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Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
India I Equities Country
Daily
2 July 2014
India Morning Bell
All the latest research and data
India Banks – Services, farm and retail loans drive credit growth in May’14. In May’14, non-food bank-credit growth came at 13% yoy, lower than the 15.3% of May’13, and slower than that in Apr’14 (14.2%). Key segments driving bank-credit growth were services (23.6% of bank credit, 14% yoy), retail (18.8% of bank credit, 13.5% yoy) and farm (12.6% of bank credit, 16.8% yoy). The industry segment saw slower yoy growth.
Hindustan Unilever – Despite the slowdown, continuing investments; Sell. We value the stock at a target price of `510, at a target PE of 27x FY16e earnings. As Hindustan Lever continues to reel from the heat of keener competition in segments such as laundry, skin care and oral care, we expect it to continue investing in these categories. We expect it to report revenue and earnings CAGRs of just 10% and 5%, respectively. Hence, we believe that, at current levels, any stock-price upside has already been capped.
Mahindra & Mahindra – Decent drive; Hold. While the UV portfolio comes off a lower base here on, short-term UV demand recovery in M&M’s key segments is likely to be restricted. Tractors will now be faced with a higher base and the possibility of a lower crop output due to adverse weather conditions. Thus, the short term appears to have very few upsides for the company. The long-term outlook, however, remains good with likelihood of agri-mechanisation, launches in the UV1 segment in FY16, and recovery in the CV cycle.
Sensex: 25516
Nifty: 7635
India: Non-food credit-growth progress modest, albeit improving
36,000
40,000
44,000
48,000
52,000
56,000
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov-
12
Feb-
13
May
-13
Aug-
13
Nov-
13
Feb-
14
May
-14
(`bn)
Source: The RBI, Anand Rathi Research
Ch
art
of
the
da
y
Markets 1 Jul ’14 1 Day YTD Sensex 25516 0.4% 20.5%Nifty 7635 0.3% 21.1%Dow Jones 16956 0.8% 2.3%S & P 500 1973 0.7% 6.8%FTSE 6803 0.9% 0.8%Nikkei* 15420 0.6% -5.3%Hang Seng* 23314 0.5% 0.0%
Volumes (US$m) 1 Jul ’14 1 Day Avg '14Cash BSE 624 5.7% 506Cash NSE 2,763 -4.1% 2,496Derivatives (NSE) 15,895 -12.7% 27,730
Flows (US$m) 1 Jul ’14* MTD YTD FII – Cash Buy 631 14,612 72,950Sell 488 12,752 63,621Net 143 1,840 9,917FII - Derivatives Buy 1,708 104,413 435,125Sell 1,542 103,694 433,398Net 166 719 1,034DII – Cash Buy 207 3,132 12,729Sell 336 2,743 14,168Net -129 389 -1,310
Others 1 Jul ’14 1 Day YTD Oil Brent (US$/bbl)* 112.2 -0.1% 3.4%Gold (US$/oz)* 1,325.3 -0.1% 9.9%Steel (US$/MT) 590.0 0.0% 0.9%`/US$ 60.08 0.0% 2.9%US$/Euro* 1.37 0.0% 0.5%Yen/US$* 101.62 -0.1% 3.6%Call Rate 8.00% -60.bps -75.bps10-year G-Secs 8.74% 0.0bps -8.8bpsEMBI spreads 278.55 -4.3bps -55.7bps@7:30am *Provisional Source: BSE, Bloomberg
2 July 2014 India Morning Bell
Anand Rathi Research India Equities
Market Data
Price Performance Price Performance Price Performance Top-5 gainers Top-5 gainers Top-5 gainersCompany CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%)
PAGE INDUSTRIES 6874 14.8 18.9 CEAT LTD 705 38.4 61.7 MAHINDRA UGINE 428 48.7 57.9
PETRONET LNG LTD 187 12.1 17.0 RAJESH EXPORTS 191 29.2 36.6 PRIME FOCUS LTD 48 22.9 39.4
BHARAT ELECTRON 2008 10.4 23.2 NATCO PHARMA LTD 1114 17.4 45.8 KESORAM INDS LTD 114 20.6 46.3
MINDTREE LTD 899 10.2 28.6 MAHANAGAR TELE 37 17.1 17.1 GRANULES INDIA 485 15.4 33.9
ASHOK LEYLAND 36 8.4 9.4 KAVERI SEED 724 14.8 12.3 NAVIN FLUORINE I 633 14.7 48.7
Top-5 losers Top-5 losers Top-5 losersCompany CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%)
JAIPRAKASH ASSOC 73 (7.2) (6.7) AMTEK INDIA LTD 101 (21.2) 32.3 S MOBILITY LTD 32 (18.6) 2.1
SHRIRAM TRANSPRT 850 (6.9) (7.2) JK LAKSHMI CEMEN 210 (13.9) 18.0 MATRA KAUSHAL EN 49 (16.4) (6.6)
MPHASIS LTD 420 (6.8) 4.9 SIFY TECHNOL-ADR 129 (10.6) 3.2 ROLLATAINERS LTD 331 (14.9) 120.5
KOTAK MAHINDRA 879 (6.2) 0.1 WELSPUN CORP LTD 87 (8.2) (2.9) IL & FS INVESTME 23 (10.9) 13.9
UNITED SPIRITS 2608 (5.1) (6.6) VA TECH WABAG LT 1220 (7.9) 25.1 PEARL AGRICULTUR 384 (10.7) (5.3)
Volume Volume VolumeVolume spurts Volume spurts Volume spurtsCompany CMP (INR) 1 wk avg 1/4 wk (%) Company CMP (INR) 1 wk avg 1/4 wk (%) Company CMP (INR) 1 wk avg 1/4 wk (%)
MINDTREE LTD 899 626,829 97.9 DB CORP LTD 310 811,828 197.3 CAPRI GLOBAL CAP 172 322,970 263.3
ZEE ENTERTAINMEN 284 7,203,465 92.9 RAJESH EXPORTS 191 1,384,591 189.7 NEWTIME INFRASTR 48 1,990 218.1
GILLETTE INDIA 2,123 35,098 70.1 CEAT LTD 705 2,971,527 187.3 APL APOLLO TUBES 283 315,517 176.4
CRISIL LTD 1,775 43,807 63.8 ABBOTT INDIA LTD 2,041 26,084 172.2 HUBTOWN LTD 165 221,318 164.0
UNITED BREWERIES 696 439,576 61.3 NATCO PHARMA LTD 1,114 553,078 154.1 MAHINDRA UGINE 428 376,060 161.0
Technicals Technicals Technicals Above 200 DMA Above 200 DMA Above 200 DMACompany CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%)
SUZLON ENERGY 31 13 140.4 BEML LTD 850 302 182.4 GREENCREST FINAN 33 10 214.4
IRB INFRASTRUCTU 217 108 102.0 # STERLITE TECH LT 70 27 159.8 ECO FRIENDLY FOO 422 162 161.3 UNITECH LTD 35 17 100.1 # HINDUSTAN CONST 42 18 137.0 AHLUWALIA CONTRA 105 41 156.3
ESSAR OIL LTD 112 61 85.7 # CCL INTERNATIONA 360 158 129.9 JMT AUTO LTD 455 184 153.8
BALKRISHNA INDS 730 399 83.1 SINTEX INDUS LTD 97.4 43.5 125.9 MAHINDRA UGINE 428 170 150.3
Below 200 DMA Below 200 DMA Below 200 DMACompany CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%)
BHUSHAN STEEL 397 462 (14.0) BOMBAY RAYON FAS 167 190 (12.3) KAPPAC PHARMA 373 562 (33.5)
UNITED BREWERIES 696 799 (12.9) WNS HOLDINGS-ADR 1,132 1,224 (7.6) SKIL INFRASTRUCT 52 76 (31.8)
IDEA CELLULAR 137 153 (10.3) JET AIRWAYS IND 261 279 (6.6) LUMINAIRE TECH 26 37 (29.3)
GLAXOSMITHKLINE 2,487 2,630 (5.3) JYOTHY LABORATOR 179 191 (6.2) JAYBHARAT TEXTIL 22 30 (25.6)
INFOSYS LTD 3,204 3,355 (4.4) R*SHARES GOLD 2,544 2,687 (5.4) CLARIS LIFESC 146 173 (15.3)
Small Caps(US$100m-250m)
Large Caps(>US$1bn)
Mid Caps(US$250m-1bn)
Source: Bloomberg
Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
Banks
UpdateIndia I Equities
2 July 2014
India Banks Services, farm and retail loans drive credit growth in May’14
Key takeaways
Non-food credit grew 13% yoy. In May’14, non-food bank-credit growth came at 13% yoy, lower than the 15.3% of May’13, and slower than that in Apr’14 (14.2%). Key segments driving bank-credit growth were services (23.6% of bank credit, 14% yoy), retail (18.8% of bank credit, 13.5% yoy) and farm (12.6% of bank credit, 16.8% yoy). The industry segment (45% of bank credit, 11.4% yoy) saw slower yoy growth.
Bank credit to industry fell sharply, led chiefly by infra. Yoy growth in bank credit to industry has slowed down starkly, from 15.9% in May’13 to 11.4% in May’14, possibly due to the sluggish macro-economic environment. Over the same period its share in incremental non-food credit slid from 47.4% to 39.8%. Yoy growth in bank credit to infrastructure also slowed down, from 21.4% in May’13 to 11% a year later. In that period the share of infrastructure in incremental non-food credit slipped from 20.8% to 13.2%.
Bank credit to retail robust, yet growth in housing loans subsides. Yoy growth in bank credit to retail has fallen, from 17.6% in Apr’13 to 13.5% a year later, yet is strong. In that period its share in incremental non-food credit has fallen from 21.2% to 19.4%. Yoy growth in bank credit to housing has also fallen considerably, from 19.4% a year ago to 15.8% in May’14. In that period, housing’s share in incremental non-food credit has fallen slightly, from 11.9% to 11.8%. Yet, housing continued to comprise a high 60.5% of incremental retail loans in May’14.
Bank credit to services improves. Yoy growth in bank credit to services has been above overall credit growth, and has fallen a mite, from 14.1% in May’13 to 14% a year later. In that period its share in incremental non-food credit has risen from 21.8% to 25.1%. While yoy growth in bank credit to NBFCs has shot up from 0.3% in May’13 to 21.7% in May’14, over the same period bank credit to transport operators has also risen sharply, from 4.8% to 10.3%.
Neutral Sensex: 25516
Nifty: 7635
Bankex vs. Sensex
Bankex
Sensex
708090
100110120130140
Jul/1
3
Aug/
13
Sep/
13O
ct/1
3
Nov
/13
Dec
/13
Jan/
14
Feb/
14M
ar/1
4
Apr/1
4M
ay/1
4
Jun/
14
Source: Bloomberg
Fig 1 - India banks’ credit deployment: May’14 ` bn 31-May-13 18-Apr-14 30-May-14 YoY % MoM % Incr. YoYNon-food credit 49,447 55,837 55,895 13.0 0.1 6,448 1. Farm 6,034 6,901 7,045 16.8 2.1 1,012 2. Industry 22,593 25,140 25,159 11.4 0.1 2,566 3. Services 11,547 13,348 13,164 14.0 (1.4) 1,617 4. Retail 9,273 10,394 10,527 13.5 1.3 1,254 Priority 16,166 18,611 18,644 15.3 0.2 2,478 % of Non-food credit 1. Farm 12.2 12.4 12.6 40 bps 25 bps 2. Industry 45.7 45.0 45.0 (68) bps (1) bp 3. Services 23.4 23.9 23.6 20 bps (35) bps 4. Retail 18.8 18.6 18.8 8 bps 22 bps Priority 32.7 33.3 33.4 66 bps 2 bps Source: Anand Rathi Research
2 July 2014 India Banks – Services, farm and retail loans drive credit growth in May’14
Anand Rathi Research 2
Fig 2 – Bank credit to Industries (` bn) 23-Aug-13 20-Sep-13 18-Oct-13 29-Nov-13 27-Dec-13 24-Jan-14 21-Feb-14 21-Mar-14 18-Apr-14 30-May-14
Mining & Quarrying (incl. coal) 323 324 333 336 354 359 357 353 359 372
Food Processing 1,214 1,214 1,221 1,292 1,370 1,398 1,454 1,480 1,509 1,515
Beverage & Tobacco 161 163 163 162 168 168 173 186 184 184
Textiles 1,849 1,870 1,869 1,893 1,946 1,964 2,000 2,040 2,024 2,009
Leather & Leather Products 90 93 95 96 100 99 100 103 101 98
Wood & Wood Products 82 84 86 89 90 92 92 94 92 94
Paper & Paper Products 307 309 313 319 320 326 329 331 332 330
Petroleum, Coal & Nuclear Fuels 568 592 602 556 575 580 571 635 584 569
Chemicals & Chemical Products 1,581 1,715 1,607 1,571 1,656 1,542 1,571 1,677 1,632 1,540
Rubber, Plastic & their Products 321 333 342 349 354 364 364 368 364 356
Glass & Glassware 72 72 80 84 86 87 87 87 93 89
Cement & Cement Products 494 498 495 511 527 522 529 541 550 557
Basic Metal & Metal Product 3,292 3,368 3,377 3,381 3,449 3,479 3,532 3,620 3,571 3,555
All Engineering 1,362 1,382 1,373 1,381 1,388 1,397 1,418 1,456 1,443 1,460
Vehicles & Transport Equipment 637 656 644 650 659 667 673 677 672 663
Gems & Jewellery 700 703 696 680 637 693 697 720 700 685
Construction 538 547 569 588 588 611 608 614 679 682
Infrastructure 7,847 7,943 7,887 7,946 8,047 8,162 8,286 8,398 8,442 8,573
Other Industries 1,860 1,850 1,812 1,841 1,803 1,777 1,807 1,850 1,812 1,831
Total Industries 23,301 23,715 23,565 23,723 24,117 24,285 24,648 25,229 25,140 25,159
Source: RBI
Fig 3 – Bank credit to Services (` bn) 23-Aug-13 20-Sep-13 18-Oct-13 29-Nov-13 27-Dec-13 24-Jan-14 21-Feb-14 21-Mar-14 18-Apr-14 30-May-14
Transport Operators 823 830 848 840 860 875 885 895 918 900
Computer Software 177 173 178 179 177 177 175 176 169 169
Tourism, Hotels & Restaurants 374 384 384 386 387 391 392 392 391 389
Shipping 90 93 93 93 91 91 94 99 95 95
Professional Services 633 637 671 662 681 689 693 707 721 708
Trade 2,846 2,945 2,978 3,005 3,042 3,049 3,151 3,228 3,260 3,216
Commercial Real Estate 1,360 1,358 1,437 1,431 1,428 1,466 1,470 1,544 1,526 1,538
NBFCs 2,834 3,070 2,909 2,869 2,904 2,812 2,819 2,946 3,119 3,037
Other Services 2,912 3,062 2,975 2,989 3,060 3,038 3,205 3,375 3,149 3,111
Total Services 12,050 12,553 12,472 12,456 12,628 12,589 12,884 13,370 13,348 13,164
Source: RBI
Fig 4 – Bank credit to Retail (` bn) 23-Aug-13 20-Sep-13 18-Oct-13 29-Nov-13 27-Dec-13 24-Jan-14 21-Feb-14 21-Mar-14 18-Apr-14 30-May-14
Consumer Durables 94 96 95 100 103 110 124 128 137 139
Housing 4,979 5,056 5,108 5,121 5,185 5,243 5,291 5,408 5,451 5,558
Loans against FDs 600 590 566 565 586 587 569 641 593 550
Advances against shares, bonds, etc. 29 31 32 33 34 35 36 38 34 33
Credit Cards 236 235 234 241 244 253 254 249 254 263
Education 573 582 585 589 592 599 602 600 601 601
Vehicle Loans 1,174 1,186 1,202 1,240 1,261 1,274 1,285 1,304 1,340 1,363
Other Personal Loans 1,879 1,876 1,880 1,955 1,985 1,990 1,999 1,998 1,984 2,020
Total Retail 9,564 9,653 9,702 9,844 9,990 10,091 10,159 10,367 10,394 10,527
Source: RBI
2 July 2014 India Banks – Services, farm and retail loans drive credit growth in May’14
Anand Rathi Research 3
Fig 5 – Non-food credit-growth progress modest, albeit improving
36,000
40,000
44,000
48,000
52,000
56,000
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov-
12
Feb-
13
May
-13
Aug-
13
Nov-
13
Feb-
14
May
-14
(`bn)
Source: RBI, Anand Rathi Research
Fig 6 – While non-food credit growth (yoy) was modest, incremental non-food credit was lower yoy
5,250
5,750
6,250
6,750
7,250
7,750
8,250
May
-11
Aug-
11
Nov
-11
Feb-
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-12
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-13
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13
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-13
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14
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-14
(`bn)
12
14
16
18
20
22
24
(%)
Non-food credit (incr.) Non-food credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 9 – Loans to industries since Jan’12 have been on a continual downtrend
38
40
42
44
46
48
50
52
54
56
May
-11
Aug-
11
Nov
-11
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13
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-13
Feb-
14
May
-14
(%)
10
12
14
16
18
20
22
24
26
28(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 10 – Large industries held the lion’s share of loans to industry
0%
20%
40%
60%
80%
100%
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov-
12
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13
May
-13
Aug-
13
Nov
-13
Feb-
14
May
-14
Mirco & small Medium Large
Source: RBI, Anand Rathi Research
Fig 7 – Non-food credit composition unchanged in May’14
0%
20%
40%
60%
80%
100%
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov-
12
Feb-
13
May
-13
Aug-
13
Nov
-13
Feb-
14
May
-14
Farm Industry Services Retail
Source: RBI, Anand Rathi Research
Fig 8 – The proportions of retail and industry loans in incremental non-food credit have risen qoq
0%
20%
40%
60%
80%
100%
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov-
12
Feb-
13
May
-13
Aug-
13
Nov
-13
Feb-
14
May
-14
Farm Industry Services Retail
Source: RBI, Anand Rathi Research
2 July 2014 India Banks – Services, farm and retail loans drive credit growth in May’14
Anand Rathi Research 4
Fig 11 – Infrastructure’s share in bank credit has been steadily declining since Jul’13
9
11
13
15
17
19
21
23
May
-12
Jul-1
2
Sep-
12
Nov-
12
Jan-
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May
-13
Jul-1
3
Sep-
13
Nov-
13
Jan-
14
Mar
-14
May
-14
(%)
Share in incr. credit YoY
Source: RBI, Anand Rathi Research
Fig 12 – Power dominates infra loans; share of telecoms loans has declined yoy
0%
20%
40%
60%
80%
100%
May
-11
Aug-
11
Nov-
11
Feb-
12
May
-12
Aug-
12
Nov
-12
Feb-
13
May
-13
Aug-
13
Nov
-13
Feb-
14
May
-14
Power Telecom Roads Other
Source: RBI, Anand Rathi Research
Fig 13 – Growth in bank credit to construction has accelerated since Aug’13. . .
4
8
12
16
20
24
28
May
-12
Jul-1
2
Sep-
12
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Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
(%)
Source: RBI, Anand Rathi Research
Fig 14 – . . .but comprises a very small share of incremental non-food credit
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
May
-12
Jul-1
2
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12
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13
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-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
(%)
Source: RBI, Anand Rathi Research
Fig 15 – Yoy growth in bank credit to the services sector is strong
16.0
18.0
20.0
22.0
24.0
26.0
28.0
30.0
May
-11
Aug-
11
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-14
(%)
9.0
11.5
14.0
16.5
19.0
21.5
24.0
26.5(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 16 – Services sector: Yoy growth in bank credit to commercial real estate is robust
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
May
-12
Jul-1
2
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-14
(%)
5.0
7.5
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12.5
15.0
17.5
20.0
22.5
25.0(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
2 July 2014 India Banks – Services, farm and retail loans drive credit growth in May’14
Anand Rathi Research 5
Fig 17 – Services sector: Yoy growth in bank credit to NBFCs on an uptrend since Mar’14
0.0
1.5
3.0
4.5
6.0
7.5
9.0
10.5
12.0
13.5
May
-12
Jul-1
2
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-14
(%)
-
7
14
21
28
35
42
49
56(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 18 – Services sector: Yoy growth in bank credit to transport operators has accelerated since Jul’13
0.3
0.6
0.9
1.2
1.5
1.8
2.1
May
-12
Jul-1
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-14
(%)
-
3
6
9
12
15
18
(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 19 – Services sector: Yoy growth in bank credit to trade is modest
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
May
-12
Jul-1
2
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-14
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-14
(%)
12
14
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18
20
22
24
26
28(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 20 – Services sector: Almost equal share of wholesale and retail in bank credit to the trade segment
0%
10%
20%
30%
40%
50%
60%70%
80%
90%
100%
May
-11
Aug-
11
Nov
-11
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12
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-12
Aug-
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12
Feb-
13
May
-13
Aug-
13
Nov
-13
Feb-
14
May
-14
Wholesale Retail
Source: RBI, Anand Rathi Research
Fig 21 – Bank credit to retail is robust; its share in incremental credit has steadily risen since Jan’12
12
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18
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22
May
-11
Aug-
11
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May
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13
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-13
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14
May
-14
(%)
11
13
15
17
19
21(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 22 – Retail loans have primarily been driven by housing loans
5
6
7
8
9
10
11
12
13
May
-11
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11
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-11
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(%)
7
9
11
13
15
17
19
21
23(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
2 July 2014 India Banks – Services, farm and retail loans drive credit growth in May’14
Anand Rathi Research 6
Fig 23 – Credit cards and education loans comprise a small (<1%) share of incremental non-food credit
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
May
-11
Aug-
11
Nov-
11
Feb-
12
May
-12
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12
Nov
-12
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13
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14
May
-14
(%)
Credit cards Education Auto
Source: RBI, Anand Rathi Research
Fig 24 – While retail auto-loan growth has fallen, loans to vehicles & transport equipment have risen since Jul’13
4
8
12
16
20
24
28
32
May
-11
Aug-
11
Nov
-11
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-14
(%)
8
11
14
17
20
23
26
29(%)
Vehicles & transport equiment YoY Retail auto loans YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 25 – Yoy growth in bank credit to the farm sector has improved, its share in incremental credit has steadily risen
4
6
8
10
12
14
16
18
May
-11
Aug-
11
Nov
-11
Feb-
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-14
(%)
6
9
12
15
18
21
24
27
(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 26 – Share of the farm sector in further priority-sector credit has risen over the past year (May’13– May’14)
15
25
35
45
55
65
75
85
95
May
-12
Jul-1
2
Sep-
12
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-12
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Mar
-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
(%)
Source: RBI, Anand Rathi Research
Fig 27 – Strong yoy growth in bank credit to the priority sector, but lower qoq
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
May
-11
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(%)
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
27.5(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Fig 28 – Priority sector housing share in incremental non-food credit is now below 5%
-
1.0
2.0
3.0
4.0
5.0
6.0
May
-12
Jul-1
2
Sep-
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Nov
-12
Jan-
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Mar
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May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
(%)
-
3
6
9
12
15
18(%)
Share in incr. credit YoY (RHS)
Source: RBI, Anand Rathi Research
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
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Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
Key financials (YE Mar) FY12 FY13 FY14 FY15e FY16e
Sales (`m) 234,363 270,040 285,390 313,384 344,631
Net profit (`m) 26,770 32,233 37,068 38,067 40,488
EPS (`) 12.4 14.9 17.1 17.6 18.7
Growth (%) 25.3 20.4 15.0 2.7 6.4
PE (x) 50.7 42.1 36.6 35.7 33.5
PBV (x) 39.1 51.1 40.4 37.5 35.0
RoE (%) 89.6 105.2 123.3 109.1 108.0
RoCE (%) 92.7 94.3 88.8 88.8 92.8
Dividend yield (%) 1.2 2.9 2.1 2.2 2.4
Net gearing (%) (92.9) (94.9) (112.4) (115.0) (119.4)
Source: Company, Anand Rathi Research
Consumer
UpdateIndia I Equities
2 July 2014
Hindustan Unilever
Despite the slowdown, continuing investments; Sell
Key takeaways from analyst meet
Product launches in line with parent’s strategy. Compared to the earlier strategy of launching products such as Wheel, Close Up, Fair & Lovely which are suitable to Indian consumers, HUL now seems focused on introducing global products in India. Dove Skin Care range, Axe Deodorants, variants of Lipton tea, Tressemme and Tony & Guy shampoos are have been rolled out simultaneously in most countries where Unilever operates. We believe this would help due to economies of scale and reduce R&D costs. Aggressive focus on male grooming. On the success of Fair & Lovely men’s cream, HUL has introduced Vaseline men’s cream and has recently rolled out Ponds men’s fairness range. It plans to aggressively launch variants under the Axe brand. It expects that male grooming is extremely under-penetrated in India and has healthy growth potential in the coming decade. Increase in advertisements in non-TV media. HUL is seeking various ways to utilise the non-TV media as consumers are paying more attention to other means such as mobile phones and the internet. It has started a unique entertainment system, ‘Kankhajoora tesan’, on mobile phones and begun showcasing its brands as an integral part of movies (Sunsilk in the movie 2 States). It has also increased promotion of Lifebuoy via stamps on rotis. Initiatives in trade to drive growth. In FY14 HUL aggressively rolled out its ‘perfect stores’ strategy, helping increase throughput per store and increase in-shop promotions. It also resorted to glow signs instead of paper tapes to promote premium product launches. Our take. We value the stock at a target price of `510, at a target PE of 27x FY16e earnings. As Hindustan Lever continues to reel from the heat of keener competition in segments such as laundry, skin care and oral care, we expect it to continue investing in these categories. We expect it to report revenue and earnings CAGRs of just 10% and 5%, respectively. Hence, we believe that, at current levels, any stock-price upside has already been capped. Risks. Lower raw material prices & lower than expected competitive pressure
Rating: Sell Target Price: `510 Share Price: `628
Key data HUVR IN / HLL.BO
52-week high / low `725 / `537
Sensex / Nifty 25516/7635
3-m average volume US$4.4m
Market cap `1,347bn / US$22bn
Shares outstanding 2,163m
Relative price performance
HUVR
Sensex
500
550
600
650
700
750
800
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Source: Bloomberg
Shareholding pattern (%) Mar ’14 Dec ’13 Sep ’13
Promoters 67.3 67.3 67.3 - of which, Pledged - - -Free Float 32.7 32.7 32.7 - Foreign Institutions 14.1 14.8 15.3 - Domestic Institutions 4.1 3.4 3.0 - Public 14.5 14.5 14.4
2 July 2014 Hindustan Unilever – Despite the slowdown, continuing investments; Sell
Anand Rathi Research 2
Quick Glance – Financials and ValuationsFig 1 – Income statement (` m) Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Net revenues 234,363 270,040 285,390 313,384 344,631 Revenue growth (%) 18.9 15.2 5.7 9.8 10.0 - Oper. expenses 199,528 227,987 244,916 268,272 294,727 EBIDTA 34,836 42,053 40,474 45,111 49,905 EBITDA margin (%) 14.9 15.6 14.2 14.4 14.5 - Interest expenses 17 257 407 353 353 - Depreciation 2,335 2,513 2,955 3,402 3,822 + Other income 2,596 5,320 12,653 10,235 9,140 - Tax 8,215 12,267 12,594 13,414 14,266 Effective tax rate (%) 23.4 27.5 25.3 26.0 26.0 Reported PAT 26,865 32,337 37,170 38,177 40,603 +/- Extraordinary items 1,137 6,057 2,387 - -+/- Minority interest 95 104 102 110 115 Adjusted PAT 27,907 38,290 39,456 38,067 40,488 Adj. FDEPS (`/sh) 12.4 14.9 17.1 17.6 18.7 Adj. FDEPS growth (%) 25.3 20.4 15.0 2.7 6.4 Source: Company, Anand Rathi Research
Fig 3 – Cash-flow statement (` m) Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Consolidated PAT 27,907 38,290 39,456 38,067 40,488 +Depreciation 2,335 2,513 2,955 3,402 3,822 Cash profit 30,242 40,803 42,411 41,469 44,310 - Incr./(Decr.) in WC (7,545) 4,295 8,147 4,877 5,262 Operating cash-flow 22,571 39,136 50,572 46,455 49,687 - Capex (2,734) (4,407) (7,605) (7,000) (7,000)Free cash-flow 19,837 34,729 42,967 39,455 42,687 - Dividend (8,762) (41,538) (32,441) (35,425) (37,955)+ Equity raised 336 73 0 - -+ Debt raised - 247 (387) - -- Investments (5,794) (4,629) (3,985) (28,500) (4,800)- Misc. items 1,307 6,321 - - -Net cash-flow 6,925 (4,796) 6,153 (24,470) (68)+ Opening cash 2,505 9,420 19,007 25,160 691 Closing cash 9,430 4,625 25,160 691 622 Source: Company, Anand Rathi Research
Fig 5 – PE band
HUVR 17x
25x
33x
41x
50x
0
150
300
450
600
750
900
Jun-
00
Feb-
01
Oct
-01
Jul-0
2
Mar
-03
Dec
-03
Aug-
04
Apr-0
5
Jan-
06
Sep-
06
Jun-
07
Feb-
08
Oct
-08
Jul-0
9
Mar
-10
Dec
-10
Aug-
11
May
-12
Jan-
13
Sep-
13
Jun-
14
Source: Bloomberg, Anand Rathi Research
Fig 2 – Balance sheet (` m) Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Share capital 2,162 2,163 2,163 2,163 2,163 Reserves & surplus 34,649 26,485 33,210 35,852 38,385 Net worth 36,811 28,648 35,373 38,015 40,548 Total debt 183 209 223 333 448 Minority interest 10,060 12,170 11,783 11,783 11,783 Def. tax liab. (net) (2,099) (2,085) (1,796) (1,796) (1,796)Capital employed 44,954 38,941 45,583 48,335 50,983 Net fixed assets 24,905 26,539 31,188 34,787 37,965 Investments 27,030 29,708 33,694 62,194 66,994 - of which, Liquid 27,030 29,708 33,694 62,194 66,994 Net working capital (26,945) (36,313) (44,460) (49,336) (54,598)Cash and bank balance 19,964 19,007 25,160 691 622 Capital deployed 44,954 38,941 45,583 48,335 50,983 Net debt (39,034) (38,631) (48,867) (52,897) (57,629)WC days (11.5) (13.4) (15.6) (15.7) (15.8)Book value (`/sh) 16.1 12.3 15.5 16.7 17.9 Source: Company, Anand Rathi Research
Fig 4 – Ratio analysis @ `628 Year-end: Mar FY12 FY13 FY14 FY15e FY16e
P/E (x) 50.7 42.1 36.6 35.7 33.5 P/B (x) 39.1 51.1 40.4 37.5 35.0 EV/sales (x) 5.7 4.9 4.7 4.3 3.9 EV/EBITDA (x) 38.2 31.7 32.9 29.5 26.7 RoAE (%) 89.6 105.2 123.3 109.1 108.0 RoACE (%) 92.7 94.3 88.8 88.8 92.8 Dividend yield (%) 1.2 2.9 2.1 2.2 2.4 Dividend payout (%) 60.6 124.1 75.8 79.5 80.1 RM to sales (%) 53.3 52.2 52.1 51.8 51.7 Ad spend to sales (%) 11.5 12.2 12.9 13.0 13.0 EBITDA growth (%) 46.5 20.7 (3.8) 11.5 10.6 EPS growth (%) 25.3 20.4 15.0 2.7 6.4 PAT margin (%) 11.5 12.0 13.0 12.2 11.8 Tax rate (%) 73.8 107.4 115.6 103.3 105.1 Staff cost to sales (%) 9.6 14.5 17.7 14.8 14.4 Source: Company, Anand Rathi Research
Fig 6 – Revenue break- up
Personal products
30%
Detergents21%
Soaps20%
Others12%
Tea & garden tea
11%
Canned & processed food
3%
Branded staple foods2%
Ice cream1%
Source: Company
2 July 2014 Hindustan Unilever – Despite the slowdown, continuing investments; Sell
Anand Rathi Research 3
Analyst meet highlights Focus on launching global products in India
HUL has been accustomed to introducing various products for Indian consumers such as Wheel, Close Up, and Fair & Lovely. It had also concentrated on acquiring businesses/brands in India such as the consumer business of Tata Oil Mills (Tomco). However, after attending the analyst meet, we believe the company is set on launching global products in India. After its global acquisitions it has rolled out shampoos such as Tressemme, and Tony & Guy in India. Within just 12 months from launch, Tressemme is now a `10bn brand in India. Dove hair and skin care products, variants of Axe deodorants have been rolled out across most of countries at the same time. Lipton Yellow Label tea was also re-launched in 70 countries in FY14.
We believe that aligning its range of products as well as launches in sync with the parent company will help HUL benefit from economies of scale and reduce research & development costs.
Aggressive launch of products for male grooming
On the success of Fair & Lovely men’s cream, HUL has increased the number of products in the men’s grooming sub-segment. It had introduced Vaseline men’s fairness cream nearly three years ago and has just rolled out a Ponds Men’s fairness range. It also indicated introducing various male grooming products under Axe. It indicated that male grooming would be one of the fastest-growing segments in the next decade.
Fig 7 – Portfolio for driving male grooming Brand Products Status
Rexona Men Deodorants Withdrawn
Fair & Lovely Mens Fairness cream Success
Vaseline Mens Fairness cream Moderate Success
Ponds Fairness cream, Facewash Just launched
Axe Deodorants, Talcum powder, shaving cream, After shave lotion Success
Source: Company, Anand Rathi Research
Aggressive investment in non-TV means of mass communication
HUL indicated that, of total ad-spend, expenditure on TV was over 80% whereas with other media such as mobile phones and the internet rapidly growing, expenditure on advertising on TV is ~76%, now. It indicated that it would increase expenditure on non-TV media.
It is showcasing brands as integral part of movies (e.g. Sunsilk in 2 States). HUL has introduced a unique entertainment system, ‘Kankhajoora tesan’. After a “missed” call to 1800 3000 0123, consumers can listen to songs and jokes for 15 minutes. Of these 15, HUL will air its advertisements for 2-3 minutes. Already ~12m users have tried this. HUL had also extended the promotion of Lifebuoy via stamps on rotis (Kya apne Lifebuoy se haath dhoye?)
2 July 2014 Hindustan Unilever – Despite the slowdown, continuing investments; Sell
Anand Rathi Research 4
Fig 8 – Aggressive investment in non-TV media Activity Medium Brands
Kankhajoora tesan Mobile All Stamp on rotis for washing hands Promotion in melas Lifebuoy Training school children Promotion in schools Lifebuoy, Pepsodent Prescription route for Oral care Promotion via doctors Pepsodent Free food samples Modern trade Kissan, Knorr Showcasing brands in movies Movies Sunsilk, Lakme
Source: Company, Anand Rathi Research
Increase in royalty rates
HUL has increased royalty rates and indicated the plan for a further increase in royalty. Royalty rates have moved up 50bps in Apr’14. They will move up a further 50bps in Apr’15 and 25bps in Apr’16. The company has not planned for any increase in royalty rate thereafter.
Fig 9 – Royalty as percent of net sales
1.25
1.65
2.05
2.45
2.85
3.25FY
13
FY14
FY15
e
FY16
e
FY17
e
(%)
Source: Company, Anand Rathi Research
Initiatives in trade to drive growth
As part of its overall growth strategy, the company has decided to increase the number of “Perfect Stores”. Investment in “Perfect Stores” helps HUL drive throughput per store and enhance in-store branding. It also helps traders increase revenue. Instead of utilising paper tapes, it is moving towards glow signs. As most of the launches are in the premium segment, it believes glow signs help maintain the premium image of such products.
It also indicated that ‘on-shelf availability’, an internal measure tracked by Unilever and HUL, has improved 900bps in 2013 from 2008. It also indicated plans to cut down SKUs by 30% to be more efficient in supply-chain and production management.
Fig 10 – Initiatives to drive off-take Initaitive Expected benefits
Drive the throughput per store Increase the Perfect store initiative
Better in shop promotions
Increase in number of Shakti Amma & Shaktimans Drive growth in rural sales
Increase on shelf availability Drive the revenues in stores
More usage of glow signs To drive growth of premium brands
To reduce confusion in trade Reduce number of SKUs by upto 30%
To improve efficiency of supply chain
Source: Company, Anand Rathi Research
2 July 2014 Hindustan Unilever – Despite the slowdown, continuing investments; Sell
Anand Rathi Research 5
Valuation
We value the stock at a target price of `510, at a target PE of 27x FY16e earnings. As Hindustan Lever continues to reel from the heat of keener competition in segments such as laundry, skin care and oral care, we expect it to continue investing in these categories. Royalty, excise duty and income tax rates are expected move upwards in FY15. We also believe delayed monsoon to impact revenue growth in rural areas. We expect it to report revenue and earnings CAGRs of just 10% and 5%, respectively. Hence, we believe that, at current levels, any stock-price upside has already been capped.
Fig 11 – Mean PE and Standard Deviation
Mean
+1SD
+2SD
-1SD
-2SD
15
22
29
36
43
50
Jun-
00Fe
b-01
Oct
-01
Jul-0
2M
ar-0
3D
ec-0
3Au
g-04
Apr-0
5Ja
n-06
Sep-
06Ju
n-07
Feb-
08O
ct-0
8Ju
l-09
Mar
-10
Dec
-10
Aug-
11M
ay-1
2Ja
n-13
Sep-
13Ju
n-14
Source: Bloomberg, Anand Rathi Research
Key risks
Lower raw material prices.
Less-than-expected competitive pressures.
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies Rating and Target Price History (as of 1 July 2014)
HUL
1 2 34
5
6
7
8
9
170
270
370
470
570
670
770
Jan-
08
Apr-0
8
Aug-
08
Dec
-08
Apr-0
9
Aug-
09
Dec
-09
Apr-1
0
Aug-
10
Nov
-10
Mar
-11
Jul-1
1
Nov
-11
Mar
-12
Jul-1
2
Nov
-12
Mar
-13
Jun-
13
Oct
-13
Feb-
14
Jun-
14
Date Rating TP (`)
Share Price (`)
1 12-Dec-08 Sell 207 240 2 12-May-09 Sell 218 225 3 16-Jul-09 Sell 249 266 4 16-Mar-10 Sell 204 227 5 27-Jun-11 Sell 265 318 6 08-Nov-11 Sell 330 382 7 08-Oct-12 Sell 466 560 8 09-Apr-13 Sell 440 471 9 02-May-13 Sell 510 584
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5%
Anand Rathi Research Ratings Distribution (as of 1 July 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13%
% who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.
© 2014 Anand Rathi Shares and Stock Brokers Limited. All rights reserved. This report or any portion thereof may not be reprinted, sold or redistributed without the prior written consent of Anand Rathi Shares and Stock Brokers Limited.
Additional information on recommended securities/instruments is available on request.
Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
Autos
Company UpdateIndia I Equities
Volume data – Jun ’14 (units) Jun ’14 yoy chg (%) mom chg (%) ytd FY15 yoy chg (%)
Passenger Vehicles 18,794 -1.7 -8.1 59,564 -8.4
4-wheel pick-ups 14,138 2.7 10.1 38,651 -10.2
3-wheeler 4,544 5.6 21.8 11,808 -4.5
CV 995 9.2 17.6 2,591 -0.3
Total Autos 38,471 1.0 1.6 1,12,614 -8.4
Tractors - Domestic 28,893 8.1 24.9 71,920 0.7
Tractors - Exports 991 -3.4 22.6 2,635 -17.3
Total Tractors 29,884 7.7 24.8 74,555 0.0
Total Volumes 68,355 3.8 10.6 1,87,169 -5.3
Source: Company, Anand Rathi Research
`
Rating: Hold Target Price: `1,250 Share Price: `1,187
Key data MM IN / MAHM.BO
52-week high / low `1269 / `742Sensex / Nifty 25516 / 76353-m average volume US$20.0m Market cap `732.7bn / US$12.2bnShares outstanding 590m
Shareholding pattern (%) Mar ’14 Dec ’13 Sep ’13
Promoters 25.29 25.24 25.26 - of which, Pledged 8.11 8.13 8.12Free Float 74.71 74.76 74.74 - Foreign Institutions 36.92 36.68 35.86 - Domestic Institutions 15.88 16.09 16.57 - Public 21.91 21.99 22.31
2 July 2014
Mahindra & Mahindra
Decent drive; Hold
Key takeaways
PVs continue to sputter. Higher fuel prices, a portfolio tilted towards the underperforming UV2 segment, and intense competition had caused sustained weakness in Mahindra and Mahindra’s (M&M) PV sales (incl. exports). However, the rate of decline has now been arrested to just 1.7%, the lowest in the past 13 months. The ytd decline, though, is higher at 8.4%. The overall auto division sales were higher by 1% yoy, boosted by other segments: three wheelers (up 5.6%), pick-ups (up 2.7%), and CVs (up 9.2%). With lower excise duty being extended till Dec ’14, the company expects sales to spurt in the run-up to the festive season.
Tractor sales decent. Despite concerns over monsoons, tractor sales were better than expectations. Domestic tractor sales were up 8.1% yoy, to 28,893 units, while tractor exports were lower 3.4% yoy to 991 units. Ytd tractor sales are flat yoy; our residual growth estimate is 6.9%.
Overall performance decent. With decent performance across the non-PV segments, M&M’s total volumes were up 3.8% yoy and 10.6% mom, to 68,355 units - slightly ahead of expectations. Ytd volume decline is 5.3% yoy; residual growth estimate is 7%.
Our take. UVs and the other automotive segments registered volume decline in FY14, and the same scenario could persist in 1QFY15 as well. While the UV portfolio comes off a lower base here on, short-term UV demand recovery in M&M’s key segments is likely to be restricted. Tractors will now be faced with a higher base and the possibility of a lower crop output due to adverse weather conditions. Thus, the short term appears to have very few upsides for the company. The long-term outlook, however, remains good with likelihood of agri-mechanisation, launches in the UV1 segment in FY16, and recovery in the CV cycle. We maintain Hold. Risks. Delay in rural demand recovery, keener competition, diesel price hike.
Standalone Financials (YE Mar) FY15e FY16e
Sales (`m) 4,36,251 4,87,131
Net profit (`m) 37,830 43,155
EPS (`) 61.6 70.3
Growth (%) 85.0 100.7
PE (x) 19.3 16.9
PBV (x) 14.0 11.8
RoE (%) 19.4 19.0
RoCE (%) 20.7 20.9
Dividend yield (%) 1.3 1.3
Net gearing (%) 30.9 29.2Source: Anand Rathi Research
2 July 2014 M&M – Decent drive; Hold
Anand Rathi Research 2
Quick Glance – Financials and ValuationsFig 1 – Income statement (`m)
Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Net revenues 3,18,535 4,04,412 4,05,085 4,36,251 4,87,131Revenue growth (%) 36.2 27.0 0.2 7.7 11.7- Op. expenses 2,80,907 3,57,469 3,57,873 3,85,102 4,29,620EBIDTA 37,629 46,943 47,212 51,149 57,511EBITDA margin (%) 11.8 11.6 11.7 11.7 11.8- Interest expenses 1,628 1,912 2,592 2,455 1,930- Depreciation 5,761 7,108 8,633 10,691 12,170+ Other income 4,658 5,492 7,180 8,132 9,216- Extraordinary items -2,647 -1,056 -528 0 0- Tax 8,755 10,943 6,111 8,304 9,473Effective tax rate (%) 23.3 24.6 14.0 18.0 18.0Reported Profit 28,789 33,528 37,583 37,830 43,155Adjusted Profit 26,169 32,578 37,061 37,830 43,155Adj. Profit growth (%) 4.8 24.5 13.8 2.1 14.1Adj. FDEPS (`/share) 42.6 53.1 60.4 61.6 70.3Adj. FDEPS growth (%) 4.8 24.5 13.8 2.1 14.1Source: Company, Anand Rathi Research
Fig 3 – Cash-flow statement (`m) Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Reported Profit 28,789 33,528 37,583 37,830 43,155+ Depreciation 5,761 7,108 8,633 10,691 12,170Cash profit 34,550 40,636 46,217 48,521 55,325- Incr./(decr.) in WC 909 -3,424 9,613 -81 -450Operating cash-flow 33,641 44,060 36,603 48,602 55,774- Capex 18,881 12,362 21,474 20,000 16,000Free cash-flow 14,760 31,698 15,130 28,602 39,774- Dividend 7,675 7,982 8,596 9,210 9,824+ Equity raised 9 6 0 0 0+ Debt raised 12,597 -922 5,181 -10,000 -5,000- Investments 13,848 15,230 -4,536 15,000 25,000- Misc. items 104 1,642 4,561 1,262 1,346Net cash-flow 5,738 5,929 11,690 -6,869 -1,395+ Op. cash & bank bal. 6,146 11,884 17,814 29,504 22,635Cl. cash & bank bal. 11,884 17,814 29,504 22,635 21,239Source: Company, Anand Rathi Research
Fig 5 – Standalone PE band
M&M10x
12x
14x
16x
18x
20x
0
200
400
600
800
1,000
1,200
1,400
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
Jun-
14
Source: Bloomberg, Anand Rathi Research
Fig 2 – Balance sheet (`m) Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Share capital 2,945 2,952 2,952 2,952 2,952Reserves & surplus 1,18,766 1,44,227 1,64,960 1,92,319 2,24,305Net worth 1,21,711 1,47,179 1,67,912 1,95,271 2,27,256Total debt 35,808 34,886 40,067 30,067 25,067Def. tax liab. (net) 4,607 5,203 8,897 8,897 8,897Capital employed 1,62,126 1,87,268 2,16,875 2,34,234 2,61,219Net fixed assets 50,808 58,213 71,054 80,363 84,193Investments 1,03,105 1,18,335 1,13,799 1,28,799 1,53,799Net working capital -3,671 -7,094 2,519 2,438 1,989Cash & bank bal. 11,884 17,814 29,504 22,635 21,239Capital deployed 1,62,126 1,87,268 2,16,875 2,34,234 2,61,219No. of shares (m) 589 590 590 590 590Net debt -79,181 -1,01,263 -1,03,236 -1,21,366 -1,49,971Net debt / Equity -0.7 -0.7 -0.6 -0.6 -0.7WC turn days -16 -5 -9 -7 -7Book value (`/sh) 206.6 249.3 284.4 330.8 385.0Source: Company, Anand Rathi Research
Fig 4 – Ratio analysis @ `1187 Year-end: Mar FY12 FY13 FY14 FY15e FY16e
Consolidated P/E (x) 23.2 19.4 16.5 14.0 11.8 P/B (x) 5.7 4.8 4.2 3.6 3.1 EV/EBITDA (x) 19.2 15.3 15.1 13.8 12.3 RoE (%) 21.5 22.1 22.1 19.4 19.0 RoCE (%) 22.4 24.1 21.1 20.7 20.9 Dividend yield (%) 1.1 1.1 1.2 1.3 1.3 Dividend payout (%) 33.2 27.4 26.4 27.7 25.9 Debt to equity (%) 0.3 0.2 0.2 0.2 0.1 Standalone P/E (x) 27.8 22.4 19.7 19.3 16.9 Cash P/E 22.1 17.8 15.5 14.6 12.8 EV/sales 2.0 1.5 1.5 1.3 1.1 Inventory days 27 22 26 26 26Receivables days 23 20 23 23 23Payables days 56 51 55 55 55Asset Turnover 1.9 2.1 1.8 1.8 1.8 Source: Company, Anand Rathi Research
Fig 6 – Standalone product mix
0
50,000
100,000
150,000
200,000
250,000
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
Automotive Tractors
Source: Company
2 July 2014 M&M – Decent drive; Hold
Anand Rathi Research 3
Fig 7 – Yoy growth in volumes
40,000
50,000
60,000
70,000
80,000
90,000
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-14
Jun-
14
(Units)
-20.0
0.0
20.0
40.0
60.0
(%)
Volume yoy growth (RHS)
40,000
50,000
60,000
70,000
80,000
90,000
Jun-
11
Sep-
11
Dec
-11
Mar
-12
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Dec
-12
Mar
-13
Jun-
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Sep-
13
Dec
-13
Mar
-14
Jun-
14
(Units)
-35.0
-23.0
-11.0
1.0
13.0
25.0
37.0
(%)
Volume mom growth (RHS)
Source: Company
Fig 8 – Auto segment sales weak
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
Jun-
11
Sep-
11
Dec
-11
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Dec
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Mar
-13
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Jun-
14
(Units)
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0(%)
Automotive yoy growth (RHS)
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000Ju
n-11
Sep-
11
Dec
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-12
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Dec
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Mar
-13
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Mar
-14
Jun-
14
(Units)
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0(%)
Automotive mom growth (RHS)
Source: Company
Fig 9 – Tractor sales decent
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
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Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-14
Jun-
14
(Units)
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
(%)
Tractors yoy growth (RHS)
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-14
Jun-
14(Units)
-45.0
-25.0
-5.0
15.0
35.0
55.0
75.0
95.0
(%)
Tractors mom growth (RHS)
Source: Company
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies Rating and Target Price History (as of 1 July 2014)
M & M 16
15
1413
12
11
10
9
8
7
6
5
4
3
21
100
300
500
700
900
1,100
1,300
Jan-
08
Apr-0
8
Aug-
08
Dec
-08
Apr-0
9
Aug-
09
Dec
-09
Apr-1
0
Aug-
10
Nov
-10
Mar
-11
Jul-1
1
Nov
-11
Mar
-12
Jul-1
2
Nov
-12
Mar
-13
Jun-
13
Oct
-13
Feb-
14
Jun-
14
Date Rating TP (`)
Share Price (`)
1 25-Feb-09 Hold 159 141 2 21-Apr-09 Hold 232 225 3 04-Jun-09 Buy 440 349 4 31-Jul-09 Buy 528 426 5 30-Oct-09 Buy 567 463 6 05-Apr-10 Buy 650 534 7 03-Nov-10 Buy 899 755 8 10-Feb-11 Buy 833 654 9 08-Oct-12 Hold 953 869
10 07-Dec-12 Hold 980 930 11 10-Apr-13 Hold 919 838 12 10-Jul-13 Hold 1,015 986 13 14-Aug-13 Buy 1,015 870 14 09-Oct-13 Buy 1,037 858 15 07-Apr-14 Buy 1,100 1,006 16 02-Jun-14 Hold 1,250 1,230
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5%
Anand Rathi Research Ratings Distribution (as of 1 July 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13%
% who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.
© 2014 Anand Rathi Shares and Stock Brokers Limited. All rights reserved. This report or any portion thereof may not be reprinted, sold or redistributed without the prior written consent of Anand Rathi Shares and Stock Brokers Limited.
Additional information on recommended securities/instruments is available on request.
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5% Anand Rathi Research Ratings Distribution (as of 1 July 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13% % who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.
© 2014 Anand Rathi Shares and Stock Brokers Limited. All rights reserved. This report or any portion thereof may not be reprinted, sold or redistributed without the prior written consent of Anand Rathi Shares and Stock Brokers Limited.
Additional information on recommended securities/instruments is available on request.
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