of India 798 834 1257 1987 1987
Others 295 264 251 1 1
Total Interest Income 21858 28481 31909 37565 43932
Others Income 2642 3321 3766 4504 4504
Total Income 24500 31802 35675 42069 48436
Interest on deposits 12218 17957 20238 29922 30362
Interest on RBI/Inter bank borrowings 813 1145 1489 1419 1419
Others 950 1065 1158 1281 1281
Interest Expended 13981 20167 22885 26987 33063
NII 7878 8313 9024 10578 10869
Other Income 2642 3321 3766 4504 4504
Total Income 10519 11635 12790 15082 15373
Employee 3492 3069 3131 0 3810
Other Expenses 1629 1871 2201 0 3656
Operating Expenses 5121 4941 5332 6381 6457
PPP( Rs Cr) 5398 6694 7458 8701 8917
Provisions 2909 4016 4709 4766 5045
Net Profit 2542 2678 2749 2776 3170
46.0 5.3 2.7 1.0 14.2
Key Balance Sheet DataDeposits 299559 318216 381840 465844 535721
Deposits Growth(%) 30 6 20 22 15
Borrowings 22021 32114 35368 43275 49766
Borrowings Growth(%) -2 46 10 22 15
Loan 213708 248833 289367 358816 366720
Loan Growth(%) 26 16 16 24 2
Investment 86677 86754 94613 117097 134662
Investment Growth(%) 27 0 9 24 15
Eastwind CalculationYield on Advances 7.3 8.1 8.0 7.5 8.5
Yield on Investments 6.3 8.7 7.1 7.3 8.0
Yield on Funds 6.5 7.8 7.7 7.5 8.4
Cost of deposits 4.1 5.6 5.2 6.4 5.7
Cost of Borrowings 8.0 6.9 6.8 7.5 7.5
Cost of fund 4.3 5.8 5.3 5.3 6.2
ValuationBook Value 322.7 365.3 416.9 434.0 0.0
P/BV 1.5 1.0 0.7 0.6 0.5
P/E 10.3 7.7 6.3 5.6 4.9
1M 1yr YTD
Absolute -7.1 2.9 35.0
Rel. to Nifty -3.4 2.5 22.0
Current 2QFY14 1QFY1
4Promoters 56.2 56.2 56.2
FII 21.5 19.7 22.0
DII 14.0 15.4 13.1
Others 8.3 8.8 8.7
Financials Rs, Crore
3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%
Revenue 10894 10468 4.1 11200 -2.7
EBITDA 1355 1321 2.6 891 52.0
PAT 681 669 1.8 501 35.9
EBITDA Margin 12.4% 12.6% (20bps) 8.0% 450bps
PAT Margin 6.3% 6.4% (10bps) 4.5% 180bps
16
CMP 1638 The company for 3QFY14 has registered net sales of Rs 10620 Cr down by 2.7% YoY led
by 4.5 % volume decline to 288151 units for the period under review. The decline in the
volume came majorly due to weaker performance on export business front. Export sales
volumes were down 38.6% YoY and 41.3% QoQ to 19,966 units.
Target Price 1700
Previous Target Price -
Upside 4%
Maruti Suzuki India Limited
Result Update NEUTRAL Result Analysis:
Change from Previous - EBITDA for MSIL is up 52% YoY to Rs.1,355 Cr and EBITDA margin was up 448 bps YoY
to 12.3%. However results are not comparable on yearly basis as 3QFY13 does not
include impact of SPIL merger. Raw material cost as % of net sales is down 671 bps
YoY.Employee cost as % of net sales is up 62 bps YoY but down 82 bps QoQ to
2.8%.Royalty payments for Q3 FY14 were around levels of H1 FY14.
Market Data
BSE Code 532500
NSE Symbol MARUTI
Average Daily Volume 423015 On realization front, the Net realization for company is up 1.4% YoY to Rs.368547 however
there is sequential decrease in net realization mainly due weak product mix, lower export
sales number and higher contribution of Mini Segments. Discounts in 3QFY14 is at all time
high to Rs.19412/unit vs. 17,500/unit QoQ.
Nifty 6073
Stock Performance-%
52wk Range H/L 1864/1217 The net profits for the company during 3QFY14 came at Rs 681 Cr and NPM at 6.25
%.Effective tax rate is around 23.1%.Market Cap (Rs/Cr) 22,266
Recent Event :
MSIL has announced that the proposed capacity expansion (1.5 Million units per annum) in
Gujarat would be through a 100% Suzuki (parent) owned subsidiary. The subsidiary would
be fully dedicated to Maruti.
Share Holding Pattern-% How we see the deal :
1.The near term effect of the deal on PAT is neutral, as this Greenfield facility at Gujrat will
take 2 -3 year to get commissioned and another 1 year to get its full capacity utilization, this
translates period FY17 onwards.
2.The MSIL is getting cars at cost of manufacturing plus portion of incremental capex which
means MSIL will lose manufacturing margins and will getting only the trading margin. The
newly formed company will be 100 % subsidiary of Suzuki Motors Limited.
One Year Price Vs NIFTY 3.The profit sharing from the upcoming Gujrat facility would depend on the stake of Suzuki
Motor in MSIL.
4..In any case Suzuki Motor will make profit equal to its stake in MSIL whether it makes its
own capex as in this case or MSIL made capex then why did Suzuki made this huge capex.
View & Valuation:
At CMP Rs 1638 the stock is trading at highest 5 year historical P/E multiple and in current
scenario we donot see much upsides from hereon. Therefore we are Neutral for the stock
with target price Rs 1700.The CMP seems to factored almost all the upsides including
improving operational efficiency and volume growth. The stock may see some upward
movement from current price on buzz that Suzuki may increase its stake in MSIL.
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
"NEUTRAL"31st Jan' 14
Narnolia Securities Ltd,
17
Raw material cost as % of net sales is down
671 bps YoY. Employee cost as % of net sales
is up 62 bps YoY but down 82 bps QoQ to
2.8%.
Maruti Suzuki India Limited
Graphical Represenation
SALES & PAT TREND
Net sales of Rs 10620 Cr down by 2.7% YoY
led by 4.5 % volume decline to 288151 units
for the period under review.
(Source: Company/Eastwind)
OPM & NPM TREND
(Source: Company/Eastwind)
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
REALIZATION PER VEHICLE
Net realization for company is up 1.4% YoY to
Rs.368547 however there is sequential
decrease in net realization mainly due weak
product mix, lower export sales number and
higher contribution of Mini Segments
Narnolia Securities Ltd,
V- Crompton Greaves Ltd.
CMP 110
Target Price 130
Previous
Target Price
120
Upside 15%
Change from
Previous
8%
Market DataBSE Code 500093
NSE Symbol
4,251
775,133
Nifty 6,074
Stock 1M 1yr YTD
Absolute (14.2) 2.3 17.9
Rel. to Nifty (10.6) 2.3 11.0
Share 3QFY14 2QFY14 1QFY14
Promoters 42.5 42.5 41.7
FII 18.5 16.6 15.2
DII 23.8 24.5 23.7
Others 15.2 16.5 19.4
Financials Rs, Crore
Consolidated 3QFY14 2QFY13 (QoQ)-% 3QFY13 (YoY)-%
Revenue 3351.9 3204.9 4.6% 2971.8 12.8%
EBITDA 169.3 161.3 5.0% 2.0 8322.4%
PAT 59.5 57.8 3.0% -69.0 186.2%
EBITDA Margin 5.1% 5.0% 10 bps 0.1% 500 bps
PAT Margin 1.8% 1.8% 0 bps -6.3% 810 bps
18
1 yr Forward P/B
CROMPGREAV
(Consolidated)
Please refer to the Disclaimers at the end of this Report.
We have rolled forward our valuation to FY16E earnings and maintained our Accumulated rating
on CGL with a revised target price of Rs130 (Rs105 earlier) based on 14xFY16E EPS, driven by
likely turnaround in international operations and a better earnings growth trajectory. We believe
that a record backlog, better/leaner cost structure, good & increasing product basket, improved
reach in terms of geography will drive earnings & intrest coverage ratio over the next few years.
It has assumed break even EBIT level for international subsidiaries in FY14. Further, In our view,
the stock's performance would largely be driven by an improvement in overseas business, though
standalone performance would protect downsides.
Valuations :
(Source: Company/ Eastwind Research)
Consolidated order book at the quarter ended Dec'14 was Rs. 10074 crore, up 9.12% yoy.
Consolidated order inflow for the quarter was Rs. 2624 crore up 15.7% yoy. Crompton expects a
robust order intake in high value-added segments like UHV/EHV in Asia, Automation/smart grid
in the power segment, Motors in EMEA market, Railway transportation and electronic drives in
the industrial segment.
Average Daily Volume
Order scenerio :
Domestic power systems and consumer products segment were key margin drivers as they
sustained healthy operating margins of 9.4% and 11.7%, respectively. Collectively, both segments
constitute 41% of total consolidated revenue. Consumer products segment continued its market
share expansion following higher distribution reach in categories like lighting (up 17% yoy and
fans up 13% yoy.
Margin to improve further :
"Rebounds begains…….."
AccumulateResult update
Mkt Capital (Rs Crores)
52wk Range H/L 72/137
Crompton consolidated net sales rose 12.8% on yearly basis to Rs 3351.9 crore during the
quarter, which were inline with street expectations. Consolidated earnings before interest, tax,
depreciation & amortisation (EBITDA) stands to Rs 169.3 crore and EBITDA margin at 4.9
percent. Power systems revenues increased 17.3 percent on yearly basis to Rs 2132.2 crore
during Dec quarter FY14, and earnings before interest & tax (EBIT) from power segment during
the quarter were Rs 53.3 crore. Meanwhile, its consumer products and industrial systems
divisions posted single digit growth in topline during the quarter and it gone by 7.3% to Rs 651
crore. EBIT of consumer products rose to Rs 75.9 crore up by 19.9% and industrial systems'
EBIT decreased by 42.7% to Rs 29.5 crore. Other income jumped 33.0% yoy to Rs 40.4 crore
while finance cost climbed to Rs 26.7 crore up by 25.6% yoy. At the current level of INR 110, we
maintain 'ACCUMULATE' at the Stock as Power sector has shown sign of revival by posting an
EBIT of Rs 53.3 crore VS Loss of Rs 104.6 crore qoq and also performance of Consumer division
was satisfactory with a sales growth of 7.25% yoy and EBIT Growth of 19.9%.
"Accumulate"31th Jan' 14
Narnolia Securities Ltd,
19
Please refer to the Disclaimers at the end of this Report.
Key financials
Crompton Greaves Ltd.
(Source: Company/ Eastwind Research)
Narnolia Securities Ltd,
PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E
Performance
Revenue 8737 9141 10005 11249 12094 13304 14634 16098
Other Income 74 110 113 63 75 110 110 110
Total Income 8811 9251 10118 11311 12170 13414 14744 16208
EBITDA 996 1278 1344 804 383 665 922 1014
EBIT 874 1122 1150 544 180 412 669 736
DEPRICIATION 122 155 194 260 203 253 253 278
INTREST COST 81 43 34 57 71 90 100 110
PBT 867 1190 1229 550 185 432 679 736
TAX 305 365 310 182 101 137 215 233
Extra Oridiniary Items 0 35 -38 0 -121 0 0 0
Reported PAT 563 860 881 368 -37 295 464 502
Dividend (INR) 75 82 82 52 30 52 52 52
DPS 1.2 1.3 1.3 0.8 0.5 0.8 0.8 0.8
EPS 8.8 13.4 13.7 5.7 -0.6 4.6 7.2 7.8
Yeild %
EBITDA % 11.4% 14.0% 13.4% 7.1% 3.2% 5.0% 6.0% 6.0%
NPM % 6.4% 9.4% 8.8% 3.3% -0.3% 2.2% 3.0% 3.0%
Earning Yeild % 13.0% 5.2% 5.1% 4.1% -0.6% 4.2% 6.6% 7.1%
Dividend Yeild % 1.7% 0.5% 0.5% 0.6% 0.5% 0.7% 0.7% 0.7%
ROE % 30.7% 34.3% 26.9% 10.2% -1.0% 8.4% 11.8% 11.4%
ROCE% 25.2% 30.0% 24.9% 9.2% 0.6% 7.5% 11.3% 11.5%
Position
Net Worth 1831 2504 3275 3611 3562 3529 3941 4391
Total Debt 718 501 395 985 1851 2000 2000 2000
Capital Employed 2549 3005 3670 4596 5413 5529 5941 6391
No of Share (Adj) 64 64 64 64 64 64 64 64
CMP 68 256 268 138 94 110 110 110
Valuation
Book Value 28.5 39.0 51.0 56.3 55.5 55.0 61.4 68.4
P/B 2.4 6.6 5.3 2.5 1.7 2.0 1.8 1.6
Int/Coverage 10.8 26.2 33.5 9.6 2.5 4.6 6.7 6.7
P/E 8 19 20 24 24 15 14
981
1094
1118
12
-2.147
1M 1yr YTD
Absolute -11.3 -18.1 -18.1
Rel.to Nifty -7.6 -18.1 -18.1
Current 4QFY13 3QFY1
3Promoters 66.7 64.1 64.1
FII 11.0 13.2 13.6
DII 15.4 15.3 15.6
Others 6.9 7.4 6.7
Financials Rs, Cr
2011 2012 2013 2014E 2015E
NII 10739 10734 13866 17734 21111
Total Income 42252 18237 22212 27035 30413
PPP 10950 10386 13199 16762 18856
Net Profit 6093 6465 8325 10658 11955
EPS 52.9 56.0 72.2 92.3 103.6
20
ICICI BANK
Average Daily Volume
11104
Previous Target Price
Market Data
Upside
358/127
BSE Code 532174NSE Symbol
Healthy NII growth on the back of higher loan growth and margin expansion
During quarter, bank reported NII growth of 21.6% YoY to Rs.4256 cr on the back of
higher than expected loan growth and loan yield led by credit deposits ratio and
expansion NIM. Other income registered growth of 26.5% YoY to Rs.2801 cr versus
Rs.2166 cr in previous quarter and Rs.2215 Cr in last quarter in corresponding
quarter. Healthy NII along with higher support from other income, revenue of the
bank grew by 23.5% YoY to Rs.7057 Cr.
Result update ACCUMULATE
CMP
Target Price
Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and
28.6% growth in operating profit was largely due to higher tax provisions
made of bank (32.4% of PBT versus 27.9% of PBT in 2QFY14). During quarter,
bank has created special reserve for deferred tax liability to the tune of Rs.215
Cr as per recent RBI guideline dated 20th December 2013. Adjusting the same,
profit grew by 22% YoY which was quite impressive. But bank’s cost of fund
increased higher than loan yield which would restrict margin expansion. We
lower our book value estimates to Rs.643 from earlier of Rs.657. Accordingly
we reduce our target price to Rs.1094 from earlier of Rs.1118.
52wk Range H/L
Change from Previous
ICICI Bank Vs Nifty
Share Holding Pattern-%
19.54 lakhs
Nifty 6073
ICICIBANK
Stable operating leverage led healthy operating profit growth
Operating leverage (opex to total assets) was remained very impressive and was
stable at 0.46% versus 0.43% in 3QFY13. Cost to income ratio of the bank improved
by 250 bps YoY to 37.4% as against 39.6%. Operating expenses increased by
15.7% YoY in which employee cost and other operating expenses increased by 6%
and 23% YoY respectively. Healthy revenue growth and controlled operating
expenses led operating profit growth of 28.6% YoY to Rs.4440 cr.
Asset quality by and large stable sequentially but provision declined
Bank reported deterioration in asset quality (GNPA) in sequential basis by 3.7% in
absoluter term. In percentage to gross advance, GNPA stood at 3.07% versus 3.1%
in previous quarter (marginally improved). Provisions were declined by 0.6% QoQ
taking net NPA increased by 15.3% QoQ. In percentage to net advance, this ratio
stood at 0.94% versus 0.85% in previous quarter. Lower provisions made PCR to
70.1% versus 73.1% in previous quarter.
Mkt Capital (Rs Cr)
Please refer to the Disclaimers at the end of this Report.
(Source: Company/Eastwind)
Stock Performance
"ACCUMULATE"31th Jan, 2013
Narnolia Securities Ltd,
21
ICICI BANK
Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and 28.6% growth
in operating profit largely due to higher tax provisions made of bank (32.4% of PBT
versus 27.9% of PBT in 2QFY14). During quarter, bank has created special reserve for
deferred tax liability to the tune of Rs.215 Cr as per recent RBI guideline dated 20th
December 2013. Adjusting the same, profit grew by 22% YoY which was quite
impressive. But bank’s cost of fund increased higher than loan yield would restrict margin
expansion. We lower our book value estimates to Rs.643 from earlier of Rs.657.
Accordingly we reduce our target price to Rs.1094 from earlier of Rs.1118.
Please refer to the Disclaimers at the end of this Report.
Lower growth in deposits led by muted growth in term deposits
In balance sheet front, bank’s deposits grew by 11% YoY lower than expectation largely
due to lower growth in term deposits. Demand deposits and saving deposits grew by
9.3% and 11.8% YoY taking overall CASA deposits growth to 16% YoY. In percentage to
total deposits, CASA stood at 42.9% versus 40.9% in last quarter. But in sequential
basis, bank reported 40 bps declined in CASA and borrowing also increased by 4%.
Overall cost of fund was increased by 32 bps in sequential basis which restricted margin
expansion despite of improvement in loan yield.
Higher loan growth led by retail loan followed by overseas and corporate loan
Loan grew by 16% YoY higher than expectation. Incremental loan growth came from
retail advances which grew by 22% YoY followed by oversea and corporate loan. Retail
loan now constituted 39% of total loan versus 37% in last quarter. Retail loans are
generally high yield in nature and higher loan constitute would result of margin sustaining
at current level. We are susceptible about the margin improvement because of higher
cost of fund as bank reported lower CASA and higher borrowing as a percentage to
NDTL in sequential basis.
Margin expansion marginally on account of higher cost of fund than deposits
NIM improved marginally from previous quarter to 3.32% from 3.31% largely due to
higher cost of fund than loan yield. Sequentially, cost of fund increased to 9.1% from
8.8% in previous quarter due to higher borrowing cost along with lower CASA ratio. Loan
yield improved to 9.9% from 9.7% in previous quarter. We believe NIM of the bank would
be highest as increasing cost of fund would cushion loan yield improvement.
Valuation & View
Narnolia Securities Ltd,
22
ICICI BANK
Source: Company/Eastwind
Please refer to the Disclaimers at the end of this Report.
Chart Focus
NII growth on account of higher than expected
loan growth and margin expansion
Healthy revenue growth and impressive
operating leverage led operating profit
Despite of higher revenue grwoth and
operating profit growth, net profit muted
because of higher tax provisions against DTL
Narnolia Securities Ltd,
23
ICICI BANK
Quarterly Result
Source: Company/Eastwind
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY % QoQ 3QFY14E Variation
Interest/discount on advances / bills 8224 7737 7066 16.4 6.3 7971 -3.1
Income on investments 2923 2839 2742 6.6 2.9 3012 3.0
Interest on balances with Reserve Bank of India 34 47 136 -75.3 -28.5 52 55.8
Others 275 190 194 42.1 44.7 236 -14.1
Total Interest Income 11456 10813 10138 13.0 5.9 11271 -1.6
Others Income 2801 2166 2215 26.5 29.3 2325 -17.0
Total Income 14257 12980 12353 15.4 9.8 13597 -4.6
Interest Expended 7200 6770 6639 8.4 6.4 6766 -6.0
NII 4256 4044 3499 21.6 5.2 4505 5.9
Other Income 2801 2166 2215 26.5 29.3 2325 -17.0
Total Income 7057 6210 5714 23.5 13.6 6831 -3.2
Employee 997 872 941 6.0 14.4 0 -100.0
Other Expenses 1620 1451 1321 22.7 11.7 0 -100.0
Operating Expenses 2617 2322 2261 15.7 12.7 2596 -0.8
PPP( Rs Cr) 4440 3888 3452 28.6 14.2 4235 -4.6
Provisions 695 625 369 88.4 11.2 657 -5.4
PBT 3745 3263 3084 21.4 14.8 3578 -4.5
Tax 1212 911 834 45.4 33.1 1073 -11.5
Net Profit 2533 2352 2250 12.6 7.7 2504 -1.1
Balance Sheet
Net Worth 74057 73103 67119 10.3 1.3 75608 2.1
Deposits 316970 309046 286418 10.7 2.6 318387 0.4
Borrowings 150940 145356 147149 2.6 3.8 153387 1.6
Investment 171985 168829 166842 3.1 1.9 3012 -98.2
Loan 332632 317786 286766 16.0 4.7 328689 -1.2
Asset Quality
GNPA (Rs Cr) 10448 10078 9803 6.6 3.7
NPA (Rs Cr) 3121 2707 2185 42.8 15.3
% GNPA 3.1 3.1 3.4
% NPA 0.9 0.9 0.8
PCR(w/o technical write-off)(%) 70.1 73.1 77.7
24
ICICI BANK
Financials & Assuption
Source: Company/Eastwind
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 19098 22130 27341 31646 34992
Income on investments 9181 9684 11009 11785 13220
Interest on balances with Reserve Bank of India 469 491 543 184 184
Others 1334 1238 1182 946 946
Total Interest Income 30081 33543 40076 44561 49342
Others Income 31513 7503 8346 9302 9302
Total Income 61595 41045 48421 53863 58644
Interest on deposits 11315 14304 16889 18217 20402
Interest on RBI/Inter bank borrowings 1683 1469 2087 0 0
Others 6345 7035 7234 10146 11364
Interest Expended 19343 22808 26209 27812 28840
NII 10739 10734 13866 16749 20502
Other Income 31513 7503 8346 9302 9302
Total Income 42252 18237 22212 26051 29804
Employee 4393 3515 3893 4451 5096
Other Expenses 26910 4335 5120 5441 6229
Operating Expenses 31302 7850 9013 9892 11325
PPP( Rs Cr) 10950 10386 13199 16159 18478
Provisions 4631 1583 1803 2592 2853
PBT 0 8803 11397 13567 15626
Tax 0 2338 3071 4071 4688
Net Profit 6093 6465 8325 9496 10938
Balance Sheet
DEPOSITS 259106 255500 292,614 321,875 360,500
Deposits Growth 7.3 -1.4 14.5 10.0 12.0
Borrowings 125839 140165 145,341 158,535 177,560
Borrowings Growth(%) 8.8 11.4 3.7 9.1 12.0
Investment 209653 159560 171,394 187,360 209,843
Growth(%) 12.5 -23.9 7.4 9.3 12.0
Advances 256019 253728 290,249 339,592 380,343
Growth(%) 13.4 -0.9 14.4 17.0 12.0
Eastwind CalculationYield on Advances 7.5 8.7 9.4 9.3 9.2
Yield on Investments 4.7 6.4 6.7 6.3 6.3
Cost of deposits 4.4 5.6 5.8 5.7 8.0
Cost of Borrowings 6.4 6.1 6.4 6.4 6.4
Cost of fund 5.0 5.8 6.0 0.0 5.9
ValuationBook Value 480 524 578 643 682
P/BV 2.3 1.7 1.5 1.6 1.5
P/E 5.5 7.3 9.4 9.2 10.6
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
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing “East wind” & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.
Top Related